Gains at the open although still on track to break that twomonth winning streak plus pharmaceutical stock rallying ahead of the open, this after Johnson Johnson received a smaller than expected judgment against it involving its sale of opioids. And facebook targeting snapchat again the social network reportedly developing a new messagingapp that would allow even more sharing between friends. Sharing. We share look. Were always sharing. The market is up. Receive watched this market from 3 30 this morning up until now, and theres nothing. Nothing nothing i mean, not even the bonds theres nothing. But people will foment reasons its going up and i refuse to do that you refuse to do what to explain right i think a lot of people recognize that without a new tweet thats disruptive, theyd better get a little longer well get back to fundamentals for while until were interrupted by a new update from the trade war. Hard to know which way thats going to go. Yesterday, jim, we obviously noted this along the way, it was very much unclear that there was any progress made whatsoever there was none i dont think either side was it wasnt phone calls it was nothing look, what matters is that without something new thats negative, people feel like theyve got to come back in. In the end, the process has not led to a bull market its not going up we have to accept the fact that we must have something negative every day to keep driving it lower when we didnt, well, i mean, and the president someone said to me the other day the president is a really good chart reader, he came in exactly where he had to. You know what, i dont care. The sellers stopped. What do you make of the move in bonds were inverted again now we dont throw our hands up or have screeching alarms. We got tired of that rap. I dont think we talk enough about how the fed is no longer as friendly to the stock market as it was. I think a lot of the rally is that the fed is your friend. Now its not necessarily your friend or your knfoe. Are they data dependent or trade war dependent . We dont know if youre jay powell, and you dont know whether youre worse for the economy or shes worse for the economy, i dont know that youre necessarily going to say, i love this guy theres got to be such antipathy right now. I question how often we get antipathy. Jay powell is very low key yes this is a really untenable situation for the president and china. 30year trading below 2 , the 210s, we know where they are, people will tell you its a reflection of the fact that theres nowhere else in the world to get a positive yield. Its not a function at all of a reflection of a negative view of the future of this economy i agree with that we have very healthy consumer i met with Kevin Johnson yesterday, the ceo of starbucks. People say, jim, thats a measure of coffee. He say thats nonsense hes the panoply of the whole country. He charges, some people say, too much for coffee, you can get coffee cheaper with styrofoam. I get it for a buck 50 from the guy with the cart and im enjoying it right now. I pay two bucks, i get a free muffin you can say things are great when you talk to Kevin Johnson yeah. You also asked him about the trade war as well. Is that a segue lets listen to what he had to say when it came to the seemingly increased tensions around trade between china, where starbucks has an enormous presence, and the u. S. You look at the geopolitical situation, i think everybody recognizes its better for all nations and all merchants to be able to have, you know, a good global trade environment and i believe well get there. You know, they all say the same thing and im not saying that he doesnt believe that but you and i both know when we sit down with these ceos in private and we have conversations with them, thats not what theyre saying. No. What theyre saying is theres going to be a recession if this trade war doesnt reach some sort of conclusion and then the president will lose in the fall if theres a recession. And that may not be good for business, because like Bernie Sanders really comes on strong its safe to say joe biden doesnt have the fastball that he used to no. Apart from the election, ceos are generally optimistic, they believe this will get resolved because it makes sense that it will but weve been hearing this for well over a year, year and a half many of them are more, i think, pessimistic when you speak to them privately than they are when they make a comment on your show or this show or any show. Brian golder from hasbro, trying to reduce his exposure to china, ive been emphasizing vietnam as a place that companies are going to the administration doesnt like vietnam, if its shipment from china. They want malaysia, indonesia, and the United States. There has not been a big move back to the United States. No, in a significant way. There have been some but it has not really amounted to anything you would argue is large. There was a piece this morning about whole foods pricing. Pricing is coming down throughout the system were seeing downward pressure on prices, not upward that should not be happening employment is strong tariffs. There should be upward pressure on everything. Theres not. I cant find upward pressure in a world where costco and walmart and amazon and target are beating each other around the head there is no upward pressure on the consumer the fed has said, theres been forecasts that 800 increase for tariff i feel on the ground, with companies, they have not raised prices theyve been eating a lot of the price increases. Now, the next the Retail Federation always says the next round of tariffs could be very difficult. But so far, so good for the consumer right and the president pointing out, were talking about 100 billion or what will be near 100 billion collected in terms of tariffs since they were put into effect remember they first said, the media was saying it wasnt collecting its not necessarily xi running a check to the United States no, the chinese are not writing the check. Peter november avarro my buddy. You and i talked yesterday about Johnson Johnson. What a big win, david from a judge in oklahoma. The shares are up in the premarket this morning the judge ruling the company did help fuel the states Opioid Crisis he ordered j j to pay 572 million in penalties now, that is less than analysts had been expecting meg tirrell has been following this from the beginning, she joins us from norman, oklahoma, and of course was there for the verdict. Meg, should we be surprised that the stock is up or does that make sense reporter david, if you look at what analysts were kind of pegging the result to be, the stock is up, because its so much less. Wall street was looking for making 1 to 2 billion that j j could have been ordered to pay here the state of course was looking for 17 billion. Comparatively the 572 million is a lot less. The judges language was pretty strong he said that j j marketed aggressively, quote, that its marketing was false, deceptive and misleading, that it caused exponentially increasing rates of addiction and Overdose Deaths in the state of okay okay. Of course that 572 million he ordered them to pay is to abate this Opioid Crisis for at least one year we talked after the decision with Oklahoma Attorney general mike hunter who had a message directly for j js ceo i challenge the ceo to put his money where his mouth is the Business Roundtable of which hes a member has made the very daring statement that theyre going to start looking out for people outside of their shareholders this is their responsibility, to put action behind his words. Reporter immediately after the decision, Johnson Johnson says it plans to appeal. It says it is not responsible for the Opioid Crisis here in the state and that it marketed responsibly. Of course j j wasnt the only defendant in this case teva and purdue were also namedd but they settled this case shows that Johnson Johnson is now found liable in this case, and what its going to pay is much more than what purdue settled for now everybody is looking forward to what this means for future cases. J js attorney said we shouldnt extrapolate. The cases that are consolidated in the mdl proceeding in cleveland, ohio, are under a different law, they have different parties, different theories and so we do believe those are very different reporter but guys, of course extrapolate is what wall street is now doing and you saw a lot of stocks, not just Johnson Johnsons, popping last night as this ruling was less than wall street expected but as the dust is kind of settling this morning you are seeing analysts coming out and saying, maybe this doesnt look so good, when you extrapolate it out to the thousands of cases about to be heard in ohio, if no settlement is reached. Wells fargo saying they spoke to one of the Companies Involved in that litigation and theyre hearing updates every day and potentially pushing towards a settlement even Johnson Johnson in its Statement Last night said a settlement in that case is potentially on the table is this case changing the Way Companies are thinking