Transcripts For CNBC Squawk Box 20240714

Asia a new benchmark lending rate, 4. 25 down from 4. 31 that help stocks early in trading and the hang seng and shanghai gave up those gains. Hang seng down by a quarter of a percentage point stocks in japan were higher. The nikkei closed up by just over half a percent. In europe with the early trading taking place youre going to see that at least the three major averages are in the green right now. Germany just barely. Its just above the flat line but the cac is up by a quarter of a percent stocks are weaker in italy and spain and then if you check out the treasury yields here in the United States, this again is what the market has been watching so closely. Those yields lower today the ten year note sitting just below 1. 6 the two year at 1. 518 and the 30 year bond is above 2 but just barely 2. 04 . Home depot reporting 317 a share. Thats above 308 thats what the consensus is however the revenue indicated 30. 984 and its at 30. 8. So the stock is indicated at this point down a little bit the same store sales number was 3 u. S. 3. 1 for the year the company sees same store sales up 4 . There is some they do update the fiscal year guidance but they havent broken it out yet i can go into the press release. Just taking a look. They expect their sales to grow and they expect comps to be up by about 4 . That would be strong growth at 4 . They beat by 9 cents. So 1010 is where the street is for full year. Theyre saying 10. 03 for the whole year maybe they got ahead however the chairman and ceo says theyre encouraged by the momentum that theyre seeing and believe the Current Health of the u. S. Consumer and stable housing environment continue to support the business but that being said, lumber prices declined significantly compared to last year and that does impact their sales growth too. All right at this point that upgrade is guidance for the continued price deflation. Its about time a huge spread. I miss this they also point out tariffs. The price deflation is why theyre upgrading their guidance and also proten shl potential impacts arising from recently announced tariffs. Other news this morning, white house officials denying a Washington Post report that said that the Trump Administration is now considering a payroll tax cut. This comes amid political debate of whether the u. S. Economy is at risk of recession the official told cnbc more tax cuts for the American People are on the table but cutting payroll taxes is not something under consideration at this time, what the other tax cuts might look like. This caught me off guard. You hear Something Like that thats an extreme measure you would expect in times of a downturn not when you hear about the Strong Economy that were seeing. There was talk at one point in terms of a tax cut on the wealthy, this idea of adjusting Capital Gains to inflation and all of that which i think is still on the table the new antitrust warning about facebook from the chairman of the federal trade commission, telling the Financial Times that facebooks plan to integrate instagram and whatsapp could hinder attempts to break up the company. It would be more difficult to have a divestiture after all the eggs are scrambled some even suggested that part of the facebook strategy combining these assets together is to make it harder to ultimately break up plus Mark Zuckerberg suggested it would make the Company Stronger you are giving me a smile. What is that smile simon says. Simon says. You used to play the game, right . Speaking of breaking up big tech, a group of states preparing to move forward with a joint antitrust investigation that would likely focus on Google Facebook and amazon and apple. The effort involving as many as 20 state attorney generals could be launched as soon as next month. Last month the Justice Department launched its own antitrust review. What does simon say . Touch your nose theres an update right now on the trade war and chinas efforts to sure up its new economy. New reforms taking hold overnight. Eunice, what can you tell us the Chinese Central Bank tweaked its Interest Rate policy it is in part because of the trade tensions with the United States so today the peoples bank of china changed its new created a new reference rate by which banks would be able to price loans. This is called the new loan prime rate it was set at 4. 25 and its lower than the benchmark lending rate which has been the guide for banks up until now so the reform makes it cheaper for Chinese Companies to be able to borrow but the fact that it was set lower by 10 basis points has been suggesting to a lot of analysts here that the authorities here are feeling a little bit cautious because it was much more modest than people had expected the officials today said the goal would be to prevent a drop in Mortgage Rates. Theres been a lot of concerned about a build up in heat in the property sector. Its also unclear if the companies will at the end of the day want to borrow so the officials here had said that theyre going to make even greater efforts to work with other Government Agencies to try to allow for more funding for these small and private firms but they also clarify that they do not believe that this latest reform was in anyway a replacement of easing Monetary Policy and so because of that statement theres a lot of people here that are feeling that perhaps the government are preparing for a possible benchmark rate cut a proper cut especially if the Federal Reserve decides to cut as well. Eunice, these changes may be a little less significant than the changes we heard first talked about on saturday those changes helped markets in monday trading maybe thats why we didnt see as much coming in the trading today. I think its because the move was much more modest people were thinking we could see as much as a 45 basis point move so the lending would be a lot more the liquidity would be more available to companies but theres still this question because Interest Rates are still not Market Driven and when Companies Make decisions about borrowing, theyre not really looking at whats happening with Interest Rates as they do in the United States. Instead theyre looking at what the policy is or theyre a favored state owned company in a favored entry. So the decision here is different. So people arent clear as to whether the end of the day these companies are going to borrow. Eunice, thank you, its good to see you. Coming up when we return, a lot more on squawk well get you ready for the opening bell after two volatile weeks of trading take a look at the u. S. Equity futures at this hour were in the green the dow up about 3 points. S p 500 up about 2 points. We have a huge lineup starting in the 7 00 hour, investor ron barron and then continuing at 8 00 with former fed official and secretary of state mike pompeo. Three interviews you do not want to miss. As we head to a break, heres a look at the biggest winners and losers in the dow. Welcome back to squawk box home depot reporting earnings of 3. 17 a share. Above the estimate of 3. 08 however sales failed home depot cutting its full year Sales Guidance due to what its calling declining lumber prices also tariffs can impact u. S. Consumers Going Forward. That stock up about 1 right now. Lets get a quick check on where the markets could be heading as the day progresses joining us for that conversation is the founder and also Portfolio Manager and chief Investment Strategy at capital wealth planning. Michael tyler is also here, chief Investment Officer good morning to both of you. Jeff, im going to start with you. Depending on what newspaper you read on any given day or the past week were either about to fall into a terrible recession and its going to be horrific or we have either extra innings or were in the 6th inning of a baseball game here which one is it . Were in the 6th inning this market, this secular bull market that were in has years left to run and i think that you should be pretty much fully invested here. It was about three weeks ago on your show that i said that the market bottomed yesterday and that was august 5th with a 90 down side meaning 90 of the total volume traded came in on the down side. Since then, you had another 90 down side day on august 14th and had 2 almost 90 upside days thats the way bottoms are made. We think the lows are in the market might be a little bit ahead of itself on a very shortterm trading basis but i think the market is going s substantially higher. You think the market might be ahead of itself . How much ahead of itself and why . You rallied 100 s p points in a very short period of time. So it wouldnt surprise to see the market kind of stall here but i dont think any pull back is going to be that much again i think the lows were in i think they were made on august 5th at 2822. We came back and retested that area twice and you have not been able to make a lower low we think the lows are in and the market may stall here for a few sessions but its eventually headed much higher. Do you agree with jeff there . I dont know about much higher but i think the market is headed higher in the shortterms. Earnings are coming in soft and we have the sign that if its implemented in september that could meaningfully impact the consumer and we could have a fundamental problem. For right now, rising valuations on low Interest Rates, even if earnings are a bit soft, jeff is right, the markets probably have at least a little bit more to go this year. How dependent is that on the fed in terms of rate cuts . What are you expecting the fed probably has one more, maybe two more cuts in front of it this year. I dont think that they are needed from an economic point of view but i think politically i think politically theyre happening whether we like it or not and whether we need it or not but if you look at the basic things that the fed looks at, unemployment, inflation, overall gdp growth theyre checking in just fine. The economy is doing fine right now despite the fears. We have this tug of war and thats maybe a cut might be in order and well see what chairman powell says. Speak to the tariff issue but also to the view that earnings are going to be tougher to come by next year. Well, i have been here for two years that earnings are not going to come in up to expectations and that point of view has been dead wrong earnings while theyre softening a little theyre still going to come in better than most people expect as far as the tariff issue goes, i think it was jp morgan that came out the other day and said they think the average consumer is going to be hit for about 1,000 a year more in terms of purchasing power with when the tariffs go into effect i dont think thats enough to shutdown the consumer. I think the consumer is in really good shape. The banks i talk to says theres been no deterioration in terms of Consumer Credit or consumer loans. I think the economy is not going into recession i think all of this about an inverted curve is nonsense in the long run. Would you buy banks right now. You would you would. I think the financials are cheap and my father used to tell me good things happen to cheap stocks. Were going to leave the conversation there. Just follow up on that. You dont think that youre looking at a situation where the banks are going to have a really tough time because Interest Rates are so low that theres never going to be paydays for banks or you think its so cheap that its worth buying anyway. I think theyre cheap banks dont lose money banks are not losing money on bad loans. Theyre not losing money on bad loans yet. The issue is whether theyre about to lose money on bad loans. Thats the issue i dont see a chance that the economy is dipping into the recession here. Just retires at 69. What . Your demise was greatly exaggerated. You left Raymond James but now you got your own firm. Just clear that up for you you seem fully engaged. I retired from Raymond James and i happen to manage 1. 5 million for capital wealth planning. Did you retire the mustache at the same time is that just consequence or that could come back at any time . We just dont know that was 10 years ago. All right. You never had a mustache. See i know that. I did. Which was so embarrassing i have seen the picture thats kind nothing no. Sort of a patchy beard. A lot of the young folk love the beard. A lot of the millennial types, do you know what i mean . Theres a business here. There is. Anyway, gentlemen, thank you glad to see. He just showed up today thats why i search. Glad to hear. When we come back, a busy morning for media stories, we have an update on the streaming wars next and later well talk Investment Opportunities with ron baron. He will join us at the 7 30 half hour and then hell join us to talk about the fed and the pressure from President Trump also the potential for more rate cuts what you can expect. Mike pompeo joining us later in the show too in the last year, there were three victims of cybercrime every second. When a criminal has your personal information, they can do all sorts of things in your name. 