Transcripts For CNBC Squawk On The Street 20240714

Amid heightened u. S. Iranian tensions. We have gasoline futures jumping this after an explosion and major fire at philadelphia area refinery. It is, by the way, the largest facility on the east coast. And slack soaring debut, shares poised to rally at the open but for other tech unicorns eyeing the public markets, is this a sign of peak ipo . Stocks are set to open lower after a record close for the s p. Multiple reports now say the president did approve military strikes against iran as retaliation for downing of a u. S. Drone and later backed off. S p still on pace for the best june since 1955. The nasdaq leading the major indices this month up a percent jim, how much further are people willing to go on the risk curve given the activity today i think were getting too close to the g20. I think that yesterday was a day where there was a frenzy of froth and euphoria i havent seen in a long time. A lot of stocks up 7, 8, 9 points and nothing had happened. I think were all starting to realize there is going to be ipo fatigue pretty soon. How many more companies that are 20 billion in this market can it sustain i said last night on mad money, im cautious, i got to be, i dont want to be, it is too much fun and it really is just it is an amazing time because what is the fed doing cutting while the stocks are at an all time high the answer is that the fed isnt cutting, but the fed is prepared if Business Investment continues to deteriorate now, a lot of the stocks that are going up in this particular leg of the market are the ones that go up and are about to go to recession i dont understand why people think of the market, it is dumb as wood. Thats not the way you should be thinking the stocks that are going down, the stocks that are economically sensitive. And that makes sense. So real state, utilities, continue to lead the year, really, right . Best performing sectors. You yield some of the Real Estate Investment trusts, uventas, senior living, but it has a good yield. We have to start affecting the fact that the stocks leading this rally are the pro proprokcter gamb gamble it does not go up when the economy is on fire. And therefore im just saying im saying therefore this time powell is doing the right thing. Powell listened to the 27yearolds that surround him, okay, that make all those books and stuff and call people and say, hey whats shaking, you know you guys are hes speaking to real executives and real executives are saying, hey, listen, not as good a quarter as last we have a slowdown coming. Inflation, cant raise prices and things arent that good. They arent as good as last quarter. I think what hes saying is, well, if theyre not as good as last quarter, im not going to focus on the s p 500 im going to focus on the fact there will be tariffs on the next 300 billion no indication there wont be there isnt. There isnt no indication whatsoever. And there is certainly got to be indications it is slowing growth yes. Slowing decisionmaking or stopping certain business that would have otherwise occurred. I keep running into it in my m a reporting. There is things being frozen about to do a deal. Huawei, 10 customer of this particular company no deal. No deal other Companies Looking as well because they sell to huawei saying i got to change my customer base. How am i going to do that. These things do have very important. It is not the economy that is trading higher look, i deal with all the rails. Rail business, car loads are car loads. Theyre down theyre down appreciably every single line. Now this iranian thing complicates things the president is tweeting right now, very long thread, but one highlight he says here, we were cocked and loaded to retaliate last night on three different sites when i asked how many will die. 150 people, sir, was the answer from a general ten minutes before the strike i stopped it not proportionate to shooting down an unmanned drone im in no hurry. Our military is rebuilt and ready to go, by far the best in the world. Sanctions are biding and more added last night. Iran can never have Nuclear Weapons, not against the usa and not against the world. We know the ties between the north koreans and the iranians and hence the chinese. Yeah. See a tweet like that, and i think, okay, im glad the president filled us in how can you be you want to be really long if youre a trader forget individuals, index funds dont listen to me, just do a im not listening, im not listening. If youre a trader, you say hes cocked and ready if there is any provocation, he is going to take out the 150 people must watch a lot of tv remember 24. It is very interesting. It is very transparent than i can ever can you ever remember a president sharing, well like were in the war like were in the situation room. Yeah, ill tell you i mean, that is a level of transparency when it comes to these kind of things we need a war room camp, right . Plenty of people to question the iran policy overall but we dont need to get into that in terms of the sanctions are biding, but where we end up. This is National Policy being made you know they always had the moments earlier, we should see moments earlier, someone says, listen, i want it to take out month, are ta more, take out less. If i were a trader, i would say, okay, lets say iran reads that and want to do a little provoking, they come too close to a ship, they fire that drone was a huge drone we are going to be this is going to be a part of the tapestry for some time now. Yeah. Has it been discounted in the marketplace already, seeing it with oil, is it something well be talking about every morning or is the market going to sort of are investors going to move on as this more background than i think that, no. Look, this is not north korea, all right. This is a complicated area i was with an Oil Executive the other day. We have been looking for a way to get rid of the oil, now, they wont get rid of it as much, not to really segue too well to the old sunoco refinery in philadelphia, but we have a lot of oil not like the old days where does anyone remember gas lines even and odd had to look at the last number couldnt go across the country, took twice as long because i had to wait on even days now asia relies on oil the way we used to. A lot of people feel like thats when they when people who want to be jingoistic and say why were great and everybody else natural resources. Look, if we had enough room for all of the oil, we would become a huge escort. I get the export numbers for natural gas every day, we started exporting more natural gas, it doesnt matter it is minus ten cents. They lose money on everything. Thats why they flare. You can see the refinery from the sky, but you can also see why we flare we have too much energy. Something that is incredible i got to tell you, beyond meat, cows, and we got nat gas thats where we get the methane. First we slaughter all the cows. Oh, my god the cow lobby will come after me but there is just it is from the manure. The manure itself. Im arranging a trip. Youre doing juul. Im arranging a trip to bakersfield, a major oil company, i will not mention, that takes manure and turns it into methane and uses it im going there, man i got to tell you, we need to have some sort of smell can we do that, can we do that like charlie ergans. Transmit the smell over television yes they do that in some disney kind of things disney plus i look at this and say i would be a little concerned. I think iran, they get twitter too over there. The refinery fire, paying close attention to that. Massive explosion at a refinery in philadelphia. Ron allen is outside the refinery with the latest good morning to you. Reporter good morning, carl. Have you been able to see so far . We have gotten reports that injuries, loss of life, nothing yet. Reporter no, there are no reports of injuries. No reports of loss of life there is a big question about how much damage was actually done i heard your discussions about the concerns about gas supplies and so forth that is unclear at this moment this is the refinery behind me you can see some smoke and some of that is part of the normal process that goes on here. Some of that is part of the heavy clouds hanging over this area today but the firefighters here have insisted that the fire was in a butane vat and contained to that one area of the plant. So theyre saying it wasnt widespread damage. And at this point, we still think the fire may be burning a little bit, but seems to be under control and certainly contained. Now, this was a terrifying thing for residents who live in this area it happened around 4 00 in the morning. They heard a loud explosion. They were jolted from bed. Walls were shaking so and people didnt know what it was. And then they walked outside and there was a massive, massive cloud of gas and flames above this plant and a huge thick cloud of smoke that was also billowing out. Philadelphia environmental officials have said they have tested the air now and there apparently is no problem with it, but theyre monitoring it. The company is also monitoring it but for people who woke up to this, it was just devastating, just terrifying. And not knowing what was going on there was a shelter in place directive for a short time that has been lifted as well again, things some operations happening at the plant we dont know the extent of the damage and we dont know the cause of this there were several workers nearby the plant says but not close enough to be hurt by this explosion and fire again, no injuries, and theyre trying to keep this fire out under control, keep it contained, and theyre trying to assess the damage at this refinery carl ron alan, well probably rely on you for more detail during the day. People buying the wrong stocks, were very long butane in this country. We have been trying to export as much butane as possible. It goes like this. We have too much in this country. If you want to buy a stock that is related to butane, good luck. Theyre all underwater if it is gasoline, of course, you go buy bp and go by valero if it is butane, you sell everything you just bought that is one supply thats probably the worst, thats probably the one we have the most of that we cant use is butane i didnt know that. Yeah. We have too much. Use for it typically . Heating oil rural areas. If that gentleman is right, and it is butane, stop buying the refineries youre going to end up owning a refinery, shares in refinery for no particular reason whatsoever. I know that facility, used to be a sunoco facility, it is so gigantic that one part is butane marcus hook on the other side is almost a huge amount of butane we have to find that out we need someone from that company to talk to us. They really have a they have been quiet it is important to make distinctions because were coming on the heels of record implied gasoline demand, but demand for distillates has not been as strong. Natural gas liquids are just a disaster, way too much of them we dont know where to put them. Were producing way too much of this stuff that we did nobody in the world needs there is some demand but these everything spoken for, the code point is the gigantic one and i just got the numbers for everything in louisiana, all spoken for so there is nothing in terms of the export, terminals as well. China wants everything. China would take everything we could give them, but we dont have any we dont have kyle cooper u. S. Net exporting 6. 