Transcripts For CNBC Squawk On The Street 20240714

Interested forecasts ibm is betting on 5g growth and the cloud, it has a tieup with at t that is talking exclusively with jim about he got both. And president ial pressure trump saying his administration will take a look at accusations from tech investor peter thiel that google coordinated with the Chinese Government so some mixed reaction out on bank earnings. Jpmorgan chase, Goldman Sachs, wells fargo. Guys, obvious lly the reason th stock is down they lowered their nim forecast by 500 million. Sometimes you look at a quarter and you say, please, please, give me a highlight. Look, the efficiency ratio was good but when i look at what the other banks have done, i understand that jpmorgan is good, just not shoot the lights out. I dont think when i look line by line, look, you got some good numbers here you have the Consumer Community banking this line about the just the consumer itself, these guys are coining money theyre not coining money as i would like it because of Net Interest Margin. Im fine with it david, do you think i should be more excited than fine with it no, not more excited than fine the Conference Call has begun. As you might have expected, new cfo, by the way, focus on taking over from marion lake, running the consumer business now. Yes first quarter, our guidance was 58 billion. Talking here about Net Interest Income and Net Interest Margin again. And some pressure on the long end at that point, the pressure persisted, increased pulled the impact of the long end through in terms of outlook and short range of the range of outcomes are broad, this is the cfo. We thought of a range of outcomes of 1 to three rate c3. You get the point. It just keeps going down from 58 billion depending how many rate cuts you get which we know but many would think the bank stocks already reacted. I know. Look, this is one where the Conference Call has always mattered the most. So i feel like it is sometimes i talk to david about this is when im most naked at this very single moment. But jpmorgan was not something where you see a lot of holds to buys goldman, though. Right to your broader point, we used to talk about ficke all the time trading revenue, ib revenue below expectations yes look, again, i dont want it is one of these things you look at it and say, that wasnt as good as again, i think a fair comparison but then again, citi is not as levered to the r rates citi is back being very international. If you look at the first page of the citi the second page, talking about mexico mexico, then there is southeast asia, a lot good and so im there for them. And jpmorgan, im okay im okay it is no jb hunt. Goldman, as we can see here, 26 minutes before we get started with trading, is going to be up this morning, perhaps as much as almost 2 . They had some significant equity gains, 741 million in gains, in part from their private Equity Ownership of companies that went public and they clearly seem to have been marking them fairly conservatively and so you mark that up, that helped on the quarter. Thats not necessarily recurring. So youre not going to want to pay for that as an investor. Right that said, everything came in, either in line, it seemed, or above, at least, judging from the response of the analysts who follow the company, also a Conference Call that will get under way or under way there, very shortly, i believe. I look at the goldman thing, what i find i say it is no longer as episodic i see as much as 63 to 65 of the revenue being reoccurring. You know what is exciting about goldman, theyre ready for apple. Theyre ready for apple. There is more than 1100 Million People that might get that card. They have still have yet to receive any real details true. But they are all set for second half thats something i didnt know you think the backoff is prepped for that kind of demand . Thats been your concern on goldman. Better be. Theyre saying that im my concern, i think, youll get comfort that my concern is misplaced. And that apple is ready and goldman is ready thats something that, you know, the other firms said to me, dont be taken in. I feel that this company has got a little bit better Risk Management than people realize, these are much lower refs. To your point, on Something Like this, you got to roll it out properly you dont get a Second Chance to mack a fir make a first impression. Where are the expenses from all of this showing up the revenues are not second half second half. And you see, you go through line by line, investing and lending, investment management, everything else, they are we talked to David Solomon about it it is not cheap in terms of what theyre spending could be the biggest hit ive ever seen. Not talking just about the credit card. Talking about marcus, talking about a number of the platforms. And marcus, look, jpmorgan is coining money, but not at much as expected. Goldman is coining money but in a less episodic, more recurring way. I am getting some surety on apple. You can say, youre dreaming apple has no idea itself how many people want the card. What i like is that theyre setting look, are they as ready as capital one are they as ready as citi . No one could be. The fact is that they can expense apple this quarter, next two quarters im sure theyll get asked a lot of questions about these various efforts on the call. I have to tell you the guard ki card will be big yesterday, i happened to have an interesting discussion on the heels of the acquisition of red hat. And ibm. Ibm announcing moments ago multiyear alliance with at t both Companies Say worth billions i want to point out the real gain here is 5g, because i believe microsoft could be involved too eventually. Ibm with red hat is allowing for a more ecumenical activity when it comes to the data center and to azure versus ibms data services, theyre web platform so you need to know that i spoke with both ceos earlier and began by asking Ginni Rometty if this moves the needle for the company as large as ibm which many people are suspect about. Heres what she told me. This is all about ibm becoming the primary partner fo the development, modernization of the apps and moving them to the ibm cloud for at t business and then at t and ibm together will be building an edge mobile platform, particularly for enterprise clients and then at t has done a super job all around moving their network to Software Defined, they used red hat, but this is now an expansion of red hat in the network. As well, at t has is a provider to ibm for my internal network this is about moving me then to that new Software Defined network. Im really pleased this absolutely moves the needle. John, at t is doing some remarkable things. Since you did the merger with time warner. This feels like growth to me did you pick ibm did ibm become the favored nation here in part because of your relationship with red hat . Absolutely. I think if you think about the history we have with ibm, the risks of moving to the cloud in a really aggressive way, the kind that not only transform your company internally, your cost structure, but how you address customers and therefore opportunities for growth and you worry about technology, you worry about how to transform your applications. And then you worry what happens if i get in trouble. I think that we had a 20year relationship with ibm. They know us and so when you think about expanding red hat, with the experience that those guys have inside of our operations, and then the ability to go to market together, those things combine for us to form a low risk, really high opportunity kind of situation. Ginni, youre probably number one fan on the red hat deal. From the moment it happened. I looked at the comparables of what you ended up paying for red hat versus the other cloud kings i talk about it does appear that in retrospect you got quite a bargain. Talk about what you got from red hat and what you got from red hat that turned out to be much more of a bargain than it looked like to the analyst when it was announced. Well, look, i think many people when they think of a cloud company, they dont think about a Profitable Company and as you know, jim built a very Profitable Company and very good company with red hat. But even more important with john donovan just said there a minute ago with at t being cloud first, think about what we now do for them. In addition to us being the primary cloud provider, john will also be multicloud and will be managing that we bought red hat in order to be the hybrid multicloud platform out there. Thats the reality for Companies Like many others in the fortune 500, fortune 1,000, like at t. So, yes, were going to modernize together those apps, move them to the cloud, ibm cloud. But there will be other partners too in the cloud and also manage that and that hybrid environment. Thats what we got with red hat. Together, our ability to do that hybrid environment and so i really give at t a lot of credit with a vision of what it is they want to accomplish. But to do it on scale. What is the financing of the deal a lot of concerned that at t, very big data issue. How does this work in terms of you paying you paying, at t paying you, or is this just an exchange in kind everything we do is laser focused on Growth Opportunity out in the market. Cost reduction, internally, and transforming ourselves into a simpler operation, which then transitions into both cost and customer effectiveness and this meets that hurdle it is wide, it is deep it is formidable i think it meets all the criteria it is one of the rare things that affects revenue costs and then how you serve your customers and that regard we love it. John, continuing a theme from what i heard is 5g, 5g, 5g how important is 5g to at T Communications jim, thats most Important Network that were going to launch in my career. It is we have been about 10 or 15 years in a an architecture where everything was consumer first. This is coming out of the chute as an enterprise First Network and really about, you know, consumers seeing everything they do whether it is shop or go to the hospital or new experiences with toys. So us getting the right enterprise relationships done early on 5g will be the foundation for how fast