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Usaa took care of her car rental, and getting her car towed. All i had to take care of was making sure that my daughter was ok. If i met another veteran, and they were with another insurance company, i would tell them, you need to join usaa because they have better rates, and better service. Were the gomez family. Were the rivera family. Were the kirby family, and we are usaa members for life. Get your Auto Insurance quote today. Apple is reportedly set to spend some big bucks to create new content for its apple tv plus service, the Financial Times says apple plans to spend more than 6 billion compared to an original budget of 1 billion. The report also says apple looking to launch the service in the next few months ahead of the launch of disneys streaming service and i think the Writers Strike and everything that we were talking about and the way that the big agencies do this stuff now and i cant imagine how this is not the golden age for everyone involved. Golden age for consumers trying to look for content. But 6 billion. Isnt that a lot a 200 million budget for a movie is a lot youre talking about 32 million. So they have already spent by the way, did you watch the trailer . I just saw it. Apparently 250 million for this one called the morning show with Jennifer Aniston. Somebody else. Reese witherspoon is in it. Why would you just mention her and not reese . Theyre similar. Also Steve Carrell is in it its a fabulous cast anyway, we are seeing a clip of it right now about the morning show world it sort of has some its a lot racier than it had expected it to be. Sort of touched on real life kind of thing. Its got some a great guy by the way. Played in too big to fail a few years ago. Are they imlying that interesting things happen on a morning show behind the scenes we have always said that we could do payperview during the commercial breaks. This is it between the commercial breaks. You could do a little but you could not build a complete sitcom around this. You probably could actually. Theyre doing i dont think it has anything to do with it. I think it has to do with the dynamics the chemistry. The chemistry that and all the the drama. I know but i think youre delusional. How about interesting we are . Yeah. Its a case study for a psychologist. Maybe that would be better. But we do. Were happy. What else is on the docket for apple . Do we know theyre going to have this service, its 9. 99. Thats the new number. But only five shows its supposed to be launching which is actually going to be maybe i mean, look, some people manage to subscribe if all the stuff looks as good as this, great but then the question is how do you maintain . Can they be launching new shows every month or two i dont think we know enough about it. We made the point before that media in a very weird na narcisistic way thinks its sbr interesting. I think between reese and Jennifer Aniston and the stars and the writing but you know what i mean. People arent quite as interested in media as we are. I spoke to someone recently thats actually seen some of these episodes and not expecting to be blown away because i think there was a view that some of this might not work. It blew me away watching this morning. And the folks that have seen some of the stuff, actually seen full episodes say it was a wow situation. One of the most ironic things is the group of people that feel that they havent moved up enough with everyone else in entertainment are the writers and the only thing that makes the show any good at all are the writers. You need a really great script and sometimes you watch all the content thats on and im amazed at some of the stuff they come up with. These are very creative people. Can i tell you about another drama taking place in real life . Yeah. Its a real life thing based off a series called succession, right . Bob bakish has signed a new contract to run and two companies merge hell be paid about 31 million annually that will be a 55 increase from his current position acting cbs chief will receive a pay out for about 70 million when the deal closes thats thanks to a provision in the old contract that entitled him in the event of merger. A good number not mind boggling. Thats for sure. We have seen bigger numbers. A pretty big number. That smaller number than the guy thats getting paid to leave. He had a big piece on bryce harper i think yesterday and the day before that hes finally worth the 330 million that he got for ten years or whatever. And he is i watched youtube i watched the 10 or 12 minutes of the final inning where the phillies came back i went to a game earlier, last month i watch it. You know they have little commercials in the middle of the youtube that youre watching its like 10 seconds they think they can sneak that in on you and you dont feel violated. You watched i did theres two or three now were going. We have to go to a commerc l commercial. Coming up, morning movers including a chinese internet giant, i think her hair was like yours. Ill take that comparison any day. Fall out who would i be . I dont want to be that guy . Can i be joey . No, his name is ross. And your andrew ross sorken. Hes a wonderful guy. He is. Hes a really, really splendid guy. He is later, dont miss our interview as secretary of state mike pompeo will join us right here right here it wasnt him it wasnt him. The lexus golden opportunity sales event. Get 0. 9 apr for 60 months on all 2019 models. Experience amazing at your lexus dealer. Keeping the night interesting, is all about setting the right tone. Lower carbs. Lower calories. Higher expectations. The light beer youve been waiting for has arrived. Corona premier. Welcome back, youre watching squawk box live with the Nasdaq Market site in times square. Good morning, u. S. Equity futures are flat this morning. We have the dow indicated down about 7. The nasdaq is actually up about 9. The s p indicated up just one point. Home depot reported earlier it was down and then it was up. Now its up but not helping the dow into the positive at this point. Stocks to watch, bhp posting its best annual profit in five years. Dividends but both were below analyst expectations the worlds biggest miner also warning that Global Economic head winds could hit demand for its key commodities iron ore and copper baidu Second Quarter profits topped estimates as more people signed up for the video streaming service. That service topped 100 million subscribers in june despite shif competiti stiff competition from rivals including tick tock the fda declined to approve its new treatment for the duchenne type of muscular dystrophy citing safety concerns including the risk of infection and kidney to toxcicity. Bayer is in the protest of divesting several businesses including its foot care brand and coppertone sunscreen the deal expected to close in mid 2020. U. S. Steel the planning temporary lay offs for hundreds of workers in a michigan plant the company is going to halt production due to lower steel prices and softening demand. U. S. Steel says lay offs could last between six months and impact nearly every area of the great lakes facility coming up, markets have been on a wild ride but how worried should we be about an economic downturn were going to talk about what a 2020 recession would look like and what might potentially cause it we have a huge lineup coming for the rest of the show well be joined this morning by ron barron also former minneapolis fed president and secretary of state mike pompeo right here on set with us. Stay tuned youre watching squawk box here on cnbc. Through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From finding out whats selling best. To managing your fleet. To collaborating remotely with your teams. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Weve seen the markets moving so drastically over the last couple of weeks a pull back in growth is not inevitable but if it were to happen, he paints the picture of how he thinks it would thats the latest New York Times piece titled how the recession of 2020 could happen neil, its good to see you thank you for being here. Thanks. Your piece really caught me because we talk about the potential for recession but you layout how you think it might actually happen. Why dont you explain for people that didnt read it . So the starting point as you have been discussing for weeks now is the way the trade wars are infecting really the Capital Spending plans of a lot of businesses disrupting a lot of Industrial Supply chains thats effecting the european economy. You have unrelated things happening across asia and europe that are slowing the Global Economy. That alone isnt enough to cause a u. S. Recession most likely but the question is is that going to be the trigger that causes a full back for consumers and then has an inadequate policy response and thats how it can spiral into recession over the next year. Companies get nervous and they stop spending as much and that inturn leads to a consumer feeling a little bit less confident now. Weve seen that happen. We had this incident in late 2015, early 2016, very similar global forces, chinese slow down, it was twotype Monetary Policy we have feedback groups, really bad for the industrial economy and agriculture commodities. Consumers didnt feel it much. That could repeat itself on one hand good news is that wasnt a recession but that did cause a lot of pain to a lot of people and had implications throughout 2016. We have been talking about whether the yield curve could sniff out something where it really has some type of mystical ability to see something coming. It doesnt need that for it to have forecast a recession. Its just looking at the percentages of what youre describing happening and we went inverted by a couple of basis points thats easily explainable by your scenario. Yeah. But does it imply fed policy mistakes or not necessarily . Yeah. I think it does. If you look just to the long end of the curve, you dont worry about the short end at the moment you can send up where its 1. 5 to 2. 5 over the next couple of years but not the 3 . I need a confirmation from the stock market is notable and he has a new piece he says we need to deal with our allies and bring them on board it points out that the stock market is down what is it off the ties . 4 . I dont think its 4 barely 4 . Were not seeing a confirmation yet. The stock market has not forecast a recession anywhere close to it at this point. Wouldnt you feel more comfortable if you really did see a break not comfortable but you wouldnt think that confirms the yield curve inversion. Theres a circumstance you lairty here. What seems to be happening is because they already cut once, theyre going to go one on two more times this year thats why the stock market is basically near its highs. 50 or 75 basis points is that going to be enough could this get out of control and be Something Bigger than the fed can handle so because its circular in nature, where do you think the answer lies . I think Slower Growth is 33 odds of recession over the next year that seems about right to me this doesnt have to happen. Are there the right tools in place. Does the fed have enough room to ease you saw these leaks yesterday about the white house considering a payroll tax holiday, are fiscal authorities ready to act if we do hit the zero lower bound again we can avoid this thing. At the same time we have to avoid it by realizing the risks out there. Neil, when i heard about the white house considering a payroll tax holiday, i mean, i tried to figure out if i was reading the onion. That seems remarkable to me at a time when were looking at such great strength in the economy on so many Different Levels that seems to me like the type of thing that we reserve for 2008 and 2009. I dont think theres anything wrong thinking about what might be done if there is a downturn and recession at the same time, the Political Landscape is very different than it was so if you remember in early 2008, forget the dark days of the crisis it was not huge compared to the later ones but there was a bipartisan effort to try to keep that recession from being worse than it was. Its hard to imagine that kind of deal making happening within the Trump Administration and nancy pelosi and mitch mcconnell. Also the piece were describing as President Trump, immediate 100 basis point cut in qe god love him he wants a Strong Economy. He wants jobs, whatever it takes. He would just pour it on, but what . I know. If youre thinking about 100 basis point cut and then qe its like and were 4 or less. Those guys are headed to new york Federal Reserve again to talk about saving the system. Right whats left what makes me think of that is what is left if we throw everything but the kitchen sink at it right now, what is left if it doesnt work and we actually do wind up its between this message of the economy is on solid footing and everything is fine. The euro today, 110 we cannot budge. Its stronger. Nothing that we do, that is a problem. If you hate trade deficits and you cant weaken the dollar, hes the most dovish guy and he says the fed has been wrong for ten years. Too tight for ten years because inflation has been so low. If the europeans pull the trigger and do Something Big in a few weeks, its going to be dollar strengthening, that said the european economy is in rough shape and one thing that im not sure that the president gets is that the Global Economy is a positive sum game and having a strong German Economy and strong frenchu. K. Economy is good for the u. S. So in that sense shouldnt think of a zero sum. Theres your facial hair guy. It looks good. Its not because you have nothing on top either. You have i mean, you have right . But he does have that gray. Makes him look incredibly intelligent. Everything he said, seemed more compelling. It did i feel like the last ten years of covering the fed has given me a lot more gray hair than i had. They have been too tight. Thank you for joining us. Its good talking to you well see you again soon conversations about recession rates and state of the economy are all going to be hot topics at this weeks big fed symposium. Well have full coverage all day thursday and friday. Coming up, when we return, we have reaction to home depots