Transcripts For CNBC Squawk On The Street 20160930

Clear focus on financials. Deutsche, the euro, spreads after the worst day for stocks in two weeks, europe lower on pressure from the banks, euro under the same fate. Oil taking a backseat for now largely unchanged. Road map will begin with what else, deutsche and capital concerns rattling markets around the world. The ceo attempting to calm the waters, will that work today . Its not just overseas, of course here in the u. S. Wells fargo is back under fire yesterday after ceo john stumpf faced angry lawmakers in the house of representatives. And the last day of the quarter, tech leading the rally. What does q4 portend . But first up, deutsche shares slumping to alltime lows in frankfurt trading taking the european Banking Sector with it, thats on concerns about deutsches Capital Position and reports that hedge funds are reducing their exposure to the bank. The Ceo John Cryan defending his company in a letter to employees saying due to ongoing rumors, talks about their liquidity reserve saying there are forces in the market trying to rattle trust in that institution. Well, i think thats true. I think that were in an asymmetrical world as commentators. I think if i said this is going to be like Lehman Brothers and in the end its like Lehman Brothers i look like a smart guy, but if it isnt, then no one cares. In other words the tenor of the rep portage is really very negative because its safer to be negative. Its safer for me to say that bank has issues than for me to say it doesnt. But i will actually give you a scenario some people are talking to me about that is a more positive scenario. The problem here aostensibly, Justice Department reports to the president of the United States. Im not saying president obama is nixon and we can have a massacre at the Justice Department. Thats something nixon did, he fired the people investigating. Im saying at a certain point obama and merkel are friends. This is a whats known as a national champion, Deutsche Bank. They are not going to wipe out a company with 100,000 employees when president obama is in Good Relationship with merkel on the way out it is not going to be his game, set, match to wipe out this company. So what im saying is the 14 billion now from what i understand is going to be reduced dramatically. And youre not going to find this company in as much trouble. Of course they cant talk about a backstop because then the shorts take it to one and the backstop kicks in. I think this is more like a potential bank of america situation in 2011 where youre able to get a preferred that has a very high rate, which is very good considering the negative Interest Rates in germany, say 700 million warrant at a certain price to have 700 million shares, a short squeeze ensues not unlike the 5, 7 that happened in 2011, and the shorts have to scramble. But this all has to unfold in a negative environment where we hear a lot about how theyre in trouble before you get that exquisite moment where Deutsche Bank might be saved. So your point is doj doesnt want blood on their hands. Obama doesnt. In the end the doj. The doj does 17 billion for bank of america because you can do bank of america. All right. Theyve got the reserves. They can do it. They had the reserves. Even though they had very good attorney. J. P. Morgan could afford 13 billion. Citi could afford seven. This is do you take one of the largest employers in germany and wipe them out while youre finishing your career as president of the United States and Angela Merkel is your number one ally . I think the number one words taken out mean Different Things. I dont like to anybody here i look to the credit markets and the credit itself is not being priced in any way for liquidity event. So when you talk about wiping out, jim, first of all, that doesnt mean this bank is going away if that were to even happen. Second of all, theyve got 43. 5 billion of core equity tier one excuse me, 43. 5 euros. 220 billion in cash on hand. And their credit mean the two and three quarters of 23 are trading up 46 basis points. This is not showing itself in their credit. So let me just continue, the point is yeah, im going to, i think people are more concerned about equity delusion than anything else. Thats what and theres virtually no one who really believes that the German Government would let this go down with the derivative book it has, with its importance to the german economy. And so the road seems to much more likely be that you get equity delusion hence why the stock is going down but not really playing out in the bonds. I am agreeing with you. Im saying if you were a commentator and you came out and said that this could go and it went, youd look like a genius. But that perhaps what we ought to do is separate the reportage, so to speak, as a matter of fact it might be an opportunity not to buy the stock. No, an opportunity for saudi arabia, an opportunity for Warren Buffett, an opportunity for someone deep pocketed who goes in and makes a sweetheart deal to get that preferred, i mentioned, and the warrant. I am in complete agreement. Im just saying its very hard to Say Something positive and then have it on youtube. Did you see cramer said Deutsche Bank was good . Did you see that . Its already being written as youre speaking. Right. Cramers a clown. Did you hear he said Deutsche Bank survives . We should mention stocks up from yesterdays lows. Yes. Davids point on the bond is important. For more on deutsche we want to go live in frankfurt talking about this cryan letter and more. Annette, good morning. Good morning to you as well. Of course the focus also is on relief. We are seeing shares trading not that badly down as they were in the opening. But of course the other focus is the letter john cryan is writing to his own staff, trying to increase the morale inside the big two towers behind me where the headquarter of Deutsche Bank is. And of course that is also reflected in a way it wasnt the biggest story in the markets here today. If you look at the biggest daily handle they are leading on china. If you look at like the most read daily newspaper like the general one, theyre leading on charlie roads. And the tabloids are leading on how much actors are paid, so its very dear to our hearts, isnt it . So by in general id say the heat is not over for Deutsche Bank. Over the weekend, i guess the media will take its time to digest what happened to the lender, the share price for the First Time Since 1983 at that level below ten euros. And i guess the bad press will only start over the weekend. Back to you. Annette wiesbach, thank you. Lowest here since they were listed at the nyse in 2001. Why would you want to own it going into the weekend given the vacuum in news we may have here . I think that, again, going back to david. This lehman analogy everyone remembers they were trying to find the korean bank, this weekend, that was like the first weekend of september and korean bank did not come to and stock got spanked on that monday. I still think that 11 is too high. But i do think that if you were this is a very clubby country, if you were a large investor and you were in touch with the government and you were able to do a substantial cash infusion for a preferred, then i think that you wish you were not short the stock. Right. You might want to take a look at the bond. So your point about lehman, if there is a run on this bank, which seems unlikely, and they have a great deal of liquidity, by the way, even over 30 days if they get no funding, but then if that were to happen and then if they werent bailed out as we didnt bailout lehman, wed have a different conversation. That was also time when there was tremendous stress yeah, the entire system was in trouble. Germanys got the best Balance Sheet in the world. They do. Theyre better than china, i think. Theyre certainly strong. And you could actually envision a world where germans might actually start spendi ini some money to build their country back up, little fiscal. Not just monetary. From the eu. But i think that theyre six down and five up from say from here. Sure. But that at a certain point the six down youre going to have to cover because i do believe there could be an investor, not like the koreans that didnt want to be with fold and lehman, but i just think that the German Government. If you knew the Justice Department was not going to pursue them at this pace because perhaps maybe theres a little bit of politics involved with the Justice Department, you will wish that you have covered. You will witch you have covered. How is that . If thats true, why did deutsche appear to be so stubborn in their willingness to negotiate an amount . And, two, how can merkel even appear to be helping them when shes been the tough cop against the greeks, the tough cop for the ecb . 100,000 people work there. Remember what this fellow cryans been saying. Hes been saying we think the Justice Department is fair. Saying, listen, we think theyre fair. Which is a negotiating ploy in itself. You didnt really hear a lot of our banks say, oh, theyre fair. Right. But i do think at a certain point, you know, you get a little bit of politics involved there. Is it so odd that, look, everyone will deny the scenario im about to lay out, but maybe its someone in the Obama White House that said, you know, Angela Merkel is kind of our friend and that 14 billion, is that fungible . The Justice Department talks to the president. Its not like the Justice Department in narcos. Which you just finished season 2. I didnt want to give anything away. But theres a separation of powers between the Supreme Court and the president. But the Justice Department, they are allowed to talk. Remember when Bobby Kennedy talked to president kennedy and said get hoffa . Well, i mean, they talk. And Angela Merkel is a very valued ally. And they dont want to destroy their ally because of 14 billion when it could be fungible. You agree with any of this . Yeah. Yeah. I think theres a possibility that it wont be 14 billion certainly. How about 4 billion . All right. All right. 