Started arresting protestors ahead of the Third Straight weekend of protests in Hong Kong Shanghai composite finishing the day in red european european equities here we are higher across the board german dax is up by almost 1 and almost 1 gains in france as well as for treasury yields, amazing to think that the ten year yield was at a three year low earlier this weekend 1. 443 were now at 1. 526 with the two year 1. 544 so the inversion remains exact. A new journal piece says that states attorney generals are taking issue with that proposed opioid deal with purdue. It will settle with a 2 billion settlement it will link much of that with future sales of oxycontin. Some states want the family itself to guarantee a larger cash payment up front. Others didnt like parts of the plan that calls for purdue to claim bankruptcy and emerge as a Public Benefit company theyll ask for an update today about where negotiations stand, he said he wants at least 35 states on board although a deal can move forward without meeting the threshold. As part of the deal to buy fox, disney sold its stake in the yes network to an Investor Group that includes amazon they required the 80 stake of yes that wasnt already held by the yankees. It was valued at about 3. 5 billion chinas version of uber is preparing to launch a robotaxi service. Users in shanghai will be able to hail Driverless Cars from the app. The vehicles are designated as level 4 which means they have a high degree of autonomy but a human back up drive could still take control if necessary. Didi didnt say when the Pilot Program will start. In every county in florida theres a state of emergency as we prepare for what may be the strongest hurricane to hit that state in nearly three decades. Catlin joins us now with more. Good morning good morning. Were continuing to keep an eye on dorian. A category 2 storm with the sustained winds at 105 Miles Per Hour currently sitting at 260 miles east northeast of the southern bahamas now it will continue that north westerly motion as we head throughout the day today but then High Pressure will build to the north and that will push dorian farther west toward the florida coast as we head toward the start of next week that being said, there is still a lot to be determined and exactly when and where we can expect landfall if we can expect landfall theres still a few scenarios that keep dorian out to sea a bit longer it will continue to push toward florida. The bahamas under the gun as we head through the second half of the weekend as well. So lets talk about the latest and what we know new this morning. Now hurricane watches are in effect for the northwest bahamas they are expecting it saturday and sunday dorian a category 2 storm, expected to become a 4 before possible landfall early next week and theres still multiple scenarios in play. What you need to know if you live in florida, the time to get a plan in place is now thats the latest on Hurricane Dorian, back to you. Thank you well be checking back coming up, the new developments of hong kong overnight as a pro democracy activist and weekend protests were cancelled. Well take you live there. What is this four Straight Days well be above where we were in the averages when the latest round the latest trade war were once again back closing and not that far from all time highs. We head to break, heres a look at the biggest premarket winners and losers were talking specifically about the dow. Kevin, meet your father. Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin Kevin trusted advice for life. Kevin, hows your mom . Life well planned. See what a Raymond James Financial Advisor can do for you. Introducing a razor that works differently. The Gillette Skinguard has a guard between the blades that helps protect skin. The Gillette Skinguard. Was in an accident. When i called usaa, it was that voice asking me, is your daughter ok . Thats where i felt relief. Were the rivera family and we plan to be with usaa for life. See how much you can save with usaa insurance. See how much you can save that could allow hackers devices into your home. Ys and like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. A very highly anticipated protest this weekend protestors remain defiant and they say theyre going to turn out to the streets regardless. That raises even more conflict between police and protestors. Protestors last weekend resorted to throwing bricks and cocktails. Police for the first time pulled out the water cannon and fired a warning shot into the air and even pointed the weapons directly at the protestors now all of this is unheard of. Hong kong instability and order. Ominous distinct for the protest taking place here in hong kong in fact, now everybody here is asking how will these protests end . In violence or in peace . Melissa. Chris, thank you. At least right now, who knows. Anyway, stocks push higher on this and i dont need to go into what happened, right its the only one set to end the month in the green utilities, real estate and Consumer Staples are worst sectors, Energy Financials and materials. Cio, cetera. And president and cio at nation shares, our guest host this morning. I saw something in the notes low Interest Rates are good for stocks, are they not earnings are great for stocks and we had a really good earnings season. We had a nice quarter. Most people expected to see Earnings Growth and they would say earnings arent growing. Were having a couple of great years. We had a little bit. The problem is the other 10 of the equation its not trade of whats going on in hong kong or dorian. Overtime, you have to, you know, get through the week you know who they are look at them and one guy in particular, one where the s p is 180 one where the s p is kind of flat at 165 of earnings and one where you see a 10 or 15 drop a you have a wide range of where it could be by the end of the year. The problem is how much lower can rates go we dont want to see it. And more easing. Nobody likes whats happening but we just keep moving along. And you think the fed does continue to ease is that your view . We think so its obviously very important. Everyone hates this economy. No one believes in it but in our opinion its going to muddle along for a long time. See think about who hates it you have Bond Investors pushing yields lower and inverting the yield curve. Look at Equity Investors throwing volatility much higher and even commodity investors are doing economically insensitive trade by buying gold and selling copper even the fed think about the fed. They sprayed raid on this cockroach economy nine times in the last three or four years and now they dont believe its going to last. Were worried about the fact that the fed funds is trading higher than the treasury thats something that suggests that the market wants more rate cuts than the fed is really talking about. So you are saying, youre getting ready to pop out and were not there yet. Yeah. Remember, joe, we talked about being cautiously optimistic. One thing that were watching, volu volatile ti voltai volatility is super dovish were just cautious and telling our advisers clientds to really look to take some profits. And its a 6040 investor. And stocks 17 in bonds. And diversifying and up 10 this year and within fixed income fixed income is your safety of a portfolio but yields have been so low for a long time everyone has been jumping in with high yields. A lot of the things that you cited in terms of where we have negative yields, the rotation from industrial medals to gold, all of those things point to a slowing Global Economy at some point doesnt the u. S. Economy get hit by a slowing Global Economy and with tariffs go into effect on midnight on sunday, shouldnt corporate profit numbers be adjusted accordingly at least for this Third Quarter. Well, i think they have already. Of course we have gone from basically 3 growth a year ago or so to about 2 right now and when you look at the details, exports have clearly weakened and we have been seeing slightly negative export numbers and along with that manufacturing section is weaker but the overall economy while slowed has obviously not collapsed. Thats where we are. And Going Forward, if theres enough of a hit to confidence broadly and equity markets then that could drag us down a lot lower but as of now, trade tensions remain a bit of a drag, Global Growth remains weaker but it hasnt completely collapsed then we could continue to get more of the same of 2 type growth which would be consistent with what you have been saying there but for sure theres vulnerabilities here and with the trade tensions and with the global numbers still being on the weak side. Scott, how do you assess how we enter the month of september . Unfortunately we know that volatility is lumpy. It gets volatile and stays volatile for awhile. Well have to put up with that we do have good news on the trade front. The spokesman for the Chinese Foreign Ministry Today earlier today said some things that sounded conciliatory that theyll continue to talk. Right now thats all the market wants is for them to continue to talk. Were going to end it there keep saying lumpy. Thats what happens when you get to our age, scott. You go back i wish we had pop up video so that we can have the definition of things that youre talking about. Because half the time, i think people have no idea. You can be a little bit hard on jerry mathers. Oh. Leave it to beaver. Now i remember so you do remember . Well, its not like the forefront of my brain. A lot of things going on. You didnt know about that . You should have known. Maybe i missed that good response the question is, did eddie haskel was he a cop or a porn star thats the real question anyway does one procollude the others no, there were rumors that there is a policeman. I dont know if hes happy with how he spent his life or not. How about you . Are you good thank you, youll be here for hes like keep me out of here when is this hour over thank you. Well tell you how tariffs and the falling yuan are taking a toll on tesla, thats next at fidelity, we believe your money should always be working harder. Thats why, your cash automatically goes into a Money Market Fund when you open a new account. And fidelitys rate is higher than etrades, td ameritrades, even 10 times more than schwabs. Plus only fidelity has zero account fees and zero minimums for retail brokerage and retirement accounts. Just another reminder of the value youll only find at fidelity. Open an account today. Introducing a razor that works differently. The Gillette Skinguard has a guard between the blades that helps protect skin. The Gillette Skinguard. Its more than 2 . Its currently all cars it sales in china its estimated that it sold more than 23,000 cars in china through july tesla is building its first overseas factory in shanghai its due to start production later this year. The Company Expects to build about 3,000 model threes a week. Marvell technology. Shares are down sharply. Second quarter profit in revenue topped estimates on strong sales of Network Equipment but the company sees Third Quarter revenue falling below forecast as the u. S. Ban on selling parts to huawei hurt the chip maker. The ceo said they also anticipate a worsening Macro Economic environment shares of Semi Conductor company ambarella are surging. The Company Reported better than expected earnings. The outlook is strong despite Geopolitical Uncertainty coming up, more big stock do you want me to sing it yes, please. I called your bluff. Anyway, we got more movers to talk about well tell you about cosmetics you know what im talking about. Do you see this . Ulta. Do you see the percentage loss 20 in the after hours yesterday. You dont want to get up today. It is, okay computers in a Discount Retail right after the break and then later, Jeff Sonnenfeld will join us to talk about trumps trade tactics and the push back from ceos as we head to break heres a look at yesterdays s p 500 winners and losers through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From finding out whats selling best. To managing your fleet. To collaborating remotely with your teams. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Great riches will find you when Liberty Mutual customizes your car insurance, so you only pay for what you need. Wow. Thanks, zoltar. How can i ever repay you . Maybe you could free zoltar . Thanks, lady. Taxi only pay for what you need. Liberty. Liberty. Liberty. Liberty. They do this. Thats chicago this is the syrupy sweet, they started with great promise i dont know if you remember we had gene goldman from there thats why were doing this. Anyway no i appreciate it i think its fun we all i like it. Its friday its labor day, right . Labor day weekend, yes. Dont come to work on monday. Do you know what that means its a four day week next week so not only do you get monday off and the three day weekend, but you also only have to work four days. Thats how it works. Thats the best but instead of a friday off. Id rather have a monday off. Good morning. U. S. You too, right u. S. Equity no, i think you like working 8 hours a day or 6 hours a day. How many are you doing today . Three shows today. Doing three shows today. You could have said no. No, i cant say no. Why would i say no. Its why were here, right . Thats why were here to be on tv u. S. Equity futures at this hour are indicated up about 190 points after yesterday kept Getting Better and better and then the day before, we made up all of those losses from last week and the trade war is not settled so figure that out everyone that thinks that the market is ive had people say that the trade war has ruined the economy and ruined the market and they point to the market he wrote the editorial the market isnt down. The market is off from its highs, what . 