report, the company beating on the bottom line but lowered its full year guidance well talk about the tariff impact usonl do thatnext. Pl r baron is going to join us on what he has been doing with his must be during this volatile market. Were back in just a moment. Great presentation, tim. Could you email me the part about geico making it easy to switch and save hundreds . Oh yeah, sure. Um. You dont know my name, do you . laughs nervously of course i know your name. I just get you mixed up with the other guy. Whats his name . Whats your name . Switch to geico®. You could save 15 or more on car insurance. Could you just tell me . I want this to be over. Home depot reporting better than expected results and also cutting its Sales Guidance, but in this case due to declining lumber prices, also mentioning the potential impact of tariffs. Joining us is brian nagle, Senior Analyst at oppenheimer and company. A lot of times when we talk tariffs, its about the future anything in this report about tariffs . What i thought was really interesting was i looked closely at the report. If im reading this correctly, theyre not saying that tariffs are having an impact on their business what theyre saying is theyre worried that tariffs could have an impact on the consumers. Although i think thats accurate, but arent the lower lumber prices the result of old tariffs coming off i dont really i dont really know. Weve been talking about lumber prices being a problem for home depot and lowes for a while i dont know how tariff related that is. Why are lumber prices still up i thought it was because we were fighting with canada. I really thought it was just more of a demand type issue, but i dont know the issue with lumber prices, and i think this is interesting in this report, too. The one thing i want to say is theres going to be a lot of talk about home depot cutting its guidance the real key is this has been very well telegraphed. For the Home Improvement chain, lumber prices are a passthrough they basically pass through to their customers whatever price they have. So whats happening here is lumber prices have come down and thats negative for sales. I understand why that hurts sales. Why would that hurt any earnings potential . It really doesnt thats an interesting point. You look at what home depot said about guidance for this year, they took comp guidance from 5 down to 4, but they maintained their earnings guidance. But theyve maintained their earnings guidance, but it was a little lower than the official street number expectation. What was the difference . It was off by a few cents. So maybe the street was just a little higher on that end . It doesnt sound like theyre saying anything all that disappointing . Thats exactly right. The street right now is 10, 11, theyre going to 10. 03 the key is they did not change earnings. You dont think its really bad news no, i think if we heard this report three months ago then it would be bad but relative to market expectations, this is very much in line. Now, home depot will have its Conference Call shortly. Well all want to see some indication of acceleration in sales trends through the quarter, which it seems that will probably happen because the other factor beyond lumber prices is weather we had once again a late start to spring. The month of may was quite wet and cold im assuming that home depots business improved as the quarter progressed and theyll have a better exit rate. The full year forecast is higher than this most recent quarter, right is it because this other other quarters you expect better comps . Was this a disappointment or not . Do they have to make that up are they optimistic . The easy answer is the comparisons were more difficult in the first half of the year than the second half so there is a way they have to make it up but the way we look at this, they have an easier Sales Comparison the second half of the year so it should be easier for them to get something north of a 3 comp to get to the 4. So its not far from an alltime high, but you expect it to continue year in and year out to grow . Youre not expecting a flat period for two, three, four years . You would buy home depot thats right. I think the one factor weve all been discussing and the prior segment we were talking about the yield curve. Theres this potential inversion of the yield curve that has caused a lot of stir in the market for heome depot, Mortgage Rates have come down dramatically. As i think about the back half of the year, that should be a positive. Thats interesting. I just saw that the actual revenue number they rounded down it really wasnt that far from the 39. 8 the stock is up sharply now, up 2. 55. Ryan nagle, thank you. Thank you. When we come back, two big hours still to come. We have interviews with ron baron and former minneapolis fed president , kocherlakota and secretary of state mike pompeo firswet re going to talk market sentiment, could nervous investors lead to a selffulfilling prophecy stay tuned on squawk box. These folks dont have time to go to the post office they use stamps. Com all the services of the post office only cheaper get a 4week trial plus postage and a digital scale go to stamps. Com tv and never go to the post office again. The r word. I dont see a recession. There will be a recession. From washington to wall street, what is all the talk of a recession doing to Investor Sentiment . A squawk box newsmaker ron baron will join us live. Plus he was fired in a very public ouster, so why is bruce linten buying more stock in the company . The second hour of squawk box begins right now announcer live from the beating heart of business, new york, this is squawk box. Good morning, and welcome back to squawk box right here. Take a look at u. S. Equity futures at this hour a little in the red here the dow off about 22, 23 points. Nasdaq looking marginally higher s p were going to call flat for now. Treasury yields, a tenyear note at 1. 562, those also keeping an eye on the twoyear note at 1. 527. So were back to getting kind of close. Heres whats making headlines in addition to the markets themselves just days after implementing Interest Rate reforms, china has lowered its new benchmark Interest Rate. The move is designed to lower corporate borrowing costs to help spur economic growth. Home depot, we just had brian nagle on, reported 9. 17 a share. However, revenue and comp sales missed by a little bit and it apparently was sort of expected by some people, at least impacted by lower lumber prices. The stock is now up a percent. The company also cut its full year Sales Forecast saying that tariffs may impact u. S. Consumer spending and appear many le is rampi reportedly, spending more money on the streaming Service Spending more than 6 billion compared to an originally planned budget of 1 billion i cant imagine what those shows will look like youve got to get decent content. Think about it, they looked at it and said lets spend six times as much money. Theres a new report suggesting the number is a lot lower, like a lot, lot lower reporting this morning is that the spending is not 6 billion and the report is wrong. Wait a minute, i just read that in a newspaper. I know. Im just telling you, i should also suggest its part of the team, part of the family. More than a billion but less than six he reports the Financial Times news and then says its significantly less than that. Thats interesting. Sources tell me apple has dedicated hundreds of millions of dollars to the morning show but the 6 billion is too high. Weve got breaking news and then were going to try and fix it that gives a whole new meaning to the word breaking news. They broke the news while you were reading the old news. They broke the story that they were going 6 billion thats totally broken if its not true dont you say that sometimes, breaking news and then we try not to break it too much. Very literal. Hopefully its fixable after were finished wit. It has been a wild month so far for investors. Weve got a closer look at indicators domm, im guessing theyre changing rapidly. They are, becky you talked about that dreaded r word that is recession. We talk about that often but so are many other people in the entire world, and we went to google trends to figure out how much they are talking about recession. Google trends shows that over the past five years that term recession has been searched a number of times, but as you can follow along here on an index from a zero to 100 basis, its been relatively calm for a good reason we havent been fearing a recession for some time now. But just in the last few weeks or so, it has spiked upto the highest level of interest that google trends has tracked over the past five years. Same thing goes for the yield curve inversion. When you put that up there, yield curve inversion, that search has yielded next to nothing all the way up until maybe the last few months or so, and then a huge spike in interest in yield curve inversion for obvious reasons over the course of the past few weeks because weve gotten there and then kind of come out of it a little bit more today. So groogle trends shows that sentiment carrying out there can we talk ourselves into a recession . Thats a question for some investors out there. One other place to look is how investors are feeling. Last week on a weekly basis they tracked sentiment for investors. Over the course of the last week, bullish Investment Sentiment is now at 23 . On average historically its closer to 38 . Neutral is more around 32 but bearish sentiment is now about 45 . Normally its closer to about 30 . So if youre looking for a possible contrarian indicator, a lot more people feel bearish right now than they have historically speaking and one of the place its playing out in the marketplace in the last year is how stocks and bonds and gold have performed look at that gold etfs have gone up about 26 in the last year, longterm about 19 and its a 2 for the s p. Theyre all playing out right now in those charts. Ill send things back to you, joe. Great were going to continue along here the word recession has been thrown around a lot lately, putting many investors on edge but as domm was just talking about, could that lead to a selffulfilling prophecy joining us now, professor of economics and he also has a new book coming out about how viral stories could drive Major Economic events called narrative economics. Also joining us still in the running for his nobel, cnbc, senior markets commentator one of the many deserving. Weve talked over the years so many times. We remember you for a lot of things, but one thing that i always think about with you is animal spirits and how important animal spirits are to everything sometimes i think animal spirits are more important than the underlying fundamentals and this is what were talking about right here are we dampening underlying animal spirits with all this talk about a recession absolutely. You read my mind i think its always been that way. Although, it became clear, especially during the Great Depression remember roosevelt, the only thing we have to fear is fear itself i wrote a book entitled animal spirits its absolutely a driving force. And economists dont seem to be i think theyre coming around now with new digitized data and things like google trends, we see more and more concrete evidence of this. Makes economics a tough pursuit in terms of a hard sign when so much is based on emotion and animal spirits of crowds and individuals. Yes, Alfred Marshal 100 years ago said economics is not an exact science. So when someone tells you that theres a leading indicator has reliably predicted recessions, dont believe it. I will say one thing that youre kind of out of mainstream thinking now is whether the fed is behind the curve in lowering rates. You think they should have not cut but hiked last time . Well, the important thing is the narrative that theyre beginning. So when they saw the rate cut the first time in years, the 25 basis points doesnt mean that much its more that they launched a new regime and that theyre worried about a recession. And in the past, you know, the fed tends to make more and more rate cuts afterwards, although this time their commentary suggested not. But still, i think that theres a problem with cutting rates because it shows a sense of alarm. Its like when your doctor suddenly gives you penicillin and you think, oh, my gosh, im really sick. Yeah, that gets you thinking. Animal spirits, saying that the fed cutting sort of dampens sentiment is saying the same thing, that you can hurt animal spirits. And its interesting the way that jay powell fed chairman tried to characterize what they did. He said we think this is a mid cycle adjustment you can look back to a couple of times in the 90s when it did seem there were mid cycle adjustments that happened and it was constructive and we didnt go into recession and the markets took it well the problem is in 1995 we werent calling it a mid cycle adjustment as they did it. It seemed as if they were preventing a recession that was theoretically possible so its almost as if the market wants if theyre going to be in this mode of cutting, they want it to be an easing cycle. So its a delicate process. You think by simply not saying i have a bazooka i could pull out if i needed to, it becomes less effective i think it becomes less effective in terms of how the market die jefts that and decides to proceed that being said, you are going to have multiple false recession alarms go off before you get to the actual one this is what the late cycle kind of dynamic always looks and feels like so i dont think its unique in this time. I also think theres an absolute difference in the