4 billion. Two to five is in the range people talk about. Yeah, i think maybe 3 billion. Maybe, hey, we get together and figure it out over some we it is oktoberfest. You know, how about you want to know how poor at one point we were . How about some there are germans out there who know it, thats horse hoof, its not as bad as you think. Hey, mcdonalds used to put it in. Oh, man no, the old days. I had buffett on saw you tweeting with easterbrook. I think easterbrook is king. Dividend boost, mcmuffin, anniversary yesterday, stock goes higher. When we come back, it was tough enough for john stumpf on capitol hill. Stick around to find out what buffett had to say about the wells fargo ceo. Also ahead, the biggest vc backed u. S. Ipo of the year. Nutanix going public today. Worst day for stocks since the 13th. Financials and health care now negative for the year. Were back in a minute. When youre on hold, your business is on hold. Thats why comcast business doesnt leave you there. When you call, a Small Business expert will answer you in about 30 seconds. 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It was another rough day on capitol hill for john stumpf, the wells fargo ceo grilled on thursday by the House Financial Services committee about the banks unauthorized account scandal. Check out this exchange between stumpf and congressman Gregory Meeks of new york. Your bank, you, ceo, chairman, violate basically for me was on top of whats basically been a criminal enterprise. Theres no question we dont do everything right. And weve made mistakes. Were upping our game so who should pay for it . If youre not doing everything right, whos accountable for it . Were going to make it right for every one of our customers. Youre v. P. Made 100 million bonus package. Who is paying for it . Whos taking responsibility for it . Dont come tell me youre sorry. That bite made all the evening newscasts. Now our becky quick reporting. Buffetts take on his interview, stumpfs interview with you on mad and how that could have gone better, he says. Yeah. Always great that Warren Buffett watches. Ill take that. He didnt give it great reviews from mr. Stumpfs perspective. Yeah. I dont know. I mean, becky spoke with him. But its what he didnt tell becky as opposed to did tell. And this based purely on having read the transcript from beckys reporting. Right. That seems interesting, i guess. He department really give an endorsement of stumpf, did he . I think the phone call must have been a tough one. I said some people say you should resign, he said no. I talked about how his hero is Vince Lombardi and Vince Lombardi would never blame the offensive line coach. You have to take the heat. And i dont think Warren Buffett liked the way it went. I dont want to put words into the oracles mouth. It was a tough interview. I wasnt mike wallace and essence, but it was a tough one. Listen, you know, when you speak to people who are expert in these kinds of things, the majority believe stumpf will have to step down. Yes. Certainly prior to the end of his term two years from now but more likely in the nearterm. Thats a board decision. Unclear what conversations if any are really taking place, guys, in terms of that or how theyre thinking about it. But youve got to believe theyre thinking about succession to some extent right now, whether they go outside or can look inside and what they have to do. Right. This is also for beckys reporting yesterday just in terms of whether or not buffett had spoken to the board, which some people had suggested had taken place. Well, look, having been in some situations counsel comes in and heres what counsel says. Its a standard speech. The institution must be preserved. If anyone thinks theyre bigger than the institution or anyone tarnishes the institution, they must leave. It really doesnt matter whos tarnishing it, even the founder. Doesnt matter. In this case its not a founder. So you can tell thats what they say. I mean, ive been there, you know, when the firm comes in and says, hey, guys, let me tell you our advice, the institution must be preserved. So then the Board Members say i guess what hes saying is we have to separate ourselves from once you become a distraction more so than a help. Yeah. You know. Yeah. And then they say get your own counsel, my friend. Well see. You dont want to predetermine anything. No, you know, look, i had talked to him many times. I think he is a great i like john stumpf. With that i guess theyll lynch me. Congressman lynch will lynch me for saying i like john stumpf, but john stumpf under this period is tarnishing the bank at this point. And when Warren Buffett says he didnt like the way it went on that, what does he think it went like in front of congress . Its a time when banks throw over people. They do that. Companies throw over people, people we respect and like and they think the institutions not going to be preserved. Its the standard speech and its a frightening speech when youre giving it to the board. Ive given it myself. Its not a great speech. Next week is the eighth anniversary of the wakovia purchase, believe it or not, time flies. 2008. Wow. Anyway, well watch that and well watch for a price action on wfc today. Well get cramers mad dash, well countdown to the opening bell on this friday, the final day of the quarter. More squawk on the street from the nyse is straight ahead. Its peyton on sunday mornings you like football . Its directv nfl sunday ticket. I can watch every sunday ticket game live on any device. Well im retired now. So i just sit here watch nothing. If i were you, id work as long as you can, son. Get nfl sunday ticket only on directv. And watch Live Football anywhere. Switch today and get 100 reward card. Youre at the top of your game. Youre unstoppable. Nothing can throw you off track. Wait, is that your car . Uh oh yeah, i saw that coming. That will throw you off track. Youre looking at around ten grand in fines, legal fees, and increased insurance rates. Lets try this again. Smart move. Because buzzed driving is drunk driving. All right. We got about seven minutes before we get the opening bell for this final trading day of the week. When i saw your tie this morning, i immediately said i like that tie. And what did i say . You turned it around. Its a kirkland tie. Who is kirkland . Thats costco. And costco had a mighty quarter. Heres what were finding out. Now i know ignore the chart which is a hideous chart. Costcos going to be up today. It was a good quarter, not a great one. But theres a big issue here, david. Actually two issues. One is they transferred from American Express to a visa card through citi. I have reason to believe americas best left this thing in tatters. They made it very hard for visa and costco. They blew it up. Now is the First Quarter that they really may have gotten it together. But it was a horrendous handoff from americas best to citi. Horrendous. Right. Now were starting to get in to the point where things are a little better. Raised the cost of the costco card, not international, but yes, an exchange between one of my favorite cfos and a fella by the name of oliver chen where he was talking about amazon. The cfo said, listen, my family does amazon prime. And he said i hear some people think were unamazonable, they cant get us, we dont buy that for a minute. We know were on the red hot griddle, basically hes saying. So he is at war with amazon. And hes saying they cant do fresh like we can, even though theres great food deflation. He does say that being said a lot of deals getting killed in apparel. David. There it is. I feel like an atavistic. Youre not atavistic. Im not . No. All right, okay, but i do think this discussion of amazon must be read by everyone because its what the merchants will eat. Galanti is actually sure enough in his shoes to discuss amazon. You take encouragement from that even though it doesnt necessarily mean that theyre in a position to win. He says that atsmazon is winning at a lot of things and prime is fantastic. This is the elephant in the room for every retailer. And mr. Galante, who ive spoken to and i love, i love, is willing to speak truth about how amazon has destroyed a lot of retail but its not going to destroy costco. Its not. I bet i am a costco member, my wife is an executive costco member, and were also amazon prime. And they can coexist, david. This is not like the soviet union, its not an evil empire. They can coexist. Were like merkel and obama. Hey, would you drop that thing with the Deutsche Bank . Okay. All right. Speaking of Deutsche Bank, of course well be watching those shares closely given the Broader Market ramifications. It certainly seemed to have late yesterday. Got a lot more of course on that Broader Market. A lot more. Do you have nhpi . Well talk a lid lttle nxpi. I got great but not telling you. Opening bell right after this. Narrator it wasnt that long ago. Years of devastating cutbacks to our schools. 30,000 teachers laid off. Class sizes increased. Art and music programs cut. We cant ever go back. Ryan ruelas so vote yes on proposition 55. Reagan duncan prop 55 prevents 4 billion in new cuts to our schools. Letty munozgonzalez simply by maintaining the current tax rate on the wealthiest californians. Ryan ruelas no new education cuts, and no new taxes. Reagan duncan vote yes on 55. Sarah morgan to help our children thrive. Reagan duncan vote yes on 55. 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. Desk, so i can take my Trading Platform wherever i go. You know that thinkorswim seamlessly syncs across all your devices. The markets hot. Sync your platform on any device with thinkorswim. Only at td ameritrade. From the creative galaxy in my idea box. Would you help me make art . Each one of our journeys keeps us young hey, i have an idea well never get older. Arty go be amazing amazing announcer give your Cardboard Box another life. Youre watching cnbc squawk on the street live from the Financial Capital of the world. The opening bell just in a minute on this friday, last day of september, last day of q3. Weve had five straight triple digit moves on the dow and yet for the month the s p has moved less than 1 . Least volatile september in a decade. Its unbelievable. Where did people go . I mean, theres no players. Im just shocked when i see the volume, other than for certain stocks, its just nonexistent. Big cap stocks proctor, 180,000 shares trade at opening, used to be 1. 