2 yeah. 2 . Ultra beauty shares are plunging after Second Quarter results missed forecasts the cosmetic retailer is cutting its profit outlook and warned shares will slow this year citing a drop in the sales of Color Cosmetics. Shoppers spend more on skin care and other products so thats an 82 we have seen this trend before in the other sort of cosmetic makers, cosmetic retailers. The troubling thing is that the ceo said the trends in terms of buying cosmetics because there arent any big trends right now, fax trends is that things got worse in the past few weeks. So thats what you dont want to hear you dont want to hear things got worse in the most recent few weeks of the quarter so were seeing that. Its been a heck of a now, where are they are they in malls or is it a different than sephora do you know . I believe theyre in malls and trstrip malls. Got nothing on this you got the fed. How is the fed effecting is the yield curve effecting ulta well, ulta, im not sure. I want to buy a consonant and make it ultra. We already have retail sales data between q2 so thats strong and this morning were going to get personal income and spending for july and pretty strong Consumer Spending number for july and despite that the numbers on the consumer side are pretty good. Thank you, jim, well talk to you more in a second Second Quarter earnings beat forecasts on higher demand for desktop computers. Lower demand across industries in china but it offset that by focussing on higher margin deals in the country a new journal report says activist investors are circlie groupon pushing for a stock buy back or sale of the company. Investors and outside groups have been increasing their positions or aligning to gain influence. Company stocks have been declining since it hit an all time high of 26 just two weeks after it went public way back in 2011 a far cry from there. 2. 57. You cant can you margin that you cant margin the 2, though. I mean, im not recommending that. Its getting closer by the day. Right. Coming up, 300 billion worth of chinese imports are set to go into tariffs on 300 billion of chinese imports set to go into effect on sunday well get you up to speed on the latest in the trade front. Stay tuned youre watching squawk box on cnbc want to freshen your home without using heavy, overwhelming scents . Introducing febreze one. It eliminates odors with no heavy perfumes, so you can feel good about using it in your home. For a light, naturalsmelling freshness, try new febreze one. Welcome back, u. S. Equity futures at this hour are sharply higher indicated up triple digits again 186 points on the dow after a good session yesterday on thursday and the day before. The s p indicated up over 20 nasdaq indicated up about 54 treasury yields backed up a little bit today and its probably a little bit of strength overall. They look like theyre heading negative over in europe. So today were as you can see theres a little bit of inversion and basically pretty close. 152 on the ten year, 153 on the two year front and center, the latest rounds of tariffs are set to take effect this weekend as china is on track for the biggest monthly fall against the dollar in more than 25 years eunice joins us now with more. And maybe, you know, tell us the latest that you know about whats happening in hong kong and how you see that potentially playing out as well this weekend here. I think ill start with the tariffs now going to hong kong but for the tariffs, were just two days away before the new tariffs kick in. On sunday, a little bit after midnight, eastern standard time, the u. S. s tariffs, its about 15 , its a 15 tariff is going to hit 125 billion worth of chinese goods. China is going to add an extra 5 to 10 tax to their First Tranche of 75 billion worth of u. S. Gods including bsoybeans the Foreign Ministry hoped the u. S. Would show sincerity with real action and thats interpreted as chinas way to make another call for the u. S. To end the tariffs now, the yuan is also headed for the worst month since 1994 it dropped by 3. 7 in the month of august and there are signs now that the authorities here are getting more nervous about the weakness there was a report in the nikkei that suggested that banks are being told by regulators to put in some more restrictions for their foreign Currency Conversions involving it and also that Real Estate Developers have limited their access to foreign currency bonds now separate to that with the hong kong police, they have now confirmed that they have arrested three pro democracy activists. One of them is a man named joshua wong who was known as one of the key organizers of the Umbrella Movement in 2014 which involved mass demonstrations and state media have been accusing his organization of ruining hong kong and has been calling him the activist that creates chaos in the city. Today here in china we also saw news outlets playing more videos of police drills along the border in hong kong. Sending that message again that beijing is ready to step in if it needs to. Now the Hong Kong Government has said they have everything under control. But of course this comes right before a massive protests were scheduled for this weekend and the organizers called off those protests because they werent able to get the proper permissions yet to have those demonstrations but they are vowing to continue to fight, to try to get more of those permissions in order to get their voices heard guys you wonder, are they really drills in case something happens, or is it ashow of force to send a message . Hopefully its the latter, i guess, right, eunice yeah. Well, theyre definitely drills but we dont really know the purpose, you know . Like you said, it could just be a show which is what it looks like, just a way to scare the protestors but, you know, its difficult to say because were not there. Now another story that was actually late breaking guys that is pretty interesting and involves the temperature of whats happening with government is that beijing expelled a wall street journal reporter, this just happened in the past couple of hours where all day today we were hearing within the Foreign Press corps rumors that one of the wall street journal reporters, he is a Singapore National that he might get kicked out of country and its because he wrote a story about president xis cousin and some allegations of gambling as well as potential Money Laundering in australia by president xis cousin so the wall street journal had confirmed that the beijing authorities have not renewed this Reporters Press credentials and those press credentials expired today. So he is leaving and as you guys could imagine, there are a lot of sensitive topics to talk about in china but to write about the financial wealth of some of the top leadership, especially president xi jingping is seen as a very taboo topic. So he will be leaving today. Cartoon characters. That gets them mad you can only imagine what this would do. Yeah. I just wonder what if there is a time when they just say all right, enough. Im wondering what would because it seems like theyre able to manage it now without without really, you know, showing the entire world what theyre capable of i dont think they want to do that, right . And then theyre going to keep pushing until i mean, they seem to want to force their hands. So i dont know how it finally quits down yeah. No, its actually gotten tighter and i mean, we have been talking about this for awhile. Theres also a big important event thats coming up the 70th anniversary of the founding of the peoples republic happening on october 1st. So in the past couple of days everybody has been starting to complain about the challenges on the internet this is probably going to continue for the next month. Its very common when we have the major events that are happening in china because the government wants to clamp down on any potential well, pretty much anything that could be seen as disruptive. And one other thing, joe, that when youre asking me before about the implications of why the government here and the state media would be describing these activists in such negative terms, again, its a way to try to dismiss them and say that this is a tiny part of the population because the whole idea that upstanding chinese citizens who have jobs and are very thoughtful could potentially go against the communist Party Something that is the communityist party thinks is unheard of and they dont want that narrative out there. Great thanks, eunice well see you on monday, sorry yes. But this is on us its not on you. Tuesday. Tuesday well see you. Right have a great week. All right lets talk more about the impact of the u. S. China trade war on businesses here in china and bring in the tuck school of business professor for the impact on china and on the impact of the u. S. Companies, we bring in zach cooper great to have you with us. Ill start off with you. Eunice outlined all of the things that the Chinese Government is dealing with right now. It certainly has its hands full but in terms of the impact of the trade war, whats the most immediate threat in your view to the chinese economy. Is it the impact specifically of tariffs . Is it currency and potentially losing control of that what is it in your view . Well, in my view its the strain its going to cause on the chinese Manufacturing Sector its probably already feeling pain at this point, Real Time Data on how the manufacturing firms are performing, on labor market situation and the Manufacturing Sector, thats actually really hard to come by from china on a regular basis. But theres definitely feeling the strains. And definitely there would be concerns that this could spill over well factory owners evaporate. Manufacturing firms closed down. Its often accompanied by lay offs or workers being asked to work without pay and thats not a great situation to have on the ground. Are there things that the Chinese Government can do to offset the pain felt in the Manufacturing Sector today there are reports that in shanghai there could be tax cuts and that the Chinese Government is planning other free trade zones around china could that help offset the pain in terms of manufacturing jobs potentially leaving . Oh, absolutely. I think Chinese Government will do whatever it can to try to cushion the blow the trade war between the u. S. And china, the tit for tat in terms of tariffs has been grabbing all the headlines they have been lowering the tariffs that theyre charging to nonu. S. Exporters so basically u. S. Exports to china have declined, exports from canada and germany to china, those have been going up to step in and fill in that void theyre doing whatever they can to cushion the blow. Whats your take on the impact of the u. S. Economy a lot of economists out there will say, this percentage of tariffs and thats the impact. What we have seen is the impact is on business spending and confidence and et cetera other measures that may not be hard measures in the u. S. Economy. Thats right. A lot of people felt that the first 250 billion in tariffs hasnt had the effect that they expected but i think the last 300 billion is going to be much more important its going to effect consumers much more directly so i think we should expect to see some real concern among the consumers over the next few months this is why the president s team didnt want to put these tariffs into place before the holidays. We heard so Many Companies though already say that consumers wont pay a price increase for the goods and so isnt it really Corporate America that will bear the brunt . If thats the case, is that less of a blow to the economy than if the consumers actually paid . Or does it not matter . They might be right but the president is quite worried about what happens with the stock market you can see it in just the fac that he announces the tariffs on a friday night and then backs off of them before monday morning when the markets open last week. So i think the president and the white house, theyre watching the stock market as much as theyre watching Consumer Confidence and even if its companies that bear the brunt theres still going to be real blow back here in washington. Can the president be the backstop to the economy then well to start with at this point hes pushing and pushing and pushing and the stock market hasnt broken it threatens to break but that remains the big threat i agree, these tariffs on their own are still pretty small theres the question of whats the direct effect on the economy and this is a tax on the u. S. Consumer but youre talking a tenth or two tenths of a percent of gdp so its not a devastate blowing but the question is on the indirect side, but i mean, so far its not been devastating and the stock market is holding near its high but obviously we are vulnerable here. David and zach, thank you for. John for joining us. Coming up, what appetite will investors have for another major loss maker well dig into the companys numbers next as we head to break, heres a quick check of the currency this morning. Stay tuned well be right back. Anyway, brought it on myself more chicago more peterpeter. And a road show. How long will theless have to work to convince investors the companys a good investment. Joining us, getting into some of the specifics, i think, with peter in a second, kathleen. Overall, in terms of what weve seen with some of the hot ipos that are many losers, another one. Isnt it its a bad sign weve studied the most moneylosing companies that have gone public. The most that lost money 12 months before theyve done their ipos weworks second after uber. That list of companies, ten most moneylosing have all done poorly for investors we look at wework. Call it we work, we