public mind what a recession is and what economists define as a technical recession. If you ask the public, they felt we were in a recession until 2011, and when it ended in 2010. Bob the word recession means getting worse according to the nbbr but we tend to have slow recoveries, so i think the public has a different meaning for recession. About Interest Rate cuts, another example of the psychological impact of these cuts is when the fed cut Interest Rates to the right after the financial crisis to the zero to 25 basis point range. You know what that did by cutting them and mentioning the word zero, it put us into the same category as japan during the lost decade i think they shouldnt have cut it to zero they should have left it above zero, a little bit above you dont want to use the z word you dont want to do that because it scares people. Bob, you dont think inflation at this point is much below target, so that argument that we have room to cut, that doesnt hold water with you . You think were pretty close to where we should be and the economy is running pretty hot so its crazy to be talking about cuts thats what i had been thinking when i said this before were actually pretty much a success with inflation its been close to the 2 target, and i dont think i wanted to stir the waters right then. The interesting thing is that, ive said this before, the economy is producing roughly as much inflation now as it was when rates were below 1 on the short end. So in other words, its not as if theres a low inflation emergency that the fed has to respond to the argument simply is with inflation this low, you can afford to cut rates a little bit to maybe boost growth a bit in the short term. Yeah, i think that our fed people are pretty sensible generalists and theres a bit of Behavioral Finance in their thinking they must be aware that the public looks at the news and reacts to that more than they react to a 25 basis point change in rates all right you could have gone into physics, you know what i mean . You didnt have to do this, right . Yeah, in fact, economists love physics its called physics envy i was there, too. Physics envy, i definitely agree with that. If i were an economist i would be like give me something that i can believe in, and im sorry, but theres nothing. Finance is attractive to people who like physics, i think. Physicists tend to come this way. Finance is so precise and youve got the minutebyminute. Then i think about chemistry and you never really know where the electron is. If you talk about theoretical physics, its pretty much storytelling once you get to the far extremes. We digress. Thank you, professor, we always love having you on. Im not optimistic about that what about a pulitzer or something . The nobel is looking bleak right now. Huge lineup ahead right here on squawk box. Weve got ron baron who is going to join us in just a little bit. Also, former fed official Narayana Kocherlakota is going to be joining us and secretary of state mike pompeo all those interviews straight ahead. Youre watching squawk box on m cnbc announcer squawk box is sponsored by franklin templeton. Reach for better announcer fidelity is redefining value with zero account fees for brokerage accounts. And zero minimums to open an account. At fidelity those zeros really add up. Maybe ill win saved by zero when we come back, bruce quk x. E s making his way to th sawbo he was fired, so why is the former ceo buying shares of the company . Well ask him next welcome back to squawk box. The ousted coceo of Canopy Growth buying up more shares of his own company. There was a bleak quarterly result joining us now is the man himself on set, bruce linton, former ceo of Canopy Growth corporation. Last time we talked to you was by phone the day and we asked you what happened and you just came out and said it i was trying to play nice and you said, no, no, i was fired. You read the word and it says terminated that means youre terminated. So what has it been like a month and a half later now my advice given to a lot of people is you should get terminated as soon as you can, because you become immediately very popular, at least if you built the company thats market cap got to be 20 billion in the last six years so a lot of Companies Want me to get involved because probably it would create shortterm value. And i dont want to do that. I want to get involved to create two to three years of value. So i have to figure out who is the shortterm stories that you can build into a longterm value build. As youve been going around having those conversations, meanwhile the company that ousted you, you decided actually is better than you think people are giving it credit for and you now want to invest in these people at 30 plus canadian, if you look at how much cashis in the bank and the culture and the people that i brought together, there are almost 4,000 people there. Theyre in 16 countries. They have more intellectual property filed and protected than any other company so when you see a little bit of a sale and whats happened every year in august is marijuana stocks generally get cheap because theyre highvolume stocks driven by retail trading. In august a lot of thosefolks say im going to take a vacation and they quit trading. Then in the fall things make them more valuable, things like elections, new regulations rolling out. So i think by the end of the year a lot of the good stocks will go up and a lot of the weak ones are going to be dead because the cash is harder to get. A lot of people dont typically buy the stocks of companies that no longer want them there how much of that was a little bit of having to get over im going to say get over your ego, but clearly you must have. Well, apparently if you get fired, what you should do is just slink away and ride under a rock it was a right time for them to make the change and it was the right time to buy the stock. When i looked at it, i go i was one person if i was that important to the company, the company is not that key but we have an awesome team there and when its cheap, you buy more. Did you yeah, i bought some more. I think people misunderstood their quarter. Theres a big headline number. But when i look at stocks and quarterly announcements, i really dont care about the noncash affecting things where they write off some money because they let somebody have a longer time to pay or their Stock Options are noncash because the value of the company goes up. I look at the actual losses and what they spent their money on and what they spent it on was intellectual property and growth. So when we were on the phone i said to you now that you were sort of free to speak, what were the other companies out there that you liked or that you thought were at least clever or interesting. Now that youve done this analysis, is there one or two that you say to yourself this makes sense, or by the way, you can take the question the other way and you can say i thought this company was good and i realized its terrible. Its kind of like a long drum roll im going to come back here in the third week of september and im going to tell you folks what are the three or four companies im going to be with and the reason im doing it then is theres going to be a lot more people watching in september than you got huge ratings. Your mom, my mom, like everybodys mom is up this hour watching this is a little tease for september. So what ive learned is to get cash into Cannabis Companies now is much harder than it was six months ago. Why i think a lot of them got a little excited and maybe expected shorterterm results. Maybe the stories mixed them up about how long its going to take to build a great company. I can think of a lot of companies where this has happened, maybe most recently in uber or lyft, great companies, theyre doing things but they havent turned a profit yet. Longterm it may be a good strategy but that doesnt mean that the stocks didnt get overvalued along the away. I think people commit to say were going to be profitable soon really what we should be clear is were going to be really profitable in a time frame of two to three years but i would say in the tech space, and ill put uber there, i would say in the marijuana space, the folks have been too eager to please investors and promise what they couldnt deliver. But would you say that the stocks or valuations for the companies that are private are overvalued or bubbled at this point . I would say the private some of them got overvalued when they went public and i think thats just a function of them using a chart that says if i were public this is how much i would be worth. And they take all of the gain out of the stock in the private mode but i think people expect news every weekend in the marijuana space. They want to hear what is mr. Trump going to do, whats happening in canada. And there isnt news every week. There isnt something that you can turn to and say look, germany just changed the regulations. That happens once a year. Bruce, thank you for coming in now your mother thanks you, my mother thanks you and all of our other viewers thank you. But we will see you again, it sounds like, in september with a big announcement how about that for a tease every day for the next month well be rolling the drum. Thank you coming up, buy and hold ideas from ron baron hell join us live plus our number of the day, 1,000 thats how much more money j. P. Morgan believes the average American Household will have to shell out per year because of the newest round of tariffs on chinese goods. Canceling out our universal basic income that youll be receiving some day stay tuned youre watching squawk box on cnbc still to come on squawk box, ron baron, never short of hold and buy ideas. Hes warming up for our conversation and will join us with his latest. He knows hes on camera. And then at 8 00 eastern, former minneapolis fed president Narayana Kocherlakota and plus secretary of state mike pompeo is going to be on set with us. Stay tuned youre watching squawk box on cnbc and started working out. And so can you only pay for what you need. Liberty. Liberty. Liberty. Liberty. Welcome back, everybody. Lets get to our newsmaker of the morning. Ron baron, ceo and Portfolio Manager for baron capital, who is out in the hamptons right now. Its great to see you. Hi, how are you good. Hi joe, hi andrew. Good to see you im guessing that you are aware where a lot of people from wall street are, on vacation, but im guessing youre watching the markets very closely given all the volatility what do you think of what weve seen over the last two weeks or two, the moves in the bond market and what that means for stocks im not watching as carefully as you would think i would or as most people do just a background for my business for a moment. We manage 30 billion and we had 100 million under management in 1992 and weve made 28 billion in profits since then and weve beaten the markets from inception for 98 of our funds and were in the top 6 for 61 of our funds so basically we have a very strong track record and were longterm investors, and what you hear about now and listen to every day on the news are events that disturb most people, worry most people. So whether its whats happening in hong kong, whether its Interest Rates, whether its the fed, oil prices, brexit, where its whats happening in europe or china trade wars, everyone is worried about these events one thing thats sort of interesting to me in the last couple of days, the president has announced that he had an interest in purchasing greenland. And what that reminded me of is that we bought the Louisiana Purchase, which was onethird of the country for 13 million in 1807 now its 3 cents an acre and then we bought alaska in the 1860s and that was Something Like 17 million so the president is a real estate guy and so he understands real estate values obviously, and maybe he has this in mind. But one that was really interesting to me about this is that greenland is owned by denmark and one of my really good friends was the ambassador to denmark for george w. Bush in the 1980s, Stewart Bernstein and i used to tease him all the time, stewart, congratulations on an amazing job youve done as ambassador, you kept us out of war with denmark he would smile maybe we need stewart to come back just in case things get a little rough so the bottom line is that when you think about all these developments that are taking place and everyone is worried about them, it doesnt mean a lot in the longterm and what we think about is that the government one of the things that is amazing to me is that people are lending governments money with negative interest, 17 trillion and people are going to get back less than they paid or have given. And when you think about that, the government has said we are going to make your money worth less so the governments are devaluing the currency against things and youre giving them money that youre not going to get back for an extended period of time and not going to make any money on that and the reason thats happening is incredible fear and the reason theres so much fear is that 10 or 11 years ago youve gone through this terrible financial crisis and so people still remember you lost a generation of investors, just like you did after 73 and 74, you lost a whole bunch of people that will never invest again this morning jeff trout said that his dad told him that he should never worry about good things happen to companies that are really cheap, the stocks that are really cheap. Now, my parents, they never were able to invest in stocks, but if they had they wouldnt have known what a growth stock was or a value stock was, but if my dad learned about it he would