this thing scales okay. I think 5g was up for grabs. I dont think the data center was up for grabs ecumenical, it could go to microsoft as well as them. It is not just an ibm cloud, could go to azure too. What i think is important is that i dont want to overstate this is gigantic in the sense that they have always been together i think 5g the last thing that john said, the most important, that was the most competitive i would argue it has been a big morning, all these Enterprise People are finding their dance partner. You see nielsen today, moving their tv ratings platform to aws. This is were going to hear more i think it is interesting aws is really they want to be very sure that people know the large retailers away from target and walmart they still recommend that aws in the retailers agree is the cheapest in the interface im focused on spotify they have a great relationship with the Amazon Web Services amazon has tentacles azure doing very well. Ibm better with red hat. At t going with red hat because they have a longterm relationship and also longterm relationship with ibm. What im saying is i dont want people to be so excited that they pay up for ibm. That would be a mistake. It also it has to do with the change in technology in terms of 5g and the edge and the lack of latency that you can have so much more information held at the edge of the network that can then be sent back and forth because it there is no latency anymore with 5g. Takes a millisecond. You wont see cisco cut out of this. No. No large opportunity for a lot of the providers and vendors. Meanwhile, people say were not going to be spending enough on 5g, not going to be there as much as they say, question the spectrum that verizon has right now in some ways and how well it propagates ibm is verizon, they have tmobile, they have at t there we go. Good stuff, jim lets get Industrial Production, Rick Santelli. Our june read on Industrial Production, a little light were expecting a positive number up. 1 it is unchanged. But the point for the rear view mirror is unrevised. Thats a good thing. On utilization rates, they disappointed a bit we dipped under 78, expecting the number slightly over 77. 9, 77. 9 and unfortunately, well, 77. 9 is the lightest number going back to about february of last year so indeed it is a number to Pay Attention to but lets also remember retail sales, indeed, if you look at retail sales for the entire year of 2019, as a group, it is a solid group compared to any five or six month grouping last year. So continue to monitor that and look for some upward revisions to q2 gdp. They will be coming today based on that control retail sales number carl, jim, david, back to you. Were going to catch them as they come in rick, thank you. When we come back, the president reacting to peter thiels accusations regarding google well fill you in. 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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. Think it is time for a change you may get disgusted welcome back about eight minutes before we get started with trading here for the day at the New York Stock Exchange time for a mad dash. Dominos, the stock were keeping a close eye on this morning after reporting earnings not being well responded to. I think when we play dominos music, it is more like brown eyed girls, going down the old line, transistor radio the u. S. Slowdown is rather extraordinary, revenue well below what i was looking for global is good i have strauss on tonight. The consistency here is, well, become, lets say inconsistent this is a juggernaut under pat doyle. They have dominated. Theyre good company they have a good franchise model. I dont think pizza suddenly shed down assh slowed down as a class you know papa januaohns made a comeback there are answers that there is nor questimore questions tha. You talked about this being a technology company. Yes but have we run out of technology how many more ways can we actually do it until we get autonomous driving i know that when you look at autonomous driving, it would be an absolute boon because how much they would save, but i know dominos, look, a great creator of jobs. But im a little surprised here. I need some answers, david, about the slowdown and the u. S. They have a robot that comes out of the car and delivers the pizza to the front door. No, you have a guy that comes out, they can tell you where you are, more of an uber situation you can just press a button, they take you to the house the biggest problem is finding the house, that will be eliminated. Well, dominos certainly going to be a feature today. Remember, this is in the mcdonalds camp of consistency. Yeah. A lot of other stocks to keep a close eye on we havent mentioned j j yet concerns there about liability in terms of opioids. Thats what is driving things, the oklahoma case. Well get that and the opening bell right after this. 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. Youre watching cnbc squawk on the street live from the Financial Capital of the world busy tuesday as we worked our way through some bank earnings, dominos over there china trade reports. Were going to watch facebook on the hill and i know we havent touched j j yet. It is good. Consumer revenue is good pharmaceutical up 4. 4, are abeg organic is good. Bristolmyers is taking share here when you wake up and you see an article about how theyre rolling the dice on opioids, by the way, if you ask me who is the most innocent in opioids of the ones that the ones that were there, j j chose not to settle thats why youre reading that theyre going to bear the brunt if they lose, and if that is driving the stock, plus, the drug stocks are out of favor the Conference Call going just okay, bravado, the drug for antisuicide, not a lot of new information, we sold some higher, i get concerned in this group, it is hard to move the needle and there was nothing here that was blowout. Nothi nothing. They didnt raise the forecast. J j pushed back against allegations that it marketed these drug s too broadly or played down addiction risks. Thats charges made against some more Prominent Players as well, Purdue Pharma being chief among them, very Different Company but this goes back to oklahoma where you got the attorney general closing arguments and what has been a seven week trial at this point, guys, presenting evidence and witnesses they say proves of course that in their words it was the kingpin of the states prescription opioid supply thank heavens, it is a judge. We saw you can get things overturned or cut like we saw with monsanto buyer. The talc hangover, the plaintiffs bar for talc. The question about blood thinners and whether theyre losing share and biosimilars dont count on it. One more company with some overlay. Here is the opening bell s p 500 at the cnbc real Time Exchange at the big board, webster etf high yield bond index. At the nasdaq brockline incorporated Ten Companies have reported so far today. All ten beat on the bottom line on revenue six six companies. Yeah, i think thats pretty much the order of things, when you see the beat and dont see raised, a lot of that is conservatism that maybe the revenues may not be as good. Look, it still beat. I think we all tend to look at the aggregate of beat and say, hey, not bad i point out through the one consistent thing throughout this is that the consumer is doing very well. That is the jpmorgan made a point of that very much so during jamie dimons comments on the in the press release and the like. Yes look, i think that anyone who expected things to be weaker, i think is not getting what they want i dont want to spend much time talking about the largest Trucking Company jb hunt, down two bucks when they reported, really had so much good commentary, it made you feel, hey, wait a second, you know what, if the trucking business is good, maybe things are better, not bad for freight recession as one analyst said, the company itself says that the integrated capital, ecom may not are been that good the dedicated contract services, 68 to 70 of the business is just plain strong. Thats american commerce and that is playing a role remember, the bank stocks ran after the sicar, they have done well if you want to bet against jpmorgan, great yield. Only one i think were struggling with. Wells fargo, but still hoping that maybe one day someone takes that ceo job i would have thought that would be a pretty good job. Someone will take it. Isnt it good to be the king . That was mel brkooks history of the world, right right maybe it is. To your point about freight, if jb hunt is a canary, csx better back it up tonight. They better precision railroading, they get rid of the low margin business i go back to davis analysis, were they imprecise before i always imagine now, we talked about precision railroading for a while now, finally everything is going all over the place, and then said wait, we have to put precision on this. I had a shirt back in elementary school, middle school, her father was in charge of demurrage, how many cars they dont know where they are, with precision railroad that teacher who i was, of course, well, quite enamored of, thats what happened, nothing, of course, happened, you know never mind, im way off base, but what matters is she said, my dad does demurrage. The main point is that they used to lose cars all the time. All the time. Until precision railroading came along and now demurrage has stopped. I was inappropriate talking about, you know, whatever. I asked her what her dad did back to the thesis of a slowing, certainly when it comes to trade related commerce, this arrow electronics, small company, down 7. 