about the overall litigation well be following this closely, guys meg, thank you. In ohio, jim, is where its going to be very important, as meg pointed out, multidistrict federal court, different law being applied there. J j telling me, look, this is oklahoma Supreme Court, filed promptly in terms of the appeal. Right and based on both fact and law, their products, a crush resistant pill and a patch, have low rates of diversion, 1 of the market david, the real thing, as we go against, if youre j j, you roll the dice for the quarter i dont know why that is but i think maybe they just want to set a precedent, writing checks they are the most deep pocketed of any of these companies. Yeah, jeez. Mallinckrodt is oh, jeez. But i think that they want to fight because they have the money to fight but its interesting that meg was talking about the Business Roundtable that was very interesting to me, the Oklahoma Attorney general mentioned that Business Roundtable finding im not even sure, communique i guess we want to call it, that shareholder value is not necessarily the only thing theyll be focused on. Of course j j has the credo, they claim to have a responsibility to a lot of other people, what the Business Roundtable is now talking about. Right the ceo spent a huge amount of time its the first time i heard that Business Roundtable change cited. Its fascinating, what this will mean, if anything. We talk about the rise of pse gs overprescribed and the other guys of course did much more. J j felt that they di less, therefore why should they settle, and they ended up having to pay much more theyll have to go to the Supreme Court. I dont know about the oklahoma Supreme Court, to me the fact and the law we move on, as meg said, to cleveland and that case. A lot of other cases are consolidated that would seem to be very important in terms of trying to determine what if any is going to be the ultimate liable. Just on j j, this is the toughest its ever been to own this stock, just the toughest, because you have talc and you have this. And j j is adamant that they didnt do anything wrong ive got to tell you, david, theres an argument that because theyre the honey pot, that they have so much money, that the plaintiffs are salivating against j j. They know that Drug Companies are not liked. Theyre not. No. I mean, where are they in the hierarchy of disliked companies . High should they be all right. Up next were going to have jims mad dash well count you down to the opening bell, about 15 minutes until we get started with trading here at the nyc. Were expecting a higher open. More squawk on the street straight ahead see thats funny, i thought you traded options. Im not really a wall street guy. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Time for mad dash as we get ready for the opening bell at the nysc we want to talk chipotle yes, david, this is one of the few stocks, like when you first got in the business of what we do, they have a new product, and people buy the stock. By the way, yesterday with Kevin Johnson, a pumpkin latte cold nitro not nitro, thats what the millenials like, thats whats driving that stock. David, the carne asada is coming this september, and they say they expect it to drive traffic. David, this is like the old days, a new product, hip, hip, hooray you know what . Its going to happen this thing has you rightly called it. Thank you in terms of how long it would take to right the problems, and its been off to the races since. The cfo stayed throughout the period, this whole time, he bought a ton of stock, everybody laughed at him, why do you keep buying that stock . He had faith in the enterprise brian niccol comes in and hes going technological, hes making it so theres tremendous delivery, go pick up, and the lines that have been shorter david, ive got to tell you that this is the way it used to trade, high, midsingle digit, low double digit growth. There is an appetite people have very, very forgivenesslike traits in our country, or you could say they dont have any memory, because remember when the rat was here and the people were sick, the boston virus and the oregon . What the hell was that was that taco bell i have no memory of that. Was that pizza hut . People dont remember Jack Restaurant is up very big. Have you had the new chicken sandwich from popeyes i have not. My son has you cant get it, line out the door to your point, these are in favor right now in the market as well, its a way to play the consumer, its a way not to be involved in trade war issues qsr, mcdonalds. What this this haveto do whether there were two calls, three calls, seven calls, no calls, busy signals . Nothing. You heard it, nothing still to come, speaking of china, Brian Goldner will talk about everything from the state of the consumer to the 4 billion deal to acquire Entertainment One to how things are going in terms of making stuff from china opening bell ten minutes from now. Stay with us on squawk on the street. Creating the future. So, every day, we put our latest technology and unrivaled network to work. The United StatesPostal Service makes more ecommerce deliveries to homes than anyone else in the country. Were going to get started with trading in seven minutes. You can see were expecting a higher open, although the month is still trending lower. Opening bell just a few minutes away wow. Youre watching cnbcs squawk on the street. Opening belfour minutes frl fou now. I want to get to some breaking news jim, we were following this yesterday as this heated up and now we have confirmation, Philip Morris international is in discussions with altria regarding a potential all stock merger of equals the two companies confirmed in a press release that was just issued moments ago this is extraordinary, putting these two together i want to mention this because yesterday the stock started to move. I heard about it a bit, frankly was unsuccessful in sort of getting anywhere on it bonnie herzog, the wellfollowed analyst at wells fargo who covers this industry, did put a note out later yesterday noting the move in pm, which was down almost 5 , and mo, of course altria, up 5 . Merger of equals, altria is far smaller than Philip Morris international. These two Companies Used to be one company. They were one company just to share herzogs analysis, because its what weve got for you right now, she said the jewel stake, remember, that huge deal that altria did that i of course made a lot of because they spent an enormous amount of money for a 35 stake it was more than that, with no path to control. None. But it showed you how they viewed their future and the future overall of people actually inhaling tobacco thats wrapped in paper, at least she said given juuls clear dominance and their international ambitions, thats the Philip MorrisInternational Entrant to this area, is worth more to Philip Morris by owning altria, given its full control of sales and distribution. She said it would be an opportunity to accelerate the growth rollout, the overall global rollout, and pm could invest in altrias strong cash flow as well so thats what weve got right now on this. Theyve told us they wont make further they wont have further discussions. I dont know if theyre uk or bound by different law, because of course there are certain markets where you have to international, right. If there is something going on, you have to confirm it if it makes its way into the press altria took a 35 stake in juul, evaluated at 38 billion and i think that juul has been the winner versus the Philip Morris offering. Dont forget, altria has a stake in chronos, the cannabis company. So this is a very strong you know what, david, this is like viacom and cbs it created a lot of money, a lot of wealth with morris and altria but you know what, this market is growing so quickly. I totally understand what i am interested in, in part, though, is the differential in market caps would have indicated this would have been a purchase by Philip Morris however, in this press release theyre talking about it being a merger of equals, which would mean youre obviously greatly increasing the value of altria to make it a merger of equals. Yeah. And well see what the respective and by the way, theyre probably negotiating something else, but what the respective ownership would be of the two Shareholder Bases, management typically merger of equals means share of board, similar ownership, management combined [ bell ringing ] i remember altria, a 45 stake in i remember when it was a growth vehicle and now pm is not growing at all. Altria switched in terms of the dividend lets look at whats going on at the big board, you heard the opening bell Great Plains Energy merged with west star energy im grown away by this, Philip Morris getting hit, yield 6, has been growing at 4 . I guess, david, this must be saying that juul is worth a lot more than we think again, i would just point out, based on what i recall, Philip Morris has no control over juul. They have a couple of board seats, i believe altria has no control im sorry, excuse me, altria. I