have said good things happen to Growth Stocks. We invest in Growth Stocks in the long term and dont worry about all these things you hear about on television every day. Its given us good performance. I appreciate your longterm view but for investors who maybe dont have the same time frame as you, would you tell them that they were foolish if they were selling last week in an 800 point decline for the dow . Would you be telling them stay the course, dont worry about everything that everyone is worried about all around you i would be telling them that. In fact, my family and i are now i had a negative net worth in 1970 and were now the largest investors in our mutual funds. And i invest so even after that, i still invest every single month and in the first week of august when the market was acting erratic and falling shoarply, i tripled the investment that i make in that fund every month. So i invest month in, month out every month consistently thats what advisers do. Financial advisers for individuals, theyre getting paid for advising people how to manage their money for them. And the average mutual fund probably makes 6 or 7 a year, the average investor makes 3 or 4 the reason is theyre always buying and selling at the wrong time because theyre emotional, because they read whats happening and they say this is going to be terrible, i should have my money in cash. So thats the way they react and a good Financial Adviser or Brokerage Firms where they have their models, their job is getting people not to sell when its a bad time to sell, but trying to do things consistently ive spoken before on your show about what millennials should do, and when they get to be 22 or 23 years old, if they get their parents or somehow get their hands on 5,000 a year and invest 5,000 a year, what thats going to do for them, if they invest in a lowcost index fund, make 6 , 7 , 8 a year. At the end of ten years its 100,000, at the end of 30 years, its 800,000 so you get to be almost a millionaire by investing 5,000 a year you cant be afraid. Let me ask. You said thats if we get historic rates of return and thats one of the Big Questions thats circulating right now people are wondering if we can get the same rates of return when youre looking at 17 trillion in sovereign funds that are negative Interest Rates. Do you think we can still expect to get 5 , 6 , 7 a year like we have gotten historically youre not going to get it on fixed income, thats for sure. And what i believe is that when capital is very inexpensive as it is right now, when you have this sdrudisruption thats takig place in europe and japan, youre not going to make money if youre getting negative interest obviously but i do think that historically i think the growth is going to be faster Going Forward than has been historically thats number one. Faster, no one said that and the reason for that is you have technology thats making businesses more efficient and giving more opportunities, knowledge for mankind is doubling faster and health care is Getting Better and better children born now and 100 years from now, theyre going to im sorry, children born now will live to be onethird of them are going to be over 100 years old. The facebook chairman is giving his money so that he will ensure the diseases whs you present to a hospital, they wont be there. There will be other diseases but the standard of living for the average person now, people talk about being left behind but the standard of living for people right now is better than the wealthiest man in the United States 100 years ago thats going to get better and better this is an amazing time to invest and an amazing time to be alive. Im very optimistic. But you did say that growth is a little slower right now that doesnt concern you no, the growth and the economy ebbs and flows so if you have hotels and theyre a little softer right now than they had been, theyre up 2 or 3 instead of 3 or 4 , or china is having some kind of significant slowdown in growth because of trade wars and tariffs. So of course you go up and down and its a wave. But longterm the value of your money, our biggest picture not thinking about the E Convenience that you react to every day, the big picture that we have in the firm is that the value of your money, the government wants to borrow money from you and pay you back less than theyre taking from you but the big picture is that in addition to that, theyre sworn to devalue your currency, theyre sworn to make your money worth less and items cost more that is their goal so when thats the goal, youre lending someone money who is going to pay you back and has the ability to control how much that money is worth. So i think the dollar, we think the dollars half in value every 17 years so if you have 100,000 in the bank today, in 17 years it will be worth 50,000, 17 more years 25,000. Thats how come when you buy the Louisiana Purchase, you buy it for 13 million. Thats a third of the country. When you buy alaska you buy it for 17 million. Thats a big deal. So what happens when you pay 3 cents an acre for the Louisiana Purchase thats not because they made a good investment, its because government for thousands of years, democracies for thousands of years, the reason they stay in power is they get people to invest and create jobs and build a strong vibrant middle class. The way they do it is they make sure that you who have been very successful in our country are forced to take your money instead of putting it in the mattress and invest it now you have a chance for your investment to grow more rapidly than you ever had before and look at all the things that are happening in the world were an investor in spacex also and they just sent a tesla car across the sun thats pretty cool so theres all of these things that are happening in the world that are providing growth. Elon musk is talking about how they want to set off Nuclear Weapons and bombs on mars to create an atmosphere so i was talking to can i just ask you oh, go ahead. I was speaking with gwen shot well and she is the president and ceo of spacex. She says in her opinion the only one who has a bigger vision than elon for spacex is her and she was talking about how she expects to get to other Solar Systems and galaxies to perhaps meet whoever is there. But ron, sometimes you make these investments and it may take a very long time to pay off and it may not pay off in the case of tesla, i think your cost basis is 218. 74 thats just around where the stock is trading right now this is one that youve been is that im not sure. Not to say that this wont eventually pay off and be a great investment for you, but to this point it has not been maybe its got a long lead time. How do you determine between the ones that are going to pay off and pay off quickly, how long do you have to stick around, and what do you think about the tes tesla investment right now. With tesla, there are many investments that weve madetha have been a very long incubation period when we invested in vail between 1996 and 2006, we made a very modest return, 50 , 60 , and then we made seven or eight times our money. And we invested in wynn resorts and we were one of the founding investors, and steve told me that there will will never be another investing and i would like to have you and so we invested after we studied the land that he owned and what he was planning to do, we invested 25 million. N when it was at 20 a share and he went public at 15 or 16, at 13 a share and we invested another 25 million maybe we invested 50 million at 20 and then when it came public at 13, we invested 7 or 8 million shares and ultimately the stock went to 150. So it was down after we invested, it was down two or three years later. And then people would say i dont want to invest because its not going to be a casino for six or seven years we invest all the time when businesses are growing tesla, when we invested in 2014, the revenues were less than 3 billion a year this year is revenues are going to be about 27 billion. So the company has grown ten times in revenues since the beginning, then they were sort of struggling and next year i think were going to do 35 or 45 billion and in two years theyre going to do 100 billion. Just answer these for me. In october of 2018, tesla was your eighth Largest Holding and today its your 13th Largest Holding. Thats not because you sold shares, i take it. Is that because the shares are less valuable or because youve invested in other companies . We havent sold any stocks and thats because the shares in tesla so we were talking about investing at 220 and it went up to 380 and now its back to 220 with some selfinflicted wounds and we spoke about this and i was saying that you invited me to come on when it was 380 and said take a victory lap and i said it was way too early. But i think that the opportunity here is 90 million cars a year that are sold and our guy is now going to sell 350,000, 400,000 cars right now youre able to expand in a time when no one else is expanding in the Automobile Industry so were able to build now in china with all the learning that theyve had in the United States were building for 70 less than it would cost for the same cars to build in the United States and 30 less than it would have cost to build a year ago so what i think is that when we start looking at tesla ten years ago, 12 years ago, the cost of a battery for a car was 100,000 when they went public it was like 30,000 or 35,000. Theyre now a little bit over 10,000, on their way to 5,000. Then you had 200 miles that you could get on a battery and now you can get 370 and pretty soon its going to be over 400. The quality of the car has improved, the distance has improved the opportunity has not shrunk in fact, the reason they have this opportunity is all these Car Companies have hundreds of billions of dollars invested in plants that make motors. So their business is making motors thats what they do. They make motors so if your competitive advantage is you make motors better than anyone else in the world and some guy comes along and says all those motors you make, we dont need them anymore, are you going to drop all the motors that youre making and go make a battery when youre five or ten years behind tesla has an opportunity because other people are slow, the guys in germany, their leading industry in germany, i think one out of ten people in germany is employed in the bobble industry. Theyre saying why arent you guys making battery cars the reason is the unions are heavily involved in the management of those companies and all those jobs that they have making cars will be lost. All the investments are stranlded. Volkswagen is going to tb a competitor but the other guys are not making an effort one more thing now the law in the United States and elsewhere is that they understand that when you burn gasoline i have other ideas to talk about, too, by the way when you burn gasoline it doesnt help the environment so they say, okay, theres countries all around the world that are banning the production of gasoline cars in addition to that, theyre saying if you produce these cars you have to get a credit by saying that youre also producing a nonpolluting car. The cars that tesla have do not pollute. Theyre now selling 800 million of credits for giving their fleet to fiat. Theyre getting 1 billion, free cash flow. Go ahead. We want to continue this conversation with you. What we do want to do is put in a quick break because theres so chore to get to and i know youre in the middle of a thought on tesla we want to get to those in just a few moments. Want to get back to our special guest, ron baron, billionaire hold and buy investor i want to talk to you about tesla again in just a moment i was curious if you have a reaction to this announcement yesterday, about 200 ceos from the business round table spoke for the first time about this idea that profits may not be their number one priority. That they had to take into account all sorts of other factors and other issues, employees, other constituents, suppliers. People look at this as sort of a turning point in the world of corpora Corporate Governance the wall street journal thinks its a terrible idea what do you think . I think that just because youre doing something thats legal today doesnt mean the government will regard it as legal tomorrow and you have to have a social conscience and social responsibility the businesses that have most diverse work forces, that hire real smart people and focus on integrity, even though and expand consistently, therefore they give people opportunity and keep them employed, i think thats very important. We have dinner parties in our home in long island over the summer and the past week is when we had three or four parties that we had, and what i was talking about and the host is supposed to give a little talk and i was saying that i was talking about what had happened to the most notorious person who is supposed to be just committed suicide, and i really didnt think that was the case. Youre referring to Jeffrey Epstein . Jeffry. The most important thing you have is your reputation and its so fragile, you can lose it in a moment and at the end of the day thats all youve got youve got your friends, your family and your reputation and i think that companies, its the same thing youre not investing in companies that are spending needlessly and not going to make companies, youre investing in companies who have a sense in whats the right thing to do, even if theyre not required to act that way so theyre trying to not to pollute or mess up the environment, because if they do, theyre trying not to be too leveraged, because if they make a mistake they are subjecting themselves to liability even though they think it wasnt prohibited expressly they have to understand and be brought up the proper way to know this is the right thing to do and this is not so i agree with this idea about the most important thing is not always making the most profits on your revenues that youre generating all the time. Buffet says the big mistake he made is not investing in amazon. Heres a guy who thinks about his customer all the time. Chuck schwab, he always thinks about his business, looking at his business from the customers viewpoint, from the way their customer sees the business i think thats very important. Ron, we want to thank you for your time. We could talk to you for hours and we hope youll come back on the set and well have an opportunity to do that in the moean time, enjoy the ret of summer. Thank you for inviting me. When omwe ce back, former minneapolis fed president kocherlakota is going to join us Retail Stocks making big waves this morning weve already seen results from home depot and khols. The president pumles his own central bank chief and calls for extreme rate cuts. Well have Narayana Kocherlakota what this means for investors. And secretary of state mike pompeo joins us live to talk about the trade war and possible ban on huawei and tensions in hong kong. The final hour of squawk box begins right now live from the most powerful city in the world, new york, this is squawk box. Good morning, and welcome back to squawk box right here on cnbc. Were live from the Nasdaq Market site. Take a look at the futures this morning. We are in the green, but only imaginely. The dow is up about 14 points, the s p about 2. 