spend. What it looks like to us i feel investors will be very careful about evaluation uber trading 30 below list price. Lyft, 25 below. Investors looking at these will know that cant happen. They must understand that underwriters and the company itself, must understand that theyre not going to get a big the latest valuation round is 47 billion. How do you how are they going to price this when the last private round valued the company at 47 billion its hard to figure out that would make any sense. Do those dismal returns change over a longer period of time as opposed to months after the ipo . Well, still, if you start at a high value its jut harder. The Company Takes so much time to get to that. They need to price this correctly. So, peter, with their business model, i mean, reading your article, they need to make all think of space like instagramready . Right . Plans, expose bricks, millennial inducements and things and thats expensive. It s. Theres a reason theyre losing money we understand it to build out this business. Right . If its understandable, does that make it okay . I mean, yes but its a question of for how long and whether or not ultimately the returns can be earned on it so, you know, as reporter, i mean, i knew this ipo was coming up, there would eventually be a document out there showing some of the financials. So before that came out i spent a lot of time talking to real estate people in new york, particularly people in the business of shared spaces, its called you know, i kind of got a sense of what i would want to see in this document and i looked at it and some of its there, to be fair, but, like, a lot of it isnt. Thats why i wrote the piece that came out yesterday. Heres a bunch of things you would really want to see. Go into some of that. Be aware of the individual places not just an aggregate number. What you want, a rival group called iwg each quarter or each half they put out an Earnings Statement and it shows you what theyre making at the location level on their more mature properties versus younger ones. In asia versus the u. S you know and its incredibly useful detail, because the older ones show you what the business can make once up and running thats the big question hanging over wework. Is this growthrelated costs or can they actually make money when theyre all kind of 15year leases and people going in for like a little under two yes. So and no per capita number on how many of there. People waiting in bathrooms, elevators, in a crowd, cant get a private room to work in, thats and you pay extra for the extra rooms often and these are things that add up and erode the experience people have in these speci spaces they look very nice but too crowded for people to be productive no way to gauge that thats the point. And not talking about mr. Neuman. And how were doing a slowdown how that would be. With 15year leases somehow were out of time, kathleen im sorry. We are. But thank you for telling us, to at least be aware of whats going on. Be aware. We also thank our guest host this last hour thank you very much. Yeah, thank you. Talking about whats moving the markets next and chief investment is joining us so stay tuned to squawk box on cnbc. Futures getting a lift this morning after some trade discussions yesterday. Break down the latest on the trade war straight ahead. Prepping for dorian the destruction, a major hurricane set to hit the east coast of florida. The latest on the path and the days ahead coming up. And the countdown of the september fed meeting is on. We preview the possible rates and arrows and discuss the global showdowns the second hour of squawk box begins right now. See you in september announcer live from the beating heart of business, new york, this is squawk box. Here we are bye, baby, goodbye dont talk about that sorry. Good morning, and welcome back to squawk box. I wish we could here on cnbc im joe kernen along with melissa lee, becky and andrew are off. Instudio remainder of the show saddling up to the desk, right, joe . Saddling. Hohum. I like that what is that i like that verb, though, when you sidle. Chief investment strategist, welcome. Thanks for having me. You get two hours we thought about this. Yeah. Day before Labor Day Weekend a good one for the both of you so so kind. Youve written down some stuff that hasnt been said before by strategists here i got notes watching all morning long, all day yesterday. Yeah. If you say cautiously optimistic youre leaving the set. He has a caddal prod. Not saying cautiously optimistic just scratched it out. Anyway, u. S. Equity futures at this hour up just under 200 points on the dow. The s p is up 21 and change, and the nasdaq is up 57 points heres whats making headlines at this hour General Electric won partial dismissal of a shareholder lawsuit. The suit accused ge of frauch lens in concealings 24ds billion in insurance liabilities the judge game the shareholders permission to amend their complaints the month of august concludes with a handful of economic reports in less than 90 minutes, Consumer Spending and later this morning the purchasing index out along with the university of michigan final august Consumer Sentiment index. Yet another retail stock is jumping after an upbeat Quarterly Earnings report. Big lots the Company Earned 53 cents a share after its latest quarter 13 cents above estimates and confident it would be able to navigate through tariffrelated head winds big lots reported lower than expected comp shares shares surges by about 12 now. A developing story well watch this weekend and into next week, Hurricane Dorian is expected to become a category 4 storm with winds reaching 140 miles an hour before making landfall on floridas east coast. President trump canceled a trip to poland because of the storm many cruise liners are expected to change routes heading into the busy Labor Day Weekend, a great day for airlines and yesterdays session. You see this performance year to date. Dramatic new developments overnight in hong kong as key demonstrations have been canceled and several important figures in the movement have been arrested. Nbcs reporter is on the scene in hong kong this morning. What can you tell us, chris . Reporter thats right. Here in congress kong, a city that has been shaken by violence and now authorities are responding to that canceling a very key protest here expected for tomorrow now, this comes in response to escalated conflicts between protesters and the police this past weekend we saw protesters hurling molotov cocktails, those are gasoline bomb, and bricks in response to we saw the police use a water cannon for the first time and shot a warning shot into the air and pointed weapons at protesters in response. Now, all of this is just unheard of in a city like hong kong which prize itself for stability and for peace. Its also unheard of in china at large, which hasnt seen a challenge to its authority of this nature since 1989 thats when protesters moved on Tiananmen Square and an ominous distinction considering those protests ended in bloodshed. However, protesters here say they have not been deterred and will march regardless. We are pinning ourselves for a showdown between protesters and Police Forces and the big question on everybodys mind is, how will this end . Will it end in peace or otherwise . And will tomorrows protest be the time in which beijing decides enough is enough. Back to you. We were just actually talking about that and wondering how things play out, chris thank you, and we appreciate your reporting over there are and will check back as we can. The countdown, meanwhile, is on sunday, september 1st when additional tariffs his chinese imports. Welcome Heritage Foundation trade economist and a former Morgan Stanley asia chairman now with yo university is author of unbalanced the codependency of america and china. And thanks for joining us. I havent read it yet. I apologize. You havent sent me a copy, autographed or anything like that, but when you talk about unbalance, are you conceding that we get the short end of the stick with china or whats the bake thrust there . The basic thrust, joe, and im crushed to know you havent read the book, but i need a copy i cant listen, ill get is there an audio copy yeah. No ill read it to you personally, joe. Second prize, do that twice for me thanks so what about what about it tbasic thesis is we both depend on one another. China certain depends on the u. S. For its largest external market, for its exportled economy, but we depend on china. Its our Third Largest and most rapidly growing export market, as President Trump fails to understand there are maare theyre a mar buyer of u. S. Treasuries and provide us with lowcost goods that American Consumers apparently need to make ends meet the idea that its a oneway relationship we have all the chips and china is hurting is not really one thats consistent with at least the arguments i try to make in the book. The one thing that ive, like, been positing recently is what a, you might play this song next what a Wonderful World it would be if both countries could see past with the current disputes and symbiotically it should be a really great relationship in the 21st century, should be one of the greatest, and china a lot of people that would like to increase their their standard of listving and over here obviously we need a big trading partner and would like to satisfy the Consumer Needs of china, and so it could end up great, but do you concede that china has certain concessions that it needs to make so that we feel not unfairly treated in terms of i. P. Theft and able to do business on a level Playing Field . I dont think ive ever gotten you to concede that before no, i dont think you have either, joe, i agree with your Wonderful World thes thesis there is tremendous opportunity if both countries would deal with each other fairly and take advantage of the needs both have for one another. China, for example is building a servicesled consumer society. It will be the biggest source of new demand in the world in the 21st century shame on us if we dont get a stake of that and birth that into a Growth Opportunity for us theres a lot of talk and ive engaged in a debate on your show before. With all three of you. Over the allegations of intellectual property theft, forced Technology Transfer and the point ive made repeatedly in looking at these charges very carefully is that the evidence that the u. S. , u. S. Trade representative Robert Lighthizer has presented to lay out these charges would not stand up in a u. S. Court of law. The flimsy evidence, and its based on innuendo rather than hard, cold facts. And you think the currency, you know, where it is i mean, there are parts of the middle of the country that obviously have been decimated its not all chinas fault, obviously, but there are steel dumping. Got to be something. Anyway, joes idol. Warning joes idol, a question do you think were likely to get a resolution before trumps reelection in 2020 i dont joe, i think, theres still a chance that well get a deal, but certainly dont count on something before this october, the first 70th anniversary of the founding of the first peoples rub pick of china. Theres no imminent detail china likes long and arduous negotiations and are more than prepared to go back to that. The framework we had that fell apart its a nonstarter for china. Let me get in tory. Sorry. I fknow youre at a Heritage Foundation and not even going to say the t word i know how you feel about that so as quickly as we cannot use that method to try to change behavior, the better, as far as youre concerned tariffs . Absolutely correct. Tariffs are taxes. Our motto at the Heritage Foundation and has been really for decades. Wa were advocating is for the president to address our concerns with china, which i think some of them are legitimately pointed out with more effective means so Treasury Department sanctioning individuals and companies that violate u. S. Intellectual property laws, taking more cases to the World Trade Organization where we win most of the time and the u. S. Government verifies that china change its behavior. More ways to address issues with china including negotiations without taxing the American People so you know, in less than 48 hours the tax burden on American Families is going up about 100 per family on sunday thats unacceptable. I understand that heritage hates taxes. So you dont want to sometimes what i dont understand, i mean, the left loves taxes. Anything we want to effect socially, hey, theres a tax for that this could be a really legitimate longterm sort of viewpoint to try to get, bring china you know, steve disagrees, but bring china into the real world in terms of fair trade i dont know why the left can see, maybe thats a good use of tax dollars to try to get a fair Playing Field for such a huge relationship that we have the problem is its an ineffective method. What tax isnt . What tax isnt that the federal government solved something with thats usually the case but in this scenario i think theres a significant misconception by the Trump Administration they believe these tariffs are taxes on the chinese thats absolutely not the case theyre taxes on american businesses and American Consumers. And that at the same time american taxpayers are footing the bill for additional susubsi hurt as a result of retaliation. Its really bad on both sides. If you wanted to address these issues with china do it headon and really just get it with a scalpel and get right at the problem. All right. I dont think were going to solve it today theyre going on either way. Well check back with you, though i knew what you were going to say and Stephen Roach, fair and unbalanced. Thats not the saying is it, stephen . Its actually