Transcripts For CNBC Squawk Alley 20240714

Good Tuesday Morning welcome to squawk alley. Im jon fortt with Morgan Brennan and sara eisen carls got the morning off the art of the deal. Stocks up for a second day on renewed optimism for u. S. china trade talks. At the g7 meeting in france, President Trump told reporters that china will come to the negotiating table, whether it likes it or not. Im not sure they have a choice and i dont say that as a threat i dont think they have a choice in the meantime, the United States, which has never collected ten cents from china, will, in a fairly short period of time, be over 100 billion in tariffs. So, i think they want to make a deal, very badly those tariffs, of course, not coming directly from china joining us now, scott clemens, brown brothers, harryman, ceo of private wealth management. Also with us, mark mahaney, managing director and lead internet analyst guys, good morning good morning. Scott, youre optimistic about a trade deal and about the economy in general, because of consumer spending. Well, i just its good to remind ones self what the underlying fundamental drivers of this economy are. Trade, as importants s as it isd as many headlines as it engenders, is 34 of gdp personal consumption, closer to 70 of gdp as long as the labor market is strong, wages are okay, were in a noninflationary environment, the consumer keeps spending. We see that from microeconomic data and macroeconomic data. So the trade disputes are like waves crashing on the shore, but the economic tide, driven by personal consumption, is still coming in. And not too many sharks in the water sounds like, mark, and that would be good for netflix, no yeah, the one shark, though are regulators, and there seem to be more of them in the water to work this analogy so let me switch over to netflix. I think of the kind of largecap internet companies, the most dislocated one now is netflix. You blow a quarter, ie, you miss subnumbers, that will cause your stock to be dislocated and you have these new competitive entrants, disney and apple coming up. That will cause the stock to be dislocated, too. Partly for those reasons, this is our favorite large cap. A name, we just published a report over the weekend or yesterday with some new survey data this is the strongest content slate the company has ever launched its coming out in the back half of this year, and specifically in this september quarter. We think that can lead to a real nice pop in subscribers. They need to have record high subadds the next two quarters to meet their goal of accelerating subs. We think this content slate will enable it. We like this stock, especially at 300 bucks why do you think netflix has underperformed the other f. A. A. N. G. Names here to date. It has been the make out of those five Big Tech Companies that we so closely follow that has been the least exposed to regulatory and antitrust scrutiny youre actually youre right. Its got the least Regulatory Risk i think, one, maybe the clearest reason is its valuation is most tenuous. Its got negative free cash flow, its not generating 20 billion in cash flow like facebook or google its generating negative 3. 5 billion in cash flow so the valuation support isnt there as much. They did have a clear miss in terms of subnumbers. The singlemost important metric that all investors focus on in the june quarter and this big competitor coming up in the back half of the year. Theres no big competitor coming up for google or facebook or amazon so i think that explains why netflix has underperformed it also helps explain why it can start outperforming if those subnumbers come in better, despite the disney and apple headwinds, it probably proves something that this Business Model and the Value Proposition is more enduring than we all think. And i want to try to get one simple point across. Whats happening is the breakup of the big cable bundle, and people are going a la carte. And survey work that we do shows that 66 or twothirds of consumers are willing to sign up for more than one streaming service. We think they will netflix is going to be one of those. And what the other one is is hard to know probably disney, but there could be other players in there, but netflix is still going to be in that bundle. So netflix has underperformed, but for the month of august, all the f. A. A. N. G. Names are down. And when you have such a large market cap group, you know, that represents such a big part of the market and has led the entire bull market over the last ten years, stop going up, can you still have conviction that the market can go up i think you can actually, as a stock picker, i welcomed a Broader Market leadership markets that are very narrowly led tend to be fragile we saw that last year, late last year with the market selloff led by these f. A. A. N. G. Names. So as an individual stock picker, i prefer a Broader Market and a wider choice of companies that arent necessarily moving in tandem with each other. But you dont see it as a risk off move. I dont, i dont. I want to get back to something that you mentioned with netflix when it comes to the subads needed how many of those need to be domestic because we talk about netflix as if everybodys got it. But if youre not a Netflix Subscriber at this point, with apple and disney coming out, are you really going to sign up . Yeah, so netflix has gone global over the last couple of years. And what i mean by that is its now over 80 i think its over 85 of all of their