8 million. I dont know whats happening here. What are all these people doing . Thank you. Thank you. Right now theyre going to ring the bell. Lets get that. The s p at the bottom of your screen down here at the big board today med Equities Realty trust focused on health care operators celebrating its ipo, which happened yesterday. At the nasdaq nutanix celebrating its ipo. Well talk to the ceo later this morning on squawk alley. Were going into the month of october, which over the past 20 years, jim, s p up 70 of the time. Q4 80 of the time. Yeah, when its up, its good. When its down, it is so bad that we just have to remember that some of those octobers have just been brutal. So, yes, if we get through this period, then were through. Then were through. Were okay. Yeah, if we get through this, gold medal if we get through this next period. Next period being what . Sorry. The election and earnings. Past the elections. Look, pepsico, con agra, accentura, did anyone read that Conference Call . These are three Big Companies that deliver great numbers. They were just congratulations gentlemen on a good quarter numbers. Those are some important companies. Dont forget next weeks dream force, love force. Are you going out there . Im going to get on the love train. You are . Yeah, the love train. The marc benioff dream force love train. Right. They got shopper speaking, tony robbins. Im sure you noticed salesforces efforts to sort of thats why i brought it up. Its not a love train. Its not going to happen. Its not a love train. Microsoft already gotten approval here in the United States and number of other places for acquisition to linkedin, but salesforce decides to that was war. To file sort of or at least publicly call them out in europe before the eu weighs in. Very highly unlikely the eu has any issues with this deal. So why are they doing it . This is so not marc benioff. What happened to the love between sacha and its a hate train. What happened . I thought there was love. I dont know. Worries microsoft is going to launch a competing product in some way . I dont know. It read so nasty. It was nasty. Yeah. It did pressure shares of linkedin yesterday. You can see up a bit now, not very much. But its really highly unlikely it has any impact. Do you really think theres the tweet that marc put up is very negative. At least many of the experts believe so, although theyve been wrong before. Marcs frenemies with larry ellison. I think hes now a frenemy with sacha. They were like this. Its odd, more so because of that than anything else. Again, it doesnt really seem likely to lead to anything, but he chose to come public and sort of make it known hes creating some hostility. Hostility is right. Yeah, i thought that was hostile. It wasnt mindful. When you go out next week youll find where the love is. Where is the love now . Thats a great song. It is. Wheres the love. Thats better than love train, right . All you need is love is better than all of them. Jim, speaking of aququiztive companies, journal seems bullish on the situation. Weve been backers of nxpi, weve been criticized for loving nxpi. He believed the company was undervalued. Theyre looking for 120 is what im told. Thats the number ive been hearing too. Yeah . I mentioned this strange report that came out from bernstein. Yesterday morning unfortunately i failed to mention this 20page report about nxpi buy kwaqualc m qualcomm excuse me, the other way around. We get news theyre in fact in talks, jim. Most importantly to note, i think, in many ways if you want a market check as we call it on these kinds of things, in other words it gets out there, you see how your Investor Base reacts, qualcomm has to be very encouraged. Qualcomm up again, but qualcomm wants cash flow, which is bountiful, qualcomm wants the auto. Nxpi has a hammer on right, chips. This is a deal that must happen for qualcomm. And many other things where they talk about potential for growth possibilities putting chips in everything whether its airplane engines or anything else you can think of. Also they have a great amount of cash at qualcomm, most of its overseas. This is a dutch company. Its a dutch company. Nxpi fixed up that Balance Sheet. What people dont understand is nxpi has an inferiority complex. Inferiority complex, come on mad money and say, listen, dont people understand we are not just apple. Were not just near field communications. We are dominant. When you go to speak to the auto companies, it is true that nvidia has a lot of content. But it is free scale that dominates the auto. Everyone wants to be in the auto. Nxpi dominates the auto. This stock its 120. 120 is the price. Autonomous automobiles will have even more. Oh, my god, do you see how much then well all be just giant chip running around with an engine. True. So this is today. On thursday, it was the potato chip. Incredible. Today its the Semiconductor Chip and its amazing. Looking at yeartodate gainers on the nasdaq 100 nvidia tops followed by amat followed by qualcomm. There you go. One of the things people dont realize, nxpi has cracked china better than any semiconductor in the world. Chinese government likes them, 20year relationship with the chinese government. Qualcomm needs that even more. Remember, theyve done the emv for they created that technology and brought it to china. Now just in fairness, my trust did sell a little yesterday. Why . Because the rumors if they dont come true, then nxpi will retreat. Right. I have no insight. I havent done reporting on it. We dont think its several months. Thats what the reports were. Im relying solely on the other reporters on this one because i have no knowledge of whats going on in terms of conversations. A lot of it is the domicile. A lot is just saying, listen remember the private equity guys bang the stock down 79, 80, 79 they were selling. They needed money so bad. Remember free scale was a private equity controlled company. Yes. But this is a deal that will happen, i believe. And i was amazed at the bernstein piece which you showed me was like, wow, that was well, its not that we havent talked about this, jim. I have had more complaints about talking endlessly about nxpi. Why does cramer every time in lightning round nxpi, welcome to nxpi, welcome to cramerica. Covered at the wall. I think theyre going to raise price. Am ex trashed visa. They were so negligent in the way they handled i think they said, hey, youre with visa now. But a lot of these people didnt even know their cards were blocked. It was really just a terrible handoff. But costco put it behind. I love im going to costco tomorrow no, i probably cant. Im going out west. But i like costco. They did say food deflation would continue for three to six months. At least thats what buyers are saying. That was a negative, but they did say fresh, fresh keeps amazon at bay. And the crab claws Everybody Knows are unbelievable. And, david, when you go with me to costco. Yes. I want you to fast the night before. Okay. Because we go free sample to free sample to free sample. And if you cant handle it, go home. I will. Well, theres a day coming up where ill be doing that. Well break the fix at costco. I got to join. I got to join. I dont belong. Youre not a costco member . Never. 90 i dont have room for all that stuff. I mean, where do you put it all . I dont have a second place to put it. Yeah, thats true. Im embarrassed that im just gold star, but my wifes got the black card so i always feel good, i feel like king when im there. What does that run you, a black card . I dont know. She pays for it. Actually, anything she pays i pay. She doesnt want the show so i dont know. Thats how things work typically in a marriage. The dogs watch the show more than she watches the show. Everest really likes the show. Deutsche adrs up 6. 5 . How do you square that with the feeling, the mood yesterday . Because the stuff we said on the show, i guess. Look, Warren Buffett watched, so makes sense. Look, i think it might have been over theres fear of what david said, which is that this stock may not be reflecting the side that you always told me. Have we watched the bonds for lehman. The bonds were lows, but they arent off as much in any way, shape or form as you would expect or being priced for liquidity event. Right. They just arent. So whether or not theyre going to get massively dluted as an equity holder that i think is a fair question. Well, i think you want to be that person that steps up to the plate and gives them that gets that preferred back. Right. If Warren Buffett wants to make a fortune right now, he calls Deutsche Bank and say, listen, guys, i think i can arrange something. He typically stays here in the u. S. Though, doesnt he . Well, isnt there like a german they got a lot of Warren Buffetts over there. Is there a european version of Warren Buffett . Remember when i bought the citi stake . Yes. Hes a bright guy. I bet you right now i know he watches the show closely. I bet hes making the call right now to cryan. Selling that stake for a long, long, long time. It looked great for a while and then didnt look very good for a while. He can crush it on this. I always say hi to him because he never misses the show. Hes our biggest fan. Hell call in if we get him. You know yeah. But maybe two people have a couple bucks and a third who could make it happen. Yeah, its a short list. The last day of the month has been positive three times this year. Were going to see if it happens today. Lets get to bob pisani. Good morning, carl. And we are sure starting positive. This was a very big open 7to1 advancing to declining stocks. Were down about 0. 9 on the month. Up 0. 4 today. We could go positive for the month. Take a look at germany because part of this rally weve been seeing today i think is due to germany doing a lot better. You see that . Started down notably but moving up all throughout the morning largely on the strength of the banks doing better. If you take a look at Deutsche Bank. And i think jim has a point about it. If it started moving when we were talking about the possibility of maybe somebody stepping in buying a high paying preferred stock as one option for Deutsche Bank, you see that starting to turn around. That happened earlier this morning as well for us. So Deutsche Bank is trading on the upside over in germany, i believe, right now. The important thing is its been off of the lows right now. Take a look at some sectors here in the United States. Energy stocks, consumer staples, banks all doing a bit better. None of the bank stocks are down. Most up 1 right now in the United States. These are the u. S. Bank stocks, industrials, also rallying as well. Its the end of the quarter, and while were down just fractionally, this would be two down days in a month in the last two months two down months, we may go positive, as i mentioned. So this quarter has belonged to the semiconductors. And you can see that in the nasdaq 100, nvidia, marvel, micron, all had a fabulous quarter overall up double digits. Small caps did well, s p very respectable gain 2. 