9 bcs this morning. Forecast i get the numbers. I see you get them. The numbers are disastrous in terms of what the where to put this stuff but overseas they need it. The battleground is germany. Why are they taking gas prom natural gas . The president struggles with how to deal with merkel. Germany also tide into the iranian picture too. Everybody and bmw. Why do they open that plant . The president did not like that. He did not like that a lot of things he doesnt like. German company, but free to have whatever why the engines arent made in the president is an unhappy guy a lot. Indeed. When we come back, an upbeat wall street debut for slack after that direct listing. Well look at whats next for the ipo pipeline jim gave you a clue a moment ago. Well talk about caterpillar downgrade, cat on mad money last night, conflicting calls on tesla. Futures down 50 points is where people first gathered to form the stock exchangeee, which brought people together to invest in all the things that move us forward. Every day, invesco combines ideas with technology, data with inspiration, investors with solutions. Because the possibilities of life and investing are greater when we come together. Your daily dashboard from fidelity. A visual snapshot of your investments. Key portfolio events. All in one place. Because when its decision time. You need decision tech. Only from fidelity. You need decision tech. Wanna take your xfi now you can with xfi advantage. Giving you enhanced performance and protection. When devices are connected to your homes wifi, theyre protected. Helping keep outsiders from getting inside. And if someone tries, well let you know. So you can stream, surf and game all you want, with confidence you can get coverage where you need it most. Thats xfi advantage. Make your xfi even better. Upgrade today. Call, click or visit a store. Slacks up in the premarket, a day after the wall street debut. Stock jumped about 49 above the Reference Price of 26. Closed slightly higher than the open the companys market value stands at 23 billion. Putting it somewhere in the neighborhood of a ual, jim. Yeah. Look, i think slack is a company that a lot of people like dropbox, doing better than dropbox, the people want it, anden this they go to their companies and ask, please bring in slack slack is a product that they really do intend to wipe out email with remember, microsoft has a competing product. And that is the favorite of corporations you have to unseat microsoft. Not referring to outlook . Their version of it they have a version of it. People all we hear about it is that im going to say it, go ahead, the millennials like slack more than they like the microsoft one. And they all like to the convivial ty ity of it and how l it is organized. It is a great way to get people to focus and if you dont read it, at a meeting, you say i slacked it, didnt you see it . It is a verb i always find when there is a verb, you want to get on it. Think about it right . Every time there is a verb yeah, i guess i snapped you. That didnt work out that well. Thats not that didnt work lets go pro this conversation. That didnt work out very well let me venmo you the money. Kayla tausche, venmo you the money at a christmas party, let me ask my kids what that is, she put an emoji an emoji smile face. Im not sure about the verb thing. My piece is a good one. My thesis is a good one. And im sticking by it. You say you set up for eipo fatigue. How much more money is out there . Maybe we have new money coming in there could be bond into stock money, returns are so low, that is not to be the case. I just say there will come a level where we dont have more money. We have got to be near that level. Look at all the money that has been raised. It is just unbelievable. Though youre worried months ago was new supply and it came and it worked out okay. They did what did they do . They learned from lyft sthe they said lets price it so the public wins on the first bid they have been prized, the final coup de grace, uber was priced wrong and these deals are ash dull. We have large deals and in this calendar year airbnb. Airbnb. Wework youre close to the ceos. I was thinking about having those ceos come down here, sit here. I hope they will. I expect they will on the days in question. That could be some time away still. Those are going to be very important. They are. Do you think adam . Do you think adam newman will will wework come here . Yes. We have to have we have to dress funny and have a circus . Remember musk . Elon musk all week. Some of my wags are saying it is butane. And it is used to be able to help get gasoline, close the gasoline plant i still believe people are buying gasoline stocks please be careful. I dont know i we can talk about some of these things i look forward to it. Do you . Well get that after the break. Jim has a lot of options this morning. Futures are still in the red were back in a moment with all that usaa offers why go with anybody else . We know their rates are good, we know that theyre always going to take care of us. It was an instant savings and i should have changed a long time ago. Were the tenneys and were usaa members for life. Call usaa to start saving on insurance today. And were usaa members for life. 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. All right, 6 1 2 minutes before we get started with trading at the New York Stock Exchange a strong week, if you are long this market. Right, right. Apple still one of the largest market cap companies, though not the single largest. No, microsoft has been a remarkable horse here. Apple has made a nice comeback this year, and it is up it is one of the best ten performers of the year in the dow there is a lot of stories swirling around that apple is panicked, trying to move the production out of china, making a lot of plans to move no not for iphones, anyway that sounds like it could be maybe some other products. Maybe there is no scramble here. I think thats i dont know sometimes you get the stories and you chase you remember you always say, listen, there is a story which is bp to merge with exxon and it is a false story and i dont know where it came from someone wrote a story, they got a gold star for breaking news that wasnt news i feel like people are breaking news that is no news there is no from my understanding, plans for tim cook, to head out of china, to build things i think that it is true that the letter that they had, lighthizer yesterday they sent a letter. The other companies have. Objecting to the potential tariffs. And apple is a huge taxpayer. Apple makes a lot of things here apple, look, lets say a quarter or fifth of your business is in china, and it is inexpensive labor, but there is no plan afoot to run out of china and stories that say that are not true okay. All right. One of many names that well bemerging with bp. It is not i do remember when exxon and mobile were getting together engrets i have oping bell coming up right after this al hi everyone al roker here. As a guy with his own catchphrase, i appreciate that after 75 years smokeys only said. Smokey bear only you can prevent wildfires. Al but, im filling in because theres a lot more to report like when there are parched or windy conditions out there, you gotta be extra careful with things like burning yard waste. After all, wildfires can start anywhere, even in your neck of the woods. Go to smokeybear. Com to learn more about wildfire prevention. I felt completely helpless. Trashed online. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. Youre watching cnbcs squawk on the street live from the Financial Capital of the world, the opening bell in about 90 seconds very busy friday quad witching could bring us some action later in the day jim and david just talking about apple. A note, jim, looking at what it would take to move all the production to the United States. Talking 100 final assembly would require a 20 price increase and we estimate the cost to manufacturing, the phones, 15 to 25, could result in demand destruction if they pass it all along. I think that we want inexpensive phones that we dont we want jobs, apple provides a huge number of jobs from developers. There are many 2 million jobs in the u. S. , but 3 million in china they got to reverse that. Is the president thinking like that. They are not inexpensive phones, of course. Very expensive. I think the president wants every company to drop wherever they are and come here and i think what is interesting is that the the u. S. , mexican, canadian accord, that prevents a lot a lot of those companies would build here and mexico could be a favored nation here. Yet thats the one you thought they had it in for the most. Mexico ratified it and lighthizer says the democrats could do it here in half a day if they would give him the time of day. Amazing they would accomplish something in 2019. Be something the opening bell. And the s p 500 and the big board is lending club. Celebrating its 3 millionth customer the nasdaq, prevail therapeutics, gene therapy that treat neurogenerative disorders. 