Transcripts For CNBC Squawk Box 20240714

Decoupling markets in asia and europe were slightly weaker but here in the u. S. Were in the green. Treasury yields at this hour as well, we have seen some better than expected german labor data cause some firming in the global bond markets right now the 30 year is just sitting at a 2. 15 yield the tenyear, 169 and the twoyear at 164. That story that really dragged our markets on friday. We finished off the lows on friday any way only down half of 1 on the s p 500 by the close, but clearly if that story is turning around, its unsurprising to see futures up a little bit this morning. Broader market was down 1 last year. The u. S. China trade fight continues to dominate the Global Market headlines friday, stocks dropped amid the report that u. S. Would limit eunice yoon with the latest. Hey, eunice. Hey, guys if its true that the u. S. Officials are clarifying that the Trump Administration is not going to be imposing any restrictions on u. S. Investments into u. S. Companies that would definitely be a welcome move earlier today the Foreign Ministry made a rare statement at its press briefing saying that any decoupling of china and the u. S. Would cause instability in Global Markets and harm both sides. I say its rare because the ministry generally doesnt like to comment on what it considers to be rumors separately from that analysts were scratching their heads as to what kind of harm these types of restrictions would have on china in any case because Foreign Investors generally dont have a whole lot of money into the chinese stock markets of course that includes u. S. Investors. Then on top of that the chinese have been trying themselves to market their own markets to Chinese Companies. And to make them more attra attractive they established a nasdaqstyle exchange in shanghai, so this move, if it were to happen by the Trump Administration, was seen as one that could be playing right into chinas hands. Separate to that, china published more Economic Data surprise to the upside but for the most part most people believe that this is just a temporary blip so the pmi officially came in at 49. 8, a little better than august and what people had been expecting. The new orders swung back to growth and a lot of analysts said that the stronger orders were probably because of some front loading. Also, the idea these are seasonal factors and government stimulus these figures came right in time for a massive celebration that china is having to celebrate the founding of the 70th the founding of the peoples republic and the 70th anniversary of it. Today president xi jinping was at Tiananmen Square with other communist party leaders. They were laying a wreath to mark to memorialize some what they consider to be the nations heros. But the big festivities will be tomorrow well have a military parade and a big party and then theres president xi jinpings speech. Most investors are watching to see if hes going to make any comment about chinas attitude or any change in policy towards the west guys thank you very much japanese Industrial Production down. 21 . Well talk a lot more about china later this morning when Top White House trade adviser Peter Navarro will join us live 8 00 a. M. Eastern time Corporate News this morning, shares of ab inbev rose more than 6 in hong kong today on their first day of trading this is the second biggest ipo so far this year behind only uber many analysts say that the ab inbev offers a major test of Investor Sentiment amid political protests in hong kong during recent months we have our own issues here with the ipo window whether thats still open well see. Well test it again. Certainly a few data points last week not looking so positive for that market heard about wework today. Its like its weird. Wework, peleton. Theres no leases being signed for wework anymore. This is the first time in history, i think, that the bag isnt being held by the poor Retail Investors that get in on the ipo. Its the private market taking the brunt of the revaluation of wework, 47 billion obviously thats also a positive spin to put on it the worst the Public Market has managed to do their Due Diligence and obviously did it with endeavor as well when you get to a certain point and youre tainted by the other ipos, you decide im not coming out at this price i dont need to come out at this price. Peleton is done since but got top of the range 8 billion valuation, an example of the flip side they still managed to get away that week. If you dont want to do no, of course. The range was lowered and then it would be below that. Ill just wait. Wework is concerned several major banks for the last three years have been warning that corporate real estate may not be if not overvalued at least fully valued it does raise the question of what sort of governance the private market was able to provide or if they were throwing money at this company. Well take your hands off. You do what you do best. Thats on them. Absolutely on them. Theres a lot of questions for the likes of soft bank and others who took part in fact most recent wework private funding and also on the bankers who, of course, approved the s1 original version the bankers who were involved were attracted private market investors. Theres also that round for Investment Bankers its not as public its not as open it doesnt go out to as many uneducated investors but they still are trying to entice bench Capital Funds i bet a lot of people are criticizing those people that told them this is a great deal. I think the vanguard, the fidelities the black rocks would consider themselves educated investors but investing on behalf of the broader public. Lets tell you whats happening in hong kong where protests have taken place for a 17th straight weekend. Nbcs Janice Frayer joins us from there with the full story ahead of a key chinese holiday janice, good morning reporter good morning. What a seething sunday it was here with riot Police Firing hundreds of rounds of tear gas, hundreds of rubber bullets including near us, water cannons, sponge grenades, pepper spray against protesters who were throwing fire bombs, vandalizing metro stations and pulling up bricks from sidewalks to throw at police this was the 17th straight weekend of protests. It was easily the most violent over 150 arrests were made thats a sign that police are showing no tolerance for decent. The timing of all of it, of course, is significant with china having its national day tomorrow there are huge celebrations planned for beijing, for the 70th anniversary theyll be a parade through military parade through Tiananmen Square xi jinping will oversee it its such a big deal in china. The government donated 620,000 tv sets to chinese households who didnt have one so that nobody would miss the festivities. Of course, what they wont be seeing is the split screen that most of the world will see with what will be happening here. Its expected to be a tense and very violent day police are urging people to avoid violence they have banned most protests but its not expected that protesters will Listen Police say they should expect a dangerous day. There will be clashes across the city with the first protests expected to start just after dawn. Thank you very much for that. Still to come on squawk box, tech under fire. Why antitrust investigators in congress are looking at google today. First, as we head to break, look at the biggest premarket winners and losers in the dow. What do advisors look for in an etf . Dont just track an index, help me meet a clients need. Is the fund built to sell or built to last . Etfs are only part of a portfolio. So make it easy to explain. Give me a quality fund that helps me get clients closer to their goals. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Welcome back to squawk box on cnbc. The Tech Industry remains under fire from regulators the wall street journal is now reporting congressional antitrust regulators are looking at plans by google to use a new internet protocol. They fear it could give the tech giant an advantage by making it harder for others to obtain consumer data with all of the ways that washington is scrutinizing all of these tech companies, its hard to imagine how they could go forward with certain new products and policies that would be seen as such. Huge amount of scrutiny even before we get into the election campaigns, probably only going to increase the rhetoric and fang was trading off quite noticeably last week, could argue thats also broad rotation but the politics plays a part in that. Couple stories about wework this morning bloomburg reports softbank is help turn around wework. Meantime the wall street journal reports turmoil at the company is keeping wework from signing new leases landlords are not having much interest on taking on the company as a tenant. Back to the broader markets, ed campbell senior Portfolio Manager at qma and head of research and chief Market Strategist welcome to you both. Katherine, i thought we would try to stay out of getting too political around here. But one of your biggest concerns is how the democratic dominating process plays out. You think that viewers and investors need to start thinking about who wins the first couple primary. And if its Elizabeth Warren, youre recommending people buy now . Yeah. Its a great time to, joe. The fact is the s p 500 is 49 comprised of the three sectors that she most hard hits, thats of course tech which you previously talked about, expect a breakup of the Major Companies there. If in fact we start to price in the risk theres no chance that Elizabeth Warren is priced in at s p 500 of near 3,000. One of the three main sectors that comprise almost half of the s p, tech, of course financials and of course health care, all three of which i think would fall precipitously if the market and when the market starts to discount even some chance let alone pretty good chance of an Elizabeth Warren nomination and later presidency. Youre okay if you end up in her campaign ads now for another bankster that doesnt like her thats a badge of honor . Look, joe, our game here is to help out our clients and to make money on the market i think a way to do that is factoring the biggest risks. This is for me the biggest risk. Markets are not pricing in corporate reform, Corporate Tax reform which was a very big part of the legup we have seen over the past two years in the s p 500 is going to go away. We need to protect ourselves and protect positions. Its a good idea to put on a put option with march expiree. Comes after the first two big caucus and primaries then you have super tuesday in early march. I think its a very prudent, very inexpensive way to protect ones positions. You like look at that backdrop its beautiful. Its going to be october tomorrow i know. Miami is amazing will you sign on for you have no income tax down there. Will you sign off on all our endreviews on remotes would it matter if were not here, you think . Move the entire show to miami . Move the entire network its also still 90 degrees. A lot of hedge funds. We dont need to go to the washington swamp. Is that being considered . Im joking only in my diluted mind only in my diluted mind. Theres an exodus of new york and new jersey its not just the weather. No kidding. Carl icahn. Thats right a lot of hedge funds, tax benefits, quality of life and the weather is impeccable, especially this time of year. You keep telling yourself as the weather rises above. I hope you laugh this interview out. Come on. Ed, you just are worried, i think. Theres no reason theres barely any reason for you to stay long at this point. Its all about trade as well, right . Well, i think the outlook is as clear as mud. We have a Global Economy thats very weak and vulnerable we have a u. S. Economy thats resilient at this point. And keeping things in keeping our head above water, but theyre a major cross currents in both directions and i think that raises both the upside and Downside Risks for financial markets. So yeah, were sticking pretty close to the shore in terms of our positioning relative to policy benchmarks. I like that i never heard that you heard that before, will . They dont say it in london much at the moment. Right no, but sticking close to shore. Keeping you dont want to be out in a storm if you cant see to try to get the boat back in there. But youre sitting there at your benchmark waits and not taking any conviction course. So, were overweight Global Equities relative to fixed income modestly because of the relative discrepancy values that have built up there. But, yeah, keeping a focus on the United States economy because its relatively more resilient. We have bought some value stocks recently because of the increasingly wide valuation discrepancy thats built up there in favor of value. The u. S. Economic surprise index has spent most of the year in negative territory we think that could spark some improvement in value relative performance. But, in general, not taking big bets because its really difficult at this point to determine whether the upside risks or the Downside Risks are going to gain the upper hand is the ipo asset class totally off the table for you right now . Were typically not buying ipos im doing global asset allegations. That would be im sure some of our small cap managers may be dipping their toes in there, but not really focus for us. If youre worried about trade, isnt tomorrow a big day. How long are the tariffs delayed . Two weeks. We want to get past tomorrow, right . Friday the market sort of went down when