5 here. Going into the Fourth Quarter, you all know the Fourth Quarter is traditionally a very strong quarter. Heres our friends at kensho, up 81 of the time since 1990. The average gain for the s p you see on the bottom there 4. 5 . Big movers are consumer staples, health care industrials, fairly broad swath of the s p does well including consumer discretionaries. What traders want is volatility, they havent had other than a brief spike on oil in the beginning of the year and brief spike on brexit, and there were bets made there would be. There were big bets made in september, for example, that there would be volatility around two particular events. One of course being the fed meeting, and the other being the clinton trump debate. None of them happened. Neither caused any volatility. Traders were a little disappointed. What did cause volatility is something nobody thought of which is mr. Rosengren not on anybodys radar suddenly causing a brief spike in the vix and brief decline in the s p 500. So three major things caused volatility in the last few years, one is recession fear. Thats not happening. The other is the fed, thats very much on everybodys mind. And the other shocks that are out there we cant figure out right now. So the volatility bets here is that wed hope thered be some volatility around election, particularly if trump wins and December Fomc meeting. But bear in mind so far a lot of these bets havent panned out. The vix futures arent that high for october and november and december. Not dramatically higher, indicating a lot of people are just hedging bets right now. We got that ipo, nutanix, its going to be open in the next hour, open priced at 16. Thats well above the price talk. And thats very, very important because the last round of funding for them, their series e a while ago, 14. 40. If that would have priced below that everyone would have said this is very disappointing news for all those unicorns that are out there. So an ipo price at 16 values at 2. 2 billion above the last round of private funding. Were going to be watching the opening very, very carefully. Guys, if its opening above that price, that will be a big flashing green to all those unicorns out there. Guys, back to you. Bob, well see you in a bit. Bob pisani on the floor. Lets get to Rick Santelli, chicago pmi just a few moments away. Hey, rick. Hi, carl. Lets do the charts real quickly. Obviously the Deutsche Bank issues at least for the moment seem to have dissipated. Look at a twoday 10, we could clearly see that these yields seem to be mean reverting, same as a 10year, but look towards august 1st for 10year, this is the key. Were back in the range and its a powerful range in the 1. 50s. Truly. If we look at a july 1st of bunds, little different scenario. Not that theyre somewhat in a range, but their range is right at the bottom of where their yields close as they dabble and flirt with this minus 15 minus 14, remember minus 19 is the alltime low yield close. If we look at whats going on in currencies, it all depends on which direction youre aiming at. Dollar index virtually unchanged. Euro got smacked on Deutsche Bank coming back. Thats what you really want to watch. And the dollar yen, watch that 100 level its very significant. And as i pointed to the september read of Chicago Purchasing Managers is now out. It is better than expected at 54. 2. Keep in mind were looking for maybe this to reflect more of the adjective weve seen in other isms, think Service Sector in particular, but this Manufacturing Index now, well, its the highest going all the way back just to july. July was 55. 8. Keep in mind we had two sub 50 reads this year. They were in may and february. So this is indeed good news. And sequentially pretty nice move in from its 51. 5 to where it now stands at 54. 2. Back to carl and the gang. Rick, see you in a little while. Rick santelli, we will keep an eye on nutanix as bob said the much anticipated cloud ipo opening trade and live interview with the ceo is coming up. Meanwhile, this would be a sixth day of triple digit moves. Dow up 117. Back after a break. Now that fedex has helped us simplify our ecommerce, 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. Waiting for Enterprise Cloud Company Nutanix to open for trading. Well have that live followed by a interview with the ceo later this morning. Speaking of the cloud, ciscos Chuck Robbins on last night telling jim where the situation. Everything is moves faster than it ever has. Which is going to require us to move more rapidly than we ever have. Requires us to embrace more Technology Transitions at one time than weve had to do in the past. And we have a tremendous focus not only on taking advantage of these transitions but also transitioning our own business to what you talked about with iot, with software, cloud, security and i think were going to have to do it faster than we ever had. Yeah, this has to do with the fact we always thought of the old cisco as this switching and routing hardware company. And what chucks doing is making it proprietary software, cyber security, internet of things, backbone of those connections in which theres so many millions and theyre gaining. So he just doesnt want to be caught up in the old days where theyre just hoping to get the att contract. Its a much bigger bet but requires deferred revenue, requires a reading of the Balance Sheet. How hard is it when you do this kind of software as a service to understand the accounting. Looks like its not doing as well as it is 66 billion in cash. Wow. We hear so much about the internet of things whether it comes up on the qualcomm and nxpi discussions, sofbank and not to mention questions of security. Yes. Interesting the wall street journal story today about all these Different Things that have been hacked apparently including your router, your cameras. I know. Look, he offers a soup to nuts just like john chamber soup to nuts offering but admits that hackers theyre aggressive. He will have to do more. Securitys going to be paramount when it comes to this completely connected world were talking about. Are you paranoid . If youre not, youre crazy. You were born that way though. No, i was born very giving and loving. Well, youre open to communicating on new platforms, i would argue, right . I am. Youre not one of those who refuses to send an email. No, i like them. I recognize that email can be tricky and get on the front page of new york times. Before you send an email, remember it could be on the front page of new york times. Remember, ransom is a big thing in hacking. They have your email and theyll threaten you unless you pay. But chuck does much more of institutional. Well, were out of time, but interesting how he talks about how quickly things are moving. Oh, yeah, he said he had to constant from Technology Executives things are moving more rapid pace. You dont want to be a ceo in technology right now. Its happening too fast. Well get stop trading with jim in a moment. Dows up 109. The light bulb, a bright idea if you use the right ones. Led bulbs use 85 less energy and last a long time, saving you up to 100 over their lifetime. Heres an idea replace yours today. [light instrumental music] time for cramer and stop trading. You know, the other day there was a very critical piece about alphabet by wedbush and really said, look, googles really finished, we dont like them, we dont use them anymore. I dont know how he gets his information. This morning mark mahaney comes out with 20 growth, revenue up maybe 30 to 40 on youtube. Mark mahaney, this is a line in the sand saying basically wedbush, you are wrong. And this is a battle. This is claymation death match. Two go in, one go out. This is tina turner versus the master blaster, and the master blaster doesnt come out okay, if you recall. Master blaster works at wedbush. Some deep sub references right there. In the end you have to go to classical either do shakespeare or mad max. Mad max. Much ado about mad max. Yes. That last one was great by the way. Jim, whats on mad tonight . We have a Company Called viva systems, which is very controversial. Cloud base for global life sciences. I always felt this company is a good company. The shorts have leaned on it forever. Its kind of the Deutsche Bank of the cloud, so to speak. How many pieces of email did you get saying dont i know about the world ending at Deutsche Bank while were on . These people have made it a cottage industry. This is their time. Yeah. And those who think that the Justice Department has to get a call from obama. No, it doesnt work like that. Theres like mind melding. You remember how spock, he did mine melding. You didnt have to wait, where did he put his hand . Somewhere, right . You dont really have to say it. I mean, its not like, hey, dolan, youre a genius. Jim, see you tonight. Long day ahead. Tonight is kind of special. 6 00 p. M. Eastern time. When we come back, well watch nutanix, well watch deutsche. Dows up 97. Dont go away. t selling guys. What are we gonna do . How about we pump more into promotions . Nah. What else . What if we hire more sales reps . Nah. What else . What if we digitize the whole supply chain . So people can customize their bike before they buy it. That worked better than expected. Ill dial it back. Yeah, dial it back. Just a little. Live business, powered by sap. When you run live, you run simple. Or the freedom to choose what doctor you want to see. So if you have medicare parts a and b, consider an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, these let you choose any doctor who accepts medicare patients. Youre not stuck in a network, because there arent any. Plus, these plans help cover some of the part b medical expenses medicare doesnt pay. So why wait . Call now to request your free decision guide and find the aarp Medicare Supplement plan that works for you. Like all Medicare Supplement plans, youll be able to stay with the doctor or specialist you trust, or look for someone new as long as they accept medicare patients. But unlike other plans, these are the only ones of their kind endorsed by aarp. Rates are competitive. So call today. And learn more about choosing the doctors youd like to see. Go long. Incr. Think it wouldotection in a pwork, but it does. Dnt. Its called always discreet for bladder leaks, the super. Absorbent core turns liquid to gel. I know im wearing it but no one else will. Always discreet for bladder leaks. Weve just been hearing 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. Good friday morning. Welcome back to squawk on the street. Im Carl Quintanilla with sarah eisen and david faber at the new york stock exchange. Last day of the quarter, last day of the month. Market trying to hang onto some gains here up about 100 points. Deutsche were watching closely up about 6 this morning on the adrs. We have some Economic Data crossing the tape. Lets get to Rick Santelli with those numbers. Hey, rick. Yes, our september final read for university of Michigan Sentiment survey comes out at 91. 