know, its confusing. Altria, symbol m. O. , has no control over juul. Juul is an independent company over which they own a significant stake, 35 , which they paid an enormous price for. But they dont control what juul does and has no ability to take control unless juul says please come in. I still think Philip Morris wants that this is an extraordinary move. This would be, by the way, just take the combined market caps, its a 100 billion deal at least, to put it in perspective, its the largest deal certainly taking place this deal if it actually gets to the finish line. I would love to get some color on i dont think i can step off right now, whos involved or what but well see, hopefully well get a little more color. I did make a couple of calls this morning and got zippo back. Nobody calls back. Well, this matters. There havent been a lot of deals of late, david i started to think maybe were out of the deal phase of this market because people are frozen because of the tariffs people are surprised, i think, to say the least. Im shocked i thought that altria was frankly doing so much better than Philip Morris, why does altria have to go with Philip Morris altria was doing so many things right. I dont recommend tobacco stocks but i think Howard Willard was doing a fantastic job. Wow. When did the two companies separate, jim . Ages, ages ago. It was a long time. As we see them, again, altria up sharply, because what we have learned from this is obviously there are talks and theyre talking about more importantly, a merger of equals, which would imply a higher valuation for altria and a lower valuation of Philip Morris. 12 years ago, altria is going to keep i do think that i thought that Philip Morris was the better value at the time because they had 6 yield and because they still smoke like chimneys overseas. But people the more you talk about juul, the more people say juul is up like this its a fundamental change in the way that juul is very defensive, you have to be 21, they got rid of the watermelon theyre like the patch, theyre goodness personified juul is kind of like a fairy tale, right . Its kind of from on high helping everyone jeez cynical. No, i mean it. Theyre fantastic. Thats my i feel like if i started options moving, altria, both had canceled various investment meetings you had that. I didnt have it, i didnt get there. But well see if they get there. These two companies will be able to reach a deal as they always say in these press releases. How about smucker lets do that smucker, they kind of failed and missed on many, many lines retail coffee down 5 . Thats suboptimal. Retail consumer down 17 i dont regard that as being too good retail pet food, this is really interesting, the consensus was looking for 706 million, it came in at 669 million. We had felt pet foods was a winner, meow mix, kibble my stepson mistakenly thought the fresh pet was baloney in the refrigerator why because it looks just like baloney. But it said fresh pet kraft, heinz, whats the difference, my baloney has a first name, jeez and smucker you look better than i do you get cnbc mad Money Research its called homework. I like to do it. Im not just there saying trump is the greatest president in the world like people think im saying this is really interesting david, this is one of the most Amazing Things ive seen smucker, he says our First Quarter performance fell short of expectations. How many ceos are willing to say that not too many. Theyre ural saying, listen, and they pick one line that was good, we had a good sometimes you will hear we failed to execute on this opportunity, didnt take full advantage, well do better, we promise. No, it department coidnt co for smucker. Here is the Philip Morris international decline now 7. 5 how can roku be up . Roku . Roku meets cord cutting the stock is unstoppable how much cord cutting must there be every single day . Cord cutting is going to continue all the time. And by the way, the Cable Companies at this point, and when i say cable, i really should be saying the internet providers in our company, our Parent Company of course one of the leading ones, charter as well, to a lesser extent they dont care anymore here theyre like, fine, fine no one cares. The video business, go, take it, all we are about is providing broadband into the home and were going to keep raising the price there, slowly, but steadily and our video business, we didnt have a great margin anyway so cord cutting, yeah. Bring on cord cutting its like the umbilical. Up 380 . When disney plus is in the marketplace with its three offerings, you can get hulu, cnn plus, and disney plus for 13 bucks. Millenials like to watch on this you can put up a digital antenna, what more do you need those digital antennas work pretty well. I have a fire stick everythings fabulous. Do you get the pizza, papa johns i didnt. Is it up on this people love papa johns in front of the tv and the stocks is up a couple ofbucks on this new ceo. David, its interesting, the other ceo didnt get a lot of mention in the note. There it is i had to go google it mr. Richie. He was yeah. Hes no longer the ceo. Heres your hat, dont let the door hit you on the way out. David, theres a Shaquille Oneal didnt like him. People want yield so bad. I saw the verizon upgrade, i dont know what to make of that, jim. Someone had to do something how about this, david, comcast, our Parent Company, presumably outperformed by wells fargo. Theres a good positive piece of research if i ever saw one comcast shares are up a bit we upgrade verizon. What happens if theres a brexit maybe thats got to be a little bit of a concern for sky they own the networks that we control. You talk about cord cutting. Well, thats not necessarily good when youre a cable network, is it i thought you just said its fine its fine for comcast, theabthe cable company. Is it fine for comcast, the nbc company . No. Its never comfortable talking about our parent lets skip it lets go to oil companies. Oil companies kidding david, apple has been back i know theres a negative article about faang today, everybody is picking on faang. Apple, along with starbucks, has become the, okay, when are they going to boycott david, no boycott yet. None. So what does that mean . I mean, isnt the boycott, that would be the sign, that they mean business. Nationalism and boycott is not yet seemingly in the playbook that china is going to use. Starbucks having extraordinary numbers in china and thats a good thing if you did get to that, it would be weve said this from the outset, that would be a very, very bad moment. And apparently the chinese are really reluctant to use that, pull that lever. But weve got faang moving up today. Today is the day that faang comes back, facebook has new initiatives. Google saw an incredible note about the next 5 billion thats coming for google. Camping world, david, stay away there, theyre talking about maybe its morgan stanley, camping world note, recreational vehicles falling off a cliff cwh the unlocking of the google web by whats the matter . Camping world is just its a tough own. Thats what you said, its a tough own. Right . Yeah. Its a tough own tough to own. Wow. Okay well okay. Did you see this . How about, actually were going to Morgan Brennan will have some thats going to really embarrassing at honeywell in terms of hes a hit of her. He hitter. Altria is a huge deal i can sit here and bemoan some bad research but this is people dont understand, it was a seminal move when they broke these companies up kraft. It took place in 08. They announced it and it was done in 08, the split and now they are, as theyve confirmed, talking about getting back together in what would be a merger of equals and hence, again, just to repeat it, given the disparate in valuations, altria is moving up. And Philip Morris moving down, because if it is a true m. O. E. And the ownerships are more or less in line, even if its somewhere in the 50s, high 40s, thats where it would be they say no guarantee, as they always do. Hope to get a little more information for our viewers at some point during the course of the day. Meanwhile j j keeps inching higher there are many pieces coming out in the last few days that it was going to be more than a billion. Theres undercurrent that it will not hold up in the Supreme Court appeal so thats another reason why j j is not down. The naysayers are saying, well, just you wait. We need to hear from the ceo to see whether he feels thi Business Roundtable accusation that i regard as an accusation, that hes not doing enough for the stakeholders and for the country, versus what hes done for veterans and how much he has spent in his time that is not earnings per share related but impact per share and i find it insulting they attack him, its insulting probably the most, i would say, giveback ceo in hes a top ten giveback ceo and to have this lawyer who just won a big deal attack him is sad. Its sad what hes done for antisuicide okay. But youre not making light of the Opioid Crisis in this country which has killed tens of thousands of people