fair and balanced. Is my book in the mail do you know what happened . No. I think you received three copies, joe, but you get so much mail that you never really open the book next time i see you in person i will personally deliver a copy ill read ill read the conclusion to you also. Okay. All right. I thought, stephen, you would read the whole book to joe i thought that was the promise joes really looking forward to that. And to his attention. Limited attention span. I noticed youve noticed youve seen the show. Once or twice. I want you to start thinking about what you say. When you write in the little page you write something to me and i dont want it to be you know, some ynical, sarcastic thing evening peither. I want it from your heart, roach. Okay always from my heart, especially to you. Thank you. Coming up, the new york yankees teaming up with amazon and sinclair to buy yes from disney futures, closing out the month of august with gains across the board. S p 500 looking to open 20 points higher. Youre watching squawk box on cnbc. Moving is hard. No kidding. But moving your internet and tv . Thats easy. Easy . easy . Easy. Because now xfinity lets you transfer your Service Online in just about a minute with a few simple steps. Really . Really. That was easy. Yup. Plus, with twohour appointment windows, its all on your schedule. Awesome. Now all you have to do is move. That thing. [ sigh ] introducing an easier way to move with xfinity. Its just another way were working to make your life simple, easy, awesome. Go to xfinity. Com moving to get started. Welcome back to squawk box. Futures open higher across the board. The final trading session in the month of august and its been a tough one for stocks s p 500 looking to open up by 20 points dow looking to add 180 nasdaq looking up by about 54 points in terms of sectors that have done the worst in the month of august, get this. Energy energy had the worst august since 2011. Thats not great for a for a Global Growth check. Right . I mean, if tell you, that other saw other other people mentioning if it was really bad the growth picture for the globe that oil would have even performed worse nap its been kind of in a manageable trade. Tensions in the middle east with iran. So thats sort of putting a floor underneath right now but were over here just pumping it like were the biggest producer around. Right . Aramco interesting, too anyway, part of the deal to buy fox disney sold its stake in the yes network to an Investor Group including amazon and sinclair. The group acquired 80 stake of yes not already held by the new york yankees valued at 3. 5 billion. Coming up, its been a hot summer for the ipo market but as the weather cools will the number of companies coming into the market do the same discuss after the break. Squawk box, coming right back. Announcer time now for todays aflac trivia question. In what year was the electric selfstarter patented for a car . The answer when cnbc squawk box continues. Hing . No, we still have bills. Aflac gives you money directly to help with those. Aflac and your deductibles, knee brace, whatever you choose. Aflac sounds like a winner. Umhum. Umhum. We try. Get help with Expenses Health insurance doesnt cover. Get to know us at. Duck aflac dot com announcer now the answer to todays aflac trivia question. In what year was the electric selfstarter patented for a car . The answer 1915 tesla popping up the market 3 3 4 news crossing the wires china exempts 16 tesla models according to a statement of industry min strags of technology some china sales taxes exempt. All of tesla cars sold in china are in fact imported this, of course, until they get their shanghai plant up and running expected sometime next year again, this is good news for shares of tesla up by almost 4 . It has ban hot summer for ipos and still a number of companies expected to go public before the year is out including peloton and the wii company. Gray croft is invested in the wii and the real reel. Great to you have with us. Thanks for having me. Interesting about small direct is that its closest comparison is align technology which makes invisalign product as a stock its been a terrible performer for the year and for the past 12 months why will smile direct be more successful i think smile direct club is actually one of the reasons align has been down so much. They settled with a Consent Decree disagreement they had and its been very advantageous for smile direct club where essentially align wont be able to compete with them for several years on the direct consumer business and align was the original innovator in the space creating clear liners but today smile direct has really reen visi reenvisioned whats possible in the market and this market is just getting going walk around the streets of new york, you see most people have some sort of maltugs, crooked tooth or whatnot and this will revolutionize the space and get better. Is this true . Yes. Really . If i start looking i think so. I think the stat is 82 of people have a malocclusion a cooked tooth i wrestled as a kid and i have a chipped tooth. And madonna you own it. Like lauren hutton, im okay with it. Can i keep it . Braces are 8,000 with an orthodontist call it that smile direct club offer it for 1,600 do it from the privacy of your own home like when was the last time you raised about your visit to your orthodontist people are having a better experience at much cheaper rates and its dramatically expanded the market when teeth whitening went over the counter it, like, tenxd the market this is happening with liners. Dramatically expanding the market, dramatically expanding access smile direct club talks how 80 of their customers use financing and so theyre getting this kind of treatment into the hands of people who previously couldnt afford the 8,000 with an orthodontist treatment one of the risks in the s1, on continue toists, professionals, only a small percentage of people can actually use these aligners. Its only praiappropriate for a certain number of the population data suggests otherwise i agree with you about orthodontists. The bulk of profits in orthadontia is from bases. Tons of use cases where clear liners are the right choice today and i think in the next 10 20sh 20 years, few people will be getting braces my daughter has braces its painful its not you know, its not the technology of the future. Whats the biggest cost for smile direct club . I think its marketing. Theyve ramped up their marketing and advertising spend, which is very interesting if you think about the top brands in dental today, you have to put smile direct club up there and theyre a relatively new company. Obviously large cpg companies in dental have been around a long time heres a Company Spending a lot, building a brand and has global aspirations to really change the space. How should we think about that spending that a consumer will do, 2,000, say, or less, for their retainers. Is it truly discretionary . I mean does it fall into one of these things, if the economy slows down consumers have to cut back, theyre going to cut back on this. I dont i dont think its going to be hit particularly hard i mean, people talk about in a cosmetic fashion and certainly benefit from, you know, instagram and selfies and people being more concerned about their smile. But i think if you have you know, misaligned teeth, its a bigger issue for you you go to a Job Interview with misaligned teeth, people may not actually think, like im going to start looking. I havent been nearly im clueless. We know that. You do find it thanks. I mean, these are this is an international company. Yes, sir. Yeah. Just thinking not mentions names. Thinking of other countries that might benefit from this. You know we have viewers everywhere not going to go into that. Im glad youre not. Okay. Some of these other countries are facing a slowdown, yes, but theyve got a lot more work. Got people, a lot more people that need this. Coming from a lower base. Right . Exactly no i have not been you say, so if i walk around new york and look im going to see a bunch of crooked teeth . You will, yeah. Go outside and check it out. I dont know, but im going to try to confirm what youre telling me and now im feeling a little selfconscious. Youre fine. Okay. Youre fine all right well, maybe, i dont know if you went to one maybe not. I thought youd say, you know youre too old probably. Are you worried about Market Conditions if this is going in september . Of course right . Like, thats an obvious statement. Youre always worried about it, but you know the adage, predict often, remember selectively. Who knows whats going happen. You alluded to the china thing, a big, heavy thing on there. It could get resolved. Youre right were a Global Economy and should be working with china its great people a great country. Incredible technology. There are serious issues we need to address and glad were taking a firmer approach to t. Right. Fundamentally, we have to work with them they have to work with us. Thats how business works. Thats how this world works that, you know, whats the benefit were not at war whats the benefit that we there is a mcdonalds role. Like, two countries that both have mcdonalds have ever gone to war thats right the more were integrated the more societies Work Together the less likely theres conflict. Thank you thats the thing. Cosmetically you know teeth you dont cover botox, do you i do not. Just wondering. Ive got a friend. Just for a friend. I have a friend thanks thank you. Sure. Okay good to see you. Coming up, politicizing the fed. Larry summers blasting former president bill dudleys push to consider the 2020 election when crafting Monetary Policy were going to talk about that issue and previous september big fed meeting heading to break take a look. U. S. Equity futures, the strongest. Well be right back. Moving is hard. No kidding. But moving your internet and tv . Thats easy. Easy . easy . Easy. Because now xfinity lets you transfer your Service Online in just about a minute with a few simple steps. Really . Really. That was easy. Yup. Plus, with twohour appointment windows, its all on your schedule. Awesome. Now all you have to do is move. That thing. [ sigh ] introducing an easier way to move with xfinity. Its just another way were working to make your life simple, easy, awesome. Go to xfinity. Com moving to get started. Tuesdays great and wednesday too, thursday, i dont care about you, its friday im in love okay. Chicagos finished now back to the cure take a look at some stocks to watch this morning shares of dell are sharply higher in premarket trading. Reporting quarterly profit of 2. 15 a share well above the consensus estimate of 1. 47. Also said its successfully mitigating the impact of tariffs. Workday beat estimate by 9 cents, Quarterly Earnings 44 cents a share. Saw 34 cent jump from a year ago and a better than expected increase for the current quarter. Shares of American Outdoor brands sliding this morning. Smith and wesson parent earned 3 cents a share compared to 7 cents and gave weaker than expected fullyear guidance. Earnings just in from campbells soup adjusted quarterly profit coming up 49 cents a share. A 5 pop in this stock this stocks got more than 3 dividend yields, too interesting. Not the only name Brand Companies with yields like that. Why isnt that a good thing, joe, in terms of support for some blue chip names why doesnt with rates so low, why wouldnt people just buy those . I think thats one of the biggest questions weve had this entire, this entire recovery, since 2009 youve seen outflows from equities pretty much since march of 2009 and a couple trillion dollars go into fixed income and equities continue to be an underowned class generally. Dividend yields now higher than 30year treasuries decent fundamentals and i think if were entering a slowdown the way the yield curve tells you you want to be in defensive issues a lot of defensive stocks have attractive dividend yields equities one of the safer places to park your cash if we end up running into recession or something else. Talking about Something Like a campbells soup in Consumer Staples a group that has had that benefit of being a defensive play so youre dealing with a pe for campbell, say, of about 36 and that seems like that would take away some of the defensiveness of a campbells soup. Yeah. The thing youve got to remember is, the combination of earnings and Interest Rates with Interest Rates so low valuation should be higher so i think its its right that these pes are high, but when you look at things like emerging market sovereign bonds now trading at negative yeeield. Ask yourself whats the appropriate valuation . I dont think anyones holding an emerging european sovereign bond to maturity with a negative yield. Betting rates go more negative moye, an asset class in equities the prospect of some growth, got defensive karat characteristics and more attractive yields. And look at tesla shares. News breaking a few minutes ago china will exempt 16 tesla models from its auto purchase tax. The announcement coming in a statement from the ministry of industry and Information Technology tesla shares extending earlier gains on that news now up almost 4 . Specifically, a 15 import tariff and 10 purchase tax that doesnt apply to locallymade cars that 10 purchase tax is suspended. Under pressure, jay powell and Company Feeling the heat from President Trump discuss the fed meeting and what investors can expect note to viewers. In rapid technological advances how do companies adapt, innovate and evolve join kceos and more visit cnbc even events. Com evolve. Cnbc will be right back. 