new subscribers are coming from outside of the u. Se approximate0 million in the u. S we think that number can get to 70, 75 million, maybe 80 million. But youre clearly sixth inning or Something Like that into the netflix growth in the u. S. Market they used to be able to consistently add 5 million subscribers a year we think that number will be more like 4 million going down to 3 million over the next couple of years. Theres no question that theyve got a very strong position in the u. S. , growth is fading for them it all depends on the international markets. Thats really where the growth is for netflix now so, scott, to go back to the point you just made, looking beyond f. A. A. N. G. , what do you like in the market right now i Like Companies that are exposed though this underlying strength of personal consumption that i referred to so the oldfashioned dividendyielding stocks are nice and also in the discretionary space, because i think the consumer is fine weve seen that for the past couple of years, despite the litany of concerns about the economy, the litany of tariffs rounds, when the going gets tough, people go shopping, and thats been the case and i think it will continue to be the case. Well see if the consumer continues to power it. Scott, mark, thanks. Thank you, jon. Thanks, jon shares of honeywell have gained 20 so far this year, outperforming the s p and the xdi. The company is making a big bet on software. But given the current geopolitical climate, question around Global Economic growth, how does all of that uncertainty factor in . Take a listen to what ceo darrius adomchick told me when we sat down at honeywells new North Carolina hq. Im always impatient, so i want to accelerate as much as i can. I think there is some political uncertainty. There are geopolitical events going on and were monitoring those very, very closely to make longerterm decisions, but independent of that, i really want to drive software at a much accelerated pace versus the rest of businesses. And even created a separate kind of unit called the honeywell connected enterprise, which plays by different rules, by different Investment Decisions and just to give them the autonomy, the freedom, and operate a whole different speed than the rest of honeywell and i think that thats working. So is it driven by the geopolitical perhaps, a little. But even if the geopolitical is very stable, we would still be running this at an accelerated pace because i really believe its the future of honeywell. In terms of nufuture of honeywell, guys, adamczyk telling me the goal is to create a swlr company, a vision hes had before he took over the ceo role in 2017 i sat down for a wideranging interview. Talked about the technology, also talked about his take on the Global Economy also, the Business Roundtable statement, that new statement that we got, because he signed on to it, too. Ge has made me suspicious of industrials, saying that theyre Tech Companies now, right . Because three years ago, they were all, you know, commercials hey, were a tech company. Look at all the Software People were hiring. How is this different . It is different and were definitely going to get into that a little bit more later in the show. For as many Industrial Companies out there in the sector that are looking at the industrial internet of things and this idea of connectivity and digitization of heavy industry, there have been many Business Models. Ge was looking to be the platform of all things for everyone that is not the direction that honeywell is taking and were going to dig into that anyway, still to come, more from that exclusive sitdown with honeywells ceo what he told me about the coming digitalization of heavy industry and next, later, looking beyond the tweets and the trade war, how investors should be lamitioning themselves ad votility squawk alley returns in less than five minutes. O research. Yep, td ameritrades got that. Free access to every platform. Yeah, that too. I dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. No hidden fees. No platform fees. No trade minimums. And yes, its all at one low price. Td ameritrade. My Car Insurance to geico. This is how it made me feel. It was like that feeling when you pull your green sock out of the dryer and then the very next sock is the other green one. And then you pull out two blue ones. And you keep going till youve matched every single sock in perfect order. And the owner of the laundromat is so impressed, he hangs a picture of you next to the dryer. Geico. Fifteen minutes could save you fifteen percent or more on Car Insurance. Those Early Morning gains slipping away. In fact, dow just turning negative moments ago were sort of hovering around the flat line right now. All the major averages still on pace to break the twomonth win streaks with the down month of august in this final week of trading. Ubs director of floor operations, art cashin joins us now at post 9, art why the loss of momentum here . Well, i think that you got that followthrough because a good chunk of the Trading Community believes that trump may have learned his lesson on friday i think the Market Action shook him up a little bit and he realized that, finally, that his tweets are what can be counterproductive. So you see, hes remained remarkably quiet today and its why you started to get that rally but when youre putting your money on the line, you begin to say, okay, were up a hundred points do we press him further . Wait a minute, he hasnt