there were some comments out of china that werent great, right then today we dont do the delisting. They might be considering stopping investment into china. China responded how they were pretty bell close. Yes, as eunice just said. So, two weeks from now, now were back on the schedule for putting tariffs back on, right we are. But before that there is another round of trade talks on october 10th and 11th. How are those going to do well see it will be interesting to hear from Peter Navarro what led to the administration coming out and categorically saying we will not have Chinese Companies delisted from the u. S. And which other restrictions may not be off the table. To do it in the first place sounded like they were angry about something, right so i dont know. Also potential tariffs on the eu in certain sectors. I dont know whether that suggests the administration is going hard on everyone or whether its an alternative avenue for the sort of protectionist rhetoric if it feels a deal is coming with china. Katherine, the next two weeks specifically theres all these flash points on trade, does that skew the way youre investing . Does that lead you to sit on your hands for a couple weeks to see how it all shakes out . No, it hasnt, kayla. One of the reasons why the market dropped almost a year ago 20 was because of trade fear. At that point, we contended that trade incentives were aligned. I think there are even more that much aligned for President Trump who needs the victory. My concern, however, is that the chinese sense blood in the waters and have measure incentive to hold out now given that he has been weakened. So, hey, these capital controls could be trump trying to countervail or counteract his weakened position in front seat of the chinese but i do think from here to november hes going to desperately try for some type of victory with regard to trade thats been my longheld view. I think if yeah, i think if he gets it hell be very well positioned for next year. Thank you my pleasure. If theres blood in the water, you want to be close to shore, too, i think. Because it could be were not ready to front run President Trump. If the trade tensions do tamp down, then i do think theres a lot of stimulus out there. And that could fuel a rally, but we want to wait and see on this one. Blood in the water could be from the great white, which is right off the coast apparently of did you see that cape cod, did you see that went from above, its that shadow its like 50 feet from the shore. Although great white sharks on the coast of massachusetts arent anything new. Well, im not sure i knew they have shark warnings every summer. Great whites . Yes. That was new york, wasnt it . That was long island you probably remember better than i do. I knew that was coming. Didnt you see jaws 6. Yeah, the computer animated version. Following people on shore i think into the sea world it did they tried to sell that. Speaking of elon musk unveiling a new rocket the pictures of that straight ahead. But first as we head to break, a look back at this day in history you should be mad at airports. Excuse me, where is gate 87 . You should be mad at nonseasoned travelers. And they took my toothpaste away. And you should be mad at people who take unnecessary risks. How dare you, hes my emotional support snake. But youre not mad, because you have e trade, whose tech helps you understand the risk and reward potential on an options trade its a paste. Its not liquid or a gel. And even explore whatif scenarios. Wheres gate 87 . Dont get mad. 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Call now to start your membership or visit lifelock. Com tv thats what happens in golf nothiand in life. Ily. Im very fortunate i can lean on people, and that for me is what teamwork is all about. You cant do everything yourself. You need someone to guide you and help you make those tough decisions, thats Morgan Stanley. Theyre industry leaders, but the most important thing is they want to do it the right way. Im really excited to be part of the Morgan Stanley team. Im justin rose. We are Morgan Stanley. 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. Time for the executive edge, spacex founder and ceo elon musk unveiling the companys next generation rocket called the starship meant to carry people deep into space. Musk outlined a rapid schedule for the programs development. He says he thinks we could potentially see people fly next year if spacex gets into orbit in about six months of course, we can to other places in the solar system, like saturn and but the critical thing that we need to focus on, i think, is the fastest path to a selfsustaining city on mars okay. No no please, not me you dont want to go to mars . You dont want to go to saturn i dont want to go to space at all not right now. Maybe next year. You got to test the hell out of this thing. Was he offering for you to be the first . Its a total va you mean. Where are you going . Where are you going when youre up there the entire time i would think about getting back here. I dont know, theres reasons that astronauts are heros and the bravest people that we know. And train for months and months and months. Exactly yeah. You dont like the freezedried food . Look, i dont like that either i dont like any of the things involved maybe the weightlessness you can check that out in a different way. Would you go next year . Not next year no. Maybe in 15 years. Maybe when kids are in college. The arbitrariness of the going into space i agree with you. If they can make it much shorter for air travel, then you can travel to australia in the space of an hour. Just go up to the moon and then back to australia but all the technology thats being developed i imagine in a decade or two decades time will allow supersonic air travel again or whatever its going to be but that has a point to it. They want to get from greenwich to new york city quicker. Investors go to hong kong and australia and wherever else. At least handful would benefit our guesthost does a lot of travel. Write in and let us know if you want joe to go to space. Hes afraid to fly but hes going to go into space no, im not going. No way. Oprah winfrey is known for being very generous and her latest announcement is no exception. Attendees of the maya angelou women who lead luncheon with a 1 million donation. The luncheon was organized by the United Negro College fund and the goal was to raise half a Million Dollars. The organization raised more than 2 Million Dollars. Wear hats to that event it seems. Looks like it coming up this mornings biggest market movers. Plus, dont forget to subscribe to our new podcast youll hear special behind the scenes content and latest headlines, everything you expect from squawk box. Everyday on cnbc. Com podcast or on your favorite podcast app. 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. High protein. Low sugar. Tastes great high protein. Low sugar. So good high protein. Low sugar. Mmmm, birthday cake pure protein. Find our coupons in sundays paper. Announcer welcome back youre watching squawk box, live from the Nasdaq Market site in times square. Good morning among the stories front and center, retailer forever 21 has filed for bankruptcy protection. Plans to close as many as 350 of its 800 stores around the world. Tough competition and aggressive Global Expansion have weighed on that company also gasoline prices risen in the latest week. The latest lundberg survey puts the price of gallon a gallon of unled at 2. 77. Bp is going to announce its ceo will retire within 12 months sky news says the announcement could come as soon as the end of the next month u. S. Equity futures down, 65 points the nasdaq indicated up 33, 34 and the s p indicated up about 9. Coming up, despite google, and Ellen Degeneres have in common youll find that out next. Peter navarro joins us at 8 00 a. M. Eastern. Stay tuned youre watching squawk box on cnbc announcer todays big number, 737 billion thats the total value of goods and services exchanged between the u. S. And china in 2018 welcome back lets check u. S. Equitieequities quickly again, theyre solidly higher today i dont know how solid is, 68 points 34 points on the nasdaq. S p indicated up about 10. Bitcoin briefly falling again below 8,000 today. I think it got down to 77, maybe even below 7,700, but its recouped much of that and is back at 8,000. Lots of tech and media stories breaking over the weekend. Joining us now is ed lee and jo ann litman journalist at princetons institute for advanced study both are cnbc contributors guys, lets start with googles coming under antitrust scrutiny ed, how does any Silicon Valley company introduce a new anything oh my goodness. A new internet protocol of all things youre trying to fundamentally change the internet. Its not just google a lot of people in Silicon Valley have looked to try to make this change partly big part of it is to prevent hacking. Theres a lot of hackers get in at this sort of root level to make this change could help that however, problem is if not everyone makes a change or near the same time, you have sort of this fractured internet. Theres also concern that the company like google will control parts of the data that other people, other companies cant see, namely isps, whether its a comcast or internet. Its a change that has to happen more in lock step. Is it the sort of thing that a company in google should be developing hand in glove with lawmakers and regulators right there in the room with them at this point yeah. I think you hit the issue on the head what were talking about here is primarily consumer data and what happens, who owns it, who has access to it, right . So, the concern primarily the initial concern with google is the competitive concern with wireless and cable and what happens bauds they cant access that consumer data i think a larger concern could be this government regulatory investigative kinds of concern because when they change the protocol, when theyre encrypting this traffic, also means that Government Agencies will have a harder time cracking down on disinformation, misinformation, on abuse of data we just saw that huge story the New York Times about child pornography. Its going to be harder to crack down on those kinds sorts of things the more that you encrypt this data and the more that google controls it. I think the question of who regulates the data, you could sort of akin to governments regulating currency. Right . If its become sort of a way that things flow and get exchange one with the other, the Silicon Valley always long been ahead of the government in terms of how these things are regulated which is why we talk about we need to self regulate that of course is changing given everything that were seeing with the fallout with whether its hacking or disinformation or as joeann pointed out with child porn, its terrible. In the op ed page, Silicon Valley goes soft attacks from media and government cowed tech firms from making bold moves. I missed travis calinec. Do you think its gone too far in the other direction i think thats a pretty extreme argument to make look where we are now. And its not just you had wework last week. You had uber you have these companies that have these big charismatic leaders that get these extreme valuations thats led us to this Technology Bubble that were in and you know its really you think its a bubble. I do think its a bubble. When you look at the nontech firms. Were looking at wework, uber, lyft and juul, these are the companies that have had difficulty with their valuations and had crazy valuations and reminds me a lot of 2,000. Those old enough to remember 2,000 will recall that all you had to do was put dot com at the end of your valuation and your valuation soared theyre not wanting for money. There is a question right now over what is a tech company and what isnt a tech company. Are they just trying to put this through the equivalent of dot com right now which is why youre seeing the pullback there is this sort of cowboy attitude with some of these startups the other the idea of the op ed, you know what, we need to let them off the hook so they can really continue to innovate. Were in a different phase now Companies Like facebook and google, theyre the establishment. Theyre the guys a the top of the things the innovation is going to happen from these startups whatever the next wave of start ups might look like. When youre seeing the pullback, is that because of the likes of wework that had to pull their ipos or is lyft and uber peloton last week decided that was a failure or too soon to know that. I think were too soon to know that. Its one of those things where these privately Held Companies you have to have a business before they invest in you. Theres a bigger gulf now between how private investors think about what they want to invest with versus Public Markets. Usually you want to get to a point of maturity to be tested on the Public Markets. Maturity means discipline, balance, et quit they havent figured out. It is too soon. I also think we need to scrutinize the people putting in the valuations the investors, theyre the ones who are bidding up these phenomenal valuations and a lot of them appear to be being snowed by these big kashzmatic leaders. Although as journalists and representing Public Market investors, i guess we dont have to scrutinize them they could frame it the other way, as long as our Smaller Group of investors are still happy with us, its still up to them thats one of the issues with private versus Public Market. I suppose