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Where do you see markets going into september i think were going to be in, for a period of more volatility and markets will be flat i this at best and actually down side risk the down side risk is twofold. Number one, inverted yield curve we deal with and historically the best predictor of business and economic cycles we have and secondly look at corporate profits. Still getting a trickle of earnings even today. Generally the corporate profit picture hasnt been that good. Earnings basically flat most of 2019 compared to 20 Earnings Growth in 2018 and midteens in 2017 for those reasons, i think markets will be choppy, volatile but the rick is sk is to the do side. Interesting the past two sessions, mike, sectors beaten up and left for dead came back to life. Retail stock, financials do you see that rotation holding or in times of volatility still utilities, real estate, staples . I would say that rotation, that kind of mean reversion by the laggards from the month, it cant be all that works for the market to say supportive yesterday you saw tech participate. Pretty broad i think in yesterdays session. What we flow is this morning and the last two days burning up a lot of excessive shortterm sentiment. Built in a valuation relative to bonds. Its extensive in stocks if, in fact, the worst of the global slowdown fears dont come to pass. Weve been in this environment with the flatter negative yield curve and all other factors and maybe the trade are an exasperating one looks like a false alarm for a recession and the market is sorting that out i think people got way more negative than a decline per 6l infer. People were twisted up tightly into the recession story and thats relaxing. Yields going higher, enough for now i think to keep the market i think people are more off balance by the market rallying three days in a row than if they went down a little more. The other market you look at. Stopped worrying about stocks because they seem to come back yeah. I dont know what the bond market is saying guess ill buy into the global yield story. If not the could be staring us in the face what do you need to show a slowdown is coming right definitely dont want in the mode of, writing it off and saying that this signal no longer works and you know not even 20 trillion global bond market has it wrong right now. Hard to see that. Negative yields. Extreme lows. Five countries whose entire yield curve is negative. I know. 20 trillion now isnt it its like how do you ignore that . Not necessarily a question of stocks being right and bonds wrong or vice versa. If you look at the leadup into recession whats you typically see happening is, one, stocks normally rip the First Six Months after the yield curve inverts. Two data typically improves. Three, the curve generally even reverts. So i think to see these things playing out now is quite normal. Mike, you mentioned leadup to recession. This is what happens going into recession because the yield curve never inverts when conditions are bad its when theyre good and we can start countdown average. Average 20 months. 6 months, the period stock doss well that started two weeks ago whatnot and counting down now to how you play it . Exactly what do you do in a portfolio . Number one, biggest risk is in fixed income markets, you said got negative yielding bonds out there, ask, hows that going to workout play out i dont any it ends well in my view its looking at equities and understanding that, okay valuations, yeah might be stretched rates are low. Offer potential for growth when youre buying in austrian 100year bond up over 100 from the day issued, ask, wheres the risk the risk is a tiny backup in rates. And youre going to have speculative outflows from all facets of the traditional fixed income markets. In a spot yields gone so low below the trend they can lift a fair bit from 1. 5 say on the ten year and not really, you know, disturb much of anything else in terms of the economy evenin terms of stock valuations fedex, threeyear low. We know why it looks cheap, still room to bounce and yesterday the low volatility stocks, stuff that has been working, didnt really sell off. Wasnt out of one and into the other. People found themselves off sides for stocks one thing about the sixmonth window and the rest, i agree and think we have to keep that in mind i dont think enough cycles to have a lot of presnicision sayi this is how it goes. Invert, six months great gains we just dont know a lot of play i think in those dynamics. If one market says one thing and the other saying something else, and somebodys wrong, i just get nervous that the stock market has a way of readjusting much more quickly than the bond market i was there in 1987. I remember what can happen. In terms of repricing, sure. The day it happened, 87, bonds up 300 basis points that day. Never see moves like that. And less dramatically 20 in three months without recession is a notable move didnt necessarily have to happen. Stock, feel complacent about it, they can shake you up quickly. Exactly. Bonds, seems like they seems like a huge global bubble. Right now. Takes longer the reason i resist the bubble thing, yes, a lot of it, depreciated a lot in price, negative yielding bonds, but i dont theyy have a publicly embraced greed story for why bonds should keep giving you great returns. I think its kind of a fear or just an acknowledgement they think Central Banks are kind of out of weapons. Right and maybe we ought to appreciate where yields are because we got a lot of debt in terms, as a government and in the private sense. Here we want it to go up and what we end up paying in debt service. Bris appreciate where we are. Sovereign debt. 440 billion of debt service right if it doubles, then i dont know so nice of you to, came all the way in here and everything. Just stopped by on my way downtown. Headed down there all right. Good thank you, mike. And friday before labor day, too. Early release i think in the day . Isnt that a horrible thing to call sounds like prison doesnt it exactly. Good behavior. And year to date. All right coming up, connecting the global slowdown dots Steve Liesman looks at other economies and ties with china. Despite Economic Growth and full employment u. S. Business leaders have mixed feelings ar President Trump. Yales school of management will be here to discuss his latest oped how Business Leaders can alter the trade war. Squawk box will be right back. Tv just keeps Getting Better. How you watch it does too. This is xfinity x1. Featuring the Emmy Awardwinning voice remote. Streaming Services Without changing passwords and input. Live sports with realtime stats and scores. Access to the most 4k content. And your movies and shows to go. The best tv experience is the best tv value. Xfinity x1. Simple. Easy. Awesome. Xfinity. The future of awesome. The global economies remains one of the top kearns of the fed. Connecting the dots on the slowdown, Steve Liesman. One of the worries. Global slowdown and potential to affect the u. S guess what data suggests no lock elonger potential. Its happening now look at this china and the u. S. Has fallen together from 62 to around 52 along with it chinas manufacturing image dropped from just below 52. Now in contraction territory around 49. Quick on the chart u. S. Fallen further unbut not to contraction. China falling less but its sector by that contraction whats happening in china also affects whats happening in germany. Overall chinese imports down overall. Started in december. Overall exports went negative suggesting a strong german, chinese trade and economic connection probably flows both ways we dont know. Germanys weakness a big part of europes weakness. All of this washes up on u. S. Shores and shows up among other places in export data we saw yesterday. Yesterdays Second Quarter gdp data shows u. S. Exports almost add to growth. Guess what subtracted 0. 7 point percentage from growth. This year seen the two biggest exports contractions of growth since the great recessions the two down bars right there. Good news. U. S. Held up remarkably well thanks to the consumer still growing at 2 but the links are there and if other economies worsen it is still, still globalized world, the u. S. Will not be immune we dont know. Not saying causation, correlation. Tariffs other things happening around the world the point is, they all are linked together. Bring in a couple of, two more fed watchers to share their view greg epp from the wall street journal commentator and from the wells fargo. What do you feel strongly about, greg you have strong feelings a lot of times i want to draw them out of you this morning so i just want you do you have a rant . Can you just can i just let you go i dont have a rant, joe. Sorry to disappoint you. Let me say a few things i think are important to remember here i think theres been a lot of focus on why powell, jay powell, only went a quarter point instead of half a point in july and basically what is he weighing whether he goes again in september i think bottom line is this data has yet to make a compelling case they need to cut a lot. Like 50, 75, 100 basis points. I take what Steve Liesman just said seriously Global Economy is slowing. No strong evidence its happening in the u. S. Outside a narrow part of the Manufacturing Sector however, if youre in Risk Management mode has fed is now by which i mean youre setting policy not for what you thinks going to happen but what might happen you want to ease, because risks are definitely to the down side problem for powell is he has a committee that does not see those risks as strongly as he does a committee that does not see the data falling apart and not as worried about low inflation bottom line now is still cautious, quarter point moves and very much a datadependent fed. Jay, you heard greg and steve. What struck you . Or what do you agree, disagree with i generally agree with both of them. I agree with what greg just said there. The fed is a, fomc is a consensusdriven sort of place got have a super majority to move we know there was two desense badesense descents back in july. Shouldnt ease dramatically here unless you go forward the data falls apart and hasnt at this point. Unless the data starts to fall apart youre looking at a very cautious fed moving at only 25 basis points a clip. Joe, when we book our guests in jackson hole we dont do it based on what they think about policy it just so happened that the way it worked out we had Esther George and then robert kaplan. We got people that said you know what its not so clear to us we should be cutting rates. Up know, i stepped back and i said trying to think of other times when the fed has moved those times its been clear to me what the fed should do and why theyre doing it, even if i agreed or not. Sort of understood it. Summarizing what greg just said. The next moves are not so obvious. The data i put up about Global Manufacturing you think the last move was obvious . Maybe taking back december, yeah. So i i dont see the only reason to do so, a couple reasons. One, the global structure of things, can you be so far from where europe is . Why should we be the beaken in a world that maintains positive Interest Rates . You know i asked the fed folks that i think i talked to five or six of them there. Pretty much same answer. When you look at the u. S. Economy. Right. They you can say say the same data two ways were running short of our 2 inflation goal or, were real close to our 2 inflation goal. Right i hear it all the time right. Youve heard me if we could really count on secular disinflation for the next five years go to zero the pedal to the metal nothing to worry about. Lets go. Joe i wanted to jump in and comment on something joe just said, about why should we have the highest Interest Rates in the world . Yeah. A fascinating information baht not because the wrong, never heard people make issue of the fact our rates are higher or lower than any other countries. Especially at 2 . A unique moment in global monetary history suddenly where your rates are visa xi tavis matters to the rest of the world. Any u. S. Only metric whether u. S. Inflation zero real rates, whether growth, pretty good. Highest in the world the only benchmark gby which our rates look high is the rest of the world. Greg greg rest of the world doesnt matter and Interest Rates as far as it affects growth why lower rates now just because other countries are lower . This is one things President Trump does so well which is points out stuff that no ones talking about and i dont agree with the idea that he brings forward which is to use rates competitively. Right. But the idea, greg, and jay, of the linkage between the currency, between the rates and between trade is something that is not being talked about in jackson hole, not talked about globally and nobodys in charge. Get you back. And you could have jumped seemed like you just are nodding. Sorry you didnt talk more anyway, thank you. Pleasure. Coming up, school of managements Jeffrey Sonnenfeld joins us to discuss how Corporate Leaders could sway the trade war. A look at futures this hour. Final trading session of the month of august. Gains across the board, s p loinhier21 so theyll be okay . I think theyll be fine. Voya. Helping you to and through retirement. Markets making a lastditch attempt to finish the month on a strong note. Futures up again this morning but major averages still down for the month. Talking trade, the fed and other Market Drivers straight ahead. Countdown to new tariffs products that u. S. Consumers rely on are about to get hit this weekend coming up a live report from the port of los angeles on the frontlines of the trade war. And serving up stocks. Tennis great brad gilbert joins us this hour breaking down drama at the u. S. Open and where hes putting his money on a volatile market. The final hour of squawk box begins right now. Oohooh, ooh sn announcer live from the most powerful city in the world, new york this is squawk box. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square im joe kernen along with mis melissa lee. Becky and andrew are off today and futures strong today, up 171 points three, four days in a row trying to make back lost ground from last week. From last friday, actually one week ago today remember that . Everybody, get outta china and im going even higher on tariffs after china responded. Anyway, treasury yields are, theyve kind of retraced some of the movement we saw this week. Back to 152 now on the ten year. Heres some of the stories investors will talk about today. Watching shares of tesla this morning. Trading higher by almost 4 . 16 tesla model its exempt from chinas auto import tax according to statement from t industry of technology and yuan drops to lowest levels in more than a decade. Campbells soup meantime reporting adjusted profits with organic sales up 2 . Revenue fell below forecasts but campbells built a Solid Foundation on which to improve results in fiscal 2020 that stock up 4 economic out shares of ulta beauty down sharply this morning. Cosmetics retailer missing bottom line in latest report revenue in line. Comp sale stores rose less than expected and ulta lowered profit forecast of sales of Color Cosmetics slow trend more towards skin care now. That stocks down 25 . Okay. Got it. All right. Always want to take care of your skin its only skin. But, i mean, do you need a new eyeshadow pallet if no troends b trends to buy it. What is the i didnt ask outside getting makeup today, a day of vanity did the tooth smile back and ulta. Rough day for me. Anyway countdown to a new round of tariffs is on sunday new levies set to go into effect not only on products businesses rely on but everyday Consumer Products right now take you to one of the front lines in the trade war uhoh jane wells joins us now from the port of los angeles on the front lines. Jane, good morning. Reporter hi, joe yes, here from the front lines this is the nations largest port complex a lot of what used to come from china and still does comes through here, and as of sunday, unless things change, 98 of what comes in from china tariffed talking 164 billion worth of goods, clothing, diapers, contact lenses u. S. Slapping tariffs on live camels coming from china i dont know how big a market that is, yet the port of los angeles is still seeing record volumes. Still a lot of stuff coming in overall exports are down, up double digits to several other major asian countries. Even so, though, a lot of containers are coming in to this port full but leaving empty. Empty containers are our largest growth segment simply because weve had nine consecutive months of declining export volumes and shipping lines need to get those containers back to asia for the next round of imports with a relatively strong u. S. Economy you and i still buying goods at the stores and need to keep those containers moving. Reporter each empty container costs 250 going back. Ship are pays it or importer, exporters do another issue. Retailers front loading. Why import volumes are up trying to get ahead of the tariffs and the holidays between august 15th and the 26th, more than a quarter million tvs came in from china to stock up, creating another issue, warehouses almost completely full. Warehouse vacancies here in Southern California under 2 less than half the national average, guys. That is something. You survived, jane glad about that, at least. What am i looking at behind, i used to live out there where is that . Thats your port . Reporter san pedro right outside the Maritime Museum no. No san pedro. San pedro. You got in trouble. I did. Reporter theres theres a ship back there. Weve got, what is it . Uss iowa its fleet week this week. Theres a lot of security around here, the navy. Wait a minute thats why youre there. Fleet week kidding, jane. Hey, sailor. Oh, god you are so so good and always so ready for anything i say. I dont find that often, jane. Thats why im glad its always a pleasure anyway, and its early which is even more amazing anyway reporter no kidding. Its earlier here than there. Yes i refer to that. Thank you jane welles. San pedro. In trouble. Latest tariffs and escalating tensions with china giving Business Leaders mixed feelings on President Trumps trade policy joining us to talk about mitigating the worst effects, Jeff Sonnenfeld, senior dean at yale school of management and a cnbc contributor great to see you what really struck me most recently is President Trump and how glowingly he spoke about tim cook and tim cook calls up the white house, talks, makes a convincing case. Should more ceos, for instance do that. The one on one approach . Yeah. Thanks so much i think youre right, and happy Labor Day Weekend to you i guess you wont start for another 16 hours of work there on the set, but for everybody else, happy start of Labor Day Weekend. And what a what an interesting contrast we have of models out there ceos becoming an increasingly unhappy group. Paraboxes in there and cheer executive magazine has an onrunning goal surray lowest level of ceo confidence since october of 2016. A lot of the its now a 62 pretty unhappy how they look at their immediate business future, roughly the same looking at the immediate. They are looking at trade sanctions. Very disappointed how theyre unfolding, but in our own surveys here at yale we find 75 of ceos are also unhappy with their trade associations and 74 , 75 contrary to what Stephen Roach said from this set here theyre also really unhappy with china and feel theyre being treated unfairly and have extensive documentation how they justify that its a quandary. What do you do about it . One thing you mentioned is, tim cook, of apple, Steve Schwartzman of blackstone and from ibm, marilyn houston, finding ways working with the administration that has been pretty effective in looking at enterprise specifically and industrywide issues by not grandstanding or humiliating, talking privately in respectful ways that worked so far we think apple may get some car belts around this, in the u. S. In regard to some of these issues trade negotiations you heard earlier in the hour, the earlier hour, 150 u. S. Trade associations bonded together and then separately the American Enterprise institute complaining about these sanctions, and well see if collective action works as an alternative. In the past, collective action has broken down a lot, and well see if that will have some influrngs bi influen influence, but the two rival approaches taken through the direct confrontation of unified voice of business, obviously worked postcharlottesville in withdrawal of the president S Advisory Council on that issue will it work on trade . Well see. How does, how is there collective action in this particular instance . I mean, theyre not going to withdraw from a president ial committee to show thats a great question if i were there to scream back at these American Enterprise institute, and theyre saying we dont like this. We want the World Trade Organization to resolve these things the World Trade Organization, you know, its fitful. In terms of multilateral oversight, we have regional 300 new regional trade agramts that undercut the world trait associati trade association and a lot of dispute how the appeals process work theres the u. S. Won 95 of the complaints that we brought to the World Trade Organization and thats what supporters say about the World Trade Organization also lost 89 of the complaints against us and President Trump, this administration says, we dont like who the judges are. Right now theres one american who is stepping down i believe in november. One indian stepping down in november and the only third member is a chinese person by november, who will remain, u. S. Says were going to block future nominees. There wont be a functioning World Trade Organization to appeal to. Rime not sure what these trade organizations, trade associations, think will be the alternative to the tariffs they dont like and yet the ceos are really unhappy with unfair trade practices. From the new york times, a list of 20 companies with unfair trade, forced imposed trade Technology Transfers and they dont want to talk about it probably to Stephen Roach or the rest of us on tv because afraid of reprisals one company after another from the chinese, but collectively, they talk privately. Jeff, joes idol here a lot of companies talking about have significant exposure into china rp to their supply chains. Right . China is the, provides a quarter of the worlds manufacturing output same time theyre selling a lot into china as well think about companies maybe realigning supply chains, move out of china to avoid tariffs and same time have to sell into china. How do ceos weigh those issues protect themselves from tariffs cut off one of their biggest markets . How do they recs sioncile those very worried about threading that needle. Exactly right, joe they want to manufacture in there, right 25 of World Manufacturing but its easier for some companies, as jane welles said, that a lot of tariffs will hit apparel manufacturing. Shirts and shorts and things im not sure what well do about the import of live camels. That was a little odd. But those apparel manufacturers are already shifting to other parts of asia, other countries a lot easier dont have the intricate supply chain and infrastructure needs that, say, Electronics Companies do, where theyre very embedded and its hard to shift i know your question is about selling in to the chinese market, and that is something they dont want to lose, and, of course, there are, theres a larger consumeroriented middle class in china than the entire u. S. Population who wants to say no to that population there is a third thing happening here i should mention in passing. That is, were also seeing right now this week, because in fact, it was exactly a year ago today that President Trump suggested we might pull out of the World Trade Organization stunning business groups well, we do have business groups that are forming in reaction to other trump policies, such as, epa moves over the last, in the last few weeks, last few days, last few hours, were seeing, for example, collective action forming to come up with perhaps standard setting on auto emissions. Standard setting which is, with major Auto Companies they dont want to remove emissions guidelines the epa is asking for rollbacks. Who wants that right. The automakers, affording federations with the state of california to come out with guidelines that canada, europe, maybe other states in the u. S. , 16 or 19 of them like, seeing automakers coming together same with petroleum and natural gas companies. Actually already invested money to clean the methane out of their process. Now being told roll that back. Those companies, shell, bp, they say we want to stay with it. In favor of it chevron, these ceos are coming out. Might see standard setting, set by individual companies that has them put their money where their mouth is by last weeks Business Roundtable see if they come out with their own standards. Selfregulation. Thats what, thats what Underwriters Lab represents, what the American Bar Association represents and guilds, seen selfreg flation other areas and might see the Business Community try to fix problems on their own if theyre not happy with the administration. Sure. Got to go. Thanks for your time have a good weekend. Jeff sonnenfeld. Should get to a tweet President Trump just did general motors, which was once the giant of detroit, is now one of the smallest auto manufacturers there. Moved major plants to china before i came into office. This was done despite the saving help given them by the usa now they should start moving back to america again . That was a question. But the implication here is how do you pay back that loan . Bringing jobs back to the u. S. Right coming up, serving up stocks its tennis time here in new york with the u. S. Open under way just across the rirkrocross. Come back with stock picks of tennis great calling you tennis great youre a great coach you were okay. You were good. The best. Anyway, brad gilbert joins us onset to talk favorites and his Favorite Investments doing that as long as youve been playing tennis. Youre watching squawk box on cnbc. I know i know it is huge night u. S. Open, tennis in full swing in new york. Now in its second week next guest is courtside for all the action here to talk tennis as well as investing welcome brad gilbert, on every year, former professional tennis player and now espn analyst 800th in the world, brought him back to win oonch. I like that every year the story gets a little better. The older you get, the better i appreciate that. And you are a great player as well. Funny now as ive gotten older. People have no idea that, like, i played i was actually on a tv show and played a doctor on amazon, on red oaks and in a starbucks once and, are you that dude that that was on red oaks they dont remember the other part. Its okay. Try to get to some of your stock picks. I dont know if you have any at this point, just worried about you know what i wake up. Look at tweets . I do. I want to know if its safe. Obviously you know i love the market, but, and i like the fact you actually got it right that this is the second week, wah actually first year on our broadcast we are doing three weeks. We did a week of the qualies 22days in new york and right now right in the middle. Coco mania. I watched Taylor Townsend i was couldnt leave the set. I was like, my heart was pounding at the very end of that when she was beating the wimbledon champ, simona. Coco, excited. Ill