tweeted anything yet so i think what were seeing here is a bit of a pullback because of that. I think the viewers want to be very careful to watch them, if they turn negative how they deal when they turn negative will be very important. You see youve got yields coming down again here. So well be waiting for the final news out of italy, whether they can form a government or not. But the key thing, obviously, to watch is the president s tweet does he go back to the game . As i say, im hoping along with several traders down here that he may have learned his lesson and hell be relatively quiet. So basically, no news the good news right now, it would seem heres what im struggling with, though nothing has fundamentally changed from friday. Yes, the rhetoric has changed, the headlines have changed, maybe the tone of the president has changed. But from a fundamental standpoint, nothing actually has. And yet, weve seen these massive moves, these massive gyrations in the market on these headlines. Does that make sense to you . I mean, is this machines is this traders . What is, i guess, the sentiment thats going into that well, some of it is the machines you can see that when the headline looks partially negative, you can almost double down on the south side but i think that, morgan, i think its almost enough if the tone calms down. I dont think youd need some actual numbers dont forget, on friday, we had the president tweeting out that chairman xi was an enemy of the United States, as was the federal reserve. So that calming down is enough to give the market at least other things to look at. So i think what you get is with the tone calming down, now you can look, you can get some big development, geopolitically or any other way, then the market will begin to move how is the wise trader factoring in the president s statements at this point the president said there was a call with china. Was there or wasnt there . The chinese had a different take on what level of communication there was. Also, this issue of tariffs. He says there are tariffs. Then maybe there arent as many tariffs as he said there were going to be. And now he says that there are going to be more tariffs again do we believe it well, i dont know that there will be more tariffs, but i would tell you, if you took a poll down here, most of the people would tell you that they believe there was no phone call at all i think the president was spooked by what happened on friday, was trying to walk it back, seized on the newsprint story about vice chairman lee, who looked like he wanted to proceed with negotiations. And seized on that and the chinese obviously didnt want to say they made a phone call, because that would be somewhat a loss of face, as if under pressure, they were crying uncle so i think the fact that it just quiet enough is good enough. But now were going to have to let the market begin to stand on its own. We will be assessing things like where yields are going and where we go. Im crossing my fingers that the president stays relatively quiet. Certainly for the balance of the day. And well let the market work on its own internals. Will we stay above yesterdays lows where will we go from there . I think its interesting that yields are lower in the face of some upside surprises on the data consumer confidence, regional fed, Richmond Fed Manufacturing index. Why is that . Well, i think that they all believe that there is at least one or two more rate cuts coming so even though the data is better, its not fully outstanding. And the manufacturing pmis are in the contraction territory, so that gives rate watchers the assumption that were going to see lower rates. I dont think powell is off the hook here. Art cashin, always good to check in with you. Thanks my pleasure dow coming off of that 270point gain, hugging the flat line here, actually, just dipping negative, down 13. Still looking for its positive session in five, if we can get there throughout the remainder of the trading day here are the names leading the index in todays trade youve got a mix of defensive names like p g, which have also been strong growers, and j j, after that landmark decision, a case that actually went in favor of the state against j j, but j j still rallies off the lower ntder of payme were after a quick break here on squawk alley. Dow down 16. Instagram working on a new messaging app called threads thats not exactly like what weve seen from snapchat before. Julia boorstin is in los angeles with the details julia . Reporter a source close to the situation tells me that instagram is internally testing a new app its calling threads it was first reported by the verge. Threads is designed for messaging or sharing photos or videos with your Close Friends on instagram its effectively kind of like a spinoff of instagrams direct messaging service. Using the closed friends list feature which instagram introduced last november a key feature of this new app is that users will be able to automatically share their status with Close Friends such as if theyre busy, working, watching tv, or they can even use gps to share their general location or their speed, to show youre on the move though my source tells me they wouldnt share your exact location, because of privacy concerns now, this is a perfect example of the new focus that Mark Zuckerberg announced in march, shifting away from getting users to share to lots of people in their news feed towards getting people to message with just their closest friends. With