and certainly was a result of certain Drug Companies absolutely abusing no, no. Perdue, mallinckrodt but 1 was j j i think that they ended up paying, you know, tens of millions more than the guys who really did it. But lets not forget the pill pushing doctors. There are any number of villains in this story multiple villains, david. Yes well see. Meanwhile, theres another run, david, in the plus 40 growers. Its happening again opta shopify. They cant stop. Plus 40 is the key to this market you ask me, octa is the key. Its amazing you heard it, bob pisani, octa is the key to this market always some interesting correlations here, thats certainly one to chew on i have an interesting correlation, breaking down all 11 sectors of the s p 500 have opened on the upside, yet yields are generally down theres an inverted yield curve. The twoyear is at 155, thats inverted and the markets not dropping. Maybe this correlation thats been annoying everybody in august so much is starting to break down a little bit. But you see, look at this, cyclicals up, semis, energy,s materials, utilities are even up, banks are lagging, understandably, with the tenyear yield down today. That makes a little bit of sense. Where are we in the month of august is there any hope for september . Its been a crummy august. But thats the way it always is. What are we down, 3 here for the month of august . Remember may, we were down close to 6 . Everybody says it hasnt been bad, as hope springs eternal for september. More central bank cuts, maybe a truce in the trade war, hope springing eternal for the month of september where are we right now were not that bad i know theres all sorts of recession worries out there. August is only down 3 were 5 from an historic high on the s p 500 as for the earnings concerns which is what my department is, forward pe of multiple, 16. 8, still a little bit high historically it was 17 1 2 in july so even thats come down nothing terrible earnings, the thing im concerned about for the 2019, i have stuck with the flatish term f now that is exactly what is materializing. Up in the first and se quarter, thats probably going to turn positive Fourth Quarter still high. This is flatish for the year. The question is will it stay that way there have been some owngrades in earnings estimates, on cyclicals, on industrials, on materials, certainly on Energy Stocks thats definitely occurred wholesale downgrades that would presage a recession type environment, it hasnt happened. I know theres a lot of concerns out there but Corporate America has not sounded the alarm on any recession probabilities in 2020, certainly at least not yet i think thats what everybody should focus on right now. Are you confused about what to do everybody is ill tell you something thats gotten a lot of interest follow momentum. There is a very interesting momentum etf out there thats gotten a lot of traction, thats this white line here this is mtun, generally up all year, right now outperforming the s p 500 by a small amount, 3 or 4 Percentage Points whats in this meomentum etf . Here is the major weightings, you have mastercard, procter gamble, visa, microsoft, and disney what do these stocks have in common by the refined definition of momentum, in this group, thats what they are, they all have very strong momentum what does momentum actually mean its a little more refined than to say the prices are going up overall. Under this definition, you have to have sixmonth price appreciation combined to a 12month price appreciation its not short term but intermediate term, price moving and lower volume at that time than the overall market in the at last three years. Its sort of a refined momentum model. Its been working very well for people who are confused and say, i just want to follow the trend in the market, and maybe outperform thats the one people are looking at Rick Santelli is standing by in chicago. Rick thanks, robert. For most part, the last hour, they were up one 150 down four base points. As a matter of fact at 198, did you see on the intraday 10, down a half a dozen basis points. Tens to twos, if you have a really sharp pencil, yesterday it closed negative by like a half a basis point right now its about four basis points nverted i always pay more attention to closes one thing i can tell you if you look at the recent spate of data, obviously it isnt aplus but certainly a bminus, cplus areas atlanta gdp for Third Quarter was upgraded yesterday to 2. 3. Does that sound like recession to you come on, people, do your homework inverted curve, look to europe think about their september 12 meeting coming up. Well have negotiable potentially bazooka of liquidity fired. If you look at the ten years, the scene of the double bottom, the first was in 2012, july. Second one, 2016, around 136ish. That means were 15 basis points away in tens from all time, alltime low yields. Finally, year to date, the treasury vix, still coming down but major elevated levels. Web to monitor that volatility its associated in both direction, up and down yields. Finally, the dollar versus the y yuan david, jim, back to you. Thank you, rick still to come, were going to be talking about the future for hasbro well do that by speaking with ceo Brian Goldner about china, the state of the consumer, but perhaps most importantly, his companys 4 billion deal to acquire Entertainment One, that was announced after the close on thursday well be right back. All right. It would be a 100 million deal if you assume a merger between 122 billion and 88 billion market cap before trading today when we learned Philip Morris international in discussion wall streetal altria. Were back with stock trading. Were back with stock trading. Were back with stock trading. 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. Lets get to stock trading with jim. Am again had been up on wall street, won a ruling most importantly they paid 13 billion plus to get it from celgene, bristolmyers now they recognize imbrel. You cant hate them because they have a cholesterol drug that isnt selling well and a migraine selling okay and some in the pipeline that could be excellent. Amgen back in favor. Its extraordinary. It was a price above what people thought they would get particularly as a seller. Once again, i think its juul behind the largest deal of the year im sorry i couldnt contribute more altria, their stake in juul is what they think is the future. Philip morris tag lioness focused on making america healthier. Do you feel like taking it up its so healthy. No. I have splunk down. Mark schneider from nestle i book and book and book Everybody Knows that listen to my podcast. Podcast ive got one. Hes coming back. Youre not leaving you are and coming back. Jim will help us interview Brian Goldner, ceo of has broke. Lots to talk about keep it right here seasoned trav. And they took my toothpaste away. And you should be mad at people who take unnecessary risks. How dare you, hes my emotional support snake. But youre not mad, because you have e trade, whose tech helps you understand the risk and reward potential on an options trade its a paste. Its not liquid or a gel. And even explore whatif scenarios. Wheres gate 87 . Dont get mad. Get e trade and start trading today. The street. Breaking news, Consumer Confidence from the confidence board, another whopper number, 13 5. 1 anything in the 130s is big time, follows 135. 7 unrevived. To give you a taste 135. Last moment was the best going all the way back to the end of 18 where we had a couple of reads in that neighborhood of course last month is higher so you look at the comp. Internals, present situation 170 and change to 177. 2. Expectations move down from 112. 2 to 107 we have another number i want to go over. August, 112 worst since january. We end up with a positive number, expecting down 2, came up plus 1. Even though its only as good as the number from minus 12 happened to be june plus 2, it really reversed what was pa very big negative number. Theres also a revision that we should point out just popped up on Consumer Confidence, 135. 7 moved higher to 135. 