2. Thats the best read since june when we were at 93. 5. And of course the 89. 8 was the mid september read. That gets tossed out. But whats fascinating here is guess what the august final read was . Yes, 89. 8. So even though the mid read goes away, that is the sequential comp, so we move from 89. 8 to 91. 2. Weve had two sub 90s numbers this year in august and of course in april right around 89 as well. So these numbers arent looking too bad. Everybody paying attention to the cocoas, you know, those convertibles, and those have rebounded. So were watching all that is Deutsche Bank today and markets seem to be at least for today looking past it. Back to you. Thank you, Rick Santelli. You mentioned Deutsche Bank, those shares as you say are up a little over 6 right now. Wilfred frost is here with more, of course been following this story closely. David, thanks. Good morning, guys, just to kick this off lets revisit the basics. As we all know capital is assets less liabilities. Liquidity is percentage of assets in cash. Db has lots of liquidity, wor worringly little of capital. Yet yesterday it was liquidity fears that mainly moved the market. The fear a few clients could pull out and that could proliferate. However, Goldman Sachs says Liquidity Position is stable highlighting that they have 223 billion euros of liquidity reserves which is 20 of assets. Thats way more than lehman during the crisis. Plus, Central Banks are more prepared for this. D. B. Can tap emergency funding, for example, from the ecb at negative 0. 4 and get paid for it if they need it. Capital though is a massive issue. And that is what has understandably driven a 50 cent share price decline yeartodate. In the short term, it all rests on the potential doj fine tied to Mortgage Backed investments during the financial crisis. The leak of 14 billion for the financial figure of that fine and selloff since has hurt them. They need a settlement, fast and as small as possible. Quickly, if we did get disaster scenario, i think it could be serious, certainly for europe and also the u. S. Goldman sachs says Deutsche Bank stands at the center of the european Financial System. It is a major counterpart for all european banks and broader. And in a report in june the imf described it as one of the most important net contributors to Systemic Risk in the Global Banking system. So nerves certainly calm today, but if they spiked up, it could be Systemic Risk. Well thats of course been the concern of the overall market. I want to bring in a couple more people. Wilfred, you stay with us. Also talk to managing director at guggenheim securities, more about the u. S. Banks, and philippe, senior credit analyst at ermise investment management. Start on Deutsche Bank, the bonds are moving but not that much. Doesnt appear to be effecting the credit at least, these concerns, as much as the equity. Whats your take . Yeah, the bonds havent moved a lot, but move quite a lot over this year so far. Almost making historical lows trading in the 70s. Backing up which is always concern may suggest some counterpart long Deutsche Bank bonds they may be trying to hedge their position. Been moving in sync with the shares ever since probably the doj news was leaked out to the press last week. Right. All right. But as a credit analyst, when you look at, as wilfred brought up, capital is one thing, but liquiditys another. What do you find . Yeah, well, liquidity its at the last official date which is the end of the Second Quarter the 30 of june this year they have 225 billion euro liquidity which is 19. 7 of the Balance Sheet. Its a lot. They have disclose d of Balance Sheet it could use on top of those. So liquidity at the moment doesnt seem to be the problem. The only thing is in this type of situation of course depletion or liquidity and things can accelerate quite a lot. We dont know what the psychological limit for the, for example, the depositor in germany, how low the share price can go before potentially pull out. Eric, you cover the u. S. Banks, weve had you on many times to talk about them. And i think youre a fan of some of those stocks right now. Whats the exposure and the risk level to american banks from whats happening over there . Well, certainly deutsche and all of the major european banks are a significant counterparty to the u. S. Banks. So theyre certainly keeping an eye on this circumstance. But i think what this gets to is that and one of the reasons these concerns may be rising is that capital or the erosion of capital is something that kills a bank slowly. Ill liquidity is something that kills it overnight. So whereas im thinking back to all the Conference Calls in q1 where we wanted to know how much energy was on the books, are people going to be asking the same question this quarter about d. B. . Yes, certainly. I think the bigger issue of course is the off Balance Sheet exposures and the Derivatives Market because those of course require very little capital and high level of liquidity. So that factors into this analysis. Wilfred, you mentioned the goldman note. They also made the point that the fact the stock and the adr yesterday had such a severe reaction to one piece of news flow that in the context of everything going on wasnt perhaps that big of a deal just shows how vulnerable it is to a vicious feedback loop which is something john cryan talked about in his employee letter today. Absolutely right. I think going back to erics point saying liquidity fears can kill a bank overnight, yesterday was a liquidity fear. So people reacted strongly to it. Theres also a lot of muscle memory, particularly stateside. Dont forget this happened in the adr to the likes of leman. Yes, deutsche has retail exposure. But predominantly this is a wholesale funded bank. Not seeing a big run on depositors and i think today the bounceback in the share price is largely focused on people realizing this is much more capital issue, an ongoing issue, a massive capital issue, that like eric says doesnt kill a bank overnight. Filippo, crisis in confidence, getting and to that point. I mean, the european banks in particular have always been questioned in terms of their Balance Sheets because they didnt seem to take the marks on a lot of the assets we did in our country quite a few years ago at this point after our first few rounds of stress tests. Are those Balance Sheets in europe in any better shape than they have been in the past . I think i would say marginally so. As you said european banks were very quick to write down the bad loans on their Balance Sheet. But i think since lehman we have seen an increasing capital in the european banks. I think probably capitals gone up from say 5 to some feel like on average 12 . There are some laggards, there are some banks that have to act, deutsche is one example. But i think on the asset side low theyre taking marks the much lower on the books. Only thing i would add to that is that european banks have tried to boost capital a number of times since the financial crisis, but they have been pegged back so many times, the eurozone crisis, greek crisis, various moves the boosts havent done because share prices fallen but maybe have to boost again at lower levels. So theres been the intention and it just hasnt worked to any length as it has in the u. S. I remember in 2007 Christine Lagarde had just took over, she was the french finance minister before that, she entered jackson hole, gave this huge speech about how european banks need to urgently recapitalize. And the europeans did not meet them well. There was a lot of political backlash about how she deserted europe now that shes at the imf. Eric, how dire of a situation its not just Deutsche Bank, but the entire european Banking System in when it it comes to needing to recapitalize . I think theres a very significant contrast between what was accomplished here in the United States from a regulatory perspective and switzerland and the uk and everywhere elsewhere the governments stuffed the banks with capital then forced them to raise common equity to replace it. And in the process of that cleans Balance Sheets. In Continental Europe most was about fore bearing for these institutions to earn their way out of the problem which theyve clearly never been able to do. Well, were certainly most likely going to be speaking more about this. Gentlemen, thanks to you both. Eric wassestrom and filippo and wilfred frost. Oh, i thought he was staying. Well see him later, i have a feeling. When we come back, the impact of the election on your portfolio. And well go to iowa and hear from the top gop donor there. As we go to break last trading day of the quarter. Apple, cat, intel. A lot more squawk on the street in just a moment. 