concerns about facebooks slowing user growth and with instagram experimenting with removing like counts on posts, threads easing and even automatic sharing is designed to grow engagement. And threads is yet another attempt to copy snap, which has had success focusing on communication among Close Friends, with a streaks feature on snapchat that encourages users to keep their conversations going. Now, facebook shares are higher today. We see them up by about 1 snap shares are down by 2 and my source tells me that they are working to launch threads as an independent app, but ultimately the plan would be to integrate with all of facebooks different messaging services morgan, back over to you julia boorstin, thank you after the break, more from my exclusive interview with honeywell chairman and ceo, darrius adam chiczyk what he told me about the Recession Risks and this market climate, next. Meantime, take a look at the major indexes right now, all dipping into the red, though slightly the dow is down 16 points right now after being up as many as 155. Its safe haven, ratesensitive sectors like uliestiti and real estate, better outperforming were back in a moment [spokesman] if youve tried college but never finished, group cheering snhu lets you transfer up to 90 credits toward you bachelors degree. [woman] it doesnt matter how old you are, you can do it, you can finish. [spokesman] finish your degree at snhu. Edu european markets set to close momentarily, just as u. S. Stocks dip into negative territory here dom chu joins us with a breakdown of todays action overseas a broadbased rally across the atlantic, but it did lose a little bit of steam going into the close. All five major averages are set to close in territory. But italian stocks are the standout performers. The countrys leaders grow closer to forming a new Coalition Government over there. Optimism taking hold, perhaps, a bit. The centerleft Democratic Party and fivestar movement are poised to select giuseppe conte. He had offered his resignation only a week ago. Yields on those italian tenyear government bonds hitting their lowest level since september of 2016, reflecting somewhat of investment optimism that a Coalition Government could help reign in the governments budget deficit and ease tensions with the European Union still, though, jon, those european forces, most of them positive, lost steam into their close. Back over to you, jon. All right thank you, dom now lets get to Courtney Reagan for a news update. Hi, jon heres whats happening at this hour puerto rico has declared a state of emergency ahead of a strengthening Tropical Storm Dorian Dorian could become a category 1 hurricane by the time it reaches the island the island is still recovering from Hurricane Maria two years ago. China formally charged an Australian Citizen with espionage, a crime punishable by death in the country he has been in detention in beijing since january. Opposition parties in the United Kingdom have pledged to try and stop a new deal brexit, saying they will try to pass a law forcing Prime Minister Boris Johnson to delay departure from the eu if there is no deal johnson has said that britain will leave the bloc in 66 days without a deal unless brussels agrees to renegotiate. And the u. S. Open is underway in queens, new york the first day of action concluding last night with Serena Williams cruising past Maria Sharapova in a cool 59 minutes. Williams has defeated sharapova in 19 straight matches dating back to 2004 thats your cnbc news update for this hour. Lets get back over to squawk alley Courtney Reagan, thank you. Lets bring in david faber for more on that potential Altria Phillip Morris deal we have some details we have some details the market wants to know i should point out, the dow jones has also reported the same thing that im about to tell you, a bit more detail the key thing is, you see it reflected to a certain extent in the moves from these stocks since the news started hitting we did not know rather than it being an allstock merger of equals released in this press release talking about the talks between the two companies what the respective economics would actually look like the market was assuming an moe implied would be close to 50 50. Its not in fact, the two companies have been focused on a deal in which they were dealing with the market caps as they stood before they became somewhat changed, as a result of speculation about a deal and so a 59 ownership with a combined company by Phillip Morris international and a 41 ownership by owners of altria is what theyve been working with they are still describing it as a merger of equals, but the economics are clearly not equal. They are reflective of what was a far larger market cap at Phillip Morris than altria prior to any speculation creeping into either one of the shares however, it is a merger of equals on social and governance issues, meaning on management, which would be split between the two companies and on the board of directors now, those talks continue in terms of focusing on who would be the ceo the chairman, and down the line. They do not have, at least at this point, according to people familiar with the situation, full answers there, which is one reason why while these talks did begin earlier this summer, im told they could extend at least for another couple of weeks before they see a deal there does seem to be optimism on both sides that a deal will be reached the talks have been quite constructive in terms of dealing