5 points higher and nasdaq about 11 points higher and most importantly lets show you treasury yields and where they stand at this hour. A tenyear note at 1. 576, the twoyear note is 1. 527. Lets get you caught up on some of the stories investors are going to be talking about today. Two big quarterly reports, dow component home depot posting earnings that came in above consensus for a Second Quarter however, home depot cut its fullyear forecast it noted the big reason for the miss was that lumber prices have decreased and thats hurt their sales. Also hurt their comps. Didnt do so much on profit. Wasnt as much of a big problem there, but they did say that they could see some consumer weakness if new tariffs are put in place right now the stock is up by 2 . Wall street kind of brushing off some of these concerns and the company is being a little conservative here. Also, kohls out with earnings as well. It missed on the top line. They posted a samestores sales decline that was worse than what analysts have expected and the stock is up this morning and amid kerngs that a recession could be on the horizon, the white house officials are denying a Washington Post report that said the Trump Administration is considering a payroll tax cut. The officials told cnbc more tax cuts for the American People are certainly on the table but cutting payroll taxes is not something under consideration at this time. President trump is lashing out at Federal Reserve chair jay powell once again. Ahead of the fed symposium in jackson hole in a series of tweets, the president said that while the u. S. Economy is strong, powell and the fed are suffering from a horrendous lack of vision. Trump also said the fed rate should be quickly dropped by at least 100 basis points joining us now, former minneapolis fed wt kocherlakota. Hes currently an economics professor at the university of rochester. Its great to see you, president kocherlakota do you agree with the president in both the substance of what hes saying . Do you also agree with the tone and the very public way that he criticizes the fed or maybe you can agree partially with one and partially with the other where are you on that . Hes very outspoken. Is he right about what hes saying, though thanks for having me on i agree with the president on the economics. I think maybe not the 100 basis points specifically that he mentioned yesterday, but in general i think the fed has been too tight. You can see that in the inflation numbers. The inflation remains low and expectations remain low, below the feds target of 2 so i think you can see the Monetary Policy has been too tight, so that calls for more easing than weve seen in the past and i expect more easing to be coming down the pike in the rest of 2019. I think the president s role as the president of the United States is not to be as out there criticizing the fed. I think that can lead to doubts about the feds credibility Going Forward. Its not so much of a problem right now because inflation remains low, but i think that this opens up the possibility the president in the future, including President Trump, might be critical of the fed about being too tight, when actually there are inflationary precious. Thats what we mean by lack of credibility. The fed will lose its ability to fight inflation because people are looking at shortterm electoral pressures. You think the fed has been too tight for ten years and thats just so out of the consensus thinking, because most people think that the bigger thy neighbor global banker policies of money, thats really the opposite of what youre saying weve been way too easy for ten years andthats part of the problem . I just judge by outcomes. We had high unemployment for far too long, unemployment now thankfully is quite low. Weve had we had lower inflation, inflation below the feds target of 2 for a very long time. There was a slight blip upwards in 2011 that took us up. But by and large weve been below 2 and you look at the way the fed makes policy, the kinds of forecasts they offer for inflation, for example theyve been willing to tolerate low inflation for over very long periods of time, even in their outlooks and so i would stick to my claim Monetary Policy has been too tight. Can you just explain sort of when youre in the room how the conversation around Something Like tariffs would manifest itself and how and to the extent that effectively the fed has to predict or at least make some kind of bets on what may or may not happen, how that works yeah, you know, obviously im not in the room now and so i dont know how the conversation would proceed about tariffs in particular but when i was there, we were very certain about fiscal policy when certain kinds of tax cuts would take place or whether or not congress would cut spending. And the way you view it, economics like to use the word exogenous. That means things that are outside of your control. And so tariffs, the tariff policy that the president is pursuing is one among many things that are outside the feds control that are going to have important consequences for the economy. Different people around the table im sure have different outlooks about how the tariff policy will unfold thats going to affect their outlook and that will affect as well the Monetary Policy they think the tariffs are going to have an impact on the u. S. Economy, youre going to be in favor of more easing. There are two things of critics of being too easy that they would bring up, professor one is there should be a cost to money. If you allow people to have money for free or even pay them to take it, that theyre going to go and invest it in things where they lose their money and then well have the same kind of problem we had during the financial crisis and the Housing Market the other one is when we do have a serious break in Global Economic activity, weve got no drive power. Weve got six total cuts and those both sound reasonable. How do you get around not worrying about either one of those two things so on the investment front so there are two ways people talk about it that im aware of. One is that were investing in the wrong things and the price of money, the price of credit which you can get money shouldnt affect whether or not you think one project is better than another if the project is paying a higher return than another project, you should take the easy money now, the other thing people would say is we have too much investment going on, and i guess when i look at the invest numbers its hard for me to understand what it could be an emerging market or empty buildings in china. There could be a lot of places where you could see it where you dont know if it ever comes home to roost im not going to blame the fed or Central Banks around the world for chinas policies im sorry, what was the other the other one was it used to be we could have 30 quarter point cuts what do we got now so the way the fed and myself think about stimulus when a recession comes along, is it really matters in terms of what the Interest Rate youre trying to hit at that time looks like and i think the problem that were facing right now is that Interest Rates on the whole are typically going to be low, as weve seen, and so the Interest Rate we have to maintain to get to 2 inflation is low, or hit full employment is low and so that means when a recession comes along, we really want to have, as youre saying, a much lower Interest Rate but if we raise rates right now, we would be choking up the economy. We would have higher unemployment and even lower inflation and things would be worse if a recession came along. So its not about the rate of change in Interest Rates, its always the level that matters. Do you have any worries at all about just the global debasing of currencies at all . Does that worry you at all as we rush to the bottom, or is it just what the current weve got 17 trillion in negative rates. It seems like something is amiss and i hope its not the pushing on a string that were in the last throws of being able to keep this thing a loloft. Im worried, but im worried about Something Different than youre worried about the concern you see in bond markets about the future is really tied to the lack of politics we have in Central Banks and were going to see the downside shocks and Central Banks are not going to be able to respond effectively and thats going to lead to another recession perhaps to the magnitude we saw in hopefully not, but could lead to a recession of the kind of magnitude we saw in 207 and 2009 with those same kind of persistent effects on output and thats because its the fear itself that breeds of low capacity that breeds the conditions where Central Banks cant respond effectively. Thats what worries me and thats why i think we have these low rates around the world. You look at german debt, for example, out to ten years and this is all a fear factor. And we need to have better expectations of growth im not sure where thats going to come from, though. Thank you appreciate all your time this morning and your perspective its sparkly opposed to those who think we should hit our numbers and should be tightening we appreciate your time. Thank you. A programming note, cnbc coverage from jackson hole wyoming kicks off later this week all day thursday and friday were going to bring you access to the most important policymakers in the world. Jackson hole in august is probably onef othe greatest places in the world. Well be right back. Welcome back to squawk box. The Financial Times reporting this morning that apple may be spending much more on apple tv plus content than they originally said. Price tag, 6 billion. Thats what the Financial Times is saying. But our next guest says that number may be incorrect and may in fact be billions less joining us on the squawk news line is the Senior Reporter for cnbc news and he is contradicting that report this morning. Dillon, what can you tell us what my sources tell me is that the number is actually significantly less,and i dont mean like a rounding error i mean by billions i think what is significant here, one of the problems is that we tend to sort of see the amount of money that Media Companies spend on original content as somehow being indicative about the success of their longterm strategy, and the fact of the matter is that despite the fact that apple, net politics, hbo, amazon, are all launching streaming services, theyre actually in very different businesses and apple is not in the netflix business it does not need to spend billions and billions to amass a library of original content. What it needs to do is create enough original content that it can create a video platform that it can bundle with apple music and games and the apple kred card, the icloud and create a service that keeps customers inside the apple universe and keeps them on hardware. One of the things weve been debating this morning is reportedly this service is going to cost 9. 99 when it launches there should be only five shows that we would launch with that and relative to a disney plus or relative to a netflix which obviously has a vast library of content and the fact that they are selling these products independently of each other, meaning apple music will be s d al la cart, whether that is tough content to attract and persuade people to buy not only for a month but to say there. And the answer is no, it is probably not and based on my conversations with sources, i dont put a lot of stock in that 9. 