5 , distributor for a lot of Electronic Components and the like. I see you and raise you western digital. Youre seeing a bottom in drams. Those are being reflected in the stocks in the last few days. They have cut back production. But in that that could explain why david is right in terms of just another canary my grandfather had a canary. They dont shut up arrow is going to reverse the move that we had in micron from 32 to 44 but dram pricing is better and nan is better. Dram pricing, 54 increase did report lower than initially expected results for the Second Quarter and cited deteriorating demand conditions in the global components business. Look at china do they need to do stimulus . They need stimulus and they need it now im not just talking about bogus fentanyl by the way, when it comes to china and the u. S. , seems as though everybody is settling into this idea this is just going to go on for a while but new focus on the key chinese negotiator being the hardliner. Recent comments. Jung, the name we need to get to a hardliner and suggesting overnight were in no hurry. No. No hurry thats suboptimal for a lot of companies. How about the times looking at the tariffs collected so far, 20. 8 billion the aid promised to farmers affected by the trade war, 28 billion. Not payi ining for itself yet. I said, well, i mean, im waiting for the administration to quickly come back and say, while the numbers, which are basically from the administration werent so good, i think thats an important data point, carl. I think the farmers played big in an election and youre not going to these numbers are going to play into the hands of the democrats. They are. I think so. It is a long way to go yet. David is right. But i do think that that was surprising to me i thought that these were i thought we were making more money. I on ton the big tech reg fr, were going to watch that. And then david marcus is going to be on the hill today, talking about libra. David has to reposition what they have been saying. David was from pay pal the idea was to work with the up banked if you were a rich person who lived in zimbabwe, i could have crafted a libra for you. I could have crafted it. But poor person, i couldnt. Why doesnt marcus explain it like that . They have to change the narrative completely President Trump seems to be joining in in a fun way here against senator mccarthy, im sorry, peter thiel he expressed interests in chinese startups i hate charges of treason. We live in a different era. I think this is the beginning of here is some of the response from google in terms of these charges peter thiel made, unsubstantiated. Some would argue, if he knows things that are secrets, he cant share them, not that i would be aware i want to know how many communists, is it more than 50 is it 57 communists . Funny, you were looking up roy combs this morning. Roy combs was the president was a confidant, the counsel for senator mccarthy he said, he wants to know were you ever or are you a member of the communist party . Will you please tell us who else at google is a member . Are we going to have those hearings is this the new mccarthyism go that far today . I have to when you call someone treasonous, how can you not have Senate Hearings run by a senator who is saying, listen, obviously peter thiels information, i want to know who is or was a member of the Chinese Communist party and is passing on information . How can i not want that . If there is a charge by a very wealthy individual, who says that there are Chinese Government basically spies within google and the president accuses them, were going to have to have hearings. It is, you know, you would expect we do have intelligence agencies that are supposed to spend a lot of time on these things thats right counterespionage and things of that nature. And perhaps they are i dont know why peter thiel is necessarily decided to involve himself in this. I would love to hear from him. Great if we can get him to sit down on cnbc at some point old guest from kudlow and cramer, ive always respected everything about him when you talk about treason and you do not talk about senator mccarthy, you have forgotten history. And youve forgotten roy cohn, what happened to this country and how it tore it apart with joseph welch took senator mccarthy apart dure the hearings when itwas sacrosanct to attac the army and they put an end to it and soon after senator mccarthy died. I do not want to see this happen i dont want mccarthyism in this country. I think the only guy who stood up to him was edward r. Murrow only he did it person to person some degree with his great documentary. We cant have treason being called here. We just cant. Treason is a high the rosenbergs were executed for treason. Should the rosenbergs have been executed for giving the Hydrogen Bomb i dont know have you no decency are we headed to episodes of black lists and friends informing on friends when you say treason, i want the names. I dont want the manchurian candidate names where he looks at the bottle of heinz i want to know what is he saying here as for libra, german finance minister says the issuance of a new currency doesnt belong in the hands of a private company so between powell, mnuchin, the uk regulators, mark cuban, the house, the senate, the germans, thats a lot for marcus to answer to. He wont be able to unless he repositions what it is for or if they go by pay pal and start offering something that is a combined basket which i think is much more he is from pay pal. Hes got to change the narrative here this thing is dead on arrival. I dont think they may have misjudged how much theyreliked. Somebody called it the new coke. Hasnt launched yet thats the only give it a year. I think that the idea that they can peg it to the dollar is a little pay pallike. This is not presented well it is a uniting force. I dont know, maybe even the squad is coming out hard against this the squad had to go there . Look, if someone is talking about if theyre talking about senator mccarthy, ill go anywhere today i cannot believe the journalists afraid to stand up to senator mccarthy when an era. Cowardice. Coward senator mccarthy is long, long dead. Yeah, but the his history lives with us again. Really quick, guys, prime day, of course, we were watching amazon and now these comments from Doug Mcmillan of walmart, if somebody is doing better, Something Better than we are, lets copy and paste what we should and can Everybody Loves saving time. And something that is easy rare to hear some new i wont say walmart is not humble, but to address a competitor directly like that. Walmart is feeling its oats because of what mark is doing. They have a good competitive offering i know that targ haeet has a go competitive offering walmart has substantial plans to put the food in your refrigerator they also have an unbelievable base of stores that is the infrastructure as you know best because you covered walmart for years. I did, yeah, quite some time back but they have been trying to rise to the challenge. There is various degrees of belief there we had analyst on yesterday on the 10 00, who is saying they didnt have not done a good job at all really . You keep bringing up Amazon Web Services it is good. I dont want to confuse people retailers using Amazon Web Services, the competition between absolutely. Retail is doing well off the retail sales home depot downgraded by a small firm, seems ridiculous. Record high for the dow as we approach 27. 4. To bob pisani. Happy tuesday mixed open overall for the markets. I think it is good to review exactly where we are with the three things that matter right now, the fed, trade, and earnings so fed, the key point here, helping out the world, Central Banks are dovish thats the main positive that the stock market globally has got going for it trade deal, were getting increasing comments here, mr. Zang in china, maybe china isnt in a hurry this could take longer than people anticipated thats neutral to not great. The earnings situation, okay, the banks are okay i dont like some of the comments im hearing from the semiconductors or the Big Industrial names review that in a minute. The sectors today, transports up on some relief on jb hunt. Consumer staples flattish. Semiconductors, weak, thats the one you want to watch. Data mentioned arrow which is a very Big Electronics distributor and also in the semiconductor space. You see moving some of the semiconductors down, they talked about deteriorating demand conditions inventory correction we have heard this before from other semiconductor companies, but this is now becoming fairly common and these comments came out, other comments out from other companies several months ago, were hearing them again from some Smaller Companies that are happening. So if you look at the industrial economy. We have heard this in the last week from a number of Different Companies out there. So basf, a different space, this is the biggest Chemical Company in the world here. Last week, they talked about abysmal numbers blaming trade, weak Industrial Production numbers around the world, impacting them, the weak automotive industry. Vishay, they talked about the same thing inventory correction, then we saw fastenal, makes fasteners and machine equipment and tools last week, they talked about higher costs and the impact of tariffs on them. There is a story that is emerging about a slower Global Economy, particularly around the industrial space and to a certain extent the semiconductor space. Let me move on, two points of interest, which en is the last you heard about the stock split. They announced a one for eight stock split. When is the last time somebody announced a stock split . Theyll split one for eight. Theyre still thinking of raising money in hong kong they may do another offering keep an eye on that one. Finally, just on jb hunt, yesterday, all waiting for jb hunt to come out after the close. And their numbers came out initially. The initial number was 1. 23 the estimate was 1. 