2. Yeah. Probably early. I remember when they had some still an interesting very interesting idea i just find anything that is kind of new and interesting in Financial Engineering tends to be loved in this market. Fleet core, you know, look at this look at this as some of these stocks in that segment square has been kind of pay pal today down, cheapened executive who is connecting with venmo left i think that dan shulman has a much larger bench net. People are dumping pay pal and i think that is ill advised. Some very Good Companies with a lot of people who work there stop selling that. Lets talk some caterpillar big story today, atlanta cuts to underweight on macro concerns, and with jim last night on mad money. Take a quick listen to that. Publicly stated that we expect tariffs to be between 250 and 350 million this year. Were very comfortable still meeting our forecast, dealing with those challenges. So, again, it is part of what we do we have seen this before we have been through it. All right so your thoughts on this i thought it was amazing. A transform caterpillar with a lot of services, much more Service Revenue by the way than apple has in terms of trying to change the prestige. This man changed things. He has decided for consistent profitable growth, no longer episodic growth, hes committed to a high single digit dividend boost. Boost earlier. And to a consistent buyback, they are returning capital like they have never returned before. This is no longer a cad. The key thing people have to recognize, 5 to 10 of their business is china. The permian is more important than china you go to the permian, huge number of trucks they have a gigantic fleet of autonomous trucks, no drivers, for miners they had superior technology and i think if youre trading off of china, go find Something Else that makes sense this is wrong. This is a stock that you want to own. You want to own it look, there have been times, as hedge fund manager, if there was a tick down, short cat short cat at your own pearl. Directionally you would rather own it when global capex is not threatening to go negative or pmis are not contracting. True, but what i like absolutely what i liked about it is the business in america is very strong as it is everything slowed right here if you get a trade deal, the stock can go up big, if you dont get a trade deal, people look at the quarter and will be shocked at how it wasnt bad business is Good Business good because they make a lot more money for whatever they sell because they have really cut costs still spending r d an executive is saying were no longer to be at the mercy of the worlds growth we have a Dealer Network that is unparalleled and Services Income is consistent regardless of the ups and downs and stop thinking of us as a china play. Were not levered to china the way you think. I like that. Anyone would say the atlantic downgrade was ill advised. Thats my term, you know, for when i think were well aware of your various terms. We understand your lexicon. Thank you, sunshine would you state same thing about boeings the laggard this morning. Exactly boeing is the same boeing, look, were going to find, i think, that were going to find one day were in that plane and were going to feel fine and i think that they made some missteps at the beginning that made you feel like they were off the reservation. I think that now theyre doing everything they can and why isnt the stock at 300 if it was really bad and the answer is because they have to fix the problem. Theyre a great company. I know that there is a lot of citizens about how they handle things those of us who have been boeing aficionados for ever, you know this is an Amazing Company i have so much faith in them that people may be critical of me for having so much faith in them, but i have it. Theyre going to solve this problem. Micron is the other big story. Cant solve that problem. Two calls jpm to 50. They were at 64. Baird to 28, says inventory is not getting any better what david was talking about. Here is an example of a company that has a lot of Huawei Business yes and anybody that haswa w hua business is not having a great quarter. Flash capacity. Flash you have companies that have to reconsider their supply, just, again, where are we getting things from, where are we selling them to, how does china figure into it and should we be doing things to offset risk that is happening in a lot of board rooms where yes, it is. Whether theyre customer relationships or purchasing relationships. Absolutely. Remember also the 38 the 32 to 28 brutal number cut for micron, a lot of that is that we thought the second half we would see the beginning of a lesser of the end of the inventory increase and begin a decline and that supply would somehow dry up and demand would pick up demand is not picking up supply is still increasing and that is a terrible situation for micron, which sells at three times earnings estimates when you sell it three times earnings estimates, youre not going to make those estimates. No. Youre not. If you did, stock would go up. You have to be in sass. Only sass is doing well. Software to service. Thank you really is that also part of your that was for our viewers. They knew. Not from me. Sparky, im just trying to i think that when this is a market that is this is a nutty market now we have rotation into oil and oil service. They rotate into anything. They keep rotating, rotating who is the they . People that david calls during the commercials, i think. Sometimes it is it also can be those who are actually rocket scientists who are putting together algorithms who have no understanding of what a stock is. None at all theyre the guys who are selling mongo dp now. Theyre working at the other guys downtown, the bigger guys. Do you think they know what ring central is . Do you think they have any idea what mongo db does versus oracle they dont care they dont care. Special agent sam girouard calling. They let it run. I did not kill my sass. Lets see, tesla, another one. Oh, i know. Jeffrey goes to 300 from 400. They said their call was humbling meanwhile, baird goes up 15 bucks. Baird, overdone i love that. What do these guys do . Go home at night and say to their husband or wife or partner, i havent ridden in tesla for a couple of minutes, let me ride in a tesla not every day is there something happening in tesla that is newsworthy i got guys who count cars. I got guys in helicopters come on. Look, it is like it is probably fine, not great, not bad. All right. They should focus on mary barra. Why more interesting at this point than mr. Sleepy, sleepy elon. You miss elon musk, dont you . You miss him tweeting. He made it exciting elon made it exciting. When a guy calls you a simulation, you tend not to like him. Although Global Auto Sales are starting to do what we saw with retail sales, meaning undo some of the damage i think that three month annual rate through may 57, Something Like that. I think that, remember, we have car max doing best and thats used cars and i think that is going to stay the same. China is the largest market for new cars in the world. The president is going to one day turn on is the president going to just is he going to turn on korea one day. They have been taking advantage of everything. Korea has done quite well. South korea quite well under President Trump. Samsung is the big beneficiary of everything we did. Of huawei too samsung huge. Samsung is taking everything you have from huawei for 5g. If youre making product, samsung is saying, ill take that product we have to leapfrog ahead and, remember, unlike ericsson and nokia, theyre not just patsies. Theyre very aggressive guys very aggressive. Very i never have been to south korea. Have you i defer to my man who went to the olympics. The 38th parallel. The dmz, yes. Next time well all go see the pictures of xi and kim yeah. How is xi doing with that hong kong protest the ceos i talked to in the last week, they say why arent you talking about the hong kong protest . If youre xi, thats not supposed to be happening. Ill talk to kyle bass about that. Hes been in hong kong for a long time. Has he got money on that . Hes made some money. I like him. Dont get me wrong i think this hong kong thing is being too much ignored if youre in a fascist totalitarian society, youre not supposed to get rallies like this this is not the this is not the hong kong is not but it starts this is not the mummers. Philadelphia. Yeah, no, the protests continue because although the bill has been suspended, they want her gone. They want the whole thing pulled. If youre xi, youre saying, listen, i wish this this is not a great time for this to happen maybe sleepy joe will be doing better remember, hes watching biden. Im doing the president s bidding . You want me to attack the president . Ill throw a bomb. What do you want me it do . Ill throw a bomb. Just call him by his name. All right he does that stuff how come i cant remember when your mom told you youre not allowed to call people names remember, my father barely there was only a couple of this would have been worthy of the belt remember the belt . The next time you say that . Youre not going to referring to the president , som monikers the left has given him, i know that. Sticks and stones cause broken bones and thats why i call Nuclear Weapons everything is up 2 this week were stupidly overbought. Ill show you some numbers here. This is the quadruple witching explanation. You see the energy stocks, a little bit up. Some refiners up on the philly refinery fire that is there. Some i condu semiconductors down. Lowering revenues on the huawei issues going on. Weakness there this say little bit in determining health care, down slightly Consumer Staples lets remind everybody how we got here, up 2 , all the major indices up 