99 figure either i think were going to see a more complex rollout where youre going to have free trials where there will be some sort of bundle over time and then also apple is going to yes, its going to start with a handful of shows and it will roll out more shows recover time but i think the big picture is apple is not an original content play in the sense of like a netflix service. This is about giving added value to the larger apple experience that, like i said, includes music and games and all of the other services that apple offers exactly how they roll that out, my anticipation based off of these conversations ive had is well get more details on that in the days and weeks ahead. Is that a september launch, do you think thats an october launch some of the reports are suggesting november and yet youre seeing promotions already and tim cook tweeting it out yesterday, the trailer for the new morning show with Jennifer Aniston and reese witherspoon. Yes it is definitely in the time period of the text two to three months we tend to believe that apple sort of rolls out these ideas as if theyre fully formed. I think everything about how apple has entered the streaming space and the original content space has actually been sort of much more its been much more ad hoc and theyve sort of experimented here, rolled out things slowly. When we first announced a lot of these shows they didnt have trailers ready for them. So apple is sort of moving at its own pace and you can read that as a signal that maybe apple isnt ready or serious, maybe they dont know what they are doing in this area i dont think that they believe that i think that they are seriously commented to the original content play, again as a piece of the larger offering to apple users and customers. Fair enough dillon, thanks for joining us this morning appreciate your perspective in the news this morning. Its a big week for retail results. This morning weve already gotten numbers from home depot what we can expect this week, lets bring in joe feldman the stocks this morning, at least for home depot and kohls are up pretty sharply. Is that because the street is looking through this or they werent more concerned about what may happen with tariffs down the road . It seems like the numbers came in a little bit better than what was being feared for kohls and theyre talking about Getting Better trends. Home depot, however, put up pretty good results. 3 comp is basically in line you look at this year plus last year, it accelerated to 11 . They did moderate their outlook for the full year, but that was expected the street was around a 4, so we all knew that was going to come. And it is related to some tariff pressure and housing pressure as well but they also called out lumber price deflation being a bigger driver than what we previously thought. So well have to get more information about that on the call. Put this together with walmart where they raised guidance and said they feel pretty comfortable despite whats happening with the implications from tariffs and other things they say the consumer is looking healthy. What does that tell you . We keep hearing that for a lot of the retailers, walmart called out that the consumer is Pretty Healthy sorry, home depot this morning had called that out. And i think thats true. Right now the consumer is Pretty Healthy. But there is some concern heading into the back half if theres tariff pressure and what thats going to mean we hear its upwards of 1,000 for the average family in terms of an impact so were going to have to see how that plays out hopefully the job situation stays stable and well see spending continue. However, what weve also noticed is the spending is happening at the lower to middle income type places i think target is going to have probably good results tomorrow, walmart was very good last week. Tj we would expect to be pretty solid. I think the whole discount world has really been where youve seen the trends hold up better than the more discretionary. What should we be listening for from the companies were going to hear from this week i think you want to hear more about tariffs and what people are thinking the tariff impact is going to be our sense is that it really pushes more into 2020, just given the way theyre currently structured and with half of the remaining 300 million happening now in september and then the rest in december and a lot of the retails have kind of planned for this so i think that that will be okay for holiday season. Its really about 2020 and the outlook for the balance of the year, where the consumers are spending and again, i think its going to be more in is that discount category is where were going to see the spending holding up a little bit better. Thanks for your time. Thank you. Coming up, secretary of state mike pompeo is here live on squawk box. Were going to ask americas chief diplomat if he sees a way out of the Trump Administrations war with china. Were going to get him to weigh in on the protest movement gripping hong kong youre watching squawk box on cnbc really . [horn honks] man this is what i feel like when i wear regular shoes, cramped and uncomfortable. We can arrange a little upgrade. Which is why i wear skechers. Wide fit shoes. They have extra room throughout. Theyre like a luxury ride for my feet. Try skechers wide fit shoes. When we come back, your biggest morning movers says futures are pointing toward its been a relatively flat session so far dow is up by about 17 points lyre in the green but just bare and we are a few minutes away from a sitdown with secretary of state pompeo. He will join us live when squawk returns. To whom it may concern, due to budget shortfalls, the panthers Baseball Program ballard softball vikings basketball we regret to inform you that due to budget shortfalls, the tigers basketball program. Is indefinitely suspended. Wait, whatre you saying . All the work that we put in . I wish it wasnt so to whom it may concern to whom it may concern to whom it may concern to whom it may concern to whom it may concern to whom it may concern to whom it may concern to whom it may concern every kid deserves a chance to play welcome back to squawk box right here on cnbc were live at the Nasdaq Market site in times square were about an hour from the opening bell on wall street. Futures are much wal mer today and joining us is a contributor on Rick Santelli the dow is opening about 23 points higher about now. Jim, whats going on here . I still think the good news today is that talking about payroll taxes, you know, trump pressures the fed. The overarching theme to me is that the fed is there to backstop any unreasonably high volatility i dont think weve seen any reaction from the fed to stock market moves yet, but weve done it before. So i think at the end of the day low rates can counterbalance all the things on the negative side of the ledger, the tariffs, argentina. We dont even talk about that anymore and that was a week ago. Even hong kong i think the market believes that the fed still has our back. Do you agree with that . I did not know that that was on the list of things the fed was supposed to do was to help with volatility on the stock market ive heard about inflation and jobs, but thats like an extra mandate that was not on the list that i have been told about. I was going to say the real job of the fed, lets sin that size the pillars not the feelgood in dissy group, not the im going to make your returns always good group, not providing sim ltimulus when were quite far from recession i was hoping that the mandate would be much more conservative historically, would be more apt to rub off on them but it is going the other way. I completely agree with you. Theres nothing i said that makes me disagree with you two what the fed is doing compared to what theyre supposed to do is wildly different t. Fed thinks they have to keep us from ever having a recession. I think thats not in their mandate either what theyre supposed to do is take the sharp edge off recession and all they do is coil the spring and then it blows up on it. Weve been having a big debate, we had neel irvin on and he talked about his view of how a recession could come in 2020 so where are we . The yield curve is inverted all of these things, it seems as though nobody wants to do their homework when anything gets cloudy they run to the fed i understand theres certain deteriorations and especially on the industrial side. I understand that many of the Financial Institutions around the globe are feverish because of negative Interest Rates but at the end of the day, i think as much deterioration as occurred from the levels of 2018, we are humming along pretty darn well and considering everything going on, a fed thats under seize by a president. And listen, i dont have a problem with his opinion i just think that maybe he ought to reevaluate what he really wants. Does he really want to manipulate his currency lower . All these issues and the market is still doing pretty well, even though many think its the hint of more fed down the road. I dont think so when i think the fed needs to break that. Andrew, i would throw in that the inversion of the yield curve is nothing to me when you have ten years of Central Banks trying to push rates low, it obviously got there manually and its not an organic experience. Gentlemen, thank you. We have a big interview coming up in just a moment. When we return secretary of state mike pompeo will join us live on set. Well ask him to weigh in on unrest in hong kong and the latest tensions with iran and well talk about the Trump Administrations stance on huawei in crossing harsh terrain. Or breaking new ground . This is the time to get an exceptional offer on the mercedes of your midsummer dreams at the mercedesbenz summer event, going on now. Lease the gla 250 suv for just 329 a month with credit toward your first months payment at the mercedesbenz summer event. Mercedesbenz. The best or nothing. Welcome back to squawk box. Lets get right to our newsmaker this morning welcome secretary of state mike pompeo its great to see you. Its great to see you. Hong kong has been very peaceful, thank god. What is the end game if it stays peaceful but if theres a third of the population in the streets . Its not a third, but its a big number its over a million and its seven and a half Million People in hong kong. 1. 7 million and, as we said, these things have a way of not going away unless something is done or they get some type of concession or something bad happens. The end game is that the chinese will up hold the commitment that they made. They made a promise, which was one country, two systems, that they would allow hong kong to continue the operate we talk about the protests, but we should remember theres important businesses there, a lot of american interests, and the impact on hong kong, if this isnt resolved in a way that is peaceful and in accordance with those agreements, i think will be significant so were hopeful that this will be resolved and the president has used the word humane way a way that reflects the right of these people to protest and we hope that the chinese will honor their commitment to hong kong. How do you think president xi use thas calculus in his negotiations on trade with President Trump . The president talked about this a little bit on sunday. If it ends in a way that there was violence, the president said Something Like tiananmen square, that it would make it more difficult. I think thats true. I hope thats not in fact, is hope that the trade negotiations move forward and i hope that hong kong is resolved in a peaceful way those would be the best outcomes for china and the United States. If president xi says ive got the possibility of some type of a rab spring event and were talking about a lot of people in not hong kong but mainland china. Thats what were all wondering. The trade deal is very important to president xi as well this is an economy that has grown at a rate of 6 , 7 , whatever you believe the impact of the reimposition of tariffs will have an enormous if the economy slows its harder to keep everyone under the autocratic system and th yearning for freedom becomes more front and center. As President Trump has said, we hope we can get to a good resolution of the trade agreements and we can get fair and reciprocal trade without them stealing our intellectual property, where american firms can invest in china. Those are the simple things that President Trump is asking for. One of the main pieces of the puzzle is huawei and theres been mixed message. No mixed messages. The president said he doesnt want to do business with huawei at all if he can avoid it. Yet wilbur ross has come out and say there are things that should be granted meanwhile we had the ceo of huawei come out and say if you tell google that we cant have android well build our own and that means a new operating system in the wild and perhaps the west isnt going to like that. I dont think theres a mixed message at all the threat of having chinese tell la come systems snieds inside of networks around the world present risk our mission is to take the risk down as much as we possibly can. I will concede the world was late to the game we let huawei and Chinese Telecom get a big jumpstart President Trump has now said thats a risk that we cant take to American National security to protect the American Peoples privacy. You dont want the Chinese Communist party inside of your network. And so were driving towards achieving that outcome. Why did the Commerce Department say just yesterday that theyre going to extend the waivers for the next 90 days there are elements. There are elements that dont have anything to do with National Security. There are components that make sense that dont pose that threat and were trying to find the right spot where the National Security risks are addressed, but we compete fairly and allow our companies to trade. I thought this was for Rural Networks here in the United States it is were working our way through to figure out how to deliver given the ten to 15year head start that they had. You cant get there all at once, but were driving toward it. The Defense Department has effectively said, look, the manifestation of