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. As election day gets closer, implications of a tighter race may weigh on the markets. For more on the elections impact on investors, lets bring in municipal strategist at morgan stanley. Michael, good morning to you. Good morning, thanks for having me. 39 days to go. So its time to start thinking about this stuff seriously. You say the markets may not be reflecting trump odds as efficiently as they should. Can you expand on that . Well, we really think investors need to think about both candidates because both candidates have proposed pretty meaningful policies in terms of market impact, whether it be fiscal tax or trade. But the question is if you can put those into practice, clinton winning probably comes with divided government which makes it more difficult to put those in practice. Trump winning probably comes along with a Republican Senate and congress, and considering that hes tightened the polls lately, notwithstanding some of the more recent polls this week, think that if that continues then markets are going to have to start pricing in his early policy path. We think that path likely leads to things like tax reform and trade protectionism, two areas where he has both the motive and the opportunity to act. Which assets would you look to see pricing better . Is it equities . Is it the dollar . Is it the peso . What are you watching . Whats on your screen . So were watching equities rates and the peso. I dont know that theres a way to give a strong directional view on where those go because the trump on both those plans fatter tails, wider dispersions on both sides. For example, if you believe he can get a tax reform package through, then its highly likely thats something were calling accidental stimulus whereby it actually is additive to the deficit and most economists that we talk to will tell you that thats something is hypothetically good given limitations of Monetary Policy right now. Under that scenario you could envision risk assets doing better and yields going higher. However, if youre mixing that with trade protectionism, tariffs and the like, you can undo a lot of those benefits potentially even more than offset those sort of pushing policies the other way. So what weve been telling people is rather than taking strong directional views on markets, volatility hedges in those areas tend to make more sense. Particularly since this is just one scenario out of many, most scenarios still point towards divided government. Michael, i get why you and a number of other analysts are focused on tax policy and trade, as for the market impact. But isnt the real implication of this election for the markets going to come in the form of Federal Reserve . Especially given the fact that donald trump is already calling out the fed specifically for its Monetary Policy . Yeah. So our Interest Rate Strategy Team led by Matt Hornbeck has weighed in on this and obviously to the extent that donald trump is not Just Lip Service and truly does want to replace janet yellen, thats Something Else that creates a substantial amount of uncertainty. Again, very difficult to determine the directionality of that uncertainty, which is why we think hedges make more sense. Our team likes curve steepeners in that regard because one tends to track well with Interest Rate pickup and volatility, and capture some of the curve steepness picking up on both a mix of fed policy, leadership uncertainty as well as uncertainty created and or stimulus. Its hard to have a conversation about dynamic scoring and budgets when the media at least is running with lewinsky and machado, sex tapes, its all over. How do you operate with a vacuum of serious policy the dynamic scoring point i think is fascinating because it is a way for stimulus to happen without it being sold as much. So the way that factors spinto r calculus is if we assume republicans control the white house and both houses of congress, dynamic scoring is a way for House Republicans to sell something that might be additive to the deficit but without actually claiming it adds to the deficit because it will reduce the expected impact. So for example, the Current Trump tax plans have been scored as adding anywhere between 3 trillion and 5 trillion to the deficit over a tenyear timeframe. But one might wonder well why would the fiscal hawks in the Republican Caucus go along with Something Like that. But if you can use the power of dynamic scoring to mitigate that impact, perhaps you can sign onto a policy that given the dna of the Republican Party theres more to want to support anyway. Yeah. Well, were in an environment where were just happy to have the government funded for a few more weeks. So that tells you a lot. Michael zezas at morgan stanley. Michael, appreciate your time. Well talk to you more over the next several weeks. Thanks very much. Appreciate it. Speaking of the election, early voting is underway in many states. And were traveling to some of the most important swing states. Our Andrew Ross Sorkin sitting down with the biggest gop donor in iowa. He joins us from des moines with more on that. Hello again, andrew. Good morning. This is a battleground state, i should say donald trump does look like he has the edge in the state right now by about 5 to 7 depending on what poll youre reading. But Hillary Clinton was here physically in town yesterday. Tim kaine was recently in town. Pence was here. So a lot of movement trying to persuade the voters to swing their way. We did sit down with bruce rasstetert try to understand what are the biggest issues that are effecting both this state and the way farmers are thinking about this election. Take a listen. If you look at for instance a couple weeks ago, china instituted 35 tariff on distilled grain, didnt matter if we had a trade agreement. They decided they were going to have a 35 tariff. If youre someone relying on that market, thats really a bad thing and an unfair thing. Same thing on japan on their tariffs on beef and pork. They have 16year tariffs that will go off 16 years from now, andrew. And some of us being a little bit older, 16 years is a long time in our lifetime to wait for a fair level playing field. You know, guys, we talk a lot about policy and what policies and issues the big issues. We always say we want to focus on the issues. Carl was mentioning some of the big issues that get put to the side as we talk about whats on twitter. But we talked about personality this morning and that was an interesting one because bruce did have some misgivings about Donald Trumps disposition. Take a listen to this though. I think sometimes we often cringe a little bit at some of the things he says, but at the end of the day a lot of us think those things and say those things privately. He happens to just say those out publicly. And thats not a bad thing. He doesnt apologize for his wealth. He doesnt apologize that we need to make this country a better country. And he doesnt apologize for sticking up for america. And i think thats the key. And i would say if theres any lesson in the conversations weve had over the past 24 hours here in des moines, as much as we do talk about the issues and policies that i just said, it is so much about the personalities. It is so much about who people like and who they dont like, who they trust and who they dont trust. And weve had a number of pretty fascinating conversations here, guys. Where will you go next . Which swing state, andrew . So were off to florida were going to do this every friday until the election. So next week were off to jacksonville, florida. After that were to arizona. And were actually going to make some selections about where we want to go after that depending on exactly what still is a battleground. We will see. I vote for ohio. Andrew, is it just you . Or do becky and joe also have to travel . Or is it solely you traveling the country . Its, its, its, its little old me. Oh, it is. Okay. I thought maybe i asked a tough question there. Okay. Its just you. Sorkin on the road. Well, good travels back to good old new york city. I think they call it squawk the vote. Yes. Hes apparently the only guy squawking it. Squawk the vote. All right. Im squawking it. Andrew ross will vote. Thats what it is. Hey, look, we say goodbye to andrew ross because were showing you qualcomm there and you can see it is up of course importantly in part because those talks to acquire Nxp Semiconductor or reported yesterday. And shareholder seem to be responding very positively. Theres a look at nutanix by the way. Well keep an eye on that. Thats a cloudrelated initial public offering. Well speak with the ceo coming up on squawk alley. We got a lot more ahead coming next here on squawk on the street. Stay with us. Want to get a market flash here on cognizant. Well go to seema mody. Cognizant falling as much as 15 in early trade. The i. T. Consulting company is conducting a probe into whether payments in india violated a federal antiforeign corruption act. Cognizants president has also resigned. The company has notified the Justice Department and the s. E. C. That it is conducting an internal investigation. Cognizant shares hitting a fresh 52week low on this news. Well keep an eye on shares as we progress throughout the day. Sarah. Seema, thank you. Another stock we are keeping a close eye on, Deutsche Bank. It is the story of the day, of the week really. Theres the adr which trades here in the u. S. Rebounding up about 6. 5 after a sharp selloff yesterday. And as you can see over the last year or so. We should also note that the german dax, the stock market, just flipped positive as sentiment recovers here. It closes in about an hour. So what could the global fallout be from Deutsche Bank . Were wondering the economics and Global Financial system reaction. Joining us with that is Vincent Reinhart at Standish Mellon asset management. Vincent, thank you for phoning in. Weve seen before in 2008 and 2009 when theres real stress in the Financial System, it ripples into the broader economy. Are you looking at that type of risk here with Deutsche Bank . Obviously its a risk. 2008 and 2009 was a very important reminder when things go wrong. But its also a reminder to policymakers. And so i think that they will be doing everything they possibly can to avoid the lehman moment. My other question has to do with the European Central bank. Clearly it is active. Its providing liquidity, which is helpful, but its also adopted this negative Interest Rate policy, which is very painful for bank profitability. So is the ecb making matters better or worse . I think that the last few quarters were not an advertisement for negative Interest Rates. The bank of england governor was right when he admitted he was not a big fan of them. At the end of the day the amount of reserves outstanding in the Banking System is entirely determined by the Central Banks Balance Sheet. If you decide to have a negative deposit rate, youre taxing those reserves. And in a bank centric system, taxing reserves is an impediment to the