so. But you have a small group of people who are really responsible for these extreme valuations and then investors when these companies do go public, investors get hurt when it turns out the valuations are out of line with reality. Whats the responsibility of the private Company Board to keep the personality of the ceo and the culture of a company as it balloons in check its not just with the board but also with the investors to make sure there is a business there and we need to sort of have a reality check i talked last week about the bro culture with joe here. I thought it was gone its still around. But what you have its very much around. Its very much there. But really i think a major issue is theres this lack of diversity of thought among the people who are doing the investing. There isnt anybody there to say wait, is wework actually a tech company . Why are we giving it a tech valuation. There isnt enough questioning and theres too much group think. And the corporate government around control thats fundamental if you have one or two guys in control of the whole thing and they can sort of decide this is going to be evaluated. That becomes the rel lynch person in terms of the maturity and awareness is it safer for investors to park their money. Needing a more realistic view of the market and definition of the company. Wework, total Addressable Market every employee in the world, perhaps that was a little too much for investors to buy. We want to get your thoughts on our next story. Good news for spiderman fans sony and marvel announcing they reached a financing agreement for the third movie in the spiderman homecoming series. Ed, how financially lucrative will this be for both companies . Is it just good there wasnt a divorce here i think its good there wasnt a divorce here. Of course what it came down to sony wanting to maintain their Box Office Revenue off of this and marvel is like, look, were responsible for this whole franchise becoming as big as it is right now so we need to own more of that thats where the negotiations came down. Its good for both sides you dont want this divorce is sort of fracture the whole fan base the fan base really drove a lot of this up of course a deal was in the offering any way, was in negotiating position on both sides. Good for both. I would agree with ed here in that the they needed to do this. They needed to do it for the fans if you look financially here, they had Something Like 22 billion, inl, in ticket sales for marvel universe. Marvel is amazing. For films over the last 11 years or so. This is a financial win for both what do you make of hbo and Ellen Degeneres potentially partnering thats a really interesting deal because hbo has always been the Prestige Network and ellen is much more mass. If you recall back when the deal was done when at t made the purchase, stanky got up there and actually in a speech to hbo employees said we need to think differently. And hes really moved them away from sort of that mass from the prestige pedestal that they were standing on. That was a stunning moment in this sort of little world of media in terms of how thats operated because for outsiders it seemed obvious, of course you wanted to broaden hbos popularity and made this thing to make it bigger. For a long time hbo watchers that was a huge shift, mental shift. Is there a core lair we should look for to see if this will be successful we think of ellen, Chelsea Handler going to netflix not the same. What theyre trying to do is trying to ultimately broaden the appeal Ellen Degeneres is a great toe tum of that idea its more specifically hbo max is the Broader Service hbo is still its own little thing. At the end of the day its not going to matter. Hbo the brand is becoming a different thing. Perhaps not going after the game of thrones. Just because you have mass market appeal, doesnt mean youre not prestigious. Its about broadening the audience hbo max also has the streaming rights for friends, Big Bang Theory and does change what the brand is the larger point is this competition for talent that is bidding up prices for everyone i mean, weve seen this with thats good we like to hear that any way, keep that going. Thanks coming up, were going to get some stock picks, includingt least one bankam ne. Really squawk box will be right back. Its the idea that if our mothers were diagnosed with cancer, how would we want them to be treated . Thats exactly how we care for you. With answers and actions. To hear your concerns, quiet your fears, lift your spirits. Thats the mother standard of care. This is how we inspire hope. This is how we heal. Cancer Treatment Centers of america. Appointments available now. Welcome back squawk picks joining us, chief Investment Officer from smead investment capital. Good morning, bill looking at what you picked out for us, lets start with wells fargo following the news of a new ceo. You want to buy that stock right now . Yes again, earlier in the show you talked about Consumer Discretionary before you folks came on. They are very close to the consumer theyre very close to millennials because the big banks have the best mobile technology, and theyre about to add the millennials as liability customers not just depost sitters. Its much more profitable to make Money Lending to people so we have that ahead of us therefore, the business could get better the next five years of course, they will probably be past their problems in the next couple of years. So some would suggest within the big banks theyve got the least exposure to millennials. This is something you think theyre going to change or that the markets already missing theres 90 million millennials. Theyre like 30 of the population of the United States of america there is no big bank that isnt dealing with millions and millions of millennials. We have to remember, you know, you look at the composition, why is the United States doing so much better than everyone else and why is forever 21 going bankrupt the answer is because the youngest millennials arent 21 there are no more millennials at 21 and theyll have to be 30, 35 and 40 when people get to be 30 to 40 and have kids, their spending composition goes from discretionary to necessity spending secondly, they go from not being a liability customer to being a liability customer. Youve also gone for obvious si dental petroleum. Tell us about that one. You dont stick a 2 and 4yearold child into uber and send them to preschool everyone says when theyre 23 and not married theyre not going to have a van. Then people get a couple of kids and all the junk and they get a van. So the future is very bright here for the use of gasoline as the millennials move from the urban core to the suburbs or move from the most expensive cities to the rest of the country to live their life so this idea that energy doesnt matter anymore because, you know, al gores running around talking about Climate Change is kind of an urban myth. Bill, youve gone for discovery . Yeah, discovery is where the necessities get advertised as you were speaking on the show just a few minutes ago about the explosion and the expense of scripted television, the sweet spot, the probable thing is what you folks do unscripted television. Discovery is the king of unscripted television. Their advertisers are people like target and home depot and thats exactly where the necessity spending is pivoting is to companieslike target and home depot, therefore, the advertisements that youll get on unscripted Television Like hgtv, 90day fiance is the most Popular Program for females. Thanks for joining us. Thank you. Mohamed el erian will want to hear his topics squawk box coming right back the impeachment inquiry and your investments the latest for washington and what it could mean for businesses the stock market and the 2020 vision. Scott gottleib joins us with his take on the cdcs latest report. Plus, we look ahead at the week ahead on wall street. Talk earnings and state of the economy with Mohamed El Erian as the second hour of squawk box begins right now live from the beating heart of business, new york. This is squawk box. Good morning and welcome back to squawk box here on cnbc im joe kernen along with Kayla Tausche and wilfred fox. In the studio is Mohamed El Erian, alliance. Mets, 10 games above. 500. We ended on a relative high its a shame of what came before. Youre sticking by the jets even though the giants are taking up a lot of oxygen around here. It was a good weekend we didnt lose you didnt play thats right. Exactly we may talk more about that ive decided i like betting on college. Nfl is impossible. Its impossible. Theres so much parity have you noticed that . Did you see what happened to the rams did you see the patriots . Barely beat the they didnt cover the spread. Not allowed to. Football is talking about the no. No no no they actually score points and its fun theres offense. Weird. I dont know if youd like it. I dont know. Odds on that. U. S. Equity futures are for mohamed theyre up a little. Up 50 points nasdaq up 28 s p up 8. Heres whats making headlines at this hour fashion retailer forever 21 filing bankruptcy as it joins a growing list of brick and Mortar Stores filing. Sears and toys r us have filed for bankruptcy protection as more customers shift to online retailers. Shares of ab inbev rose. This is the second biggest ipo so far this year just behind uber many analysts say the ab inbev is a major test. Dream works animated adventure a bon min nabl topped the box office. It marks the seventh number one for universal or eight if you count downton abbey. I was glad a bon minable wasnt in the teleprompter one more time. I was lucky to have gotten it twice. Will you see downton abbey, wilf. If lord fellows is watching, i apologize. I thought it got tired. You could rejuvenate it in a movie . Perhaps perhaps. Back home with mum or whatever otherwise, no. You arent interested in getting an update on what carson is doing with mrs. Hughes . Hes a good character the rest of them are tired and repetitive fat play to nbc and itv. They have milked that and why watch it when you can live it . Thats a good point. We saw it on saturday and i would recommend you go see it. Really . Yeah. Does something actually happen yes countess is back, right the visit of the king and queen. Does cousin matthew come back to life . That was my wifes biggest regret. Thats really why i cant watch it anymore heartbreaking to be reminded of the tragedies. Did he get any good roles after that no. He thought he was worth too much quit because he wanted more money and thought he was going to get above his station come crashing back to earth right now because were going to talk u. S. China trade. Is that okay . Tell me we dont need a little escapism lately cant we think about other things occasionally or no . Youre down there in the middle of it all. Right in the thick of it. Anyway, the u. S. China im heading down there, too. Thats why i was asking whether you take the trade u. S. China trade fight continues to dominate the Global Market headlines. Eamon javers who needs weekends as much as the rest of us. Maybe more so. I hope you had a good one it wasnt much of a weekend. A lot to follow over the weekend. We have the redskins. Yeah, well, im from philly im an eagles guy. Ive been living in this town for 20 plus years and never been a redskins fan. Okay. So the Treasury Department over the weekend putting out a statement, this responding to reports from friday that the u. S. Government was looking for various ways to stop American Capital going to Chinese Companies. Those reports spooked the market a little bit on friday on saturday treasury putting out this statement from monica crowley, the spokesperson there saying the administration is not contemplating blocking Chinese Companies from listing shares on the u. S. Stock exchanges at this time we welcome investment in the United States. I can tell you, joe, that they have been considering a wide variety of options designed to prevent American Capital going to Chinese Companies its not clear what the time line for any of that is. Its not clear where any of that would land, but treasury taking steps over the weekend to put the kibosh on that idea which clearly the market didnt really like meanwhile, all of this coming against a backdrop in washington of impeachment nancy pelosi and House Democrats expected to continue the impeachment push this week expected to issue new subpoenas that the white house is expecting some optimism here i was texting with a Senior Administration official who said this, spirits are actually very high we think the democrats have made a fatal blunder. Not only will this effort by the democrats fail, but it can actually help the president. So republicans in the white house seeing democrats who are the ones making the mistake thinking they might have political opportunity in overreach by capitol hill. Hard to sift through it all, eamon. People are so entrenched that if they go off cant say that anymore. If they go off their the tribalism where they are, they immediately have to come back in i saw cuomo appeared to be saying, our governor in new york, appeared to be saying that he thought this was a bad move, and i think he probably heard from everyone that that was you know, dont say things then he kind of walked it back then on the other side i also see when anyone says i heard, you know, there was one republican who supposedly said we should have an inquiry and he walked that back its very, very polarized. I know thats not a headline or newsflash or