2 for the week ecb you foeuphoria that kicked things off then the fed threading the needle effectively implying economy is still strong. They stand ready to cut rates if they need to be. Trump xi meeting put these all together, a tremendous up week the problem is now youre really, really overbought. We went from really oversold on worries about trade to really overbought i look at very simple shortterm indicators, relative strength indicators, 14 days of trading if youre over 70, youre overbought if youre over 80, youre really overbought if youre at 90, folks, this is stupidly overbought territory. We havent seen these kinds of numbers since early 2018 remember that big rally. Thats when we got these kinds of numbers this tells you the market has advanced as much as it can advance in a short period of time and that it is time to stop and move sideways. Thats normally the implications of this. You can always have overbought for a long time, but normally these stop going up here some stocks, individual stocks, how much they have moved dramatically look at the big tech names here, amazon, microsoft, amazon 1900 now. 1600 to 1900 in three weeks, just on not a lot, fundamentals changing for amazon and that period this is what im talking about when i talk about overbought speaking of overbought if you look at some of these names, i think the atlantic call on caterpillar was excellent today. Perfect timing here you go, here is all the concerns about trade and here is all the concerns about trade going away so it is a perfect v shape we have got here. This is what you create as this dramatically overbought situation. They talk about the macro data being weaker talked about tariffs, europe and china, overall affecting things. And what they cant figure out is whether this say temporary slowdown or more enduring slowdown they made a point of saying as of now, our call is no recession in 2020. I think that was very important clarification. What theyre saying is were as confused as everybody else but some kind of slowdown, the question is longterm or just more shortterm overall. This move on to the ipo, the big talk yesterday, as we watched that tremendous slack ipo, slack direct listing more accurately was is this the peak are we going to see a peak ipo look, here is your historic high for the etf, 33 outperforming the s p 500, twice as much. We have seen inflows into these ipo etfs i want to get on to the idea of peak ipo this is a very good time to call this the average first day pop this year, ipo, 22 according to renaissance capital. Historically, good day, you get an ipo pop of 10, 12 , Something Like that, stretch of 15, 22 for what we had so far thats amazing that is real big numbers overall. The pricing at the high end and opening way above that, thats a sign of a little bit of froth. Look at some other things here, many pricing at the high end of the range. We have seen inflows into i ipipo ipo etfs beyond meat, zoom, crowd strike, pager duty, only thing they have in common is Simple Growth and anybody who has growth, theyre paying an awful lot of money for them right now back to you. Thank you very much, bob pisani as bob was talking, were getting some u. S. Flash pmi numbers. To Rick Santelli rick well, if we look at what has been going on in treasuries, absolutely amazing how we avoided a close under 2 in ten year we did to many, that may not seem significant. But it is huge psychological area and is about an eighth of an point below a technical level. Lets look at charts that all start on tuesday when mario draghi spoke before our central banking announcement you could see twoyear note yields, climbed a bit. All maturities are virtually unchanged on the day and down about 5 basis points on the week look at tenyear, see the way we avoided the 2 below close even though intraday we did trade down to 197, actually several times. Dollar index, well, you know, this one is just having a problem altogether were down a full penny on the week we settle around 96 1 2 last week 97 1 2 currently around 96 1 2. It doesnt end there the euro versus the dollar the talk was that mario draghi was talking about easing and the Euro Currency was hit. But then again, maybe this artificial stimulus, the primer they keep pumping in will help the economy. The euro is popping nicely you see on this fourday chart going back to tuesday, and that very elusive 114 that many were calling for is not that far away now. Considering 113. 30 the dollar yen, we havent looked at this as much as we should yesterday, the dollar reached the weakest level against the safe harbor currency since april of 2018. This morning the dollar bounce against that currency is very small. Carl, david, jim, back to you. Have a great week. Thank you very much, rick. When we come back, kyle bass, his investment perspective on u. S. china trade. That market pmi flash almost into contraction, 50. 1 on the manufacturing side is the lowest since 2009 were back in a moment through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. That philadelphia refinery fire having an effect on gasoline futures up almost 4 that facility processes about 300,000 barrels a day. We will get stock trading with jim in a mutine. The dow is down 24 the lexus es. Every curve, every innovation, every feeling. A product of mastery. Lease the 2019 es 350 for 379 month for 36 months. Experience amazing at your lexus dealer. Mno kidding. Rd. But moving your internet and tv . Thats easy. Easy . easy . Easy. Because now xfinity lets you transfer your Service Online in just about a minute with a few simple steps. Really . Really. That was easy. Yup. Plus, with twohour appointment windows, its all on your schedule. Awesome. Now all you have to do is move. That thing. [ sigh ] introducing an easier way to move with xfinity. Its just another way were working to make your life simple, easy, awesome. Go to xfinity. Com moving to get started. Lets get to jim. Canopy growth down today. They are most capitalized in the cannabis area because they have got the 4 billion american, 5 billion american from constellation. They reported a quarter that was not as great growth as i thought. There is still a lot to company here i dont want to make a judgment that cannabis is slow and done they are preparing for a future in america where we will all go to a cannabis bar and go to the supermarket and get cannabis stuff and thc will be fine and doctors will use it, and that is distant. Its not as close as people think. So its kind of a wakeup call bruce linton doing a very good job, spending a lot of money trying to make sure that he wins you have to be careful these stocks got ahead of themselves thats what that stock is telling you. Would you use the analogue of a. I. Or virtual reality, promises of tomorrow that take longer than we think i think so. Its a political issue there is a lot of companies that take a charge for acreage. Look, this is going to be an incredible growth business, maybe 250 billion in Consumer Product worldwide, but its not legal. Its not federally legal yet and canada is not a big market you know, this is what i was afraid was going to happen but this company, canopy, has a lot of money but they are spending like mad yeah. How are you going to follow up last night tonight . I have my game plan i have to go back over this caterpillar downgrade. But i feel that caterpillar is a buy. I am just going right out there, im saying it. Caterpillar is not china its not your fathers caterpillar. Or in that case my caterpillar. Yeah. Caterpillar from the millennials, what do they like more cup holders. Yes paper straws i best westrock. Paper is an ethereal concept it doesnt work. Waste management is the better way. Landfill. Landfill. Because we dont know how to recycle in this country. No, we dont. Jim, well see you tonight. All right thank you, guys. Good stuff frpts have a great one. When we return, kyle bass will talk china and trade as were right at 29. 50 in these turbulent times, will talk china and trade as were right at 29. 50 at kpmg, we believe success requires both. With our broad range of services and industry expertise, kpmg can help you anticipate tomorrow and deliver today. Kpmg 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. From the day youre born indistthat was awful. Tering why are you so good at this . Had a coach in high school. Really helped me up my game. I had a coach. Math. Ooh. So, why dont traders have coaches . Who says they dont . Coach mcadoo you know, at td ameritrade, we offer free access to coaches and a full education curriculum just to help you improve your skills. Boom mad skills. Education to take your trading to the next level. Only with td ameritrade. Good morning im Carl Quintanilla at the New York Stock Exchange. Obviously, coming off of that record close, watching iran, this refinery fire in philly, and about to get existing homes. Lets get to diana ohere. Carl, existing home sales up 2. 5 in may to a seasonally adjusted annualized rate of 5. 34 Million Units thats a beat. The street was hooking for 5. 25 and aprils numbers were adjusted up to 5. 21. Sales down 1. 1 compared to a year ago realtors put in on lower Mortgage Rates here is the real headline. Median home price in may 277700. That is up 4. 8 year over year, the biggest annual gain since august of last year. I have been warning about this these lower mortgage reigniting the fire under home prices so again the largest annual gain since last summer. We had been seeing those annual gains shrink, improving affordability. Now the prices are higher again. Vice president ele inventory is low up 2. 7 yearoveryear still at a 4. 3 month supply with lower Mortgage Rates and that low supply, we are going to continue to see the prices move higher yet again good beat on existing home sales at 5. 