be there. You know that . Come see me tomorrow night if you dont know anything about her, 15 years old. Right . If she was a stock put nothing but a buy rating on it a defending champion playing, whos 21 also raised in south florida will play tomorrow night. If she happens to beat her, she will just be known everywhere wouldnt be shocked. Shes an incredible athlete and on the mens side the big three. But the mystery of the djokovic shoulder got a Left Shoulder injury. I thought he would withdraw the other night. A mistress over that as well. Dont knowabout that. Should appreciate those three guise, because it will never happen again. Not in my lifetime, unless, you know, i can make it to 120, 130. But its an amazing run, those three guys are on, and actually show no signs of slowing up. The open, first time i went to wimbledon this year its very special. I thought, you know what maybe i like it better then, when this starts and you see the excitement and the energy and how everybodys there and 70,000 people across all walks of life, i think i like the u. S. Open. A grandiose venue. Awesome. This is the 39th Straight Year ive come to new york you know, way back in the day i used to have the mullet. Used to be shortshorts, high socks. Now its long shorts, no socks and i got no hair and your hair has actually gotten better how is that possible it is better. Give you a name. If you but you know youve got to suspend all ego if going. Cy sperling. Heard of him is that the im kidding no, no. If you know super joe, a million parody accounts on twitter about his hair. About my hair. I ask people. Cant be real u. Know it is. Its amazingly real. The color and everything, its real. Eat your heart out do we even care about nadal . Saturday night should i stay . How can you say about the hair he actually play as guy that plays chung in south korea got to the semis last year and a massive star in asia but nothing but injuries had to play in the qualies last year hurt. Played them won two matches in the qualies, won yesterday in five sets. So he will play nadal. Hopefully has something left, and but playing nadal, a night match, could be difficult, but i actually think, though, that on the bottom half of the draw could be headed to playing isner in a round of 16, that match. Seen all of these i cant believe im watching this. Already advancing got to get you into tennis thinking about the tennis. While the open is here. Enjoying the tennis. So glitzy up there. A million people, for the three weeks at the open. Whats your biggest position right now . My biggest position, two left feet, unfortunately, go daddy. Had it a long time basically since the ipo. This year, theyve been hasnt been trump affected just a little bit of bad earnings a couple times or the product of if youve done good, what have done for me lately . Can you do better . Of course, since im a bay area guy, sales force. You do got some crm. Of course between that and go daddy, you know, still you know, im totally a nasdaq guy, since were in the nasdaq, i dont play funds i dont have anybody do it all myself you know i can literally, you know, go to one click. You know i cant quite sell something put proceeds in bitcoin do i go to bitcoin . Put proceeds in bitcoin is what im asking for all holders out there that love to talk about that. This is a great question and thought, but i i cant really hold or feel bitcoin you know i dont quite get bitcoin but if making dough on it i would like it you know do you play bitcoin . I have owned bitcoin and ive mined bitcoin, never withdrawn money particular bitcoin its out there. Youve mined bitcoin . I have mined bitcoin and ethereum but never taken money out of it. May not be real. Sits out there in wallets, sometimes grow, sometimes up, sometimes down never withdrawn. I wouldnt mind it actually. Check it out. Making dough on it i would like it. At the moment, not in it. This could be the third year in a row, one by different women. Never that parity. Did you know that . Think about that well, osaka is the only one. Shes number one. That won well won last years open and then won this years australian open. Right. But we had, before that, we had, like, eight slams, eight different winners. Right. Serena is obviously trying to get to 24. Theres a lot of different stories. Got to go. On the womens side. Ou thank y see you tomorrow. Advancing me. Steve liesman, youve got numbers. Got things father kids. Change of plans vo defy the laws of human nature. At the summer of audi sales event get exceptional offers now whoa coming up, breaking Economic Data try to fix it ahead of the friday opening bell. Latest read on iome d ncan personal spending is next. Stay tuned youre watching squawk box on cnbc. You spend days researching bed sheets. And weeks picking a dog bed. So why would you settle for just any bank . Just do what you do with everything else. Ask the internet ask your friends. Ask your co workers. Were pretty sure theyll send you over to us. Because were not just a bank. Were an ally. Ally, this is pamela how can i help you . Roxana our students dont have parttime needs. So they absolutely cannot have parttime solutions. Angelia one of changes that we need is smaller class sizes. Rosanne we need a lot more school nurses, a lot more school counselors. Rodney counselors provide that social, emotional core thats needed. Marisa schools need to be safe places for our children to learn. Ever every student has the right to quality education. No matter what neighborhood you live in. Angelia we are cta. Rosanne we are cta. Marisa we are cta. Narrator because we know quality Public Schools make a better california for all of us. Welcome back to squawk box. Rick santelli here live on the floor of the cme group with breaking news before the holiday weekend. July readout, personal income expected up 3 10 and gain 1 10 in the review mirror up spending on the other hand gang busters up 6 cents, 1 better than expected. Look at personal spending. Real personal spending that was up 4 10 twice the look in the Rearview Mirror personal consumption expenditure, deflator month over month up 2 10. Youve over year up 1. 4. 1. 4 is wild across the board representing oh, did get revised to 1. 3 but exactly what we expected. Look at the core deflator year over year up 1. 6 many, of course, like to monitor that fed pays very close attention. Still have chicago pmi and university of michigan final august reads to come out but right now suffice to say that a very large rebalancing certainly seems to have given turbo thrusters on front running in front of friday, todays close which is really the benchmark. Should be more selling in treasuries maybe there isnt. A counter factual here, but yields firm on the short end not as firm as the long end 30year bond kind of dragging a bit. Many monitoring which side of 2 right now on the Southern Side at 198 melissa lee, back to you. Futures firm, too rick, stick around bring in for more from Institution Services and cnbc contributor and our own Steve Liesman. Steve, your interpretation consumer is strong, has been strong and appears to be set up to remain strong income a little light. I dont know if its a timing thing or what, but people dont usually get too far out ahead of their income this spending, 0. 6 more than expected very good number durables up 0. 6. No nondurables up 1. 1. I dont know if were adjusting for the amazon prime day. In terms of number being hot. Funny, takes about five years to correctly adjust things and then things can change anyway. I dont know if theyre adjusting that out, strength in internet retailing in any point people spent a lot. Savings rate came down sort of high revised it higher in a revision. So the 0. 3 decline in savings doesnt bother me. Then the debate. Talked about in the last hour. Are we close enough for rock n roll on a 1. 6 core pittsburgh p the pce or too far im okay with a 20 trillion economy you cant necessarily get there by tenths. Some on the fed concerned about this missing below some say its close enough. Markets i think would want to interpret were below it. Below it. Fed will act. Yet the consumer remains strong the goldilocks scenario for markets. Jim, your take first of all, the spending number, to me, is more important than it usually is today, because i want to answer the question, is the consumer being talked into a recession by inversion and by, you know its broad coverage of the recession implications to me doesnt seem it is a week ago we heard James Bullard talking about his frustration. He doesnt say that, but i interpreted they cant control inflation. And willing to put extra wool on the fire to get it going market should like that nap said, all week talking about 29. 50 level series of highs in s p all month. Put up or shut up time for the market wee ject reject it today, bad accept it, a pretty good deal. Say the level 29. 50 29. 44 highs in future last months rocking back and forth. See if it has conviction or not. Joe, how do you piece together this data along with the overall message for the fed . Thats the hardest thing to reconcile here we have a very strong consumer driven princely by these really strong labor markets, but at the same time know ceo confidence is rolling over and capex, a lot lighter than anyones forecast it and confidence is related to capex and capex is related to employment at some point you wantgot to bring the three elements together. Add to that, joe. Why i watch jobless claims number weekly numbers tells me is decline in ceo confidence shows capex also affecting hiring. Thats going to be key to consumption, i think that people start losing jobs or people start being afraid of losing their jobs. Do they cut back on spending i think these numbers, cant say for sure because i dont know how everybodys model is set, could lead to an upgrade of our gdp tracking forecasts for the Third Quarter. That means well do better than 2 probably, and looks like consumption this quarter, at least the way it started, is on track to equal the strong consumption numbers of the Second Quarter. Yeah. Rick listen, you know, i know you guys have been discussing inflation and you pointed to 1. 6 deflator number youve over year. Core, yeah. Steve, my issue is that i understand for a variety of reasons why Central Banks want higher pricing okay i get. Isnt the reality that the target is arbitrary and the real question for our central bank should be, is wasting eight of your quarter points that you raised rates worth trying to control something that it will not be i agree. They could do 50 or 75 does anybody think thats going to make a difference to next read on pce . I certainly dont think so. Just got through explaining it is arbitrary. They pick two, because two is greater than one, because one is too close to zero nap is t the best way to explain they dont want inflation at zero risking deflation. And Higher Education is definitely worth the money guys, we can talk about how their tools arent working to achieve their goal at all but still have to settle on the fact that thats not whats disturbing. Whats disturbing is that these very smart men and women are in charge of nudging the short rate to try to help the economy okay and to think that they have a strategy that makes no sense really kind of takes all the fun out of the game. Dont you think . Yeah, but when all you have is a hammer everything looks like a nail. They look at every problem we have and say either needs more money or less. They dont understand seems to me that theres a greater picture out there theyre not more people are understanding. Ten years ago, jim, did any of your friends or people you associate with outside this building really get what the fed does i know theres more and more and more people talking about Central Banks and the fed. Guess what jay powell, that is not a good thing. Im not really sure what your complaint is i mean, look, picked an inflation my complaint is every argument with a world of negative rates seems to come about with inflation theyre looking at the wrong movie on the wrong theater they really need to look at a bigger picture. Rick, i like that idea because there are flaws in the Inflation Numbers. By the way, one of those flaws is that the inflation number is dramatically overstating inflation rate and i am i am and have been for many years, rick, game to find and alternative trouble is i dont have one. So what you do is you take but its not your job to find alternative. Its our job to point out the people in charge of that are doing a crummy job thats fine, rick, and i think your complaints are justified. I just want to know if youre the policymaker, what do you do . Whats your actual you you find a better mouse trap or dont keep using one that doesnt catch mice if i throw out my other mouse trap, rick, and i dont have another mouse trap, all ive got is the mouse running rampant all over my house. Then do nothing like a doctor. Do no harm first what is do no harm then, rick do nothing. Pretty easy do nothing, because Central Banks have done so far everything theyve done hasnt helped. And you, too, its your show, but thinking our guest host might have an idea on this this is sort of an ongoing decadelong argument, which i agree with him on. The Inflation Numbers are not great numbers. The fed has been incapable of theyre fine numbers but cant be the center of the strategy youre not listening to me. I am listening to you im listening. Im hearing you. I love all tebs i love the temperature in the morning. Jay powell isnt monitoring policy to that. Im with you, rick, but the question if youre still a policymaker, still in control, need a metric to aim at. What do you do alternatively the do nothing thing in central banking, if i could let me finish a thought, ricks in central banking, doing nothing is doing something. Right . Holding rates, especially holding rates relative to where the market is, youre doing something. That is active policy. So you cant do nothing, and im with you its terrible. It sucks say it on television, but we need something something to go with, rick. I dont think Central Banks are doing their job and have a novel idea. Back to the Gold Standard lets talk about it. You want to get the Gold Standard. Just let the markets do it. How about that markets are looking at the fed, feds looking at the market. Take the fed away markets will look at price discovery oh, my god doesnt that sound wonderful. Looking at cost of wonder bread, the fed, and missing cost of tech stocks thats an interesting point, jim, a good point. All were talking about is modifying it a little bit. Look at other things, too. Jim, i know we have to go, tell you idea of including asset prices in inflation gauges is something studied for a long time and its been decided for a lot of reasons to exclude asset prices from inflation gauges and i will tell you right now that people who support the free market would not want the Federal Reserve entering into the market and raising Interest Rates how could you say that. To reduce asset prices. Good conversation weve got to end it there. Thank you. Rick santelli, jim iuorio. Have a good holiday good day off. Right reuters had reporting this week el straighting apples large exposure to china and the upcoming trade war tariffs reports 46 out of 50 apple products made in china could face tariffs by end of the year. Joining us now, tom forte. Senior Research Analyst and a b buy rating. Apple down 4. 