34 everyone said, my gosh, this is a terrible number. And the machines that scrape it came out immediately and dropped 4 immediately on the read, the machines read the initial headline, well the machines got it wrong. When somebody read the numbers, they said, did anybody notice there was a huge charge here for insurance claim. And if you take out that, the numbers actually one or two cents above expectations i dont want to make too much about this i did feel a little bit better that in the eternal battle of man versus machine, at least last night, it is man, one and machine nothing. The machines got that one wrong. Carl, back to you. Absolutely true, bob, thank you. To the bond pits, Rick Santelli in chicago, having given us Industrial Production hey, rick. Yes, very interesting morning. If we look at the retail sales data especially, i like the grouping, ill be talking about that throughout the day. Look at intraday of twoyear note, short end was very responsive to the good data. If you move down the curve, lets look at seven trading sessions of ten year yields, shall we can see the way it popped up hovering at levels were about to blow off the top of what are basically close to six week highs based on a close just a few more basis points it really jumps out at you if you look at the chart, starting june 1st now, lets switch gears a bit. We all know that there has been a lot of action going on with regard to the uncertainties in the world, one uncertainty that certainly seems to be a large worry beat for europe and the uk specifically, of course, is brexit and it certainly looks like a bust out, a breakout, a no deal brexit looms much more close to reality than any of the other issues look at the way the pound versus the dollar has moved, remember, thats a chart of the pound being proactive. Lowest levels versus the greenbacks since april of 2017, the chart starts in may of 17 excuse me. Starts in may, april is the lows if we look at the dollar index, it really has had a wild run today. If you look at the twoday chart, to give it some context, it popped on the solid data. If you notice, all markets, treasury rates move, dollar move, one market that doesnt seem to pay a whole lot of attention are the equity markets. My guess is there is reading fed tea leaves into this yes, the july rate cut is built in, but if we get more data like retail sales today, future rate cuts could be in doubt carl, david, jim, back to you. All right, rick, thank you very much. Today marks a milestone for those of us who cover Business News it has been 15 years since Martha Stewart was sentenced for corporate fraud. A federal judge sentenced stewart to five months in prison, five months of home confinement for lying about a stock sale this is what she said on this day back in 2004. Today is a shameful day it is shameful for me and for my family and for my beloved company. Talked a lot about mso and what would happen if she were unable to lead the company big risk factor for the stock well before this ever happened. Always a one Person Company obviously a lot of people worked there, but people felt the price ratings multiple won because of her. She came on mad money after she got out. What i loved was her attitude. I asked her about what jail was like, she said it wasnt as good as going to yale she immediately put it in a context that showed what a magnificent way that this woman has to be able to take an obviously terrible situation and do it and really actually unfortunately she did not help herself. She was her own lawyer in the end and comey did not like that and just very different negotiations, but i think that those days are behind her. We dont think of her as that. I think thats a large part because of her outsized fantastic personality. There. I think that she put it behind her better than anybody else i know. Shares of inclone. That was instrumental in not having a lot of put a little bid on it. Time does fly Senate Banking this time holding a hearing on libra and the cryptocurrency david banking Holding Hearings on libra in the hot seat. Well bring that to you live in a few moments. As we said, record high for the dow. Back in a minute seems like the other day we got 27k, now at almost 27 four here is a 20year chart of the dow as we Pay Attention to key industrials. Banks earnings and j j back in a moment Johnson Johnson is a baby company. But were also a cancer fighting, hiv controlling, joint replacing, and depression relieving company. From the day youre born we never stop taking care of you. When a plan stops being a plan and gets set into motion. Todays merrill can help you get there with the people, tools, and personalized advice to help turn your ambitions into action. What would you like the power to do . Ritch allison will be on. Well see you tonight 6 00 p. M. Mad money. When we come back capitol hill hearing on facebooks cryptocurrency plans skeptical about libra. Dow is up 7. Virtual wallet from pnc bank. Just one way pnc is modernizing banking to help make things easier. Pnc bank. Make today the day. Happening this morning on capitol hill, the Senate Banking committee holding a hearing on facebooks proposed Cryptocurrency Libra the head of blockchain security is testifying. Well take you live to that hearing as soon as q a begins. Meantime good Tuesday Morning, walk to squawk on the street. Im david quintanilla. Sara has the morning off a record high on the dow, although just settling back a point. Busy morning with bank earnings, china news as we said, facebook, and now some Economic Data lets get to Rick Santelli. Yes, more Economic Data its been a busy morning business inventory for may still the Second Quarter number up. 3 as expected. Of course building inventories will contribute to gdp the real issue is how much will be sold to contribute to the true economy lets Head National association of Home Builders Housing Market index diana olick will give us the details on that. Diana. Rick, builder confidence for Single Family homes rose one point to 65 in july. Thats below july 28 reading of 68 anything above 50 is considered positive this is despite a growing shortage of existing homes for sale and lower mortgage rates. The average on the 30year fix fell sharply end of may and continued lower in june, held steady first week of july, right around 3. 8 according to Mortgage News Daily indexes componentss Sales Conditions and expectations each rose one point to 72 and 71 respectively buyer traffic also up one point to 48, although that one still in negative territory. A note from nahb economist current low Interest Rate environment should be getting more buyers off the sidelines but they remain hesitant due to affordability concern. Builder sentiment highest in the west, lowest in the midwest. Back to you guys. Thank you for that. Appreciate it. Chorus growing against Facebooks Libra in the past week alone, the president has spoken out against proposed cryptocurrency along with treasury secretary Steven Mnuchin and mark cuban. Im not a big fan of what they are doing there i think its a big mistake not so much because of what will happen here in the United States but globally they are way ahead on that. We agree that libra raises a lot of serious concerns. Those would include around privacy, money laundering, consumer protection, financial stability. Those are going to need to be thoroughly and publicly assessed and evaluated before this proceeds. I didnt say i was comfortable with them launching a currency. If they launch it in the appropriate and safe way. Im not comfortable today so let me just be careful, as i said they and others have a lot of work to do before they get us comfortable. So you have the Senate Finance committee today tackling this issue you have Maxine Waters already introducing legislation that would ban libra. Guys, i feel like youve got lawmakers that are taking a real vested interest in what happens here my big question is do you think that there is a lack of creativity, a lack of insight into the ways this might disrupt currency markets in a way thats good for the Global Economy. Its a big, tough issue to tackle. It truly is a note out this morning addressing criticism its gotten in recent days they say its a commentary on how efficient it is that lawmakers are so afraid it works so well that they are getting their mack else up. Hes got his work cut out for him, mr. Marcus. As jim said, hes got to come up with a new nar thifr they commented how many questions the chairman got on libra during his testimony in front of both house of representatives and senate and Senate Banking today well see what mr. Marcus has to say. It should be interesting to see if he can rebut this remember, it is just a white paper. They have not rolled out the product in any way at this point. Certainly they will take in commentary and perhaps change the approach accordingly. I keep hearing a suggestion that facebook has rolled this out not to make sure they are meeting regulatory requirements in countries around the globe but also to detract attention away from the privacy concerns that are being brought up. Lets get over to elon at the hearing now. What are you hearing reporter that hearing has just gotten under way. I expect republicans and democrats will have detailed questions. The chairman will focus on privacy and Data Protection asking questions like what type of information would be shared with facebook, how would they get consumer consent to share that information more broadly, does the country need a new regulator focused squarely on privacy. In his Opening Statement he will say, quote, regulation should be clear and understandable for both collectors and consumers and should not punish those who opt out. On the democratic side the Ranking Member brown is not going to mince any word. His very first sentence today will be, facebook is dangerous hell go on to say they dont intend to be but they dont respect the power of the technology they are working with now, during the q a, expect that to be fairly heated as well. Were going to be on the lookout for senator mark warner, who has been rolling out a series of bills regulating social media companies. Also brian schott, part of a working group in the senate trying to put together some sort of comprehensive privacy legislation. Then of course theres Elizabeth Warren will she take a break from the campaign trail to show up today. We havent seen her yet today, guys but well be on the lookout all the latest what happened to you. So often in these big hearings, its an opportunity for lawmakers to position their platforms and grandstand somewhat are you getting a sense behind the sends minds are made up about cryptocurrency, facebooks new project or is this really a Factfinding Mission i think a little bit of both here i think clearly theres a lot of heated rhetoric that lawmakers have already sort of put out into the ether i did think it was notable in crapos Opening Statement, the chairman of the committee, hell acknowledge there could be a role for