8. Sa sara, back to you. All right good morning, Everyone Welcome back to squawk on the street im sara eisen with david faber. Ca Carl Quintanilla has the day off. Continuing rally mode after yesterdays rebound from fridays big selloff, dow up 95 points or so, s p 500 gaining half a percent, nasdaq gaining in the lead second month in a row. Starts with stocks extending yesterdays gains. Still on track to break a twomonth win streak is the market volatility of august continues. Plus big tobacco talks, and i am talking big, Philip Morris and altria considering or telling us they are in talks about a merger of equals well give you the latest. Later hasbro ceo Brian Goldner will join us to discuss the latest billion dollar deal, china trade tension. Meantime stocks extending their stocks as investors monitor latest investments in chinas trade war. Cofounder and managing partner tom lee and Jpmorgan Fund chief global strategy david kelly. Tom, the bulls are dropping like flies on all this volatility and increased recession probability around trade tensions. I believe youre still hanging in there. Yeah, were at the ledge. Looks like its scary but i think were mid psych em i think if the economy is mid cycle and getting confirmation from high yield near alltime highs, this is a buyable pullback its a scary time but i think investors need to have faith. Why are you saying were mid cycle when everybody else is saying were late cycle . I think one of the things convincing people were late sickle is conversion the entire curve is kind of inverted most inversions occur because the fed is tightening. These are taking place because its plunging. This has been risk off inversion. Capital spending mid cycle, around 24 of gdp. David, what are your thoughts at this point . Im curious whether you happen to see this editorial from former fed chairman dudley, sort of basically saying, you know, the feds accommodation could encourage the president to escalate the trade war further, encouraging to decouple from that. Its what psychologists call enabling it is i think that is problematic for the fed. The fed has to deal with the economy they have. Its clear the fact that the president increased tariffs the day after the last fed cut does suggest if he gets easier monetary policy, he feels license to be tougher on trade policy im not sure thats a recipe that will work well for the economy. Still, you know, its for the market the key thing is that rates are so low that it is funneling money towards equities its very hard for the equity market to crash when yields and tenyear bonds are 150 you dont get value anywhere in fixed income world that is keeping the market even though there are troubling signs for the economy overall. What are those troubling signs . Well, i think this is really much more a matter of Business Confidence than Consumer Confidence the Consumer Confidence numbers sound very good. I think the problem with Business Confidence, not so much confidence as uncertainty, i think this back and forth and trade war is causing Business Uncertainty that tends to cause them to pull back on Capital Spending and pull back on hiring by the way, hiring is twice as cyclical as layoffs. The thing we worry about, if Companies Stop hiring because they are uncertain, that can put a damper on the economy. Still, i dont even know you can call this late cycle because the economy has been evolving so much this is not a typical cycle at all i think the economy probably has room to run here but at a slow pace. So tom, within your overall sort of optimistic view of where we are on the economy, how do you read into the fact that cyclical stocks have underperformed so much especially in the month of august leading stocks like transports and the russell you can look at and auto stocks. Take your pick. These are all going to be victims of trade tensions. I do think Global Economic conditions are really slow we have a growth recession globally lets face it, i think parts of europe are probably in recession. Im not surprised cyclicals are weak, does this mean the whole economy has to roll over and equities have to roll over the key to watch is if high yield remaining alltime highs and tight, thats a market not telling us were late cycle. So would you go into those sectors . I think one of the most contrarian things people can bet on, inventory correction, caused by a lot of the trade tensions is going to be ending and i think we have cyclical growth pickup at the end of this year, early next year. Thats why the 1030 curve has been steepening. Longterm yield curve is a better barometer than 10 two. Despite escalation in the fight. I think companies are going to prove to be really creative i think something pisani talked about massive downward are vision of earnings if trade escalation was causing economies to hit a wall, companies would be slashing guidance and it hasnt happened yet. More importantly, i think companies are going to be very creative what does creative mean for instance, if youve got export restrictions, are Companies Going to be shipping it through other countries, its a way for companies to manage not only cost sharing but also creatively Work Together to rework the supply chain. David, you continue to come back to i know in a number of your notes what you call this demographic pothole. I have to admit im interested in it, thats why im asking about it again what do you mean when you keep talking about demographic pothole . What does it mean figuring into the economy. Its crucial to our growth rate up until a few years ago working age population was growing,. 5 a year, now. 2 right there take half off gdp growth this has everything to do with the retirement, baby boom. Affected by immigration. Right now were assuming were going to have about a Million Immigrants a year. Were running short on that. Immigrant visas down for a third year in a row. Without more immigration, unless we see other change in policy, were going to have very slow growth in the working age population and therefore slow growth in the labor force. It doesnt matter how much we rev up the economy, if we dont have demand the economy will grow slower. I think were seeing that. Do you look to japan for a model . Well, its a model of what could happen to us but america has got a huge advantage in that america has always been a magnet for the worlds adventure remembers. We have people who want green card, we need to think about Immigration Reform from the perspective of what could immigration do for us in terms of growth as the baby boomer retires next decade or so. You can have a different policy. For right now we need more skilled workers, more skilled immigrants to allow the economy to grow at better than 2 . Without immigration i think were doomed to slow to below 2 growth. Almost sounds like a campaign speech. Yeah. What id add to davids comments, if you look at urban institute, the most important demographic is age 30 to 48, thats the prime leverage years. Thats when people borrow money and contribute to the economy the most that come hearth is growing at the fastest pace since early 70s i think when you look demographic perspective, u. S. Pulling ahead the rest of the world because of the generation. Because of people like me, not you, david. Thanks for reminding me you are so mean. Just mean. You brought up demographics. Yeah. I didnt know it was going to come back to remind me im old. Hit the sweetspot there. Tom lee, david kelly, thank you. See you soon. When we come back, industrial giant honeywell under going major changes. Well hear from the ceo. Later Brian Goldner will join us first time cnbc interview, discuss the latest4 al de and a lot more squawk on the street back after this r was losing my independence. Mmm. Good. So ive spent my life developing technology to help the visually impaired. We are so good. We built a guide that uses ibm watson. To help the blind. It is already working in cities like tokyo. My dream is to help millions more people like me. D if you are first it is already working stand up if youre a mother. If you are actively deployed, a veteran, or youre in a military family, please stand. I will tell you this, Southern New Hampshire university can change the whole trajectory of your life. Our Morgan Brennan sat down with the ceo who tells her how its connected warehouses are a big factor and Delivery Experts like amazon listen. We love oneday delivery. Were big fans we love to get to one or two hours. Our customers are pushing using to get better. Much more what i call dark warehouse, less people footprints and robotics and Digital Information to drive the warehous warehouses so this is pushing us in terms of technology. We have blue chip customers driving the tip of the spear in terms of driving that twohour or oneday deliver yshy. Were very much keeping up with that its not just our connected warehouse keeping up with that, our investments, robotics and warehouse automation. Morgan brennan who did that interview joins us with more so how big part of the sorry is this for the stock and the outlook . It is a significant part of the story and its a growing part of the story. I think thats the key here. Whether connected warehouses, buildings and plants, thats part of this big bet as honeywell looks to become a Software Company some is automation products, Software Portfolio industrial internet of things offering and platform. Software already a 4 billion business, more than estimated 2019 sales, expected to grow organically, though, at 20 . Were going to go deeper into that transformation next hour on squawk alley. Guys, the thought process is you boost margins through the Software Offerings and youre able to smooth out cyclicalities, a longer term play implemented last year. The fact its showing up in earnings is quite notable. I was looking at the Stock Performance of honeywell, its up double digits despite pretty rough august wonder how hes balancing macro risk these industrials get swept into china trade, recession fears and tech story hes trying to