with these social issues and so they do anticipate barring, obviously, unforeseen complications, which do happen, particularly when youre talking about peoples egos and the likelihood of who becomes ceo, but they should be able to get to a deal in the nearly far term its a company that existed prior to 2008 when these two companies were split apart it was a very different market back then. And im told the strategic rationale for this deal is focused on the ability of this combined company to both save money in what is a declining category, obviously, that being the smoking of tobacco, but most importantly, to fuel innovation. Sarah, we were talking a bit earlier on squawk on the street about that iqos is their entry at pmi in terms of globally rolling out that smokeless system. Here in the states, altria does own 35 of juul. Thats important, its relevant, but they wouldnt take control of it. They cant do that but it is about having a Larger Company with larger ability to spend money on r d to innovate for the next 10 or 15 years as things change so rapidly in this sector Phillip Morris has come on multiple times to talk about a smokeless future theyre going to phase out cigarettes and they want to go fully into this. Its interesting this could potentially be the next step there. And i guess well see to your point if he becomes the leader of it if they do merge that remains unclear, but you have similar leverage ratios at both companies, but put them together, and obviously, there is a larger ability for them to together focus on shared r d goals as opposed to separately pursue them. And this is an area where there is going to be potentially a lot more innovation, just beyond juul and iqos, which were the early entrants david, thanks overall, stocks in the red after some Early Morning gains dow, s p within and nasdaq all lower by about 3 . Questions over a coming recession top of mind for investors. Still, though, our next guest says increased trade fears and Economic Uncertainty are indicating a limited Recession Risk joining us now, Charles Schwab chief investment strategist and senior vp, liz ann saunders. Welcome back, liz ann. So talk us through your outlook here i think of you as one of the more cautious strategists on stocks, which was a helpful position here in august to have. So how do you put that alongside your view of Recession Risks i think the overall Recession Risk still looks relatively low. I think were on the cusp if not already in a manufacturing recession, which is clearly the case globally, right now there is still a pretty firm dividing line between the manufacturing consumer side of the economy thats what to watch, though because theres a reason why theres more of a bias within leading indicators, leading indexes of manufacturing indicators, because you do tend to see those lead at cyclical turns. So watching the strength of that dividing line is important and if it does start to morph into a bigger job problem, a longer term capex problem, it probably will start to morph into the consumer side of the economy. And thats when youre likely to see overall Recession Risks pick up beyond just what were seeing in manufacturing yeah, and i realize theres a lot of questions here, liz ann but if were in a manufacturing recession right now, are there opportunities within some of those sectors that would be most exposed . Or do investors just need to steer clear . We think that you still want to be somewhat defensive in sector positioning weve had a fairly neutral sector positioning for the past year or so and weve been neutral to overall u. S. Equities for the past two years so we havent been in a bearish position, but we do think later in the cycle, you want to kind of snuggle up to your longterm strategic allocation we still think you want to be biased towards large caps at the expense of small caps. So thats starting at the most macro level when you get into a little bit of the weeds of where we think investors should have money. And our only outperform rating right now at the sector level is on health care, which offers a little bit of growth, but also at a somewhat reasonable price other than that, for the most part, the sectors are neutral. So we just think this is an environment where you stay around your longterm strategic allocations, dont get out over your skis and use swings in the market to rebalance back to those corporate positions. Thats about the best advice we think you can give in this type of environment, especially given the wild swings were seeing in the shortterm you havent really mentioned, weve been talking around the whole trade issue between the u. S. And china, the unpredictability of the approach on both sides, liz ann what do you at Charles Schwab telling your clients in terms of tweet risk and volatility and exposure to sectors like a semiconductor or an industrial that continue to get in the crosshairs its part of the reason why we think you want to snuggle up to benchmarks and use the swings from a rebalancing perspective, but not try to trade around tweets i think thats a fools errand i think even the algos are having a difficult time trying to try to keep up with this. And it is this volleyball back and forth and whiplash and all the terms we have been using and i think for investors to try to attempt to play that game, its a losing proposition. Theres no free lunch. The closest thing you can get is what we think is the advice around disciplined diversification, but not trying to make