34 Million Units. Back to you guys. Thank you and now we are getting breaking news as well from the fed. Lets go to steve. He has that for us. Fed officials making first comments since the meeting on wednesday. Minneapolis fed president in an essay said he advocated during the wednesday meeting, tuesday meeting, for a 50 basis point rate cut he said in addition to that the fed should not, committee to not raising Interest Rates until inflation is at the 2 target on a sustained basis. He is concerned that Inflation Expectations have fallen further recently, and he is saying aggressive policy is required to, quote, reanchor expectations one to two rate cuts wont do it he says you need to reanchor Inflation Expectations, a reaction function for the feds 2 target. Jim bullard explaining his dissent in a statement this morning saying he wanted a quarter point cut this week as, quote, insurance here is his statement. U. S. Economic growth expected to slow moreover, uncertainties about the outlook have recently increased. I believe lowering the target rate would provide insurance against further declines and expected inflation and the slowing economy subject to elevated Downside Risk guys, thats bullard is a voter now. Kashkari will have a vote next year evans is dovish among the president s voting. And esther george, who is more on the hawkish side. So, carl, this is a pretty vocal dovish i call it minority that wanted to cut wednesday. It looks like they might get their way come july. All right steve, fascinating stuff Steve Liesman at hq. Meantime, geopolitical tensions giving investors reason for pause. With us carson block, muddy waters, and chief economist david rosenberg. Happy friday people making jokes that bullard and kashkari are gunning for fed share. Is that where we are i dont think thats going to happen i think we are gunning for 50 basis points on july 31st. I think thats going to happen i dont think the fed is going to stop there. You have to remember, you know, back in the last cycle the first rate cut in september of 2007 was 50 basis points. Go back to the cycle before then when the fed started cutting rates in january of 2001, first rate cut 50 basis points and both those time periods nobody saw a recession coming, although it came two months later in both situations. Yeah, in those situations 50 basis points didnt take us almost 30 of the way down to the bottom. Thats a good point, but that was the famous quote from the q a about the ounce of prevention for the pound of cure that was it right there. And he told us then and there at these low levels, the rates, if you are going to go, you are going big. The point this morning is we actually have cushion from zero bound. Which is it, carson . Well, definitely thats more of davids domain than mine. I guess my question is really how much are the governors, especially the chairmen, thinking about thinstitutional area of the fed . Whats new is this public bullying of the fed. How do you maintain the independence of the fed and cut rates in this situation . Going into an election year, by the way yeah. I dont think there is any tick pressure on mario draggy. These bankers talk to each other every day. This is coordinated. The European Data had been very weak what was one of the central focal points in the press conference from powell was about the weakening trend overseas i think primarily he is talking about europe and they are becoming appropriately concerned about capital spending, which has been extraordinarily weak so i think youre right about the trump tweets and all the pressure is really, you know, unfortunately its negative noise. But i dont think that the fed would be acting any differently if, you know, we werent seeing this pressure out of the white house. 50 would be a lot. They went 50 each of the last two cycles that was their first move. I know that people are going so say, you know, they didnt change their macro forecast. Its roughly 2 . But the fed, as a group, are risk managers just like Portfolio Managers are so their comfort zone or their confidence around their forecasts has been, has deteriorated markedly. The one thing that happened in that press conference that never has happened before was a fed chairman uttering the word uncertainty seven times. Now, so they have a lack of confidence over their economic forecasts and all the risk skew to the downside. One of the keys to why is the continued tension with china and where that is going to end up, whether its going to worsen and continue to dampen Global Growth you have been following that pretty closely i remember you as a guy who shorted a lot of these chinese names when they listed here. Is that still the case are you focused still on that relationship do you have any insight to share with us in terms of your expectations and where things go whats interesting, for a year and a half i have been saying while the pressure with china has been or the relationship with china has been under a lot of pressure, a lot of u. S. Businesses and corporates have been speaking out about ip theft, issues they didnt talk about. Nobody was really talking about the Capital Markets element of that and how we give liquid markets to markets to companies that are raising money here and in many cases using that to basically Fund Strategic priorities of the Chinese Government and their competition with us. So that has changed. Senator rubio has introduced a bill to try to bring some sort of accountability to the auditors over there. And they are talking about msci. I think msci is a really interesting issue because msci, when it added Mainland Companies to the indices, was apparently pressured by china to do so. There were some Fund Management firms that withdrew from talks with mc ser cci they said you are short selling here, we dont want to add the stocks to the index. And so msci has been pressured so we have to ask the question, is it really in our medium to longterm interest for our capital to flow certainly to inskrimnently to mainland chinese countries, particularly when even the ones that are audited and supposedly transparent, the track record of fraud is just, its off the charts we havent seen this before. A dangerous road there. The idea of closing the Capital Markets to Certain Companies and where do you draw the line and how do you do it and or a potential sovereign itself we are known for the transparency of our Capital Markets and rule of law. Its the reason people want to live here. Who is to know if hong kong or toronto or london follow suit, right . Whats interesting is china, and to a certain extent russia, but they are not economically a serious player, has figured out how to use our open systems against us at the end of the day, there can be no business that is based in Mainland China that can be assured of acting independently of the government and always for commercial reasons huawei and zte built themselves because they were Strategic Priorities of the Chinese Government and when erickson and nokia were laying off employees, huawei was hiring them in sweden and norway, not because it was a great commercial decision, but because of the longterm vision of these guys are subject to economic cycles. We are going to take advantage of that and we are going to bring in the Technology Even though its not commercial, because this is about strategic positioning of the prc versus the west. Let me turn it back to you, david. Long standing bullish call on bonds. When will it change now that the fed has sort of come to you . The fed has talked the talk they havent walked the walk yet. If my forecast is right, we are going back to the zero bound in the next six or 12 months. The yield curve will melt. My call is for a convergence its not go japanfication. I call it u cocainefication. I think we will converge on tenyear guilts. Why are they at 0. 8 mark harney is pegging the cost of funds at 0. 5. Its one thing donald trump is right. I think the fed is going to ease, the curve steepens and the tenyear is going to converge where the u. K. Market is now people tend to forget. We are equity centric. People forget that since the last time the s p was at these levels, late august of last year, the tenyear note generated a positive return of over 10 the total return is 2 on the s p. So people tend to forget that you can make a lot of money in the bond market. What do you say to strategists who come on, look at that on the screen and say thats great for stocks . Well, i think that its great for some stocks. Take a look. Since we last were at these levels ten months ago, what are the leading sectors in the stock market all the rate sense tifs, stuff that works well in the low growth environment utilities, health care, telecom, real estate. What has declined, financials, energy, materials, and by the way, industrials the deep cyclicals its funny that people talk about the stock market and bond market are divorced in terms of the macro view not at all if you look at the Sector Performance in the past ten months, a very defensive rotation. How important is something coming out of the g20 to your view of sort of growth at this point, or lack thereof the only thing that matters is whether there is going to be a kumbaya moment between President Trump and xi jinping other than that, i dont think there is anything material thats why the markets have rallied to some extent, even beyond what happened with draggy and powell, is this view that the markets are pricing in there will be something positive coming out on the trade side. What do you think i dont think we will have remoech meant here the Chinese Media is digging in and not softening their tone they are preparing, i think, for a long gee lopolitical battle wh the u. S. You spent time there . I lived there six years. Preachiresearching some of t companies. And im just curious sort of what your sense is in terms of the damage being done by the trade war on the chinese autonomy. So i have been calling it a massive asset and credit bubble since halfway through the last decade i still think it is, but can they, given that the state controls the Financial System, can they stave off the day of reckoning for another few years . Possibly i have honestly threaten in the towel on trying to prognosticate that does that matter in our lifetime i have no idea. I think you are seeing it in the Property Market. The commercial Property Market is reeling, and its