tell wall street and growth story there. Absolutely. I think it makes the tech story more notable hes very focused on that. It involves investment and organic growth of Software Portfolio. Geopolitical make that maybe perhaps much more attractive to investors, which is why youve seen it outperform broader industrials and s p this year. That said end markets are everything from aerospace to ecommerce, oil and gas chemicals. Certainly has a pulse on key parts of the Global Economy and says that he doesnt see any major recession manifesting right now. But that being said is seeing slower growth, does see the u. S. Economy holding up a bit better than the rest of the world in general given their areas and their portfolio expertise still seeing some growth but much lower than last year. Dealt with act vicvic act last year, did what they wanted to do and didnt follow playbook when will we see the interview. More on squawk alley, closing bell sat down 30 minutes in charlotte at new headquarters sat down exclusively last night talked about a wide range of topics so well bring you all of that. We got one thing, just that. The tease are. I think the no recession call is important as well. I did ask him actually whether he thought that all of these comments that weve been getting from economists, strategists about the rising risk of recession, all the volatility weve seen in the markets, whether he believes the fears are overblown. What he did say in response to that was theres always the concern that you could talk yourself into a recession. Right . The concern that all of the uncertainty out there is going to cause businesses, ceos and then potentially consumers to stop spending as much making those investments but hes not necessarily seeing that right now. Thanks, morgan. See you next hour. All right here is an interview well stop teasing. Brian goldner will voin us on the other side of the break. First cnbc interview, talk about the companys acquisitions, china tre adtensions, a lot more jim cramer will also join us for that interview widodo accretive to earnings in the first full year and include about 130 million worth of kostitsyn guys Brian Goldner ceo joins us from headquarters nice to have you this morning, mr. Goldner. Hi, good morning. Good morning. You know, all the analysts weigh in many say, we get it. Its not without risks that seems to be one of the themes every deal comes with its share of risks, whether in this case with one analyst saying a bloated Balance Sheet bloated with debt, more complicated business, so to speak. What made this deal worth taking on the risk to get it done well, first and foremost we get incredible brands, incredible capabilities, and a great Management Team. Its very commplimentary to our business pepa pig be on the lookout for ricky zoom, which is startingto air around the world and a great deal in the u. S. With nickelodeon. Youll see other brands in the Development Pipeline where we can then also have hasbro ip through that great capability based in london. What we see were developing wizard, like dungeons and dragons. We said we could double the size years. Driving into gaming with magic arena. Were seeing people now offer us opportunities for this deep ip with incredible mythology to be in the stream space. We want capabilities with the teams that can drive it. We have a commitment to return to that sorry, i was going to say we have a commitment to return to 2 to 2 1 2 times leverage weve had fortress Balance Sheet. We want to continue to be that kind of company, maintain our dividend, but we really see this as being complimentary to our business and weve been thoughtful and strategic in our approach. Brian, jim cramer good to see you in a different hour how have you been . Hi, just a minute doing well. I have to ask you somewhat of a diversion from traditional toys built in china. You had china exposure youve been moving out of china. People say, you know what, its easier to move a toy factory than Semiconductor Factory how have you found the diversionification away from china going. Its gone well. As you recall were an assetlike country we dont own any factories anywhere in the world. In the u. S. For the u. S. We produce about 20 of our revenues in the u. S. For our u. S. Business. Globally its about twothirds of our business coming out of china but thats down substantially from nearly the 90 from where we are in 2012 when we made the decision for enterprise risk reasons to begin to diversify were seeing great opportunities in vietnam and india and other territories like mexico and even more were doing in the u. S. We brought playdoh back to the u. S. Last year, magic Trading Cards here and board games here in the u. S. So were seeing an opportunity that will lead us by the end of 2020 to be at about 50 percent or under for the u. S. Market coming out of china, and we believe by 2023 we should be under a third. This has all to do with our strategic sourcing footprint, expanding strategy and being smart and strategic about where we source our product recognizing we want to make a safe product, highquality product at a value price. Also lets talk about the acquisition for a second i think the acquisition is brilliant because i want you to be more than toys. This seems to be what people have been saying over and over again. Theres a giant opportunity for over the top someone is going to take it. Youve decided to seize it how much of this initiative and this acquisition will be about providing the content that everybody is short of . Well, what were really seeing, amazing partners Like Walt Disney Company building incredibly exciting platforms. Thats great they want the ip on their platform there are other platforms that need great ip. They are coming to us and having conversations. We have a number of priority projects with paramount. Beyond that we own nearly 1500 brands many of those brands have great legacy they have been economic book, toys and games in higs great mythology and we need that bandwidth, great Story Tellers and Management Team and capabilities along with the profitable television and film business, best practices with how they go to market around the world to help accelerate our efforts. This really does change our revenue and earnings profile, our thought process about our growth rate over time. Wanted to follow up on the cultural combination youre putting together here, brian, because Entertainment One also owns Death Row Records founded by shug knight thats an interesting portfolio to have that and peppa pig, what does that look like consult really. Its a small piece of the music business were focused in on the bigger parts to begin with but recognize what were seeing in music, everybody using music from everything we do from advertising to television to motion pictures. Other people are using music and they have a great capability of providing that music to ad agencies and other creative businesses that are making video content. You know, in due time, many people have asked us about different assets that eone owns. Death row isnt what you want on your brand. Are you just going to sell it . Is this something youll get rid of. Mostly were focused on what we want to possess of course, were thoughtful, out to make things better for children and their families. Over time if theres an as thaet doesnt fit, certainly wed be open to selling it its a very profitable business. Its performed very well over time its a very small part i think its got more pr these taste than the performance of the business underlying. Yeah. Although it did garner a good deal of attention over the last 24 hours as people realized hasbro was going to own it youre obviously talking about a higher growth rate as a result of this purchase are you limiting your ability to do anything else given that youre five times leveraged . It wont be five times. It will be lower than that well return to 2, 2 1 2 leverage over the next couple of years. We have a game plan how to do that our finance team has undid an excellent job planning this out. Well have an Equity Offering 1 billion to 1. 