outsized bets in one direction or another because i dont have any better ability to sort of gauge what the next tweet is going to look like than anybody else its treacherous liz ann saunders, thanks for joining us thanks. Well, yesterday i sat down with chairman and ceo of honey well, darrius adamczyk for a new cnbc exclusive hes transitioning the Company Beyond its industrial roots to become an Industrial Software company. Take a listen to his vision for the transforming of the company through tech theres kind of two different parts of honeywell in terms of software theres the connected enterprise part of it, which is purely our iit play, economies the tip of the spear in terms of strategy, and the broader Honeywell Software portfolio is actually around 4 billion. So there are some traditional parts of the Software Portfolio that arent necessarily, you know, iiot related, but overall still very important so thats the total, 4 billion. But the point we really focus on and part of our core strategy is this connected enterprise piece, which is about 1. 5 billion and when youre talking about connected enterprise, youre talking about connecting the install base the customers that are buying products from you, the hardware from you and being able to offer the services exactly this is really leveraging strength of honeywell. Because the key differentiator for is domain knowledge, expertise, and processing digital data because at the end of the day, were a controls company and thats whats our heritage thats what we are and now were using that data in a very different way to bring extra value to customers whether its energy savings, safety, proficiency, efficiency. We have value drivers based on the various industries that we play i feel like weve been hearing about the industrial internet of things and this digitalization of heavy industry for quite a number of years. It hasnt really yet totally taken off if you look across the sector, at least until now why do you think that is customer option i think industrial customers are very different than consumers. Theyre much more cautious, they really want to understand the issues theyre putting big infrastructure at risk theyre putting aircraft at risk theyre putting, you know, oil and gas offshore platforms at risk so the risk profile is so much greater, that they really want to make sure that something works, works properly, works as advertised and theyre not really all certain exactly what value is going to be brought. Theres a lot of people as you said, morgan, that are playing in this space pb and you really have to focus on bringing value. And i absolutely insist that at the onset of any engagement we have of customer, that we have to show demonstrated value so we insist on a base line, and then insist on measuring off of that base line to make sure that were clearly bringing value to their enterprise and you know, theres a little bit of customer confusion out there. Because you mentioned, theres a lot of players out there the techs, the other Industrial Companies, the startups, the consulting firms so theres a little bit of customer confusion thats also happening right now, but i think ultimately, there will be the winners and the other side of the coin, which is people who really wont play longer term. And i think youll see that kind of happen, that shake out happen, probably not soon, but within the next two to four years. And the fact that you are focused on your end markets, what, i think about six end markets, and that install base, those customers, would you ever expand beyond that thats one of the things that we try to accomplish through our spends, is we want to understand what our expertise is. Our expertise is in those six end markets. And we simplified from eight to six through the two spends that we did last year because i believe in simplicity is a good thing for honeywell and a good thing for our customers. So we love the six markets that were in and bringing value to customers in those six markets is where we want to participate. So this is not a Big Industrial platform thats ubiquitous across many industrial place we only participate in the markets that we know and we understand our customers that is a key point and it gets right back at what jon was asking earlier in the hour, the fact that honeywell is focusing on the markets it currently operates in, be it aerospace, oil and gas, ecommerce and logistics. Youll recall when ge made its multimillion dollar bet on digital a few years ago, it was trying to be all things to all companies, as one analyst put it to me. A reason it wasnt successful, at least in that iteration connectivity is harder to achieve in this space versus consumer because its not so scaleable, more customization is required, and thats why honeywell is willing to offer these services to its Customer Base the way i would almost sum it up, guys, its like an industrial version of apple. Thats the vision thats playing out. To boost margins and smooth out cylicality two other things i would just note on this topic the first is that theyve also been making a bet, and this has been adamczyks personal project hes overseeing into quantum computing. And he says that he expects that to actually start generating some revenue that will be visible within the financials before this year is out. Early adopters there have been Material Sciences and pharma and also that i asked him about m a. Because so much of this has been organic growth, inhouse investments, would he