starting to have impact on the Banking Sector there some strings are starting to surface. We are talking about manufacturing and the hit to trade, but the property bubble is starting to pop in china. Residential is still strong if you are talking about the private bank failure, its privately owned. So especially what happens in asia when there is loose credit, these guys gain control of the banks, lend money to their own businesses and the banks blow up i dont know that thats really a leading indicator of whats going to happen for the stateowned banks. Thats where the cockroach theory comes from. Thanks for the insight on this friday. Thank you. Happening now, judge moreajo is in front of a hearing a complaint from the state attorneys general seeking to stop tmobile from buying sprint its a Pretrial Hearing in response to a request for a expedited hearing. Ten states, new york and california leading them, filed that lawsuit on the 12th of june its aimed at stopping the merger on antitrust grounds saying the deal would cost people a lot more for their cell service. Well see and we will obviously bring you up to date if there are any headlines as they cross. When we come back, tehran tensions the president says we are cocked and loaded but called off a military strike last night. Plus, a massive explosion at this gas refinery in philadelphia we will go there live, look how its moving Energy Markets this morning. And creeping closer, just talking about that g20 meeting kyle bass is going to be talking china with us. He will break down some of those talks and, importantly, what it means in terms of hong kong and the huge protests that have been going on there as that relates to the overrelationship between the u. S. And china dont go anywhere. But not when to use it. Do i use aflac when the kids get slime in the plumbing . No. Thats home owners insurance. Slime in my motorcycle. No. Thats motorcycle insurance. Slime everywhere . Ughhh nooo, theres no insurance for that. Do they help when i have bills Health Insurance doesnt cover . Yeah thats it aflac gross guys. Get help with expenses Health Insurance doesnt cover. Get to know us at aflac. Com the u. S. Is ratcheting pressure up on iran. More on what was a developing story this morning, including, of course, important tweets from the president. Thats right. One of those developments is the president laying out the narrative of what happened with that aborted airstrike on iran last night in a tweet, series of tweets, the president explaining that he simply decided not to go forward with it. He says we were cocked and loaded to retaliate when i asked how many will die . 150 people, sir, was the answer from a general ten minutes before the strike i stopped it, not proportionate to shooting down an unmanned drone. Our military is rebuilt, new, ready to go, by far the best in the world. Sanctions are biting and more added last night iran can never have a Nuclear Weapons, not against the usa, not against the world says the president. A couple of points one is, i have been talking to a white house official this morning about this who explains that the president would have had to have authorized the strike in the first place. That is, the United States military doesnt get to be ten minutes away from an airstrike on iran without the president giving it the go ahead in the first place. So the president simply changed his mind at some point and decided not to go ahead. He says here because of concerns about iranian loss of life, and that that wouldnt be a proportionate response we dont know whether there was any additional communication with the iranians or anyone else or new information that the president got between authorizing the airstrike and calling it off secondly, the president is saying here that there were new sanctions placed on iran last night. We have asked the white house and the Treasury Department for information about those sanctions. So far they have been unable to provide any information about any new sanctions. They are working on it as soon as we get the details and how it might effect companies in the region, we will get them to you. I mean, i guess youre trying to understand the decisionmaking here why wouldnt you have asked what the ramifications are first in terms of making the decision, i guess is your point, correct yeah. The question is, if the president is saying that this was not a proportionate response, the question is why did he authorize it and call it off . Did something change in that decisionmaking tree up until ten minutes before the strike was set to happen . We dont know the answer to that right now. The white house official telling me the president simply changed his mind. Eamon, thank you. Tons of breaking news this morning on the energy front. Got this massive explosion and subsequent fire at Philadelphia Energy solutions refinery in philadelphia, pennsylvania how that is impacting the complexion, don. The team thats on the ground there trying to monitor the situation, as of 9 08 this morning there is a response crew still there, including many First Responders from local jurisdictions. There were three separate explosions on this particular unit they say. The unit impacted was one of the al collation units they have not determined the product that was burning they believe it was mostly propane according to a spokesperson from Philadelphia Energy solutions they say the shelter in place was lifted at 7 07 a. M. Eastern time they have four confirmed injuries all employees were treated on site by pes medical personnel. The refining complex is running at a reduced rate. The cause of the fire is still currently under investigation. They sincerely apologize for any concern this caused the community. More updates to come as for the Energy Market impact, gasoline futures specifically towards east coast markets up 3. 5 thats off the highs of the session. We are keeping an eye on certain refinery related stocks like phillips, like valero, because they are seeing reaction from a competitive standpoint perhaps from traders with regard to this particular outage and what it could mean for the oil market dynamic. Thats reverberating in the etf markets as well. Some of the large etfs that track oil and gas markets. Xle, a focus for some traders in reaction so only some of the tss there. The United States oil fund, thats also one traders are tracking i would mention, carl, a number of smaller Exchange Traded funds that track things like the Energy Futures market, like the gasoline futures market, and like refiners specifically they are rather small. They could be impacted more. We will bring you more details thats the latest on the Energy Market impact from this Philadelphia Energy solutions explosion, carl. Thank you very much. Whee come back, beyond meat has cooled off still up over 500 now dr. Pragers unveils a new perfect berger to compete with beyond meat and impossible the ceo is going to join us. A check on the major averages. Up four straight, shooting for the third week higher. Ngowafraynge on this id dot ay. Is where people first gathered to form the stock exchangeee, which brought people together to invest in all the things that move us forward. Every day, invesco combines ideas with technology, data with inspiration, investors with solutions. Because the possibilities of life and investing are greater when we come together. I felt completely helpless. Trashed online. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. Welcome back to squawk on the street. Shares of slack edging higher this morning this after it made its public debut at the New York Stock Exchange yesterday slackened up more than 48 it put that company in the top 20 ipo debuts of this year it was a direct listing, remember, not raising any actual capital. Beyond meat still holds the number one spot for firstday performance. And subsequent performance up 163 day one. Sticking to, speaking of which, shares pulling back after news that a Consumer Group launched an ad campaign claiming plantbased meats contain toxic chemicals. Dr. Praegers, which is known for veggie patties, announced the launch of the perfect burger joining us is the ceo, larry praeger. What is difference about this one . The perfect burger we wanted to launch a product with the texture of meat, has the experience of meat, but we wanted to elevate the product. So we have all ingredients that are recognizable you flip over the back of the box, you look at the ingredients, its everything you would know we also wanted to improve upon the nutrition. Less sodium, less fat, less saturated fat. We are infusing the product with four different types of vegetables squash, carrots, beets, and sweet potato and we also have thirdparty certifications, nongmo verification, vegan, dpluglutene and kosher. Is it a liability given that some of those ingredients are hard to pronounce, for example it depends on the goal. They have been focused on improving the environment and trying to go after the Meat Industry so it could help to protect the environment. But for dr. Praegers, we are really a food company and we want to use ingredients that are recognizable and people can flip over and understand. How hard is it to get the mouth feel just right . Why is this seemingly so difficult . Yeah. It takes time. We spent about a year and a half developing the product wow. Yeah. And it is, you know, the texture of meat is different when you are working with plants, we use pea protein in ours and keep the ingredients simple but it does take quite a bit of work to try to get the mouth feel and experience exactly like meat. Could you handle an order from a quick restaurant chain . Yeah. We spent a lot of time working on supply chain. We look at supply chain being two parts. One from a Raw Materials standpoint and vendor relationships. So weve really secured up our Raw Materials for the next pufe years. On the other side being able to produce the product. So dr. Praegers recently built out a new production area within our facility we run two production lines currently. We built out a new one its a highspeed line we are going to