economic progress. That hasnt stopped bernanke from writing for brookings that its something we should not toss out, maybe even consider over other alternatives. Does that make any sense at all . Its probably on the list, but it should be pretty far down on the list. If you think about the conversation in jackson hole in august, chair yellen at the press conference. It doesnt really feel like Federal Reserve officials view it as a viable alternative. Its on the list because you cant rule out anything. So is there a role here for the ecb at this point . The problem is once you do something that you say is accommodative and you have support and its very difficult to take it back in terms of policy, where the ecb has a role is theyve hemmed themselves in on their asset purchases. Theyre going to have to do something soon, whether it is to change the capital key, you know, portion of different assets theyre buying across the different sovereigns, or their own selfimposed limits. Or else theyre going to run out of room for asset purchases next year. So it would be reassuring if they told us soon what theyre going to do. You know, the politics are certainly at play here. As always in europe this has become a political problem with merkel facing an election next fall, what do you think shes going to do here . One of her claims to fame is keeping the eurozone at least together and muddling through economically through what have been a series of shocks and crises. I think clearly one of the first victims in this sort of financial war is going to be a principle, ie, no bailout perhaps. Chancellor merkel has made enormous efforts, a lot of resources committed to keeping the european project together. And one would presume they will keep doing that. But they also have to protect their Sovereign National financial champion. And so theyre going to have to, you know, find a way to thread a very, very narrow needle. Certainly going to be an interesting few months ahead. Thank you Vincent Reinhart weighing in this morning on Deutsche Bank. Thank you for having me. Well have much more of course on d. B. And well head to the banks headquarters in frankfurt next. As we head to break take a look at the dow laggards for the third quarter. Exxon, cocacola and verizon. Squawk on the street will be back after this quick break with the dow up 119. 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 mobility is very important to me. Thats why i use e trade mobile. Its on all my mobile devices, so it suits my mobile lifestyle and it keeps my investments fully mobile. Even when im on the move. Sign up at etrade. Com and get up to six hundred dollars. Good morning everyone. Im sue herera. Here is your cnbc news update at this hour. Former israeli Prime Minister shimon peres was laid to rest in jerusalem. Leaders from around the world including president obama and former president bill clinton were in attendance. President obama praised peres in his eulogy. To the people of israel, i could not be more honored to be in jerusalem to say farewell to my friend shimon peres, who showed us that justice and hope are at the heart of the zionist idea. Israeli Prime Minister Benjamin Netanyahu and mahmoud abass, shared a peace prize for attempting to resolve the israelipalestinian conflict. Back here at home, Ralph Witworth pioneer in investing who sparked change at companies died on thursday after a long battle with cancer. He was the founder of relational investors, whitworth was 60 years old. You are uptodate. Thats the news update this hour. Ill send it back down to you, carl. Sue, thank you very much. Sue herera. Financials are getting crushed as the health of deutsche continues to worry investors on this final trading day of the quarter. The sector now necktigative for year. Gabrielle happy friday to you. Thank you. We hope. Were going to find out. Are we back to a period to have to worry about Balance Sheets going into a weekend, headline risk on a sunday out of europe. We would say were in much better financial and capital shape than we used to be just a few years ago. I think this issue with Deutsche Bank is symbolic of some of the challenges facing the european Financial System rather than a systemic issue we need to worry about all the way over here in the u. S. Certainly, david, theyve gotten their share of criticism all yearlong. Draghi specifically. Is this going to be a payback of sorts . Well, i do think its a payback, but maybe not the same one that everybodys talking about in the market. I really think its a symbol a bit of the stress trade relations globally. It wasnt that long ago that apple had a little bit of a tax issue over in europe and low and behold a very similar number pops out from the doj for Deutsche Bank. So, yes, its deutsche is in a weaker position and has been than many other banks, i think fed stress tests even indicated as such. But i actually see this whole story line thats developed with deutsche as much more symbolic of deteriorating trade relations, which you can trace back maybe even to our election here and some of the trade discussions that are taking place in our debates as well as in our body politic. And, david, its already starting to show up in the numbers. World trade is back to levels we havent seen since after the financial crisis. And that really takes a bite out of Global Economic growth. So how as an investor do you navigate what looks to be a higher protectionist kind of environment . Yeah, weve really looked at the brexit template and one of the biggest financial movers in the move to kind of close the uk down if you want to call brexit that, was the currency. So we think here and weve been pushing our investors along this line that if the u. S. Were to go to a more protectionist stance that really the escape valve for that move would be lower real returns on capital and a lower dollar. The u. S. Dollar is really the story for us. And it has been way back since february and march when we were talking about currency war detaunts. But since brexit and since the upped trade rhetoric weve had, the story line for a suppressed and now weaker dollar is really gaining traction for us. And thats what were talking with our clients about. You go along with that, gabrielle . Well, when we think about the trade issue and how depressed trade has been, we bring it back to the issue of productivity. Productivitys very much related to global trade volumes. So if we continue seeing such weak trade, we can continue expecting weak productivity. And as a result weaker long term growth, which has been such an issue here in the u. S. And around the world. Are there certain sectors or industries to stay away from if trade does continue to pull back here . Were not at the place where we would say that. Were just making a broader generalization about the continuation of 2 growth versus 3 and as a result were taking down longer term return assumptions for equity markets and Interest Rates as well in the developed world. But you are looking for second half gdp to be stronger than first half . We are. The first half in the u. S. Was very depressed at 1 . A lot of headwinds from inventories from experts and those are drags starting to fade in the second half. We see consumption remaining strong. Numbers this week this morning pointing to that. So were expecting a bounce to 2. 5. Hey, david, you know your way around Systemic Risk. I can remember your voice being an important one during the crisis for example. I mean, what about this argument in Deutsche Bank and these concerns that certainly seem to show themselves in the equity yesterday, perhaps not in the debt. Is it real or is it imagined . You know, i think its a lot more imagined than real. And, look, i spent a lot of time thinking about this stuff in 07, 08 and into 09 when i went back to the Federal Reserve. I think we changed the collateral system so much, we could spend a lot of time talking about it and maybe confusing a lot of people on the show, but the way the collateral markets are intertwined today is just nothing like the way they were intertwined back in 06, 07, 08 and the sort of forced selling, the repo markets, the rehypothecation, all the buzz words that were really confusing everyone at the time. And we didnt really realize how interconnected this was. All of that stuff is really been the kabosh put on it by regulators and the Balance Sheets are a lot cleaner. So i think the story line of some sort of forced selling doesnt really resonate with me. We could see, you know, capital call from Deutsche Bank. We could see equity dilution. We could see some forced mergers. We could see a lot of other ways to deal with the 14 billion fine they might have to pay. But i dont think this is one of those forced selling trades like we saw beginning with a lehman moment or any of the other things we experienced in 07 and 08. Ill let you respond to that. Have the last word. We would agree again its not a systemic issue but again it is representative of the challenges facing european financials and one of the big reasons europe has understood performed yeartodate. So we need to see improvement in sentiment there in order for europe to start pmping b inperf again. Can i just add one thing, you dont expect a weaker dollar or a lot of stress from this, do you expect the Federal Reserve to raise rates . Or does the fact this is rippling across markets give it another excuse not to next quarter . They certainly love to find excuses. And they slash their forecast for 17 and 18 by 50 basis points each. And i think that if they were to raise rates, which its very possible they could in december if the data come out okay. I think it will be one of the most dovish hikes youve seen in a long time. And the expectation for significant rate rises Going Forward will continue to be marked down or suppressed. So i dont see that as a significant driver for dollar strength. To me the trade story and lower real returns on capital are a much bigger driver for the dollar. Thats some good work right there. David, gabriela, thank you so much. Deutsche as we know is rebounding this morning. Whats the sentiment though on the ground in germany . Our Annette Weisbach is outside Company Headquarters in frankfurt. And joins us again. Annette, good morning again. Well, thank you so much. After a little bit of a panic mode in the morning when we also had shares opening up sharply