5 and we put out a published note shortly thereafter indicating, you know, things may not be as bad for apple as they seem tim cooks done ain mazing job lobbying in the u. S. We would argue apples big enough to lobby both the u. S. And Chinese Governments. The impact on apple from tariffs may not be as bad as many fear. Lets say theyre not successful in lobbying efforts and all tariffs go into place and its december 16th at this point, tom who is paying for those tariffs . Trying to figure out if is apple paying for it . Making suppliers pay for it . Sure. So if this was a conversation we had, say, i dont know two, three years ago, we would argue that apple had Pricing Power for all of its products. And i think the lesson weve learned over the last year is that given the maturation of the smartphone market, they dont have as much Pricing Power in smartphones, and may not have Pricing Power in smartphones against until they launch a 5g device, could be next year or the year after i think what youre going to see is apple in those products where it has Pricing Power passing it on to the consumer in other instances trying to get it from their suppliers and in our argument, getting it from the Chinese Government in lower currency so i do think that there are ways that apple could offset impact withoutpassing the cost to the consumer. Tom, joe here for not only apple but the other companies in your coverage universe, is this going to become more of a margin story. Where they dont have that type of Pricing Power i think that actually is a great point. I think about it is, in coverage universe, logictech dealing with it longest look at their june quarter actually a 40 basis point increase in gross margin despite tariff pressure. What did they say Going Forward . Said theyll going to selectively take price logictech somewhat like apple can do it. Margin story generally speaking from tariffs will not be as bad as people anticipate a lot of levers these companieses can pull to mitigate tariffrelated risk without having to do price. Market leaders essentially might have power to go to s suppliers, you need to absorb the hits apple and other companies you coverage tend to not hold a lot of inventory spent years building up supply chains able to get products as quickly as they need them in order to not carry a lot of inventory risk recon figuring supply chains and go to smaller volumetype producers, will they take more products out of their inventory . Other risks we ought to think about now . Sure. Two risks. One, i think they can respond to tariffs by essentially getting as much product in the u. S. Ahead of tariffs or to the end market where they intend to sell it, and, two, i think what youll see over time meaning years maybe multiple quarters but not months, move supply chain to places like vietnam and out of china a shortterm basis i think navigating inventory can be an effective way to mitigate tar f tariffrepresented risk. Longer term, more of the supply clayne to not directly include china. Tom, thanks. Thank you. Coming up, something we havent seen in u. S. Real estate markets since beginning of the deca decade a key source took a dip in the Second Quarter bring you details and in a live report and talk markets ahead of opening bell when squawk box comes back. Keeping the night interesting, is all about setting the right tone. Lower carbs. Lower calories. Higher expectations. The light beer youve been waiting for has arrived. Corona premier. Welcome back to squawk box. Looking at futures now didnt move much on income and spending data. Holding steady with gains on the open last trading session of mot. Dow jones industrial looks to add and s p up and nasdaq higher by 47 points. All right news from the Real Estate Market pap new report showing us a shift in investment flows. Havent seen that in quite some time diana olick joins us with more good morning. Reporter good morning, joe, yeah International Investors became net sellers of commercial real estate First Time Since 2012 capital analytics reports found direct acquisitions totaling 23. 5 billion in first half of 2019 but sold more at 24. 4 billion. Dropped 3 percen 7 from a year. Why . Hard for investors to put money to work in the u. S yield not what it was even a few years ago. Investors are increasing spending on the office and opt sectors after a big push in retail more capital into the new york city, boston, seattle, las vegas and less into los angeles, phoenix, san jose and right here in d. C canada, germany and singapore are the top buyers of u. S. Commercial real estate by dollar volume canada and germany increased investment annually singapore dropped by 54 china, smaller investor volume tell steeper and due to capital in the past year recent drop in Interest Rates has not come into play here because commercial real estate deals take about 20 to 30 weeks to close and Interest Rates didnt fall dramatically until the last couple months back to you. Thank you, diana olick in d. C. From the Real Estate Market to the Broader Market getting ready for the final trading session of the week, strategist at jpmorgan Asset Management welcome. Were going to have a few straight, good days in the markets. Do we keep it up into september . Whats the outlook well, depends. Like all good questions. But i think were sitting slightly cautious here. Starting the economy, we see the u. S. As being resilient but at risk here and, you know, the good news is that you have some segments of the economy that are humming along. You have Credit Conditions which are decent, employment which is fine all those feed into a consumption growth number which is just fine however, i think, you know, what were doing is essentially the escalation in the trade war creates a lot of uncertainty about how that feeds back into the future growth of the u. S. Economy. It is hard to really say at this point. So i think that volatility could push us over the edge for a recession. We escalated our own evaluation of what Recession Risk is going to be over the next 12 months. And i think, you know, youre subject to the vagaries of the evaluation if youre building up, we say if you look at the economy today, you say about 15 , 20 , really good, actually in the context of an expansion, which is this long once you layer on to the fact that were in a sense weaponizing uncertainty against the outlook, you have to add an adjustment factor to that. I put it up to 40 once you add that in. Ben, youre looking at increasing odds of recession, slowing growth, and we havent really talked about eps growth it is corporate earnings largely disappointing in 2019. Low single digits. Where do you position a portfolio given those three factors . I think, you know, were if you want to take risk or not, i think this is question number one. We positioned based on the outlook and the follow through to eps fundamentals, were slightly underweight equities at the moment were positioned moderately cautiously in our portfolio and our portfolio, were picking our spots in credit, upping quality and credit were thinking about what is your insurance policy against Downside Risks of the outlook and negative growth shocks so treasuries have traditionally played that role it is hard to make a big case to buy treasuries at these levels but the truth is theyre reflecting a real phenomenon underneath it. Elevated Recession Risk and elevated uncertainty you have to have a slightly cautious tilt in your portfolio writ large and be agile as things unfold. When was the last time you were underweight equitys it has been a little while. The financial crisis or 2011 . 201516 is the last time we were in any size underweight equities but all goes back to that Recession Risk as an economist, im biased here thats an important fundamental. The pro cyclicality maeans that fundamental. What is the proximity to that adverse play for risk the assets and on the other side, when are you getting out of it . It is elevated im curious, when you upped your outlook for recession, after inversion, stocks have x number of months, joe says six, others say 18 months, for stocks to do well, youre underweight here and the risk of missing out on that 40 is still more likely there is not a recession and if the trade if the trade stuff were to be settled, you go back you said 20 baseline. So youre going to miss out. It is more important to prepare for the possibility of loss. Even if you think that the trade issue is going away, right, pretty bold assertion at the moment, even if thats the case, i think you have to look at the asymmetry of outcomes, downside case, 40 risk probability on is that equities are down the usual recession 20 , 30 your upside case, what is that in an environment where you expect eps growth to be 5 in 2020 consensus is 10 and so, you know, a lot of the good news to the extent there is any is in there already. If you lose 20 , it is like you made 30, i think, right . There is going to be some volatility as things play out with the trade, trade volatility if anything, you know, taking a longer run perspective, all things equal, if you expect that volatility to persist, youre holding fewer equities at the moment. Ben, thank you. Good to see you. Coming up, well get you caught up on the mornings Market Action in prep for the opening bell in a special next week, is this true yes. 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Lease the gla 250 suv for just 329 a month with credit toward your first months payment at the mercedesbenz summer event. Mercedesbenz. The best or nothing. Theres one thing you can be sure of. Theyre changing by the nanosecond. Thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. Our guest host today, joe decidele, chief investment strategist at blackstone our last guest, exactly what he was an economist, ph. D. Used to work for some like the fed or did a lot of research for world banks. I understand what hes saying. Yeah. Asymmetrically, even if youre at 40 , even though, you know, obviously 60 chance what people never talk about with these recession models is once you go above a certain percent, maybe 25 , they tend to go straight to 100 . So people dont necessarily say if youre at 40 , your next step is 100 anyway i think all that stuff is great, it is nice i have a very simple indicator i look at, the yield curve, it is screaming, there is a problem. It doesnt tell you what the problem is, but tells you there is a problem. You think it is 100 . I think the countdown timer started. We got 18 to 24 months before the next recession the only way to offset this at this point in my opinion, soft trade. We look back on it two or three years from now what will we say, what policy mistakes brought on the recession the deglobalization of the world. That we have 70 years of falling tariffs that lifted 2. 5 billion people out trade war will cause a recession . Tariffs in the United States versus china, maybe go after europe, japan and south korea going at it, currency wars are starting to open up. Maybe trumps tariffs are a reflection of the glee globalization touched every corner of this world. Brexit, italy. Brexit, all the same forces, yes. All right. Sorry to end on that note. It is a threeday weekend, i dont care ill worry about this not until tuesday. Anyway, thank you. Melissa, thank you. Ill see you tuesday. And im excited about the big special next week. And well see you on tuesday. On cannabis. On cannabis well see if we can broaden it out. Happy labor day, everyone. Were off on monday. See you on tuesday squawk on the street is next good morning welcome to squawk on the street. Im david faber with sara eisen and mike santoli, live from the New York Stock Exchange. Jim and carl have the morning off. Lets give you one look at futures here, of course, as we get you ready to the open a half hour from now on the New York Stock Exchange once again, third day in a row i think im saying a higher open at least as forecast well see if we follow through, of course, with those levels going to be
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