be able to double our capacity within the next four to five weeks. One of the other and possible or beyond meat, i think it may be impossible, uses a pea isolate. Is that similar to you are they completely different chemical combinations for these burgers . I dont know exactly what they are beyond is using a pea protein and we are also using a pea protein. Again one of the big differences is that we are infusing it with vegetables that ties back to the canadna o. Praegers products. I have to think that you guys have been doing this for a quarter century. Along come the new players and people go bananas. Arent you saying, hey, we have been right here . Yeah. I mean, the category has always been growing for a really long time obviously, the past few years. Dr. Praegers is up 30 to 35 yearoveryear over the past five years much we are approaching 100 million one of the things we are most proud about is we it profitably. Watching the ipo of one of them, has that given you more thoughts about doing it yourself no, we havent really considered an exit or ipo. There has been so much attention brought to the category. We have been doing it for a while, but there is such a new energy in the category that it allows you to create more items and come out with more exciting stuff as that category expands. Is your consumer buying it for Health Reasons as opposed to, say, the planet reasons . Yeah, our consumer is flipping over the box, reading the ingredients, reading the nutritionals and wants something that they can feel good about feeding themselves and feeding their family i think for health, yeah. Finally, you know the market. You have been studying it for decades. When people say it could be as big as what plantbased beverages have done, is that right . Yeah, i think it does if you look at the meat category on a global level, its a trillion dollar business i think now Meat Alternatives are roughly at about 1 billion. So, and thats globally. I think there is a lot of room for breathe. To go from 1 to 10 . Yeah. Please come back. People cant get enough of the topic. Thank you guys so much. All right. Lets send it over to sue herera with a cnbc news update at this hour. Good morning. Heres whats happening at this hour Iranian State television showed what it said were retrieved sections of a u. S. Military drone downed by iran a revolutionary guard general says a manned u. S. Spy plane was near the drone when it was shot down, but iran chose not to target it. President trump says he is in no hurry to retaliate. Chinese president xi and north Korean Leader kim jong un attending a mass performance of music, dance, and calisthenics at a packed stadium in pyongyang. Xi offered encouragement for Economic Development saying kim had improved north koreas livelihood. A wildfire burning 65 miles west of phoenix has chard 50,000 acres and is prompting evacuations. The fire started june 8th. Officials say it was discussed by humans caused by humans. 900 firefighters are battling the blaze which is 42 contained. A small plane made an Emergency Landing in baena park on thursday. The plane experienced engine trouble forcing the pilot to land on a busy roadway luckily, nobody was injured. You are up to date thats the news update this hour back downtown to you, david. Thank you, sue. When we come back, kyle bass is going to be talking china, china trade, hong kong protests, and what it all means for the Financial System falya ir large economy squawk on the street is back after this through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Protests in hong kong continueas thousands block roads and occupy government buildings in response to a suspended bill that would allow extraditions to Mainland China meanwhile, concerns over the Hong Kong Monetary authoritys reserves fueling fears of losing economic autonomy from Mainland China as well, and that of course could further pressure. Its already been a weak hong kong dollar. Capital manager founder kyle bass believes this is the tip of the iceberg for hong kong and its currency he joins us from San Francisco kyle, good to see you. Nice to have you with us this morning. Good morning, david. Lets start with the protests themselves and why you believe they are important far beyond this debate and opposition to this extradition bill. Yeah, i think the protests create an existential crisis for the communist party in china china is basically, it runs hong kong interest the perspective of national security. As part of the handover from the british in 97, you know, it fully reverts to china in 2047 at some point in time we start discounting back a full takeover of china to hong kong. If you think about it, these protests are actually creating a real problem for xi jinping because i dont think the communist party can back down. They cant show that a mass uprising, a protest can actually affect the course of the leadership of both hong kong and or china so im fearful that the protests are going to, a, continue, and b, they are going to stop using rubber bullets and start using real bullets at some point in time. For now at least the bill has been, as weve said, taken back. It hasnt been completely withdrawn, although that is what these protesters want. Do you still think that there is a real possibility that it actually will come back and potentially be passed . Oh, sure. They havent fully withdrawn the bill specifically for this reason, to let the dust settle and reintroduce the bill at some point in time. I dont think the communist party and, therefore, carrie lam, who was hand picked by xi and the standing committee, can back down from these protests. I think they can delay, but i dont think they will fully withdraw this bill the students that are pushing today are demanding carrie lams resignation. They are demanding that the Hong Kong Legislature fully withdraw the bill and they are demanding that the protests be reclassified as protests instead of peaceful instead of violent i dont think hong kong can do any of those things. All right but draw the connection for me in terms of why this matters to hong kongs currency, which we should point out, of course, you are not a believer you believe it will continue to decline in value how does that connect to this . Well, its important because when you are, if you are running your family, lets say you are a billionaire or even a wall street firm or anyone that has business in hong kong. Are you going to spend the capex . Are you going to buy more property are you going to invest for the long term in hong kong when you dont know what the rule of law is going to be in hong kong, whether its u. K. Law, a real rule of law, or chinas law, which is a rule by law and they do whatever they want to do. So i think when you talk to the people of hong kong, maybe off the record or maybe off the television set, they will all tell you that they are making plans to move somewhere else and move their capital and their Family Offices elsewhere so you are going to see a big migration of capital and both Human Capital and Financial Capital from hong kong to places like singapore and sydney. Other places in the region that dont have the prospect of heavyhanded chinese communistic law hanging over their head. On the specific point about the currency, you have gotten pushback in the past you have talk and spoken about it now in terms of the plight of the Hong Kong Monetary authority. Others say they have 430 br 430 billion in u. S. Dollar foreign currency reserves. It would be foolish to think that they could ever be in danger in running out of reserves. If you want to get into this idea of currency boards and currency pegs, when you have a system that has, for every 1, you have 7. 85 hong kong dollars, and you have a perfect match, if money starts to leave, and lets say fo4 or 5 of the population leaves, you will not only have to cancel assets, but cancel liability. You will have to shrink your money supply things will get tight. And you cant have the most levered Financial System in the world, which is hong kong, tighten up its financial conditions at a point in time in which the economy ask starting to head lower. In fact, since the protests have begun, you have seen two very large property transactions canceled you have seen Residential Property sales drop 90 in three weeks. So now you are going to see, i think you are going to see the results of a system thats got, you know, 900 leverage in its Banking System and private sector credit to gdp is like 300 the highest in the word. So you have the most levered Financial System in the world experiencing a very tight money supply issue so when the money leaves, their excess capital that they defend the peg with will be depleted. Then they have their actual reserves thatter set aside to, basically to monetize that system, and you are going to have to cancel both sides of that and have extreme tightness. So i dont think the 36year peg is going to hold. You dont now, you have spoken for years, we have had this conversation kyle, not just about, obviously, the incredible credit bubble that has built up in hong kong, but even more so in china. It is yet to burst, you know they have hung in there, it would seem, despite what you have been saying for some time they were going to reach a point of no return they dont seem to have yet. Yeah, well, i dont know if you followed whats happened in their Banking Sector in the last month and a half, but you have bow shank bank, a very large bank in china that failed. They haircut inner Bank Borrowers and commercial deposits by up to 30 , which was heretofore unthinkable in the chinese Banking System and just today you saw another bank china get recapitallized below book value because of, again, more of a banking crisis. So you have a 25year rule of not doing deals below book value, which was broken this week, and the bank haircut inner Bank Depositors and commercial depositors you are starting to see things happen in the regional banks in china that should give people pause. Put this all in perspective for me for the larger issues that you have been on to discuss as well. You have