lower, as we were seeing those losses have been less and less during the course of the trading day. We are soon at the end of the trading session here in germany, more or less an hour to go. And the mood in general is really sober. If you speak to people here on the street, they even dont really know what happened to Deutsche Bank. Theyre not aware about the problems the bank is actually having. Of course we have the occasional headline that the banking shares the shares of deutsche were falling below 10 euros a share for the First Time Since 1983 here in the german market. But nobody really is extremely concerned about the health or the stability of the lender. Of course inside the bank things look different. If you talk to the staff, they are concerned. Theyre afraid about the future of the bank. They are of course afraid that they might lose their job if the bank would have to restructure to sell assets, et cetera, but that sober mood in general in the German Society is also reflected in the headlines here. For example, the biggest business daily they are having the biggest headline on china. Then we have the biggest daily here, they are talking about toll roads in germany. Then we have the biggest tabloid which is actually read by everybody here in the market and they are leading with pay for two actors which are very famous in germany. So you see i guess there was a lot of panic mode, but this panic has receded. Perhaps over the weekend we might see more bad press for Deutsche Bank as the media is only digesting what actually happened. But i guess it will be more or less concentrating on the fact that there are some hedge funds from the states who speculated against the bank and not essentially talking about general instability of the lender. With that, back to you. Okay. All right, thank you very much Annette Weisbach reporting for us from germany, of course, on Deutsche Bank. Coming up, were going to speak with the ceo of the opener on the nasdaq, you can see the name is nutanix, theres a picture of that ceo. And its the last trading day of the quarter. The s p stocks leading the way. Seagate, nvidia and chesapeake. We got a lot more ahead on squawk on the street. 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. According to one top trader, there are three big reasons to buy apple stock right now. What are they . Go to tradingnation. Cnbc. Com to find out. More squawk on the street coming up. Welcome back to squawk on the street. Consumer staples standing out as one of the leading spite of s i sectors. Costco providing boost to consumer stocks improving Consumer Sentiment data this morning and a number of positive analyst notes on retail this week also helping lift the sector. Shares of spice maker mccormick, retail giant walmart and snackmaker mondolese up more than 5 . David, back to you. Thank you very much, seema mody. Now lets send it to Rick Santelli with the santelli exchange. Good morning, david. Good morning, beeterman, beeterman, beeterman, aloha. Aloha to you guys, from new york. Oh, youre in new york. Sorry about that. I want to know what are you seeing on the major sectors, bond or fixed income inflows, what are you seeing on the equity side, charles . Well, the fascinating thing and last month we saw massive outflows from equity mutual funds and not as big an inflow into etfs. So that means that people are taking money out of managed accounts and putting less back into the market via passive etfs, which really means like the same thing like the bond market, theres a hollowing out of capital available to buy when there is a downturn. Remember that markets do go down at some point when the Central Banks stop levitating everything. And when that happens theres no buying power underneath. Hedge funds have redemptions. Equity mutual funds are losing money. Whatever moneys going in is going passive. All right, now, charles, having said that, and lets remove the biggest fundamental, Central Banks, were in between meetings. We know that has a huge influence. But just on the merits of your statement, what do you think the outlook is up to the next fed meeting with regard to the level of the s p 500 and the 10year note relative to this tight range in the 1. 50 area . Well, as youve said many times money is fungible. If the Central Banks globally do not tighten, then the markets will probably be okay. That said, if it looks like the numbers that the u. S. Will tighten in december and it gets closer to december, i think well have a tough time, you know, next month, in november, if people really expect it. But you see a green light. We know its only your opinion, but the s p 500 for example, you know, if were revisiting the august ranges as most markets seem to want to do, it should be for the moment a rather positive outlook all things considered, correct . Yes. Well, the most recent actions by central bank has been to ease. Theres been no tightening globally. So right now were in an easing mode. Charles, i want to get one other topic and were running out of time. Deutsche bank, everybody wants to talk about Deutsche Bank. What does Charles Biderman think about Deutsche Bank . Let me ask you a question. Has there been any major bank allowed to go broke by its government . I knew youd get to the heart of the matter. Lehman was a brokerage firm. Exactly. So its a bit of ka boo ki theater. Theres a lot of politics in this country. Thus we not forget theres a lot of politics going on in the ecb areas, like germany. Your final comment, please. Well, i think, you know, were actually going back to flows. Were seeing no seeing outflow global, europe, american investors are taking money out of the Global Markets and the global theres a lot of concern about theres no growth listen, weve got to go. Charles, you know what i hear . I think the u. S. Is going to benefit from all of this. And by the way, congratulations. Trimtabs relaunched the flow edf. You were the first to Start Talking about flow buyback. Congratulations. Thank you for being our guest today and were going back to squawk on the street. Thanks for that lively conversation, as always. Coming up, newtannics about to start trading. Well hear from the ceo first on cnbc. The dow is up 111 points and financials are in the lead. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Today, i am helping people work better. And also feel better. I am helping hospitals personalize treatments using billions of data points. And working with medtronic to predict the highs and lows of diabetes, hours in advance. And i am working with orreco to use Biomarker Data to boost the performance of athletes. Hello, my name is watson. Working together, we can outthink anything. The super rich are going to vote republican, right . Well, not this year. According to the recently released insos affluent survey, among those making the 250,000 a year, 53 plan to vote for Hillary Clinton. Just 25 are backing donald trump, and surprisingly, 14 are still undecided. Joining us at post nine to help break down those numbers is ipsoss chief executive officer, steve krause. You look t as these households making 250,000 or more and more than half support Hillary Clinton, even though she wants to tax them more. Thats correct. We look at a group we call the ultra affluent. Thats the top 4 of the country. They hold 48 of the net worth. You might think of them as skewing really, really republican and we dont see. About half will vote for hillary, one out of four for trump and the other one out of four are going for gary johnson or saying, i dont know yet. Do you get the sense that the why is theyre doing something other than thats best for their own finances. Even a majority of the wealthy hillary voters that we talk to believe that their own taxes are going to go up and they feel its the right thing to do. Its particularly interesting if if we look back a couple of months, we saw these ultra affluent were evenly split between voting democrat, split between hillary and bernie, and the other 50 were split between the three republican candidates, trump, cruz, and rubio, at the time. Since then, as the election has sort of evened out a little bit, hillary picked up all of those bernie voters, whereas trump only picked up about half of the cruz and rubio voters. And they instead went to . Either gary johnson or saying theyre still undecided on what theyre going to do. Do they express any concern at all about the penalties theyll pay in additional taxes . Or is it outweighed by social concerns . They feel that raising taxes on the wealthy is the best thing for the country at this time. And their concerns about trump run the gamut from concerns about his judgment, lack of experience, and quite importantly, feeling that trump isnt really grounded in conservative values. I would assume most of these people are also College Educated and i know a lot of the polls show similar numbers, at least, when it comes to that group in terms of where they fall. And certainly if you look at a lot of the trump support in the general population, it comes from lowerincome, lesseducated consumers, as you go up and up in income, you get a more educated consumer. Is there any correlation that the wealthy actually determine what happens in the election . I mean, usually, yes, they give a lot of money in terms of ads and that helps, but everythings being turned on its head during this time. Certainly, the wealthy do give a lot of money. The wealthy also vote, in much greater numbers than the general population. Are much more engaged with the political process. Finally, do you expect these numbers to vary, move around at all in the next 39 days . I think if you look at the really wealthy, theyre pretty set at this point on who theyre going to vote for. Steve, thank you for joining us with the results of your latest survey. That is steve krause from ipsos. Up next on squawk alley, well speak with the ceo of that highly anticipated ipo, a key litmus test for tech ipos, nutanix, first on cnbc. The dow is up 125 points, s p 500 rallying more than half a percent. Well be right back. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Good morning. It is 8 00 a. M. At salesforce headquarters out west, its 11 00 a. M. On wall street and squawk alley is live. Good friday morning. Welcome to squawk alley. Jon fortt with me at post nine along with sara eisen, who joins us for the hour. Sara, good to see you