actually be looking to buy other software companies. He said right now the types of companies theyve been looking at on a larger scale look to be very pricey. The m a looks a little frothy right now. So more or less, it would be bottleon acquisitions, but this would more or less be an inhouse organic strategy. Who are they competing with when it comes to selling software to their clients . There are a number of industrial players that are focused on the industrial internet of things or different types of software or automation tech you can point to ge and siemens, roper is another example out there. Youve got Rockwell Automation everybody whos sort of implemented their own Business Models are and are focused on very specific types of offerings or even different parts of the market so its still very much early days, early innings for industrial internet. Im wondering if theyre ahead. I think the fact that its already a 4 billion business, which is more than 10 of estimated 2019 sales expects this part of the business, the Software Portfolio to grow 20 organically. Really speaks to why youve seen the stock outperform yeartodate so i would say, yes, theyre seen as a very meaningful new player in this market. Reminds you of language around the cloud in 2010 thanks all right, the nasdaq breaking its twoday losing streak monday, near the flat line this morning. Take a look at some names trying to change the narrative in todays session. Were back in a mome woman my reputation was trashed online. I felt completely helpless. My entire career and business were in jeopardy. I called reputation defender. They were able to restore my good name. If you are under attack, i recommend calling reputation defender. Vo theres more negativity online than ever. Reputation defender ensures that when people check you out, theyll find more of the truth, not trash. If you have search results that are wrong or unfair, visit reputationdefender. Com or call 18778668555. Welcome back to squasquawk alle alley lets get over to the cme now and Rick Santelli for the santelli exchange. Good morning, rick i would like to welcome my guest, seth carter, chief economist at ubs seth, thanks for joining me. Lets get right into it. Thanks for having me. Youre welcome. And i know youre going to have good things. You have a nice background at the fed in various areas over 16 trillion now negative Financial Times quoted today that thats a little over 30 of all securities in the world are negative rates i know that number rises dramatically if you pull out u. S. Securities, because none of them are negative. Whats your thought on that and how that will affect any future policy by poour central bank specifically but additional policies by others i mean, its truly remarkable that you could have negative Interest Rates across so many different markets and such long maturities i think it has to matter as part of whats pulling down longer term Interest Rates in the u. S and thinking about what that means in the future for policy easing theres no question that starting with now the federal funds rate, just above 2 f, if the fed needed to ease aggressively like in past easing cycles, theres less room for them to cut rates, with rates being as low as they are now, an additional chunk of the Financial Markets is already there. So they have less space to go at this point you know, seth, heres what i find remarkable. Take today as a case study in markets, okay . We had some pretty good data out today. Richmond fed turned back positive consumer confidence, a solid number like historically solid. There arent that many 134s and higher numbers in that series. And yet yields are dropping like a rock again were down seven basis points on the long end does that make any sense to you . So there are just so many different, as chair powell would say, crosscurrents going on in the economy sp so the consumer has been holding up reasonably well for most of this time. The turnaround in one manufacturing survey, while encouraging, doesnt tell you the whole story. Earlier this week, we got the core equipment goods survey that goes into equipment investing and that was a lousy, lousy number it really does show that there are lots of different risks everywhere i think the global circumstances are looking pretty bleak and this estimation in the trade war that trump announced by increasing tariffs across the board by another five percentage points, thats only going to make things worse. We have estimates that weve published last week about how much more thats going to take off of gdp at least 30 basis points, if not more, from the level of gdp. And if that all comes, say, following the holiday season, because so many more of these new tariffs are on consumer goods, it will hit spending pretty aggressively. Having said all of that, and i see how the big picture of trade affects the Global Economy, the actual numbers of trade with china arent that big. But at the end of the day, the consumer is holding up well, were a consumptiondriven economy, and atlanta gdp now moved up to 2. 