been an outspoken proponent of the administrations actions when it comes to trying to level the playing field, if i can call it that, with china what does the potential economic distress you are discussing in terms of hong kong and potentially china mean for the ongoing tensions between our two countries . Yeah, i mean, i think as trump heads to the g20 in osaka next week, i think that if you just think about the political cal cue constance wu list of both sides calculus of both sides, trumps is its better to restart the talks, but basically not get to quote a deal because hell be criticized by his own base and his opponents and xi would like to continue to delay things think about how long we have been this these tariff discussions with china this literally began in january of 2018, and here we are in june of 2019 still talking. And so i think both sides will continue to talk i think the kchasm is too far what does that mean . As trump tweeted yesterday, the stock market opened at a new high and closed at a new high yesterday. The u. S. Economy is doing better than most of the others in the world. I think thats the path that we are going to see going into the election year. Right but if youre right, we could continue then to potentially apply more economic pressure on them and on their Financial System, that would seem to be leverage that we have in any negotiation . Yeah. We have the most leverage we have ever had right now. And i think that our Financial System is more solid than its been in the last ten years, and theirss f is as weak as its ever been. When we think about warfare, and the chinese like to say fairly frequently that they havent invaded anyone outside of their borders in the last 40 years there are many different kinds of warfare there is kinetic warfare, but there is cyber war and economic war. And the chinese have been at cyber and economic war with the u. S. And many other parts of the world for the last 20 years and we are just now figuring this out. On the economic war front, i think we have much stronger footing than china does. And President Trump should hold the line here and get a deal done, if he is going to get a deal done. He should force something thats both measurable and enforceable, which is i think what his trade negotiators are working towards. Well, kyle, its a conversation that we will have to continue and will continue. But for now we have to leave it there. Thank you for joining us this morning. Appreciate it. Of course good talking with you, david. Kyle bass from hayman capital. Ed laz ear is coming up. Talking about whats going on in the job market meantime, major averages obviously in a tight range, but we are close to session highs on the dow, up 43 i need it to guide this analyst to customize Flood Coverage for this house. So that this team, can inform this couple, that their payment will arrive faster than this guy. Hey. So whether im processing claims due to this fine gentleman. car engine starting or suggesting premiums for this young lady. Ai can help change everything at this company. Expect more from ai. Ibm watson. 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. Get e trade and start trading today. Stocks back at alltime highs. Chk chart points to bigger gains ahd. Ecit out on trading nation on cnbc. Com. More squawk on the street is coming up. Lets get the santelli exchange. Thanks, carl. I would like to welcome ed lazear thank you for joining me let the match begin. Im just not seeing eye to eye with many these days regarding the fed. I loved your article i just dont know that i agree with it. But make your case with regard to how you would defend our central bank lowering rates at this particular point in time. Okay. Well, let me start by where we do agree i dont know if you recall, but about three years ago everybody was forecasting that we were pretty much at the end of labor market recovery, and both you and i were saying, look, we think there is a long way to go. We have had eight million jobs since then on that score, i think were probably on the same page. The question is, is it possible to continue that into the near future and i would say its possible, but its just getting a lot tougher. And there are basically three indicators that you want to look at one is job growth. You know, it slowed to 75,000 last month that doesnt bother me that much if we think about the threemonth moving average, about 150,000. But thats still down from the over 200,000 that weve had. So its slowing. The other thing that i point to, and we talk about this a lot, is the employment rate, which is the ratio, number of people who have jobs to the number of people in the working age population that peaked at 60. 7. Its down to 60. 6 down and pretty much stable so that looks like its at close to full employment range and then, range. And finally, rage growth, which is kind of right on target, its what you want to look at is the sum of productivity growth plus inflation. And thats right in the low 3 range, which is what weve been seeing in terms of wage growth so all of those things look like we are at pretty much at full employment that doesnt mean a recession is imminent it doesnt mean that the economy has to stop chugging along and, you know, we can continue to grow, all of that stuff is fine. But it just says that the that the slack that was there is no longer there to the same extent it sounds to me like, just from your employment argument, youre looking to be a bit preemptive, then because being at full employment in and of itself certainly doesnt warrant easing as a matter of fact, if it stays hot, maybe the other direction so it all seems to boil down to some of the deflationary pressures. And my nervousness about this is, is i think theres a good chunk of global inflation and developed economies that is being exported and packaged and ends up on the shores of the u. S. Not that we dont have some issues but the real question that needs to be asked is, will lowering rates address these issues will it have enough leverage in a Global Economy that has these pressures to make a difference without impacting other areas . I dont think a quarter, a half point, or three quarters of a point is going to make a difference in many of the issues you described, especially with Central Banks being the transformers in the universe in terms of negative rates, bloated Balance Sheets and debt. Its just going to fuel a bigger debt bubble, mostly outside the u. S. , but were included in that thoughts well, i guess i would focus primarily not so much on the monetary side of the thing its not so much the inflation and the comparison with other countries pip also worry about the debt, by the way but thats a really serious longrun structural problem that has to do with spending, more than anything that the fed controls i agree what i would say you know, what i would say, rick, in terms of, you mentioned the word preemptive i guess the thing that troubles me the most right now are market forecasts of where were headed for the next four quarters, which until last the last fed meeting, was really below 2 but the other thing is if you look at investment, and you know, investment has been way stronger than it was in 2015 and 2016 thats the good news but its tapered off a bit and i guess my view is we need to keep investment were out of time im sorry were out of time we have to leave it there. I agree on many. Im going to do an exchange in an hour and address what we didnt cover thank you for joining me, david faber, back to you my pleasure, rick thank you. Thanks, ed. Ed lazear joining Rick Santelli now time to send it over to Morgan Brennan whos got a look at whats coming up on squawk alley hey, david. And oh, do we have so much coming up on squawk alley. We have ali raghani to talk about slack and the overall ipopalooza peter allerton, the founder of boost is back to talk about tmobile and sprint. And we have the creator of a 7 billion ai and robotics tech unicorn. Can you get which one . Thats all coming up in just a couple of minutes on squawk alley. Stay with us feel that . Thats the beat of global markets, the rhythm of the world. But to us, its the pace of tomorrow. With ingenuity, technologies, and markets expertise we create the possible. And when you do that, you dont chase the pace of tomorrow. You set it. Nasdaq. Rewrite tomorrow. Seen a Little Market action here dow is up 52, close to the highs of the session dow jones does have a headline that Vice President pence has postponed a speech on china amid signs of progress with the chinese. Some Chinese Media suggested that the teams could meet as early as tuesday so well see, because that g20 is getting closer and closer by the day. Certainly is. But that would be a positive expected to have a fiery antichina speech at some point. Right, right. Well watch that obviously, watching oil, as well dow is up 51 ipo inn a few director listings flooding the mkearts well talk to the ceo of twitter, ali rowghani when squawk alley starts in a moment small things. Big things. Too hard to do alone things. Day after day, you need to get it all done. And here to listen and help you through it all is bank of america. With the expertise and knowhow you need to reach that blissful state of doneness. So lets get after it. 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Intand ux f sport,rst of its kind lexus ux also available in hybrid allwheel drive. Lease the 2019 ux 200 for 329 month for 36 months. Experience amazing at your lexus dealer. Good morning its 8 00 a. M. At slack headquarters in San Francisco. 11 00 a. M. On wall street and squawk alley is live good friday morning welcome to squawk alley. Im Carl Quintanilla with Morgan Brennan at post nine of the New York Stock Exchange. Jon fortt has the morning off. Market starting to get some legs here 20 points from an alltime closing high on the dow, but well start with slack surging nearly 50 in the first day of trading. On the rise again today. Leslie picker back at hq with more on the debut. I think the flag was still outside of the exchange this morning. They werent quick to t