these Huawei Networks around the world in china and africa and other places where effectively huawei is not only licensing theyre providing loans to their Technology Gets there. That that unto itself represents a National Security risk. Thats correct, not only has the department of defense said it, so has the state department. If thats true wouldnt you want to shut them down entirely . When we said theres a mixed message or confusion, thats where the waiver issue becomes complicated. Weve not been entirely successful around the worl theres enormous gaps in some of these transitions. Its inside the United States as well you cant rip and tear it all out at once. So our effort is to put together a pathway where these risks, and its not just huawei, the focus has often been huawei. Its broader than that the risk from chinese tele com companies isnt present in the United States or the trusted networks that the United States participates in all around the world. Are you talking decades i dont think it would be that long. But if we ignore it and let it go away, well never get it back. And you dont see president xi saying if youre going to put us in this position with huawei, we cant even talk to you on the other issues thats not been our experience and thats not whats happening today. So you think that president xi has effectively given up on huawei to some degree . No, i think hes prepared to engage in a complex set of trade negotiations so he hasnt walked away and said i wont talk if you do these things hes said we need to sit down and have a conversation about the trade relationship not only between the United States and china, but chinas place in the world trade organization, all of the broader trade issues that exist as well. The other intersection of state and commerce and treasury is iran, i think, because of oil prices and the r word is being thrown around now iran, you probably wake up in the morning and youll say i dont know if i want to look at the paper today. Im ready for something from iran once a week theyre stirring things up, are they not . When does it affect oil prices im in the u. N. Security council meeting. Thats why i came to new york today, talking about this threat from iran. I remember back when we withdrew, when the president made the decision, and folks said crude oil would go to 100 a barrel, you can go read some of the major Financial Institutions when i woke up this around, crude 58, we have managed to take almost 2. 7 Million Barrels of crude oil off the market by denying iran the wealth to create their Terror Campaign around the world and we have managed to keep the oil markets supplied im confident we can continue to do that. Do you see the possibility of dealing with the taliban in a good, safe way in afghanistan . My team has been out negotiating with the Afghan Government and with the taliban over the last six, seven months now. We hope to achieve conditions on the ground to reduce what is 30, 35 billion a year in taxpayer money and the american lives. The conversations are going well but in the end, it will be about whats delivered on the ground, whether thats from the Afghan Government, other afghans that arent inside the government the taliban. The truth will be in the reality. What really happens on the ground if we can reduce violence, well create a space where we can withdraw not only american support but nato forces that are there as well. I think the most important thing i think in terms of our viewers is probably tariffs in china obviously. And we still dont know whether a big deal is possible before the election and were hearing the way that this is resolved near term is with half measures that kick the can down the road and maybe get some ag buys and some agreements that arent codified in the chinese law but some assurances, but those havent worked in the past can we expect anything better before november of 2020 when xi knows theres an election here joe, ive not heard the president talk about these half measures that you speak of hes been very focused on achieving a set of priorities that he laid out for the team. Is that possible for the election its up to president xi and the two of them have developed a good relationship. I hope the teams get back together in the next week or ten days, at least by phone and then perhaps in person shortly after that i dont know the outcome in the end, the Chinese Government has to make a fundamental decision about whether they want to compete in the world on fair and terms or whether they want to keep abusing the system the president has made it clear those are the two choices for china. What do you expect the reception to be today . Where do all these sides line up different folks have different views all across the worl we have many youre means that are with us. Well have folks from all across the world and other regions. Well have the gulf states who are fully on board with our efforts. There will be a wide range of views. Consistent amongst all of them is the deep understanding that the greatest threat to stability in the middle east is the Islamic Republic of iran however they think about the jcpoa, there wont be a voice in the room unless the iranians show up themselves, who doesnt agree with that. Youre going to think im crazy but im going to ask you about bitcoin in terms of terrorism. G7 is this week as well and both japan and france both have working groups trying to figure out lybra and everyone is thinking about how to deal with it now im hearing fears that theyre already being funded with crypto. Have you seen this ive seen some of the reports. Weve seen secretary mnuchin express concern. It was kind of funny, because we talked and it became a viral moment because every nefarious act before this has been Money Laundering so where are you on what kind of world weve had if things were much harder, if things were not anonymous, but much harder to trac trace . Do you think thats the world well have in five years. I hope not. Im going to try not to create a viral moment or meme this morning. Look, the risk with anonymous transactions is one we all know well we know this from 9 11 when terror activities that took place in the years preceding that when we didnt have the capacity to understand money flow it has helped keep the world secure to fight terrorism and other nefarious activity, criminal activity by having access to this information we need to preserve a Global Financial system that protects that. Just quickly, you rattled off crude oil prices do you watch all markets how does that play into your role and how much the volatility weve seen recently have an impact on what youre doing . I watch all the markets very closely. Our equity markets, our bond markets as well, Borrowing Capacity in countries around the world, my job is quintessential economic to create a situation where the American Economy can prosper, we protect American National security in the context of a growing u. S. Economy. Let me ask you, popping around on different topics, but it relates to you mentioned libra, facebook, facebook and twitter just yesterday, reports that they effectively shutdown some accounts, chinese accounts that may have been spreading disinformation related to hong kong what do you think the role of facebook and twitter and social media should be . The president expressed all sorts of concerns about those companies. We have antitrust regulators looking at those companies at the same time. There is National Security issues or even issues that youre contending with. Sure. Theyre in the midst of i cant do justice to that question in 15, 20 seconds other than to say, i saw the reports too theyre very consistent with our understanding of chinese efforts around the world i remember when russia thing was all in the news. And i reminded people that it is not just russia. There is the same kind of activity taking place with china, out of north korea, out of iran. I think it is an international challenge. These are international businesses, grown here in america. We need to get the policy right from a security perspective. Im happy to talk about it at greater length sometime. Do we, the u. S. , use those services for propaganda . We do not we do not spread false information intentionally anywhere in the world. It is against u. S. Law and we dont do it. Are you how long are you going to be secretary of state what is your future youre a young man. What about Kansas Senate im very focused on this job, joe. Im going to be the secretary of state as long as President Trump continues to want me to be his secretary of state. What if we need you in kansas as a senator we would have a serious conversation. You never say never you know, so focused on what im doing. I hear all the chatter i see it i think only one not talking about my Kansas Senate run is me. You can serve with beto and hickenlooper, maybe, in case they dont make it all the way this time. I dont know this is what i hear i follow politics less than i follow so how do you regulate these things libra or bitcoin what do you do bitcoin is tough to regulate already out of the bag. My sense is this, we should use the same framework we use to regulate all other electronic Financial Transactions today thats what these are. These are monies moving through markets or in some cases disintermediated transacts but should regulate them the same way. The same set of requirements th ought to apply to those transactions as well it will be difficult to do, but the theory, the regulatory theory we ought to apply is that one. Okay. We didnt talk much about cybersecurity. That scares me to death too. Every morning. Every morning what was in the brief this morning . It was a crowded briefing this morning it takes me depending on the time i have an hour, hour and a half to get through it with any level of detail. Do you need a cocktail after you see whats going on around the world . Or thats tmi . Diet coke is my addiction, yes. Caffeine free dont need to be more anyway, mr. Secretary, great to have you on thank you very much thank you lets get down to jim cramer at the New York Stock Exchange and, jim, a lot of things to ask you, but what you thought from home depot and other retailers wei we heard from this morning, maybe not as much bad news as some had anticipated they think the consumer is pretty strong. In each case the cadence of the actual month is very, very positive, including the time after the quarters closed, which i think is always great. So, yes, i think that if you listen it these you go back to what larry kudlow said on meet the press , you agree maybe optimism is in too short supply home depot is gigantic, great read on the professional and the person who is just rying to refurbish their home these are bullish numbers from home depot they already flagged lumber, the algorithms who read the headlines, just not reliable they have been telling me, they said lumber is a problem we have gotten that message from walmart and home depot. You think thats going to be the rule or the exception when you look back at retail and after the next week or so . I think traditional brick and mortar mall, no. Theyll be terrible like macys. I think if you is a good online strategy or if you appeal to a particular kind of clientele like professional, youll be fine but it is very few that are good, just theyre very large. Walmart was fantastic. Amazon was great i think costco will be terrific. I target tomorrow, i think people think it is not good. In the end, same day delivery is very strong. I think the big ones are winning and the ones that are just pure mall based, jcpenneys or macys, theyre done i think theyre done. I know yesterday before the open you were a little concerned by how much the futures were up. That was maybe too much of a bounceback over three days running. What do you think now . Moderated a little bit but what do you think . 24 hours later. Midday, then you start seeing tremendous buying back in the nvidias of the world nvidia turned out to be the leader in semis and nvidia can take a lot of stocks with it i didnt see i didnt expect that kind of pin action. Nvidia is different from a Texas Instruments or nxpi or micron. There was enough enthusiasm to carry that group around. Financials stop goading down i dont know why i guess people felt if we uninvert, we dont buy them. There were enough groups beaten down, participated yesterday i think if we invert again today, well go right back down. Right now, things look okay. Cant think of nvidia without think of your cute puppy well, nvidia is look, used to answer to everest, now strictly nvidia. Doesnt remember nvidia. Hes not a genius either thats l rialght. Not all dogs can be geniuses. No, no. Thank you well see you in a few minutes and unrivaled network to work. The United States Postal Service makes more ecommerce deliveries to homes than anyone else in the country. Ecommerce deliveries to homes announcer only fidelity offers four zero Expense Ratio index funds directly to investors. And we have zero account fees for brokerage accounts. At fidelity those zeros really add up. Maybe ill win saved by zero we are look like we are actually, these turned in the red, just briefly. S p 500 off about well call it two points for now. We sort of a little post mortem on the conversation with the secretary. But well talk more about that tomorrow join us tomorrow, squawk on the street begins right now say goodbye to hollywood say goodbye my baby say goodbye to hollywood good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber. Markets juggling a miss the white house is mulling a payroll tax cut. Road map begins with a pause in all volatility got some calmer waves over futures this