25 billion which immediately starts us deleveraging, moving forward we have operating cash flows weve identified, 6to 700 million a year just from hasbros core business and we continue to see that as our target again, were very focused on the discipline of returning excess cash to shareholders and maintaining our dividend but also retiring the debt and getting back down to that 2, 2 1 2 times. Lets go ba k to china for a second there are a lot of companies that cant be as nimble as yours. They arent asset light. Do you think the initiative the president has to base the companies out of china is a sound one, given the fact it is a gigantic market for everybodys products i think the way we think about issues like tariffs is kind of a threefold you have to focus in and think about the policy, the predictability and the pace. Those three elements are really how you manage an issue like moving out of a territory or something that comes from the government you want to have predictability and understand what youre trying to solve for, what the policy is and what kind of impact it will have and what pace you need to take in order to really address the issue in realtime recognizing its about moving immense amounts of resources around your company. Teams and teams of people working through these issues and working with retailers all the way down to the consumer so we would say were on this journey already. We really feel that were on our game here. And we do see our capabilities, our ability to get to that about a third of our business out of china, but we have to ensure we have great partnerships for great highquality product made at the right kinds of prices in other territories. It takes some time will again, im glad to see the administration put off putting tariffs on our category until later, closer to the holidays. I hope we continue to have a very productive dialogue there and think about whether thats the best opportunity for the administration to put tariffs on right before christmas because, again, we think that we are moving in that direction we believe we can lead the industry in the direction of a bigger, broader strategic footprint rather than just having to go through the process of on boarding. Im sorry, brian, how do you think about the fact youre going to have were going to call it at least 10 if not more on your products thais going to be passed along to the consumer . Are your efforts going to make how mitigate the margin or the cost of that internally . What are we going to see the way it works is we are the importer, so tariffs really arent applied until you import the product. It doesnt happen as you leave china because products go all around the world so its the importation of the products into the u. S. Therefore we bear the cost and were having conversations with our retailers. Of course we will pass along those costs. Weve always talked about trying to maintain gross margin and operating margin, pass along those incremental costs. Obviously theres other supply chain elements to this because we need to bring in domestic inventory because the direct import programs we use with retailers really diminish in a tariff environment because, of course, we need to be able to bring the product in at our cost of goods so there are lots of changes we make the way we look at warehousing changes. Yes, we can effectively pass on those costs, ultimately those costs will be borne by the consumer over time with time you can redesign and redevelop product lines with tariffs in line. In the shortterm you do need to pass along the cost to maintain gross margin and ensure you can be a Successful Company for your employees and shareholders. Brian, we keep hearing how difficult it is for companies to be able to switch their supply chain, move to vietnam, very, very hard. I certainly am not hearing that from you. We are asset light. I think vietnam if you think about it broadly and more strategically, i think vietnam is a great opportunity for our industry over the next four to five years it does not have the capacity or capability in total that a china has, so were also looking simultaneously at accelerating in india and other territories that does have the kind of capacity and capability and frankly lots of manufacturers there working in regulated Industries Like the Automotive Industry who can make a very safe product for us. Were seeing great progress on new product lines like nerf coming out of india. Youll see us stretch our capabilities, major supply team, sourcing team around the world again, being very thoughtful about where we put our products into the future. Brian, back to domestic for the final question youve clearly proven you can thrive in a post toys r us world. Weve seen that in results, stock prices this year as someone covering retailers trying to get into the toy business and fill that void, who is winning that battle where are you seeing the biggest growth in terms of toy sales in specific retailers. We see incredible acceleration of sales in online and omni channel that includes major retailers from amazon, walmart, target then, of course, you have new kinds of retailers for us as we expand our channel and product development. Nerf working incredible well at a lot of Sporting Good shops you have gaming shops that focus on the fan 20 is focused on the fan economy so we continue to drive in that space. Again, the reasons why eone makes so much sense, we build content for fan so we continue as we expand the channel and Product Innovation strategy were able to get to more retailers. Its many of the retailers weve grown with over time an expanding array of retailers here, around europe and around the world. Mr. Goldner, appreciate taking time with us. Thank you. Thanks, guys. Have a good day. You, too. Brian goldner, hasbros chairman and ceo. Kind of shooting down the snoop dogg, peppa pig, my little pony collab. I would think an automatic sell. The key thing, how easy for him to move because asset light. The president you talk about predictability and speed, the president has been completely precipitous on speed that was fridays tweet. In terms of predictability could there be anyone less predictable than our president he did say basically things that make it feel like mattel has more manufacturing exposure. Good luck thanks for being here. I love being here. Any time. Open invite. Lets send it now to Courtney Reagan back to headquarters for cnbc news update. Reporter hi, sara. Cnbc news update brazil will reject the offer of aid for amazon rain forest unless french president macron withdraws insults according to brazils president s the two leaders exchanged public bars in recent days. G7 offered aid of around 20 million on monday. Italys popular five Star Movement halted talks Ruling Coalition with center left party demanding fivestar member stay on as a member fivestar suspended talks to Ruling Coalition hours before negotiations were set to continue malaysians prosecutors wrapped up their first case against former Prime Minister najib, called 57 witnesses in the five months since the trial began all tolled faces cases linked to multibillion looting of one mdb state investment fund. Finally, suggestion on social media on what to name the new capital. No clue what the city would be called there are suggestions after the president , joko widodo thats the update. Back over to you. Thats a weird one. Courtney, thank you. Watching the market, dow up 81, s p 500 continues twoday recovery after last week squawk on the street will be right back spraef were watching dollar and tenyear both weaker slightly and dow higher by about 90 points this morning as wall street economists warn of a possible recession due to ongoing u. S. China trade war joining us now legendary market investor whose new book is out invest for good, a healthier world and wealthier you. Mark, thanks for joining us. Just broadly in the last week or so weve seen an escalation pretty dramatic in the trade war, higher tariff rates from both u. S. And china. Generally what does that do for the prospects for emerging markets . Its not good for emerging markets at least in the shortterm because theres a lot of adjustments to be made, particularly in asia you must remember most of the asian nations have a major trade partner, china so this creates some problems. As you just heard, there are some countries that will benefit from the movement of manufacturing from china into these other countries. So we have to balance out and look very carefully at who is going to benefit and who is going to be heard. Generally speaking its not been good for the emerging markets. We were just talking to the hasbro ceo about that. In your view, mark, who are the biggest beneficiaries and is that already reflected in their markets . Not yet most of these markets are down i would say almost all emerging markets are down but i think gradually as people wake up to the fact that these adjustments are being made, then were going to see some recovery its going to be a real pick market in other words, we have to pick very, very carefully who were going to be in bed with in terms of the future, particularly with this ongoing trade war, which is not going to end very soon i think its going to keep on going on all right so what markets are the ones you believe are going to weather this storm better than others . I think in asia probably indonesia and thailand, malaysia, those countries are going to be in pretty good shape. As we move up north, youve got all kinds of problems. Im here in seoul, korea, as you know the dispute with japan and this is going to hurt the korean market to great extent so i would say those countries in asia. Then further afield, probably after this amazon fire problem is solved, then brazil will be interesting. And in Eastern Europe or at least the middle east, youre talking about egypt and turkey those countries would be interesting. On china, mark, a lot of people are watching the chinese currency its at the weakest levels in over a decade. How do you read into what