anything. Nancy pelosi sent her members home over the weekend with some talking points and instructions. The whole messaging from democratic leadership to the rank and file is one of solemnity. Shes prayerful and heart broken i dont believe her. I dont believe that, eamon. I do not believe that, crocodile tears. You dont believe she wants that to be the message or you dont believe she fears that in her heart. I believe she wants that to be the message dont believe she feels that in her heart. No. No no. I dont know whats in her heart. I can tell you whats in her messaging. The republicans thats the best we can do the white house is all over the place in terms of its messaging. We saw the president lashing out over the weekend on twitter in a number of different ways venting frustration that the whistleblower is anonymous. The president doesnt like the idea that he cant counter punch against his main attacker here we have this fascinating and unprecedented dynamic where an anonymous figure is a skewsing the president of wrongdoing and the president doesnt know who it is or if he does know who it is, hes not allowed to say. Are we allowed to talk about the onion . I dont know if were allowed to talk about the onion piece. Which one New York Times. If you subscribe in the next 24 hours they will give you the name of the anonymous whistleblower and all of his background, where he went to school, likes, dislikes, everything, but you have to do it within the next 24 hours. Look, i mean, thats a joke, right . Yeah. Its not going to be that hard for the white house to figure out who the whistleblower is, right its somebody, according to the New York Times reporting, its somebody who is a serving cia officer, who was at one point detailed to the white house. Presumably this person has experience covering the ukraine as an area the list of people who fit that description is probably relatively small the white house can sort of go through the logs and figure out who it might be, but theyre ham strunk strung by the whistleblower law. I asked Kellyanne Conway whether or not the president wanted to name this whistleblower, whether or not he was frustrated she wouldnt answer that question she wouldnt say no. She simply said, nobody is considering that right now. Adam schiff said they will testify. How are they going to get him in and out or her. Yeah. All right, javers all right, kernen. Eagles, big win. Eagles. Like walking on air. Lets get to our guest host, Mohamed El Erian, alliance chief Economic Advisor he had a choice to pick teams. The mets and the jets. That was a long time ago, 1959. Doesnt mean anything yeah, youre right. Long time ago its loyalty mohamed, china trade. What we were just talking about. I watched the markets. If theres a constitutional crisis i assume well have a pretty big break in equity markets. Have i got that right . Or do you see no reflection on whats going on . Joe, weve had relative stability now for a while and i think that reflects two things one is a cease fire on trade we neither are neither have we resolved nor have we intensified the trade war, but secondly and more importantly, is the hope in markets that were going to have a handoff, a handoff on Monetary Policy to fiscal policy. Do you address what i meant though let me do you see a break if there was something else, another shoe drops where it could change the dynamic in the senate in terms of republicans, change public opinion, would you expect the stock market at that point to saw off yeah. If the senate evolves in such a way that an impeachment, then we would most likely see a selloff, yes. Whats the time frame for that because democrats are saying this is going to be a relatively tight time frame hearings over the next few weeks. Deposition of five state Department Officials this week and possible whethery a vote byr does this mean it could be over and done with relatively soon . It could be, but the market assumes the senate will continue to stand by President Trump. Thats a critical assumption in the marketplace right now. But the distraction i dont think the senate stays by President Trump if this does not resolve. I think the market has to brush off all of these political maneuverings and focus on whether you can get a handoff of policy if you really want to know where we are going to be in the next few months ask where germany the assumption is were going to get fiscal expansion from germany. Im not sure we will. We dont want to talk about it wed rather talk about all of this other stuff maybe trade with china handoff to what does that mean do we need u. S. Mca first of all, its trade plus the possibility of an investment war which was friday plus the possibility of a currency war and watch that, okay because the probability changes. Right now a ceasefire, everything is fine, were talking, that can move one way or the other the second element is on the policy side. I dont think weve talked enough about whats happening in the repo market as a reflection of concerns that central bank are no longer in full control of outcomes it hasnt had an impact on the market yet why . Because the market has thats okay Monetary Policy may become ineffective on the case of europe, but weve got fiscal policy coming. If that doesnt materialize, then we have a significant down side. Well talk more with mohamed. Hell be here until 9. Coming up, a new report that ecigarettes contain primarily thc. Could be behind the string of vaping deaths and illnesses across the country well speak to former fda commissioner Scott Gottleib about the cds fiincndgs stay tuned youre watching squawk box on cnbc but were also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. Tell him were flexible. Dont worry. My dutch is ok. Just ok . in dutch tell him we need this merger. in dutch its happening. just ok is not ok. Especially when it comes to your network. At t is americas best Wireless Network according to americas biggest test. Now with 5g evolution. The first step to 5g. More for your thing. Thats our thing. Officials at the cdc say that thc could be behind a string of vapingrelated deaths and illnesses. Meg tirrell joins us with more i feel like i knew this. Been trending for that to be the case. Thats right. Thats what Public Health officials have been looking at we were hoping for an update and what the maybe common ingredient was that was linking all of these vapingrelated illnesses what we did get were more concrete numbers about what some folks had in common. 2 3 or 3 4 of folks who had these illnesses were using thccontaining products. 57 reported using nicotinecontaining products, but some were using both of course only 16 were only using nicotinecontaining products these things arent universal across the different patients. They still havent identified just what substance is causing this what they found in an investigation in wisconsin and illinois are some similarities 64 of folks in those two states were using a counterfeit product known as dank vapes. We dont know whats going in them they are still trying to dig down as of last week there were 805 cases reported of these illnesses. 12 deaths confirmed by the cdc and unfortunately we have learned of a few more. Now the death is up to 14 based on the vapingrelated illnesses. Theyre working to identify Common Threads as of now it looks like related to thc from people acquiring them sort of informally off the street from friends and family, things like that but we still dont know exactly what do we know how much these thcrelated products comprise of the overall market probably not because some of them are black market sort of counterfeit type of things. Resolve the oil Scott Gottleib said its the way the thc was delivered. Cbd oils. What people are questioning, is it the product itself . Is it cut with something people are talking about including Vitamin E Oil or that the product had been treated with a fungicide that can become dangerous when burned. A lot of concerning elements. Dont do it dont do it thats my pitch. Thats what the cdc says, too. With more on the latest on the vaping illnesses, lets bring in our guest who joins us now, former fda commissioner, Scott Gottleib, cnbc contributor and a member of pfizers board did the cdc study put anything to rest for you . Well, i think the best work is coming out of work of the states if you look at the study in the state of wisconsin and illinois, they looked at 85 cases of people who became ill, 87 of them were traced back to thc the other 13 werent aware or they didnt admit to using thc but it does seem to be thc vapes getting implicated its bootleg vapes it appears the people who are developing these counterfeit vaping products and bootleg vaping products are cutting them with oil to make them thicker. One of the things of people who buy marijuana oils is the viscosity of the liquid. By putting oil thickeners in it consumers are misled to believe its more potent but it has something dangerous in it. If a person doesnt buy a product labeled dank vape, do they eliminate the risk entirely no. This really exposes the problem with the Marijuana Law in this country. We have federal prohibition. We have a patch work of laws and loose regulation you go into the legalized marijuana dispensaries you are getting a safe product no one knows its estimated of the 50 billion cannabis market, only 25 is legit being sold in the dispensaries a lot of those cartridges that people are buying to put in these vaping pens are what theyre getting, getting bootleg counterfeit products another thing to point out is the activity, the fashion of vaping Cannabis Oils really took off this last year and there were some national launches of hardware, specifically for vaping cbd and thc with the growing popularity of vaping these liquids were starting to see these problems emerge. Scott, ive been talking with folks in the cannabis phase who see these illnesses as a further rallying cry of why marijuana should be legalized on the federal level. If we saw that oversight ive been talking with folks who say that would help avoid the black market products. Do you agree should it be legalized will that help solve this problem . We need federal reckoning i wouldnt go so far as they need to be legalized we need to crack down the laws that have allowed rampant use and irresponsible use by teenagers while making it easier to study the potential legitimate medical applications. Its hard to do legitimate scientific studies because its a legitimate compound. We need to have a federal reckoning. You see states banning ecigarettes. Dont get me wrong, they have plenty associated with them, primarily the epidemic of the use of those products. It doesnt seem to be the ecigarettes in these cases sweeping the market isnt going to get at the problem. The states have a problem when it comes to Marijuana Law. Theyre reluctant to take reaction in states that have legitimized it. How is it were only now relying on the afterthefact studies as opposed to more stringent tests before they become more widespread even if thats on the thc products of the last year. How do we get to this point . We dont have any regulatory framework. The states claim they do Regulatory Oversight but nobodys really examined vaping cannabinoids and i dont think anybody should be vaping marijuana oils you can make an argument about the delivery the lung is not a good vehicle when it comes to the ecigarettes, we presumed or thought the ecigarettes could be a way to migrate currently addicted adult smokers off of nicotine to noncombustible products that premise still probably holds true for certain adults but it cant come at the expense of addicting a whole generation of kids on nicotine. We need more stringent action. Over the past few years the Food Drug Administration has been taking pretty stringent regulations on that. We wouldnt be on the cusp of more forceful action if we hadnt had that. Juul would argue thats still the core customer. Im wondering what you think the events of the past week, replacing the ceo, stopping all advertising does to get back to that core customer and away from the teen use. Well, look, i think the ecigarette manufacturers have changed how theyre approaching the market and how theyre approaching their products in the marketplace but its going to be hard to unring the bell theyve created in terms of the rampant use of these products and the fact that theyve really ignored the burgeoning epidemic theyve taken place in the past two years. This isnt another fashionable item that teens can migrate off of and a new one will come along. This is an addictive substance and it will be hard to get kids off of nicotine. Although perhaps by not having slcelebrities glamor ris it. It will help. Still to come, a check on whats moving in the premarket plus much more from guest host Mohamed El Erian u. S. Equities higher pnthiern the dow. Servicenow put our workflows in the cloud. This changes everything. Youre right sir. Everything. No not everything, i mean youre still blatantly sucking up to me gary. Brilliantly observed, sir. Always three steps ahead. Six steps ahead. Sixteen. So many steps. You done . A million steps ahead. Servicenow. Works for you. Still to come on squawk box. What will be moving markets as we get ready to kick off another week on wall street. Then from the impeachment to trade and more well find out what investors need to watch on the political front and how it could affect your investments. Speaking of the political front. The white house manufacturing trade director Peter Navarro will join us