3. If you look at the years under barack that we had under the credit crisis, boy, you couldnt get anywhere much above 2 arent we underrating the fact that were doing as well considering all the issues you just raised . Maybe i mean, the economy had been growing pretty strongly last year for a while and it came off really sharply in the Fourth Quarter of last year and domestic spending was pretty weak as well but the comparison was hard. Youve had the biggest tax cut youve seen in god knows how long all of that should have been led to a ripping economy but now what we see is the economy is facing a series of these body shots from these tariff escalations and the question becomes, at what point does the economy start to stagger i am very worried about this last increase. Go ahead were out of time, seth, ill have to leave it there but i want viewers to picture Sylvester Stallone as rocky. He can take a lot of punches and still win the fight. Jon fortt, back to you Rick Santelli, thanks and the Halftime Report is just moments away. Scott wapner, what have you got . Well pick up on the conversation that rick was just having the fed and the trade war. What should the fed do, if anything the former new york fed president , bill uply with an oped today. Well talk to bill fisher on whether he agrees with what mr. Dudley is writing. Stocks up for the second straight day, twists and turns, wall street divided on what investors should do. And them our call of the day is on a reit that some of our it got a big upgra tdeoday well discuss whether it is right for your portfolio, squawk alley back after this break. Welcome back could a recession mean a revolution that is the new oped who writes that ceos should fear a recession. Joins us now from mountain view, california good to see you. You are unimpressed with this Business Roundtable statement that the ceo said that they care more about the stock price you think they were really to get people to think they care . Yeah. I mean, im not impressed because it doesnt say anything more than we care. It doesnt call for any kind of regulation or changes in tax policies or changes in how cus are paid and its just kind of messaging and i think it suggests a deeper fear which is that the ceos and Corporate America in general has done really well over the past expansion. But most people in america have not. You know, the gains havent been spread widely and the recession could end the party and affect how people think about the fundamental structure of the economy. So then what would have substance . You mentioned a couple things, in terms of either policies that ceos and Business Roundtable could advocate that are specific versus what you think is lip survesh. I mean, you know, specifically, they could outline policies for changing ceo pay or just making it more equitable. They could talk about the decline in unions in america all of these kind of proworker policies that corporations have fought for a long time you know, even policies affecting the environment. Affecting local communities. I mean, one of the things that happened in the last ten years is that many urban areas have faced these huge housing problems because of success there. The big corporations that have been at the center of these problems, you know, Tech Companies in silicoicon valley done very little on these problems, for example. Just to outline efforts towards caring about these other communities that they say they care about would have been nice. There are lots of proposals that economists and, you know, Public Advocates have put forward over the last few years many of them are in Elizabeth Warrens president ial plan and the ceos are trying to stave off those policies by saying they care and youre a fan of Elizabeth Warren i dont know that there are a ton of ceos who are. You think the fact that persony sa Bernie Sanders and sanders are polling better and factor into ceo messaging around these issues i think a warren presidency and a sanders presidency really scares wall street really scares the business community. And, you know, perhaps justifiable. She wants to rewrite the structure of capitalism and, you know, i am in favor of that. I think the fact that we had ten years of record growth that hasnt really trickled down to a lot of americans is a bad thing for the country. And shes trying to address that and i think that, you know, ceos will need to figure out ways to accommodate those kind of sentiments which are widespread on the left and the right in the United States or despite them. I dont think they figured out as a community what to do. Warrens president ial campaign is not popular among wall street types and perhaps it will stay that way she might do well despite that is a real sign of warning to them yeah, Interesting Times ahead. Thanks squawk alley is back in less than three thats it for me today, heading out early. But morgan is going to be anchoring closing bell. Tell me what is coming up. I know its in good hands. It is big shoes to fill but i will try to protect it much more of my exclusive interview with chairman and ceo of Honeywell Darius Adamczyk his take on the Global Economy and trade. Sarah, so great to have you on squawk alley today looking at the turn in the markets. Yields are the big story, again. Stocks lower scott wapner has that and more coming up on the half all right. Guys, thanks so much front and center this hour, the current state of stocks. The markets dazed and confused these last few weeks what to make of the twists and turns and where your money might go next. It is 12 00 noon and this is the Halftime Report. August anxiety on the street and the stocks about to stage a major turn around. Go for growth or get defensive 2 trillion worth of advice and where to put your money to work right now. A former fed out saying powell and the policymakers shouldnt play along with trumps trade war. The risks facing the fed and the economy