cryptocurrencies in a digital landscape. I think theres an acknowledgement that the world is moving very quickly, but i do think right now capitol hill and this committee in particular are trying to wrap their minds away what does that mean for regulation right now we have a patchwork system is that going to work in the new mod he were era. Elon, does marcus have a champion on the dais anywhere today . Who would you look to for this im not sure, carl. What im hearing is scepticism, questions, criticism, not a whole lot of support for facebook at this point clearly part of the reason why hes here today is to try to win over lawmakers,explain his position, as we saw in his prepared remarks he intends to sort of present a humble front, acknowledge that he needs to work with both the hill and with federal regulators on this, so i expect this to be a very long and drawnout process. Elon, thank you joining us from d. C. , of course. Were going to continue to monitor that hearing and take you there as soon as questioning begins in the meantime, lets give you a look at financials this morning. Rebounding a bit with both kbe and kre coming off what was the worst day since the end of may, this, of course, on the heels of aerp earnings, Goldman Sachs. More on the results. Sort of a mixed bag in terms of the reaction better reaction in the premarket at least the key theme for banks so far in the quarter has been stronger fee income but weaker Net Interest Income than expected. Thats whats weighed on jpmorgan shares today. The margin was a little soft, 2. 49 . Citi yesterday also a little soft but they were able to reiterate net income guidance whereas jpmorgan cut theirs. The new cfo explaining that would be if theres just one rate cut it could be worse if theres more than that theres one offs in jpmorgan numbers including a lower than expected tax rate, reserve release and gains from the trade web ipo. Wells fargo kind of similar but a little less pronounced fee on income, net provisions did look fine so far no comments worsening credit quality from any banks. Goldman sachs leading the pack today in part because it is more tilted to fee income than Net Interest Income spread across multiple divisions, fee trading up year over year. That contained their oneoff gain from ipo. Bottom line exposure to u. S. Rates is bad exposure to markets less bad than feared. Thats why the regional index is down along with jpmorgan and why Goldman Sachs leads the market higher worth pointing out Morgan Stanley up a full percent ahead of their numbers which come on thursday macro environment jamie dimon said not that bad, consumer in the United States is doing fine. The Business Sentiment worse because of the trade war i wouldnt get too pessimistic yet. Similar feeling here, wells fargo just kicked off. I was going to ask about that not a lot about their efforts when it comes to the consumer, broadly speaking, whether its marcus or the credit card. Is your expectation goldman on the call is going to get a good bit of questioning. The q a part is kicking off as we speak. There was also comment on Wealth Management business. Key to highlight one of their acquisitions is formally closed. That scenario they see themselves pushing significantly. I havent heard any questions on marcus in consumer yet the other area, david, i think is of interest is the increasing transparency they are giving on investing and lending. As you know inl business, as its often referred to, got them out of jail last two or three years when they see declines in trading. Analysts never previously paid up for the beat in inl because it was kind of seen as a little bit of a black box they are increasing their disclosures there. I think its starting to get better weighting in analyst minds. Talking particularly about debt side of inl recent, a lot of the beat did come from this quarter and people awarding it its up 2 the stock. They asked questions about consumer efrlts in part, put in their models expense numbers as they try to get those figured out. Thank you, wilford frost. Dow hit a record, five Straight Days of games, obviously earnings in full swing. Are we poised to see a pullback or can this continue investor of global macro and chief investment strategist. Morning, guys, good to see you i know its early days but ten for ten on bottom line beats this morning you make the point what we get in q2 could come at the expense of q3 guidance yes this is what happened in the first quarter, right so if you look at the progression of earnings estimates from the street expressed as a growth rate, the bottom was supposed to happen in q1 and big recovery. What ended up happening, every time a company boot in q1 and the end result was about 400 basis points better than the initial expectation, that beat came at the expense of lower guidance toss to q2, q3 we saw the number go from minus 3 to minus 2. 2, so already a big pickup again, its coming at the expense of q3. So this kind of describes the tension in the market, right if its always about growth and rates and the fed is now coming to the rescue, if you will, with lower rates, you can afford some weaker growth because the denominator of the discounted cash flow model is kind of helping you out. But we do need to see that recovery at some point that is expected in the second half of the year into 2020 or else the market is a little bit too expensive at 17. 3 times forward. Jeff, how about you comment on earnings weve gotten at least on this day are you unnerved by top line, which is not at least right now as good as what were seeing on Bottom Line Results . Yeah. Top line is weak as well manufacturer caters like pmi sliding for 14 months in a row, which says bad things about the top line if we look at the biggest sector by earnings, thats financials in the u. S. , europe, japan that doesnt look right if were at the start of a federate cutting market i know it was better but certainly Interest Income headed down we dont know Details Behind the cuts maybe more to come if were on the start of an easing cycle that means the forecast he just talked about, the Fourth Quarter of this year strong single digit numbers expected for u. S. For s p 500 but double digit numbers in europe, japan those are at high risk of disappointment with valuations crept higher all year on relatively zero aerpgs growth, lets face it, they are at risk in the second half look for more difficult second half particularly from an earnings perspective. Jeff, we keep hearing about this issue of ongoing trade tensions with china pressuring the outlook. How important is it the United States and china and onto europe, that these trade deals get done this is really important from a sentiment perspective. Were not seeing too much show up in the Economic Data. If you take a look at whats happening in terms of capital expenditures, its really had an impact cfo last month from cfo magazine showing most cfos are expecting concessions next year, tied to trade concern, little cap ex, industrial slumped as well thats a big part of the backdrop there parallelsation in an environment trade picture between two biggest trade nations is unknown. Sounds like you think a proactive fed, in your words is what we need to extend Business Cycle further and get the market out of this 18 month long holding pattern. If fed speakers are going to pivot on expectations, they dont have much time. No, exactly at this point, i think 25 basis point cut at the end of this month is pretty much baked in. They certainly would have walked the market back from that expectation if it wasnt going to happen. I think the fed is in. You know, if the fed the market is expecting the fed to basically extend the cycle like it is in 95 or 98. I think thats the assumption. Maybe a wrong assumption but thats the assumption and thats why the market is trading as well as it is despite putting weak Earnings Growth and why it has pushed up the multiple because the market is going to kind of assume that its all going to be better in 2020 and then the fed has extended the cycle. Remember, the fed is about to cut rates while outward gap is growing. Spreads are pretty average financial commissions are back to the easy levels from last october. So its a pretty rare backdrop where the fed is easing really without any clear and present danger, i guess, to the economy and to the market. Right jeff, i assume youd prefer to see one and done rather than a protracted cycle of cuts, right . Well, at this point, yeah it doesnt seem like in the u. S. Theres a whole lot of need for the fed to cut in europe it will be very interesting to see what ecb or bank of japan does they are looking towards stimulus, obviously things are slowing down globally. Their stimulus will look like qe for rate cuts, could be good for financial earnings, rate cuts could be a drag. Bifurcation for results and guidance european financials versus u. S. In the coming weeks. All right, guys well see. Obviously were going to learn a lot more as the week goes on maybe one reason the market is so tight here. Thanks so much well take a short break when we come back, confronting resistance, facebook on the hill talking about libra, well take you live to Senate Banking as so ath binons ategs. Dont go away. 