live. Squawk box returns after a short break. Mmm. Good. So ive spent my life developing technology to help the visually impaired. We are so good. We built a guide that uses ibm watson. To help the blind. It is already working in cities like tokyo. My dream is to help millions more people like me. Were changing whats possible every single day. And if you run a business, that means a lot. We create Financing Options for your customers. To help them get the things they love instantly. Our data provides insights into what your shoppers have already bought. So you can offer them what they might consider buying next. Our technology and Financial Solutions are changing whats possible in all sorts of ways. So, how can we change whats possible for you . Were back. The premarket dom chu. Dom . Wilf, its the money markets. Right now the evidence suggests it will be business as usual the reap poe rates the higher than the market turmoil at the end of last year. The Financial System was adequately supplying it. Shortterm interest rates. The retail space the consensus. The rates had unintended consequences they boosted the cash system the fed has true. And the legal rates. You brought this up earlier. I think it speaks to not just that there was a surge in the market for cash, i think thats right, but theres three fundamental issues going on underneath one is structurally the market changed. You just heard dom on this secondly, theres now concerns about the ability of the fed to keep control and third and most importantly im going to stress this over and over again, the market is under pricing liquidity risks. Not just in that market but in other markets. I think that was the first evidence not the first evidence thats yet another evidence of this happening lets bring in christian am mama ni. A factor of the last couple of weeks has been a sell jeff in faang stocks you see that as a buying issue yes, first let me address the issue mohamed mentioned. Why liquidity remains an interest looking at the repo rate spike, its making an exaggerated statement. It has big banks hoarding reserves because they used it for regulatory purposes. This is a solvable problem we can blame the new york fed for not anticipating it, but at the end of the day it is really not the end of the world the way it is being made up. As far as tech stocks are concerned, i think at the end of the day when the u. S. Economy is growing at 2 , people are going to pay fancy prices for companies that can deliver significantly higher growth rate in their revenues and cash flows. And i think while we may be taking a bit of a pit stop with respect to them, eventually tech stock is where if the market is going to go up, tech stocks have to go up. In terms of the phase on liquidity, how concerned are you about that you also like credit at the moment. Yes i think if you look at the concerns with respect to the repo market, what the implications of that was in the credit market, its really we basically looked at it and said, okay, the fed will solve this problem, go away i think that is the reality. This is a very nuanced issue with respect to reserve hoarding by banks the fed can solve that problem the easiest thing that they can do is to reduce the interest that they pay on reserves. They do that, the demand of reserves goes down meaningfully. That has implications for bank ability. To talk about that is to talk about every item as an isolated item lets look at the items that were treating as noise, which is what you basically said forget the disruption in repo market forget the 16 trillion of bonds trading at negative yields forget the fact that we are deglobalizing the Global Economy. I can go through a whole list of things that you and i would have thought were unthinkable four years ago. Theyve all happened and the tendency in the marketplace is to treat every one as a stand alone containable issue but we are ignoring signals i would tell you what were hearing is not just noise, its a signal that the system is under stress. Look, mohamed, there are significant issues in the global marke markets. The biggest of them is a slowdown at the end of the day at the end that is the core problem. Negative rates certainly help. They dont solve the problem theyve softened the blow off of that negative growth maybe at the margin that increases things looking at repo market issues and kind of conflating that with Everything Else that the Global Economy is facing is a bit of exaggeration thats the point im trying to make. How far could markets fall if that happens if you get a policy rate, that will accelerate the system is not built for negative yields. Its okay if its for a yield, too, but the longer they last, the bigger pressure they put on systems. The system is not built for deglobalization. Its okay for a while but not for long weve got to recognize that the system is not built for this, not wired. Were you pleased at the last press conference that powell said he wouldnt pursue negative rates and go that far. I am. If we end up at negative rates, we would break something for me it is striking that the ecb itself is now looking at the cost of negative yields, that it can neither go forward nor go back we have divisions in the ecb we have divisions in the fed and we have a very tentative handoff to another policy instrument we can dismiss this element and this element and this element. I think one of the things that basically saved that is Mario Draghis policy that he implemented over the last few years. Its a worse option. We have to construct that. You like that theyre going higher rather than lower. Thank you coming up, what a wealth tax could mean for your investments and american businesses. Dan clifton, head of policy research for strategis affects us i can think of only one person on this set that has anything to really worry about check out the futures you knew it was coming at some point, mohamed youre a very successful guy i admire you this comes from love comes from love. Well be right back. Key portfolio events. All in one place. Because when its decision time. You need decision tech. Only from fidelity. Democrats on wall street are pushing back against a potential senator warren they could sit out the election or join President Trump. Dan clifton. Strategis partners head of research such a big topic to talk about you have some a fin niffinit you say egregious might not be the word. Not a good word. Not a good word for you thats not my position. Thats how they justify it. No, thats not the whacky proposal. So, here, ill tell you what i think as opposed to you telling me. Okay. Ill see how long i let you go with it. No, kidding. Thank you even if the democrats were to flip the senate, a marginal vote is a moderate. Joe manchin. Senator cinema, tester it is unlikely that senator warren or senator sanders would be able to come in and enact the full agenda that theyre talking about. I dont think you can find any candidate that doesnt want to reduce the extent of wealth concentration at the top of the scale. Not that some of them aspire to. I would say universally there is a sentiment. The reason that joe biden with all of his negatives they dont think those will be a positive. They need to take a closer look at joe bidens tax agenda hes talking about closing the step up basis loophole youre saying its just as bad as the other so dont think hes moderate. Not bad hes more interested in building on the tax code that exists and making it more progressive significantly at the top of the scale where senator warren is talking about adding new pieces. Dan, we had an analyst on earlier today. She gave us three areas of the stock market to buy puts on if Elizabeth Warren wins the primary. She said health care, she said the banks and she said Technology Yeah a market manager said the market wouldnt open i think it was hyperbole there could be a problem if Elizabeth Warren became president. Lets look at what all 20 candidates are saying. If the democrats take the senate, this is the after tax rate of return on stocks goes down all else being equal. You go and introduce the growth killing tax increases on top of it, i think thats going to compound the pressure the democrats need to be careful in energizing their base with developing a good economic outcome. Dan, the fact that senator warren and Vice President biden are virtually tied in the quinnipiac poll, does that tell you that the Democratic Party still doesnt quite have a decision on the degree to which it wants to move in any of those directions that you just outlined thats a great question, kayla. I would say the moderates always believe their path to victory was that the progressive would split the vote for most of this race, Bernie Sanders and Elizabeth Warren have been splitting the vote thats starting to shift where youre actually seeing constituencies in bidens camp starting to move over to the warren camp. She has real momentum in the polls now. Im not sure its an ideological one. She has to convince democratic voters she can beat donald trump. If she can do that, she will continue to accelerate. Will she beat donald trump . Yes, i think so look, in fact, all the headtoheads show she can clearly beat donald trump and biden and most of the others those are the headtohead polls. I want to push back. I want to be very clear. The trump tax cut did almost nothing for those at the very bottom is expand it. Miraculously they spent 2 trillion on a tax cut and did nothing for low income people. There is no democrat that doesnt want to roll back the trump tax cuts. The investors are crystal clear. We had positives from the tax reform. I think weve had a shortterm positive. Its a question whether we have the longer term. Jared, i want to ask you a very simple question. I agree with you theres a push back against inequality. It comes for the inequality of income and wealth. Mostly of opportunity. Why are we hearing more about what to do about the inequality of opportunity. Great question. Thats absolutely key yeah, no, great question. Let me first say what you described in terms of the tax cut boosting the economy, i agree. Thats a cainsian effect as soon as that faded from the system, gdp growth downshifted from 3 to 2 clearly what im referring to when i talk about the failure of the tax cut is structural longer term growth. I think we agree on that point heres the answer to your excellent question there is a strong linkage between income inequality and economic mobility. Let me tell you how it works it works through opportunities for kids if you grew up in a family thats hit with the kinds of symptoms of income inequality, stagnant earnings, living in neighborhoods that dont offer you the kinds ofopportunities whether its libraries, th environment or quality of school, youre going to do less well there is great research, read the work of raj cheddie on this, increased equality, diminished capabilities by families hit by then. Dan, the Corporate Tax cuts, do you think that was cainsian i dont i think some of the trade issues that happened in 2018 have offset some of the positive impacts of that tax cut, particularly the confidence which is then reducing investments. I think a lot of this about cainsian is ridiculous youve permanently lowered the hurdle i think it will produce dividends. Let me say a quick point. Quick point. I believe that everybody sitting there in that studio, including dan, would be better served on trade policy by anyone whos running for president except donald trump so i want you to think about that Elizabeth Warren, joe biden, any one of those frontrunners will be better in terms of global trade, reversing the deglobalization that mohamed was talking about than donald trump. Interestingly, jared, in 2016 the trump trade platform and the clinton trade platform looked extremely similar. There was hardly any difference there. Whos talking about platforms, kayla donald trump is executing what he ran on in 2016 which Hillary Clinton was also espousing later on in the campaign as well. Right im sure well hear more on trade from the democrats jared, i want to ask you about this financial transaction tax. Sure. Good question. The support by Vice President biden of this financial transaction tax comes in the wake of the Obama Administration considering it but not going forward. You were there you were advising him there. Why didnt the Obama Administration pursue this if this would have been a good policy and would have raised some good revenue . There just werent enough cheerleaders for the tax within the administration at the time since that point there have been some very interesting and important studies. I think probably one of the ones id recommend viewers check out is by the tax policy center. This is a really down the middle group. There are a bunch of tax wonks they dont have a partisan thumb on the scale they looked at the financial transaction. This is post obama i think they went into their study thinking this is a really difficult tax. They came out of the study thinking it might be worth doing it we now have some actual legislation written. I think its a tax whose time has come. Dan so if we do 2 because of trade, the question is, do buy want to return what jared is talking about or do nothing . The payoff is down the road if we get a more fair playing field. Nkts the worse you can do for low income workers is have 2 growth its not enough income for them to grow and it means low interest rates, high stock market returns we need 3 growth. Weve got to go we have navarro coming on. Jared, i can guarantee