china is doing strategically to manage that currency. Is it trying to weaken it, trying to strengthen it . What do these levels tell you . I think they want to weaken it gradually of course they want to keep control and not have a precipitous drop generally speaking a weaker. The problem they face is as they reduce the amount of dollar holdings, then it will become much more difficult to keep this control. So its something to watch very, very carefully i would say its going to continue to weaken. Do you think hong kong dollar will continue to be stable amid protests going on for months really a lot of investors have been on the other side of that bet. Thats for sure i think the Hong Kong Authority has enough reserves to protect the peg but that cant last forever so we have to watch it carefully. I think they are safe for the time being at least. Mark, i know one of your Larger Holdings is yum china the chinese seem to be staying away from trying to foment nationalism or encourage boycotts are you confident well never get to that point . No, im not confident here in korea, people are not going to japanese restaurants. So these things do affect what happens in the marketplace i think in china yum has moved into some of the chinese foods, acquired companies in traditional chinese foods. They wont be identified as an American Company but it remains to be seen we have to watch that carefully. Have you been increasing or decreasing or just keeping stable your positioning in china as a result of the weakening of its economy and the targeted tariffs from the Trump Administration were keeping it stable we didnt have a big waiting in china. India was more important for us and china is going to remain the same were not going to reduce or increase. And mark, finally, youve got a new book we mentioned it. Youre dealing here with esg, which were hearing more and more about it as investors really do start to focus on it and their lps start to have them focus on it or their Investor Base you saw what the Business Roundtable did is it here to stay or is it as some would tell you just another fad that eventually will pass . No. Definitely its here to stay, simply because it means better profits, better earnings and better performance thats the bottom line so at the end of the day it reduces risk if a company has a good esg rating it reduces risk and stock prices perform better. Thats the findings weve seen for a number of studies. Our interest is on governance. We want to improve the governance of these companies, because then go after environmental and social aspects. Its governance the key. Where in the world do you see the best example of that not many places are perfect theres no question about it i would say in some countries in Eastern Europe its Getting Better places like poland were seeing big improvements in romania mainly because of the fund a lot of work in that direction. No, i cant say that any country is perfect and theres really a lot of work to be done no question about that mark mobius, nice to see you. Thanks for joining us from seoul this morning or tonight. Got to hit j j shares on the rise since a judge ruled against the company in the opioid case. Live from oklahoma with the latest boy, what a big switch to see those stocks gain, drugmakers gain double digits yesterday and give much of that up, meg. Thats right, sara. Last night wall street responding positively to this decision in oklahoma the first case to go to trial, thousands across the Company Seeking to hold the drug industry accountability for the opioid epidemic. The judgment against j and j was 582 million less than what wall street expected while the state asked for 17 billion. Not just Johnson Johnson but other drug members, but check out those stocks today they are not reacting so positively i was talking with health care strategist, he said the only positive thing 572 million was less than what wall street expected, the fact j j lost, the number is large if you extrapolate to other cases pending. Of course Johnson Johnson says thats the wrong thing to do and legal cases are divot here but thats what wall street is looking for, guys. Back over to you. Meg, thank you. Meg tirrell covering that important story. Moving to ohio in terms of figuring out what the ultimate liability will be for these companies. I want to talk about a very big deal that may be in the works, is in the works, whether well get to the finish line 9 24 learned Via Press ReleasePhilip Morris international and altria are in talks about combining in what they have described as an all stock merge are of equals. Thats all the details we have for these two companies. It would be an enormous transaction. Of course youre talking about companies that had roughly altria, 88 million market cap before the move today and Philip Morris international around 120, 122. They are moving respectively up and down in part because of what we did or didnt know previously and now know, affirm, they are in talks b, its a merger of equals, which would indicate a close alignment in terms of ownership of each Shareholder Base not to mention typically what is also a board of directors that reflects equally on both and matt those are always tough things to negotiate, by the way. Those socalled social issues we talk about who is the ceo, who is the chairman, who gets the general counsel spot, who is the cfo that can take up a lot of time and energy and sometimes lead to a deal not happening, sara in this case, the strategic merits of the transaction seem to be all about the smokeless future. Right. Philip Morris International icost product of course, altria has significant investment in juul. Thats what they are saying strategic rational, Tobacco Company changed so much since Companies Work as one back up since 2008 more dynamic, less of a spread remember, they separatedthe companies. The global faster growing Tobacco Company without as much regulation would win, that was Philip Morris. Altria the other great for shareholders up 2 including dividends but the market has changed in the u. S. Theres some Growth Opportunity now between the approval and, of course, juul. Well obviously bring people up to date if we get anything more as the day goes along. Watching those stocks move in opposite directions, watching the dows off the high up 58 points squawk on the street will be right back sending stocks every which way, and one strategist says to buckle in, the uncertainty is just beginning. Find out more on trading nation. Cnbc. Com. More squawk on the street is coming up. The rise of amazon and other ecommerce platforms drawi ining investors into one incidence trade in real estate our dom chu back at headquarters with more. All right, dom the real estate sector already a hot performer as the bestperforming sector in that index so far on a yeartodate basis. As you can see there, outperforming about ten Percentage Points. Now, warehouses has become a lot of part of that consensus real estate trade right now as shipping and logistics gets even more prevalent with ecommerce and some of the companies on the Real Estate Investment trust side that have seen the benefits have to do with industrial warehouse and commercial properties a couple of them in prologis an duke reality are up. Drexford industrial and east group are smaller, 4. 8 to 5 billion Real Estate Investment in trust, also in warehouses so david, those ones, back over to you its funny, i dont remember when blackstone made a big bet on warehouses a while back it seems like that was a good one, too dom, thank you you got it. When we return, smuckers, those shares are down sharply this morning, this after the earnings that the company missed expectations whats next for that company, when squawk on the street comes back smuckers down sharply today after missing its earnings the companys earnings also falling short, pointing to lower prices for coffee and peanut butter, as well as increased competition in the dog food category smuckers is a tale of three businesses its got the snacks, the pet food, its got the coffee. The point i was going to make here is that there is a growth story there. Net sales increased 7 in the quarter, though they did take down the sales guidance, they do expect the rest of the year to continue to heat up in terms of growth theyre just dealing with some pricing issues here when it comes to coffee and competition ucret foods smkes still underperforming the entire market today. Squawk alley up next dont go away. At Southern New Hampshire university, we believe in education built for all people. [woman] snhu was the best experience of my life. [man] without snhu, i wouldnt be the leader i am today. [woman] i graduated high school 19 years ago. I still finished. [man] in the military, you feel that sense of accomplishment. Thats what snhu is. You will march from this arena and say to the world. I did it. [woman] you did it. I love you. [graduate] i love you too. Good morning its 11 00 a. M. At honeywell headquarters in charlotte, North Carolina its 11 00 a. M. Here and squawk alley is live