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. [what about him . Lets do it. [ sniffing ] come on. This summer, add a new member to the family. Hurry into the mercedesbenz summer event today for exceptional offers. Lease the glc 300 suv for just 419 a month at the mercedesbenz summer event. Going on now. College is worth the money but not worth taking on too much debt our survey found over half Senate Finance committee now on capitol hill. Were just getting ready to hear from david marcus from facebook. Lets listen in. I also believe that the United States should lead in developing what the rules of the road should be youve already indicated your awareness of secretary mnuchins remarks yesterday, a statement that chairman powell gave in responses to this committee when he was before us just a week or so ago and other concerns raised by federal regulators. By setting up libra in geneva, switzerland, makes me wonder whether the rules of the road and supervisory oversight will be focused more on the swiss financial supervisory authority. However, in your testimony, you state, as youve again stated today, that facebook will not offer libra Digital Currency until weve fully addressed regulatory concerns and received appropriate approvals. My first question is, do you agree with me that the United States should lead in establishing the rules of the road and legal oversight of libra and similar Digital Currency initiatives. Chairman, thank you for your question yes, absolutely. I agree that the u. S. Should lead i want to reaffirm that we chose switzerland not to evade responsibilities or oversights but because its a well established International Place with headquarters for w. H. O. , w. T. O. , b. I. S. , bank of international settlements. Despite the fact Libra Association will be headquartered in switzerland, it will stell register with fenson and as a result well have oversight from u. S. Regulators but completely agree with you, chairman, that the u. S. Should be. So i appreciate that. Youve already indicated that you see that in the United States that youll need to deal with ofac, s. E. C. And some state regulato regulators the u. S. Approaches data and data privacy in a sectoral way we have multiple regular regulators with different activity and social activity yours does it differently with gdpr, broadbased rule across sector if you look at fsoc in financial world, weve got treasury, Federal Reserve, fdc, fdic, cfpb, ncua, cftc, fhfa my question to you, have you analyzed and determined in our sectoral approach to regulation which of all these regulators could have a piece of creating the rules of the road, if the United States stays on this sectoral approach. Chairman, this is not for me to say but all i can say today is that were committed to working until we satisfy all the concerns and regulatory and meet regulatory bar before we proceed. In the u. S. , there are a number of regulators that were engaged with, and were also engaged with g7 working group that includes finance ministries and Central Banks that are looking into libra, and were working collaboratively with them as well i understand you cant tell us which agencies are going to take a claim to establishing libra but you have committed you will comply with regulatory requirements of all u. S. Regulators. Yes, chairman. Let me go quickly to one other questions. I have a lot of them ill have to submit some of those to you after the hearing you recently told Banking Committee facebook, inc. On platform and personalization briefly would you describe perm Data Collection from on platform transactions what im talking about, will this information be collected for on platform transactions that use the calibra wallet. For example, when a user buyers a product on facebook through calibra, will facebook, inc. Allow other digital wallets to be used within its family and products if you could, just explain how that will work. Chairman, one thing is really important and i want to state this very clearly. We will have with the calibra wallet to compete with a number of other wallets that will operate on top of the Libra Network. The Libra Network will in intraoperable meaning wallets can send money from one wallet to another wallet, which is not possible with the Current System as a result, to earn peoples trust, we will have to have mpblt the highest standard when it comes to privacy. The way weve built calibra, no Financial Data or account data that is actually collected in libra to offer the service will actually be shared with facebook the way that weve built this is to separate social and Financial Data because weve heard loud and clear from people they dont want those two types of data streams connected. So this is the way the system is designed now, for transactions that would happen on any of our family of apps, the same way any merchants completing a transaction, we will offer many options, including, of course, the option for people to pay with credit, debit cards and other wallets as well as with their calibra wallet. Thank you senator brown. Thank you, mr. Chairman i point out in response to chairman crapos questions, youre the only one talk about competition but youre the only one with the reach of 2 billion people, so thats important to remember. Facebook has a long track record of abusing users trust, you know that mr. Marcus, until recently you headed facebooks messaging team as they were allowing you were allowing other Companies Like netflix and spotify and world bank of canada access and read private users messages so to be clear what went on in facebook, facebook told us they were keeping our data safe when they were allowing other companies to sift through private messages you had to shut down those programs after huge backlash over and over facebook has said, just trust us. Every time Americans Trust you, they seem to get burned. Facebook told fec in 2012 that it would stop abusing our data last week out of 5 billion, with a b, 5,000 million fine for violating that agreement as you know, youve run psychological experiments on users. So sitting here today, mr. Marcus, after all the Times Facebook has abused the publics trust, and you know that, do you really think people should trust facebook with their hard earned money . Yes or no . Senator, you heard directly from mark, and i will reiterate this, that trust is primordial. I didnt remember hear from mark, im hearing from you. Its primordial weve made mistakes in the past. Were continuing to work hard in Getting Better weve invested in a number of programs, on privacy, Election Integrity and a number of other issues i want to answer your question directly for libra the reason we designed libra in such a way that facebook will only be one among 100 different members of the Libra Association and will have no special privilege means that you will not have to trust facebook. Mr. Marcus, you know better than that. You know that only facebook has access to 2 billion people to say that you are just one of many is simply not true after peoples data and private messages have been stolen and sold, after youve let russian bots try to throw the 2016 election with no contrition, abetted genocide in foreign countries, you really think people should trust you with Bank Accounts and economy. I think thats delusional. Let me ask a related question. If you think hardworking families should trust facebooks monopoly money, id like to see how much you and your Company Trust it you get a paycheck in dollars, i assume i assume you get some pretty good compensation in facebook stock, too will you pledge today in this committee that you and your team who are working on this project will accept 100 of your salary and other compensation in this facebook currency . Senator, libra is not designed to compete with Bank Accounts or thats not the question the question is will you accept all of your compensation in this new currency that you want us to trust you so much . Senator, libra is not meant to compete with Bank Accounts. Well, for instance, not pay interest its like cash, digital cash. Thats avoiding the question. Do you trust it so much you are willing to have 100 of your compensation paid to you in that currency, which it could be if you decided it could. Senator, if your question is whether i would trust all of my assets in libra, the answer is yes, i would. My question was do you trust this enough to make your compensation paid fully in your currency senator, i would, because it is backed one for one with a reserve. You could have said yes at the beginning of the question. Senator, with respect, i wanted to clarify were not trying to compete with bank deposi deposits let me finish with the last question you said youre open to feedback about your Company Creating a new currency ive told you i think this is a bad idea the republican chairman of this committee raised concerns, the democratic chair Maxine Waters in the senate and house has demanded you give up on this project. Chairman of the Federal Reserve sat in front of this committee, Humphrey Hawkins hearing last week and voiced numerous and serious concerns even the president of the United States has told facebook to back down thats not to mention the Many International leaders who have raised serious, serious alarm. My question is this, is there anything, mr. Marcus, that elected leaders and Economic Experts can say that will convince you and facebook that it should not launch this currency senator, we agree with all of the concerns, very legitimate concerns, that were raised by chairman powell, secretary mnuchin and many others. This is why we released our white paper so much ahead of any public launch. We want to ensure we take the time to get this right getting this right means addressing these concerns in full and ensuring theres proper Regulatory Oversight for this project. Were fully committed to doing what it takes to get there. But if all mr. Marcus, with all due respect, all of us have seen collective amnesia with this congress in terms of what happened in my zip code in cleveland, more foreclosures than any zip code in the United States a decade ago, if all of us find this to be a bad idea, think you shouldnt do this launch, are you still going to do it . Senator, what i heard from chairman powell, secretary mnuchin and many others is there were serious legitimate concerns have arose from libra. I will commit, again, to do what it takes to address these concerns if those concerns are not addressed, and if the Regulatory Oversight is not appropriate, then, you know, we will not launch until it is. That speaks a lot, mr. Chairman, to their accountability and their trustworthiness. Senator toomey. Thank you, mr. Chairman thank you, mr. Marcus, for joining us let me just say, it strikes me as wildly premature for us to come to the conclusion that we have to act now to prevent that could be a very constructive innovation in Financial Services i think there are tremendous potential benefits in Blockchain Technology and cryptocurrencies. I can imagine, i think its clear, that they could help us lower payment transaction costs. They could facilitate access to capital. They provide pseudonymity, security that other forms