you hes not going to like what you said. Im not afraid. I know youre not dans not in the studio. He has the same dome behind him. Thanks. As joe said,et nar peravro up after this. Stay tuned obvious. Sometimes, they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Plants capture co2. What if other kinds of plants captured it too . If these industrial plants had technology that captured carbon like trees we could help lower emissions. Carbon capture is Important Technology and experts agree. Thats why were working on ways to improve it. So plants. Can be a little more. Like plants. Squawk box newsmaker Peter Navarro will join us live. Ipo rush or crush. It is sold, sold. Some Big Companies struggling in the race to go public the names you need to know. Plus, see ya september. Investors ready to close the book on the month as the final hour of squawk box begins right now. Live from the most powerful city in the world. This is squawk box. Good morning. Welcome back to squawk box on cnbc live from the Nasdaq Market site in times square becky and andrew are off our guest, Mohamed El Erian. The futures indicated up a little bit today 65 points on the dow jones premarket. Trade fight remains front and center the Trump Administration has no plans to limit the investments in china Peter Navarro, assistant to the president and office of trade and Manufacturing Policy director peter, this was fake news pure and simple really joe, were going to get to that i promiseill answer that. Something i have to say first. Last week president donald j. Trump signed a trade deal while in geneva, switzerland, they negotiated the most radical reform in history. Those two big trump wins are going to net the American People billions of dollars. There was virtually no mention of these big trump wins in the news this news cycle is overwhelmed by the second impeachment in years. Make no mistake, joe this is a coup de tat. I was astounded when al green said we cant beat donald j. Trump at the ballot box. Hes too good on the economy hes standing up to china. We have secure borders lets just take him out with thissism pea issis issism impeaf congress has declared war on congress and the Electoral Congress its going to be as Tulsi Gabbard said, very divisive. The country is taking us in a very wrong direction. Lets keep it how that affects the china trade negotiations were talking about, peter do you think that with that as a backdrop it makes it more likely or less likely. I want to get deep into that, joe. Was that ever on the table, delisting the chinese i think the last time we talked i proposed navarros rule which is that any story that comes from fake news is designed to have a man part from his money. Ive read it over half of it was highly inaccurate or simply flat out false but it was market moving, joe. Alibaba took a haircut other Chinese Companies. And it was really irresponsible journalism the problem we have here, its kind of like greshams law of journalism bad stories push out the good. What happens is as soon as bloomberg puts it out there theres pressure for others to put it out there then it comes up on the cable news networks. Peter, it doesnt hang on, kayla. Just stop. I want to finish this thought. Wow this this story was just so full of inaccuracies and in terms of the truth of the matter, what the treasury said i think was accurate, but heres the problem the treasury did not address internal discussions about outbound u. S. Investment. Please, kayla. Im trying to ask you a followup question because we also share air time with you here kayla kayla, kayla so heres my point. When these stories come out in the press, theyre designed to basically have the white house reveal whatever it is is going on there and so im not going to do that here, but what i can tell you is this theres some significant issues related to chinese stocks listed on public exchanges. Senator marco rubio, among others, has brought that to our attention. Just let me give you some statistics on this you have the Public Company accounting over sight board. Theres over 100 Chinese Companies with a market cap of over 1 trillion dollars which refused to give appropriate transparency on accounting to the pcaob. And fraud is ubiquitous. Theres issues related to fake receipts, fake invoices. Okay. Part of the stuff is fake cash balances because its very hard for auditors to penetrate that wall and so this raises real issues that then go down the line for example, the federal retirement thrift board had announced the policy to start buying some chinese invest in chinese stocks. Okay. So that was that raises risks. The Goldman Sachs dramatically increased the weighting in the m msci index which effectively forces investors to decrease their investments there. Peter these are the issues i think that the white house and capitol hill are looking at, and thats all im going o say about what happened internally other than to say that that story was fake news. Peter, generally do you support limits to capital flight generally do you support policies to weaken the dollar . And is there a view at the white house, is there an early stage discussion about how to do this if the trade dispute with china continues to linger . Because that was the crux of the story on friday. Bloomberg had one story. New york times, politico, cnbc, various white house officials are talking to various news outlets and they didnt all report the same thing but we have reported in the past that there are some things under consideration that the administration has been evaluating at different stages of development, some brought by congress, some originating how long is this going to go on, kayla. You brought me on as a guest here. I believe i can ask a followup question. That was a followup monolog. Heres my point, kayla those type of questions its not appropriate peter, you said were not allowed to listen to reports according to sources youre here on the record and youre saying youre not going to answer a question. Can i finish my point here . Heres the thing. When these stories come out, all they are designed to do is to force the white house, people like me, to reveal the inner workings of our trade negotiations with places like china, and im not going to do that the other part of the rule i have is the lighthizer rule, particularly with china and the sensitive areas of negotiation, these things are going to happen behind closed doors. I think ive been forthright in telling you that the bloomberg story was fake news. I think ive been forthright in telling you right now there are some interesting and significant transparency issues with chinese stocks but thats all im going to say im not going to talk about whats going on behind closed doors in the negotiation room. Go beyond the stories. Sure. There is a view, and youre getting a lot of support, the administration has gotten a lot of support for the hypothesis if not now, when . Okay the reason why you get the when if not now when what . The world believes that the u. S. Is serious about this. Serious about what . What are we talking about . Were talking about why not press china further right now . The economy is weakening they are risking destabilization. Why not force them to make sure we get a deal that not just addresses genuine grievances about intellectual property rights, about subsidies, but also makes this snik why not force it harder right now . So donald j. Trump is standing up to chinese like no president has done before and whats on the table is what ive referred to in the past as the seven deadly sins. Youve mentioned part of them. Its the cyber intrusions into our business networks, intellectual property theft on hundreds of billions of dollars, the forced technology transfer, the dumping, currency manipulation, Stateowned Enterprises and one of the things thats very important to me is the made in china fentanyl that will kill 100 americans today and 50 million in a year im puzzled why you want us to go further President Trump is standing up for america on this on seven clear vectors that need to be addressed. So its like what more do you want us to do. Peter, you know if you tell the chinese hang on before you say i know, dont put words in my mouth before i speak but ask your question. So there is a view that if you convey to china its not just about trade war we can take it up to investment war, we can take it up to currency war so agree now before it escalates. Why not make that argument very explicit and keep on pressing it right now . Why say, no, were not looking at investment restrictions why step back from that . I im going to let commentators such as yourself speculate as to how or how the negotiations may unfold. I simply say that weve made abundantly clear what our asks are. In fact, there was 150 page plus agreement on the table based on those seven verticals that i talked about and thats in terms of the context of what were speaking with with the chinese, thats what President Trump is focused on. Thats what ambassador lighthizer is focused on commentators are free to speculate on whatever else you want to throw into the mix here, but thats not my job. My job basically is to have the president and ambassador lighthizer as we navigate to sensitive negotiations here. I get back to fake news by bloomberg. This kind of thing doesnt help us, joe. But you started off with talking about i think you called it another impeachment hoax how does with that as a backdrop yeah. Just forecast how that changes or doesnt change our negotiations with the chinese over the next month or between now and the election even . Well, lets look at it from two perspectives one, lets look at it from President Trumps perspective. This man has steely resolve about standing up to china nothings going to change about that the probability of a great deal has not changed, right he has said very clearly were either going to get a great deal or were not with respect to the chinese, i think i think its fair to say that throughout these negotiations theyve consistently miscalculated the resolve of this president and theres a danger here that they might do the same as this second impeachment circus in three years is fired up, but, you know, here look, make no mistake about this, too, this the trump base is not going to tolerate whats going on here, and independents and moderates in this country who are increasingly disgusted of the left ward lurch of the Democratic Party are not going to put up with it. America needs donald j. Trump. The trump base knows it. The independents know it the moderates know it. They need President Trump for the challenges of the economy going forward. They need him to stand up to china. They need him to secure our borders. So i dont think that peter, wisconsin and pennsylvania wisconsin and pennsylvania were two of the states that President Trump won in 2016 and just looking at some of the Employment Data for this year, wisconsin has lost 5,000 manufacturing jobs pennsylvania has lost 8,000 manufacturing jobs what do you tell those workers in those swing states about the president s trade policy and when they will see results so i think thats a bit of cheri picking the data weve created through President Trumps policies over half a Million Manufacturing jobs ive been to the state of wisconsin. Ive been to marionette, wisconsin, where theyre building the combat ship ive been to pennsylvania, york, pennsylvania, where theyre building the combat vehicle. All of these things have happened because of President Trumps ability to get increased Defense Budget and his focus every day this man goes to work and focuses on creating good jobs for the American People who work with their hands. Im actively involved in working with the philly shipyard issue we are keenly aware of the importance of manufacturing in this country and we are very proud of what President Trump has done. And there were peter some gains in dont forget, kayla 2017 and 2018 but voters remember during the Biden Administration they lost over 200,000 manufacturing jobs and those people were on the set with joe back there in the campaign they were telling joe that manufacturing was gone forever, we were going to be a service sector. There is data wed only grow at 1 . You can cheri pick the data, but 6 million jobs there are traders who warn of a manufacturing recession. Let me ask you this, kayla. If weve got the lowest historic unemployment rates weve ever seen for blacks, hispanics, women, the disabled, veterans and youre here and kind of singing some song about unemployment in an economy which is just giving a job to everybody who wants one and still theres we need to fill jobs so i i dont even know why youre going down this path. This trump economy is strong as a rock manufacturing is strong as a rock and, you know, ive been to wisconsin and ive seen firsthand the fruits of President Trumps labor on the manufacturing front. Peter, should we expect tariffs on the eu . Dont ask me. Ask the president and ambassador Robert Lighthizer. Weve got how long before wed need to see progress and then wed have more tariffs back on china its two weeks, right . What do you expect is going to happen i expect that on october 10th the chinese delegation is going to arrive and behind closed doors he and his team will engage with ambassador Robert Lighthizer and then well see what happens. I hear that a lot from President Trump. Well see what happens well, look, you cant joe, you cant negotiate in public. You just cant do that you just cant do that again, im telling ya, its like the people watching