of currency have not. Limit pickup as a medium of exchange might be explained by volatility of currencies here we have what strikes me as an interesting iteration, maybe, including a mechanism to provide a diminished volatility. All right Senate Banking committee hearing. There youre hearing senator brown, the ranking democrat, really just drilling down on this idea that Facebooks Libra could potentially compete with the u. S. Dollar in terms of paying people. He was pressing facebooks david marcus on whether he would be willing to accept his compensation marcus pushing back on that. Lets get some reaction here fund Global Advisers bitcoin bull its interesting to me, on a day were talking about cryptocurrency, the wall street journal is also talking about this 50year anniversary of putting a man on the moon. The headline monday shot mindset once came from the government, no longer. Is what were seeing a failure of government leaders to imagine what could be in terms of currency yes and no. I think its a real struggle for the u. S. Government with concerns about money laundering, dealing with this notion of digital money that actually seems to work really well. So i wouldnt say the u. S. Government is taking the wrong approach i think they are being correct in terms of putting it center stage. Are they being slow i dont think the individual agencies are being slow. I think individual agencies have been all over this i think now its just become such a big issue, its now a matter of policy and where the administration wants to come out on this. The alphabet soup crapo mentioned was a lot of agencies. The journal says s. E. C. Is looking into whether they have over sight facebook argues its not an investment, a payment platform why security where do you think thats going to come down it comes down to a bit of a turf war the s. E. C. Feels, and correctly is probably a better known agency, and wields a lot of power and prestige and has a lot of Resources Available so they would like to have purview over this youre absolutely right. Its probably a bit of a furve battle with ftc and others. How do you view it . It looks and sounds just like a stable coin. I dont think its designed to make money, so i think it meets a classic definition of a utility token or commodity, so i dont think it should be a registered instrument or under s. E. C. But thats just my opinion. Your point this morning in a note is these platforms are so trustworthy they are gaining trust among those who have the least reason to trust anybody and that is bad actors. Yes thats the irony, right . The best judge of sound money is probably a thief i think the fact that, you know, dark web and criminal organizations, which used to use gold and used to use 100 bills find bitcoin to be an effective way to store and transmit value. Its people who trust the least really trust bitcoin its kind of the message to me i see when i look at all of this. Thats one of the arguments we heard the president make. These cryptos can be used to facilitate bad actors. Dollars have been used to facilitate bad actors. I guess im curious whether our leaders see this as an existential threat to the currency is it . Could this eventually be the way that we accommodate trade globally theres a lot of logic to it. Id say its probably a safe estimate in the last 20 years over half of all Economic Growth global was native digital, so why do we use fiat money when you have digital transmission of services the dollar is still something people prefer to use to price oil and a lot of physical commodities. I could easily see a u. S. Central bank issue dollar would be the reserve currency. But if it becomes bitcoin, i think the u. S. Should think about policy around that should they become a state min miner and control the blockchain that way. You say this isnt meant to be a moneymaker, investment vehicle. If thats the case, why is facebook willing to spend all this time, money, energy on building it up and trying to accommodate an infinite number of regulatory hurdles. Interestingly, within crypto, a large percentage of those are focused on trying to bank the unbanged theres a social benefit they are seeing i think facebook is correct. Millions of people dont have access to Bank Accounts. When they do, its very expensive. When they send money overseas its expensive libra and cryptocurrencies are a way to offer low cost banking services. Finally in terms of the process facebook is using to roll this out, the white paper, when are we going to hear from visa and square and all these partners why does marcus have to defend this all alone, at least for now . I think all those entities have to tread carefully, because what they dont want to do is ignite a political storm in their own purview and how they operate. I think ultimately everybody who is not a bank would love to offer some form of banking service. Thats what libra is starting to do today banks capture 6 of gdp, its 4 trillion a year, its a huge amount of money so naturally over time with digital money, visa could do things that are banking but do they want to take that can of worms out now, i dont think so. Wyoming tester taking over the questioning. Thank you for joining us and lending some expertise to the situation. We might get fireworks. Well watch that, continue to check on capitol hill. Tight range, s p down less than a point as we are just Getting Started on earnings. Dont go away. Driverless cars. All ground personnel. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. Well, the u. S. Debt ceiling deadline is a week away. Treasury secretary Steven Mnuchin throwing cold water on the prospect of a Government Shutdown i dont see a Government Shutdown looming again, thats not an issue until the end of september i have no expectation that there will be a Government Shutdown. Mnuchin went on to tell reporters an agreement is very close, his words he and House Speaker nancy pelosi are expected to meet today. Joining with his take on budget battle Grover Norquist i feel like ive been having this conversation with you, grover, 15 years, we talk about the debt ceiling every few years. In 2011 republicans insisted spending cuts should be matched to whatever we exceeded or lifted the debt limit cap by back then the National Debt was 14. 3 trillion now we have 22 trillion why do we even have a debt ceiling . What the debt ceiling does means at least every couple of years, you have to sit down and really come to grips on appear bipartisan basis about what you want to do when you have divided government, the only way nancy pelosi can be part of any conversation is on the debt ceilings or on questions of the final budget otherwise, the government just continues to move along. So the out of power party, as it was the republicans in 2011, was able to extract very serious spending restraint spending went from 25 of economy down to 20 of the economy because they slammed on the brakes of obamas planned spending, took quite a bit of money away from what obama had planned to spend obama didnt want to give that up we get the sequester, the spending limit. The holdup v. A. Mission counted as military spending, nonmilitary spending in terms of parity where do you fall down on this and what should happen what we have right now is the sequester, so theres a limit on spending the democrats would like to eliminate it or tremendously increase that limit. The limit right now says that if you hit the limit on spending, you take half of the savings out of the military spending and half out of domestic spending. And the democrats would like to take more money out of the military and less money out of domestic what they have been demanding so far is 100 billion increase over two years in domestic spending regardless of what else happens. They want im sorry 100 billion 100 billion more in spending. Republicans would like to not see spending go up as a result of a budget deal both sides want to avoid being the one who is blamed for a default or Government Shutdown. How do we get out of it well, the republicans the president saying we dont want to shut the government down. We think well get a deal. Nancy pelosi saying we dont want a shutdown or default, we think well get to a deal. Both of them are continuing to argue to get the best deal they can. At the very end, they will come to an agreement. And the question is will that happen before august recess or will we suffer a Government Shutdown again you heard the fed chairman testifying on capitol hill that this is one of the big policy issues that looms as a cloud over the Economic Outlook for our nation is this something that, in your mind, washington takes serious enough are republicans taking this seriously enough well, both parties are trying to use this to their advantage to get something they could not get from the other Party Without this deadline. At the end of the day, Everybody Knows that a deal will be made so this isnt some mega deal, because there will be an agreement. Everybody knows it we go through this each year the world is going to end if we dont come to an agreement we come to an agreement and somebody decides to give more than they wanted to or they both give more than they wanted to. This is not as important as ending the trade war with china. Or simply getting control of the budget first one we might get second one is no i know republicans would very much like to maintain the sequester at some level so theres some spending restraint going ahead next two to three years and democrats would prefer not to tax increases are off the table, which is a tremendous win for the republicans. Now its a question of the democrats want more social spending, less military spending, and a reduction in the power of the sequester limitations. Grover, you mentioned the trade war with china youve repeatedly said on twitter tariffs are taxes. Were not seeing it feed into inflation at all is your thinking evolved at all on tariffs. Tariffs are taxes weve seen steel prices fall for other reasons. The uncertainty whether the trade war continues forever and indefinitely, trade wars are wars of choice, but you dont get to decide when they are over china gets a vote, too, on whether the trade war is over. I think its