this show who are investors, i just want to reemphasize this point. Its like any news that you hear about china that doesnt quote real sources, like a person close just dont believe it treat it as entertainment, not information, otherwise youre going to get a haircut have you ever given briefings to reporters, peter, off the record why would you ask a question like that . Because youre saying that any story that ever comes out is to be totally disbelieved. What are you talking about . If you give them something off the record then a reporter cant do it. You dont even know the rules of journalism. The white house often doesnt allow people to go on the record, peter which is why theres a litany of background sources. Lighthizer can go on the record any time he wants Steve Mnuchin can go on the record any time he wants larry kudlow can go on the record any time he wants wilbur ross can go on the record any time he wants. These are the people who are the who are the key players in the china negotiations. Im just telling ya, you saw what happened last week, right you saw bloomberg puts out a story, billions of dollars change hands on what is effectively inaccurate information. Now youre telling me thats okay you know, kayla, are you telling me thats okay i dont report things that arent fully verified with multiple sources, peter, but the issue is even principles often dont want to be seen disagreeing with the president in public. Yeah, well i would ask the white house to revise that policy. Thats another cheap shot, too, so but anyway, how can i help you, joe . No, were done. Were done, peter. I appreciate it, my friend. Okay. Well see you later. Thanks. I would also like to note that when President Trump and Prime Minister abe were announcing their trade deal we covered it live. I talked about it on the air and we also wrote a long piece about the changes. You get to talk about it. If you want to read about that. Bernie sanders unveiling an income inequality plan just minutes ago. I guess its to help income inequality, not to make it worse, although i dont know. The details next later this morning well hear much more out abthe investor trade fight. Dont miss kyle bass on the set. Stay tuned and experience adventure in unexpected places. Who were inspired by different cultures and found that the past can create new memories. Leading them to discover were woven together by the moments we share. For everywhere you go, expedia has everything you need, all in one place. Breaking news from the 2020 campaign trail today senator Bernie Sanders unveiling an income equality tax plan. Among the headlines hes proposing to raise taxes with what he calls, quote, exorbitant pay gaps between workers and tax increases on companies with ceos who are paid 50 times more than their median worker salary this Campaign Says this plan will raise 150 billion over the next decade. Follows his wealth flanges which he released last week. Interestingly, 150 billion raised from this would seem to pale in comparison to what he would be looking to raise from the wealth tax for more on this, lets bring back jared bernstein, former economist to Vice President biden and dan clifton, strategis research partners. At first blush, jared, dan, who wants to raise their hand to go first with some thoughts on this plan jared okay. Well, first of all, i think if i may let me just say you guys are exemplary journalists so lets get that out of the way. This is a reaction to, as you said, a ratio of ceo pay to worker pay that is close to alltime highs and rather than try to target, you know, this narrow slice of the problem i would probably argue for the type that we were talking about in our earlier segment. I tend to go with this. Theres a difference between campaigning and governing. From a Campaign Theme it fits well in the theme we were talking about. Income inequality, ceo pay it would be very difficult to implement. Just looking at it, where do you get the ceo disclosures. Those are publicly traded companies. Does it force them to take them out of the capital markets. If you had a Democratic Administration and fcc, then they could demand that ceos disclose that ratio. No doubt about it here you are changing the rules. That gets to your point, this is only 150 billion, kayla it seems hes throwing this on top of all of his other tax proposals. Its not a significant source of funding. It is logistically able to be done you would see changes to the broader progressivity. What would 150 billion get you when you look at all of the proposals that sanders is trying to get you wouldnt seem to get you much . Youre right. Of course. A fraction of a percent. But i like this idea i dont want to lose the thing you just said which is trying to pay for. You can cast all kinds of aspersions at the democrats plans, but theyre trying to pay for their ideas and i think thats admirable republicans when they administered this tax cut, it was completely on the deficit. Then democrats and republicans got together and all of their spending bills have been completely deficit financed. Whether youre talking about warren, biden and sanders. The idea that youre trying to raise revenue is important and its something that nobody seems to care about in this town. As for your point, governing versus campaigning, to the fact that this is a campaign offering, youre not going after arbitrary levels of wealth or income this is where there is a clear example of a disconnect between the average worker in one company and the top worker. Look at where the polls are hes fading into the election. Hes losing momentum this is his way of trying to reassert that message and really say to the democratic base, im the one who will go after ceos and big wealth in this country thats why i think its more of a political message but one that will be effective in the democratic primary as he tries to regain his footing and puts out a tax on stock transfers were going to see increasing more aggressive proposals. One quick point here. One way to solve this problem is to try to do something that reaches the median worker. Earlier dan made the correct point that when you look at the bottom of the scale you see pay growing quickly. Thats a function of the tight labor market median pay has really lagged for a long time. One thing i like about the sanders idea is it does provide an incentive to lift the middle of the scale a lot of our policies whether youre talking about and we need to do more with middle wage workers. At the end of the day you need Economic Growth to lift wages and workers. Its increased 4,000 over the last 2 1 2 years its the same level it was in 2007. It was 1,000 in a previous eight years. Its not about who gets what on the tax benefit, its about getting Economic Growth. So you think the median worker is doing fine i think the median worker is doing better over the last two years than the last eight years. Just to put on the side of the latest proposal. Got to acknowledge that the simplest way a ceo or company could reduce their ratio is to fire low paid workers. The ratio would improve on the surface. Exactly. Is that a risk . Thats a risk thats precisely why this kind of a surgical attempt to address a corner of the inquality, important corner of the inequality problem can lead you down paths to generating unintended consequences. Well see how the rest of the field responds to this. We saw that happen, jared we saw for eight years the fed was the only game in town and income inequality got worse with all of the wellintentioned programs to help people. Interestingly the fed stays at zero and income inequality gets worse it finally starts improving under pro growth packages weve seen recently and were back to more redistribution. Nobody a couple of things. First of all, inequality, believe it or not, hasnt increased over the last few years. Its been stuck at the highest level. Organic you and dan keep talking you grow the economy. Grow the economy. Nobody disagrees with grow the economy. It has down shifted from 3 to 2 . Dont stunt the growth. The economy has downshifted because this idea that you cut taxes for rich people, you generate you said its because of the trade wars or because of the tax cuts no, i dont think the trade wars i dont think the trade wars have yet really shifted the economy into reverse i think the trade wars have hurt business investment, thats 12 of gdp. Anything else, dan . You gave up. Going to come back again for the third appearance. Third appearance. Jared will come to the third studio because i note you moved in between we managed to pin you down somewhere. He went back and started hitting those books to come up with more stuff. Yeah, exactly thank you. Good talking to you. Still to come, from uber to we work, its been a rough run for a member of high profile ipos whats next in the pipeline . Well ask a member at graykroft. Later dont miss former u. K. Prime minister David Cameron will join me live on closing bell. Squasquawk box back in a coupf minutes. Its been a rough week for many ipos. Check out these returns. Just last week smile direct, slack, peloton, lyft and uber all down significantly joining us whether these laggards are indicative of a narrowing in the ipo window. Graykroft own shares of the we company. A very good morning to you how are you doing . Very well thanks for having me so is peloton an example that were now past the beat for this cycle . Not only have we had a wework pulled, weve got a peloton listing and falling significant cantly . Yeah. Theres kind of the great reckoning in the Public Markets of these Public Markets, the unicorns in the private market you see software is eating the world and whats happened is that has been stretched as the natural things that have been disrupted like, you know, salesforce disrupting software for salespeople now its migrating further and further afield so youre seeing it come to commercial real estate, youre seeing it come to fitness. The key thing that we think about is some of these models have lower Gross Margins attached to them and in the private markets they were trading Like Software companies, but if you look at some of these companies with much lower Gross Margins, very different businesses, i think the Public Markets are voting on this they say, hey, this doesnt get a software multiple because youre reenvisioning something. Thats interesting. Gross margin very binary about 15 you can still spin with this but below 15 you cant. Is that what youre saying zoom, 81 , cloud first 77 , data dog, 75 . Some of the ones with tougher times, uber, 46 , lyft 39 , peloton, 42 theres a bifurcation of these companies. Zoom is doing very well. Its a high margin repeatable sticky Software Business in our portfolio we have icertis, work fusion these are companies that are doing super and but theyre more traditional Enterprise Software companies you get further afield from them, its not that they arent great companies, its just i think the people are looking at the valuations in the private market valuations and theyre asking the hard questions, which is healthy it doesnt mean theyre completely bad businesses. I think peloton is a very interesting company, but, you know, does it demand a software multiple is the question john, what you said which i agree with is obvious. Now weve had multiple, why isnt it taking the ipo multiples . Why do we have to wait until its doing badly and Start Talking about it obviously theres momentum. People want a price at a healthy valuation and theres fiercesome competition to get these listings theres a further debate around direct listings. Im a big proponent around direct listings. Its a healthier way giving handouts to your friends from investment banks versus having an algorithm decide who gets the allocation. Theres no lockup, theres no headache over, hey, when this lockup comes up everyone is going to sell. Everyone can sell immediately. I think its a healthier way to do it. I think that will find pricing more quickly its a good question why is a stock down 25, 30 in one day of trading like it feels like theres a better mechanism for price discovery. To the point about gross margin again and reading out some of those with low Gross Margins that may not, therefore, deserve a Software Type multi e multiple you put peloton in that camp why do you own wework . Thats in the same camp. I have lots to say about wework id rather not talk about it. No, but if youre saying peloton doesnt deserve that multiple, its a fair followup question. Yeah, i wont talk about that specifically but more generally in as you go further afield the questions that we ask you have to daisy chain it out, right . It starts with gross margin but it goes all the way to profitability. The only reason to raise capital is because theres a disconnect between your cash and your your cash flow and your cash needs so when you look at these companies from, you know, raising hundreds of millions of dollars from soft bank, for example, like the returning capital that you have to get is just enormous and they talk about investing in companies that have kind of consumed the capital they need. There are very few companies that can return billions and billions of dollars ever so, you know, we take a harder look on these daisy chain it out, like does this business actually work does it have high margin, repeatable business . Sticky customers. So softbank made an error investing at that valuation youre saying . I think its pretty apparent. But you criticize peloton for going public at that level and youve also invested in wework