in both countries interest, if they will stop stealing intellectual property the economy would be extremely happy because there would be more certainty its uncertainty when things bobble along, get worse, settling things with europeans certainly the mexicocanada deal is ready to go we just need congress to act settling the trade conflicts with some progress on intellectual property would be a tremendous win for the United States and china is having its own challenges there are reasons why it would want to bring this to an end as well. Grover norquist, great to see you. Thank you. Good luck. As we go to break, continue to monitor the hearing on the hill as david marcus continues to testify at Senate Banking major averages this hour within a tight range as weve seen. Quk t s, and today, dow up 32 sawonhetreet back after this q a continues with senator mark warner. Either copy it or buy it up ill call it catch and kill. Its been a technology or methodology that facebook has used extraordinarily effectively. Buying up or copying other Emergent Technologies that might be disruptive to your dominance. Now we move into block chain which has the ability to be extraordinarily disruptive why shouldnt we view facebooks efforts here with libra and calibra as another manifestation of the catch and kill approach senator, im glad you asked that question, because the way that we have developed the technology, the Early Technology for libra is that weve invested, weve put our best engineering talent in building the code base, the technology for the Libra Network. And then what we did is we open sourced it and as a result, it doesnt belong to us anymore it is now belonging to the community and they will help build the code and we will relinquish our control over both the code base and network through the process. Let me follow up, then. Because, will you commit that facebook will not develop preferential incentives that unfairly tie calibra, which is going to be your moneymaking venture, to other facebook products as a way from prohibiting libra users to use wallets other than calibra senator, i would even go further, which is that not soninlaw have we started the technology and shared it in open source, but the network is actually complete no, thats not the question is, incentives within your existing products you didnt answer chairman crapos question, or you said, with your dominance, how do you make sure that youre already existing Global Platforms like whatsapp and messenger will actually support third Party Wallets. Will you at least clarify your answer to chairman crapos question and say, facebook will make sure thatwhatsapp and messenger will support thirdParty Wallets . Senator yes or no senator, i want to clarify not clarification you didnt answer chairman crapo please answer my question. Senator, the network is interoperable, meaning that people who are using the Libra Network from within whatsapp will be able to receive and other wallets that are not calibra wallets. So if a user wishes to use a Facebook User wishes to use a wallet other than calibra, will you make it easy to allow the export of their keys, their Financial Data, and other calibra data if somebody started as a calibra wallet user and we decide, i dont want calibra anymore, i want to go to newco, will you make it easy for them to move their keys, their data, their Financial Information all over to that other third party . Absolutely, senator so that so right there, youve agreed on data portability and potential interoperability in terms of the use of these wallets so my hope will be, youll have that same approach when i lay out any legislation for data portability and interoperability on existing platform use so i hope your commitment on calibra will extend to your current application as well. Can i get a commitment there as well i cannot commit for other parts of the company i appreciate your team, who has been willing to work with us, but it would be really great if you go ahead and make nah same commitment on facebook basic products, because if we want to bring in competition, youve got to have that data portabili portability, interoperability. But at least on calibra, you are on the record as making sure that you will put no barriers in place to moving from one wallet to another senator, we believe that this is actually primordial for the caLibra Network that users have the ability to move from wallet to wallet, to make sure there are good dynamics that work in favor of consumers so ill come back to chairman crapos question about your globally dominant products already in terms of whatsapp and messenger. They will support third Party Wallets other than calibra senator, i want to clarify, which is every time you start with i want to clarify, it gives me great level of pause chairman crapo has asked the question, it seem to me Pretty Simple whatsapp and messenger globally dominant products will they support third Party Wallets or will they have incentives that will push people to simply using the facebook product, calibra sir, this is why i want to clarify, senator, if i may, because its a knew answered answer if your question is whether we will embed other wallets inside of whatsapp and messenger, the answer is no if youre asking whether other wallets will have a full interoperability, meaning that you dont have to use the calibra wallet inside of messenger and whatsapp to be able to send or receive money to people who are using the calibra wallet inside of messenger and whatsapp, the answer is yes. Embedding zimpbt than putting prempbable treatment and preferential areas i didnt get to the question around Third Party Developers having some concerns about giving access, but again, mr. Chairman, i think some of your questions that youve asked is one of the reasons that were going to need to take a great deal of time to work this through. Thank you, mr. Marcus. Senator rounds. Thank you, mr. Chairman mr. Marcus, thanks very much for appearing here before us today before i begin my questions, i just wanted to take a moment to the south Dakota Division of banking for their forward thinking and willingness to allow for innovation in the Digital Currency space another Founding Member of the Libra Association, anchorage, just received permission from the division of banking to become a south dakota chartered trust company. We will continue to monitor excellent comments out of Senate Banking obviously, warners focus was the degree to which libra and participation in libra is going to be tied to other facebook operating units and whether any of them have any potential benefit from having people play on this. Its pretty astonishing to see how much some of these senators are diving in and trying to get Firm Commitments that they can use down the road to extract what they want from facebook yeah, looking for those sound bites they can use later lets send it over now to the cme group in chicago and join Rick Santelli whos got the santelli exchange. Rick thanks, david i would like to welcome my guest asho from newburgher berman. This is a big deal this mornings retail sales, especially that control number, these are really good data points if you look at the first half of the year on the control number only across all of 2018, it stacks up pretty impressively. Yeah, this was a strong number this morning. We saw revisions to previous months and you look at some of these threemonth averages of retail sales control group, like youre saying, were back to the run rates we were before this slowdown of 2019 and i think the biggest story is for the consumption side of the economy, were pretty stable and these are low, but positive growth rates and it brings a lot of stability to the u. S. Economy. Everyone is so preoccupied, investors all around the globe, about all the uncertainty, especially regarding trade i did some wonderful research on, if you monitor shipments, tankers, freight lines, trucks, that things dont look good. But it certainly seems to me that this part of the economy, at least, is making up for it. Your thoughts . Its true and were also seeing some bottoming and improvement in the data for china and i think a lot of the story is, the slowdown is more anticipated by the market based on the weakness in pmis that weve seen this year and that weakness has been pretty moderate the pmis, thats a whole different world to get into. Many of those pmis have those questions at the bottom, where many of the respondents say even though theyre nervous about certain issues, their underlying business still seems strong. I think thats the story. Theres a lot of stability in the Global Economy and we think theres a bit of improvement happening now. And you know, it will be interesting. The fed will have to navigate this in a couple of weeks about how they want to describe whats going on with inflation, whats going on with Global Growth against a backdrop where the hard data now seems to be coming in, certainly a bit more on the positive side. And it brings back that same question about how the fed is going to real in Market Expectations the Market Participants are already jumping that this is going to be the beginning of an easing cycle yet the data and some of the comments could be interpreted as maybe were throwing this one out there. But maybe its not going to go any deeper your thoughts . We think this is going to be a short, compact easing cycle. The u. S. Economy and the Global Economy doesnt need that much easing and the fed will likely ease in july and keep open some probability, if the economy deteriorates but our view is, were not seeing that at the moment. Ashop, thank you very much for your thoughts. Carl, back to you. All right, rick, thank you very much. Good Tuesday Morning it is 8 00 a. M. At Amazon Headquarters in seattle. Its 11 00 a. M. On wall street and squawk alley is live good Tuesday Morning welcome to squawk alley. Im Carl Quintanilla with Morgan Brennan at the New York Stock Exchange jon fortts in chicago today at cnbcs at work Human Capital and finance summit a lot more from jon in just a moment were obviously going to begin in washington, go back to Senate Banking and that hearing on facebooks crypto. Ylan mui can wrap up some of what weve heard