yourself so, again, im not going to comment specifically on wework. I get the position youve taken. You kind of mentioned that before the interview unfair to criticize softbank and criticize pelotons multiple. Again, i think the Public Market multiples that theyre getting were not driven by us. Thats a Public Market thing but we take hard looks when were going into private companies and make sure that the fundamentals of the business daisy chain out to a Healthy Business its interesting though that these companies that have gone kind of further afield in how they address the market using software, reenvisioning things, smile direct club is a good example of this, they have reinvented this kind of old market of clear liners candid is a company were in theyre using technology to make the experience cheaper, more accessible and 10x better. With softbank, which side of the equation are you when you think of them as a coinvestor do you think theyre too big and the Value Proposition doesnt make sense in their space . Or do you think this is great theyre bringing in billions of dollars and i want them with me . Where do you end up on the coinvesting with softbank well, i would say its very specific to a company, right all of this is specific to a company. And there are situations where you look at it and you say, capital is a weapon and being very well capitalized makes it very difficult for other people to compete with you. Were in a Company Called byrd which competes with other Mobility Companies and having capital to, you know, deploy fast, go global, invest in innovation is helpful. In that respect softbank has the biggest capital base in venture capital. The flip side is what i said earlier, like, you know, thats a lot of capital and you have to be the best company and be very smart about how they invest that capital and are strategic about it theres always, you know, this urge when you have too much capital to go too fast, burn too much and i think were seeing the vote in the Public Markets on what that means and i think the Public Markets is saying, hey, like this you know, these burn rates or this gross margin, this is kind of scary. Thank you coming up, the u. S. Could be one step closer to putting tariffs on european countries. Details next dont forget to subscribe to our new podcast. Hear interviews, special behind the scenes content and the latest headlines everything you expect. From squawk box. Subscribe today on squawk pod. Weve talked china already in other trade news the wto is expected to clear the way for the u. S. To put tariffs on europe phil will lebeau joins us. Reporter we know the wto will issue its ruling. The question is when when that happens this is what it means this is a longrunning dispute between the u. S. And wto about sanctions or about subsidies that were being used by airbus so as a result this agreement or this ruling by the wto means that the u. S. Will be allowed to put on tariffs on european goods. Exactly how much remains to be seen it is likely that you will see some of these possible targets, whether its cheese, olives, scotch, leather, aircraft fuselage theres a whole list of things that could be taxed by the United States that come from europe and well have to find out exactly what those tariffs are. As i mentioned, this is a longrunning dispute it goes all the way back to 2004 with boeing and the u. S. Saying, hey, look, there are subsidies from these federal governments or from these countries in europe to airbus and as a result we need to have relief by the way, if you take a look at shares of boeing and airbus over the last ten years, guys, were showing you this because for the most part these two stocks have tended to trade in tandem over time and thats still the case here. Even with the split, a little bit of a split there at the end between airbus and boeing. Keep in mind there is a case against the United States brought by the eu and airbus that the wto will be ruling on thats expected to happen early next year. So while we get the ruling here in the u. S. Against europe, youll see the europeans get a ruling against the u. S. Likely sometime early next year thats the expectation. All right, phil as you mentioned, its been a longrunning dispute so well see if and when we get any response from the administration and europe as well phil lebeau. Joining us to talk about the impact on Companies Like airbus is Carter Copeland and gordon, ill start with you. You have been watching this dispute for the last 15 years. What do you think we could finally see when we get this ruling this week this kind of fits in with the trade disputes that the administration wants to engage in in any case, this has been going on, i used to work at boeing and back as late as 92 that was surfacing. Theres no questionnaire bus had implicit and explicit blown guarantees to subsidize the nonrequired costs of the a380 and the a340 pretty dry but there are, like phil lebeau said, some issues where tax abatements in the state of washington that were given to boeing to build extra plants, all of these things are being worked out i suspect its going to get worked out without sanctions being approved but a negotiated settlement. Well, i think that is certainly the markets hope for this. Yeah. The administration has published its list of the items it would go after. The eu has published the retaliatory list there is the preferential tax treatment and some tax benefits at the state level thats been airbuss argument. Were receiving some benefits from the french and the eu government but boeing is being subsidized as well how much truth is there to that . And how much risk is there to boeing right now because of Everything Else it has been through in the last year look, theres a lot of truth to that frankly. When you look at state tax incentives in washington, south carolina, the new facility down in charleston, youre going to find plenty of support if you go way back and look at boeing and their real success in winning in the jet age, you know, they ordered the u. S. Air force ordered 500 plus kc 135s which was a derivative of the 707 at a time when the passenger jet fleet in the world was less than 100 airplanes. The boost from military spending and the cross subsidization there have been big benefits for boeing but at the end of the day whether each one of these Companies Got subsidies or benefits in some form, which they did, you know, putting tariffs on aircraft now at this point doesnt make any sense i mean, both of these companies are doing very well, selling products in both geographies they have suppliers in both geographies. Up until the max crisis they had the highest margins in 100 years. Its hard to see why this industry is damaged in some fashion that requires tariffs at this point. Carter, if they did just keep pricing themselves higher through tariffs or whatever, are there any other competitors outside the u. S. And europe playing catchup to perhaps threaten the duopoly these two companies have no. I mean, the hard part about the airplane business is it takes a substantial investment to be going. Youre going to be billions and billions of dollars in trying to build an of time you know, youre talking better part of ten, 12 years before airbus got up and going. So no, there arent real competitors arising out there that we think about in the near term landscape, so it just, you know, doesnt make any sense at this point to say, okay, we need to influence the competitive landscape. Both these companies are very successful and a well functioning duopoly. Gordon, if it is china seen as the nascent competitor here, and the issue at heart is subsidies that are being paid to Airline Companies or to manufacturers, then how long until we have a similar lawsuit against china for subsidizing its airplanes . Good question, kayla. I dont know the answer to that. I do know as carter pointed out that cross pollenization if you will of technology, r d that the u. S. Air force and other u. S. Government agency put in to boeing to develop Space Programs and the kc135 program were in fact part of the issue that airbus i think has a point and arguably the state guarantees and the federal guarantees of money for airbus is certainly been decided. That is going to be announced like bill said this week but, there are 100 airplane 100 seat airplanes in china. So thats theyre really not in the fight this is about the big boys with the a380 and a340 versus the 777 and now the 787. And that, i think, it is a long time until you hear from china. All right, we will see what in fact the ruling says, how the u. S. Responds and whether in fact that does raise prices for travelers around the world carter, gordon, thanks to both of you. Thank you still to come, top movers, squawk box back in a couple. You should be mad they gave this guy a promotion. You should be mad at forced camaraderie. And you should be mad at tech that makes things worse. But youre not mad, because you have e trade, whos tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. Dont get mad. Get e trades simplified technical analysis. Were counting down to the opening bell dom chu is back at hq with a look at some of the biggest movers so far this morning. On monday morning movers starts with a check on apple shares f you look at those, theyre up a percent or so on roughly 180,000 shares premarket volume the iphonemaker and Services Company gets bumped. Now 265, was 243 they keep the outperform theyre making some modest upside revisions to the forecast for iphone sales they think Investor Sentiment will improve materially from low expectations on this iphone 11 refresh cycle. Those shares on the move next up, shares of newell brands, up 2. 5 , 2800 shares premarket volume the Company Behind big Consumer Brands like sharpie markers, graco baby strollers, crock pot slow cookers gets up to a buy rating, it was a hold. The target price goes to 25 from 15 they like among other things the current valuation and think a turn around is in the works. Were going to end on shares of bed bath beyond, might find some of the newell products in there as well. Shares up 4 on roughly 32,000 shares premarket the Home Products retailer gets up to outperform from a prior neutral at web bush. Target price to 16 from 14 they like stabilizing and growth in earnings in the next couple of years as well as Strategic Plan for noncore asset sales shares up 6 , kayla, premarket back over to you. All right, dominic chu at headquarters, thank you. Coming up, mohammed elerians aicdve to investors his big story to watch when squawk box comes right back. At synchrony, were changing whats possible every single day. With technology that helps you offer shoppers a better experience. Take your companys app. We can add in all sorts of capabilities, which help your customers manage rewards, offers, and payments on the fly. And now, applying for credit can happen in a flash. That way, more people can start shopping with you on the spot, wherever they are. Hows that for changing whats possible . High protein. Low sugar. Tastes great high protein. Low sugar. So good high protein. Low sugar. Mmmm, birthday cake pure protein. Find our coupons in sundays paper. Our guest host this morning, mohammad elerian, chief economic adviser i dont know, mohammad, if you had to manage money here, you could how would you insulate yourself would you be taking adding on risk, taking risk off, would you be as cash viable . Is there any place in fixed income to hide what would you do . Initial conditions matter, but if im 80 20 as an example, i would be taking some money off the table right now. I think we have two very big uncertainties out there, and it is not the fed it is interest in we didnt speak about the fed today even though this week will be full of fed speak. The amount of central bank is talking this week is incredible. We didnt talk about it because i think the market has realized it is no longer just about the fed. It is more importantly about sorting out trade and this handoff to fiscal. You dont think thats priced in already what . The expectation of more stimulus, more easing globally it is thatsy thi why i think you takm money off at this point. You talk fiscal, you talk politics, the minute you talk politics, it is not as easy as the fed. This is a good time if youre heavily exposed to the stock market, take money off, youll have opportunities to invest at cheaper valuations and you dont think germany comes through with the stimulus very quickly you mentioned that earlier no, i dont think you get a major fiscal stimulus out of germany. It is counter to the way they think. There is a good economic argument why they shouldnt do it the problem is china and it is not clear that fiscal does anything to help that issue. All right, very good, mohammad, thank you. Make sure we got a few minutes left i think im out tomorrow you guys in . Im in. Youre in. Im not. Youre not. I think becky is back. Maybe andrew is out. I look forward to it. Good, make sure you join us tomorrow squawk on the street is next good monday morning. Welcome to squawk on the street. Im Carl Quintanilla with melissa lee, mike santoli at the new york stock exchange. Jim crame and david faber have the day off. Final day of september, and q3 as we get set for a busy week full of pmi data, jobs number friday, more than a dozen fed speakers including powell, and the First Official q3 earnings number in pepsi, thats later in the week, europe is green, ten year steady, oil back to 55. Road map begins with futures pointing to small gains of the