Transcripts For CNBC Squawk On The Street 20240714

Inversions plus, tiffanys mixed quarter, the luxury retailer with an earnings beat. Peloton getting set for the public debut, widening losses ahead of its initial Public Offering as we have said twice now, stocks are set to open lower on worries about Global Growth and the risk of recession. Investors paying close attention to that yield curve and its inversions of the two and ten as well as trade tensions between the u. S. And china about an hour ago or so, we got a president ial tweet, quote, so interesting to read and see all of the free and interesting advice im getting on china from people who tried to handle it before and failed miserably. They got taken to the cleaners, were doing very well with china. This has never happened to them before this being a preference to the large tariffs in place that are set to go up september 1 and then december 15 and the overall there has been some press that echoed some things i was hearing shared on monday that the idea that the chinese have pulled back to some extent to trying to see if they can engineer some sort of deal at this point. Always difficult to know based on who you speak to, i rely on more of the people doing business over there and talking to the chinese leadership and talking directly to them whether or not you can believe them anyway the line has been that they would like some time to pass for those to those who are in opposition to realize the interdependence two of the economies and perhaps a step back thats being echoed in other reports perhaps contributing then the chinese currency down i think 08. Lowest we have seen since 2008. They made it stronger than expected last night. That w thing it is yields, bonds that are front and center right now whether it is trying to figure out as we all are what the next step is, what the chinese and what the u. S. Side are doing on the trade war, the impact on the economy on earnings, seen grinding to a halt or the enormous Central Bank Stimulus were preparing from every single corner of the globe, were continuing to see this pressure on yields we have a number of inversions going back to may 2007, march 2007 we have the threemonth 30year inverted you can debate what that means equities are taking a cue from that we saw that selloff, banks the worst performers, treasury yields in the drivers seat. Still remains stocks remain within that gravitational pull of yields the entire the curve from one month out is below 2 . The absolute levels matter a lot too. One thing the markets are dealing with, the leadup to an actual recession, however long that leadup is, looks a lot like a false alarm. If it looks like a recession scare globally it is hard to distinguish. If the trade standoff is kind of, you know, at a stand still, and we have to consider this just part of the backdrop, emerging market currencies continue to fall, it has that sense out there that activity is grinding slower. Well discuss a 48, 49 basis point spread and almost all of our guests will say doesnt mean anything it is simply a sign of the fact that you cannot get a yield anywhere in the world and that the money has to find a home, at least with a one in front of it. Thats true to a degree maybe it is foreiimportant to k two separate dots in line at the same time. It isnt meaningless but it doesnt mean everything. You go back to the mid2000s, people trying to write off the inversion then too that was suppressing yields on the long end. We didnt have negative yields what is different now, in a way, the fed is no longer tightening theyll be in theory moving against this inversion direction. Lets see if it holds true. Joining us at post nine, alan ruscan and brian levitt. How are you explaining the yield curve inversions across the curve to your clients . I think you hit the nail on the head the global backdrop is usually bullish. I think just a rush, people think that most Central Banks are going down to zero some already negative. The fed is perceived in the longer term i think as potentially going down to zero as well. Thats not a lot of stimulus in the package there. So i think people are just looking for duration and for yield. It is a global phenomenon. Im not one of the guests that david predicted he woulden have on the show today it is an ominous sign. Cycles end with policy mistakes and yield curves it doesnt mean this cycle has to end what it does mean is we need greater clarity on policy. The usual cycles end to michaels point with the fed raising shortterm Interest Rates above the ten year this time is different the fed is in an easing cycle, but as long as the uncertainty persists around trade and as long as business sentiment, business investment, new orders, all slow, the ten year is going to go along with that. What do we need here we need the fed to cut Interest Rates further, and we need clarity from the administration. Doesnt mean we need a trade deal tomorrow. Cant keep going on with businesses not understanding the rules of the game. Businesses dont understand the rules of the game, it is very hard to put investment into place and without investment into place, growth slows and yields go further. Are those the policy mistakes youre referring to or expecting further mistakes the fed made a policy mistake last year raising Interest Rates three times and what was still a largely slow growth, disinflationary world. Theyre backing off of that mistake. The administration regardless of what they want the ultimate outcome to be needs to provide clarity to the market. Protectionism, we all know, leads to inefficient economic outcomes, but it doesnt mean it is necessarily recessionary. It is when there is uncertainty that persists for a long time where you can really end up with a strong dollar, weaker earnings, and dare we say even a recession. I dont think well go there in election year. I think the administration will work to try and put a bottom in here and try to get rates back up again but the risks are rising to this cycle. Bonds have been such an amazing performer. I guess you have to wonder if mechanically people are going to say we had an overshoot to the downside in yields and that positioning will get so extreme in that area that if for no other reason, everybody is likely to buy might back off for a while. Any hint of that potentially some truth. What i tend to like to look for is the idea there is some selfcorrective mechanism in place. For example, bond yields have come off so sharply by more than 150 basis points, thats equivalent to net stimulus from the fed of twice that. Roughly 300 basis point cut from the Federal Reserve. That should feed through to the economy. That stimulus in terms of the economy taking hold and growth taking hold should feed back to bond yields. The problem i think of finding right now is that the bond stimulus is not really feeding through in a particularly meaningful way into the sectors that it should do. You look at housing, look at the a little weakness. Look at the refi numbers they spiked, but dont seem to be spiking into the netherland we have seen before. Im concerned youre not getting the refi feeding through to the consumer a lot of things that suggest that there is not the same traction that you get from the bond yield side on to the economy. And on the stock market cnbc running a big headline that the s p dividend yield is below the now above the 30 year treasury yield for the First Time Since march 2009 during the depths of recession. I dont know if thats bullish or bearish for stocks. Youll need a catalyst for this trade now that were into change and i liken it to what wesaw i 2016 i keep coming back to that throws of a policy mistake, stronger dollar, tighter financial conditions and the fed backed off equities looked very attractive. Bond yields back up, people intrigued by the dividends in equity i think we can get back to an early 2016 environment but to come back to my point, well need to know the rules of the game. You said you think the administration has to work to get rates higher i heard you say that. Work to get a president tweets every week he wants rates to come down 100 basis points the short rates given the deflationary impulses on the economy now and the strength of the dollar need to come down what you would see on trade and better Economic Activity would be ten year rates backing up finally, alan, end of the month, we expected all this pension Fund Rebalancing given the outperformance ot right now. Is there any reason to think, september, october, will be different from what we saw in august not really. You look at september and october, you look at the events coming up, the brexit side, the tariffs that we likely to have implemented at the end of this month and beginning of next month, that clarity that were looking for in terms of u. S. China is not likely to be there. Hong kong lurks in the shadows i think you have enough global events that essentially will keep this thing rolling in terms of global yields suppressed. Thank you for joining us this morning. Thank you when we come back, peloton files to go public, despite what has been recent market volatility well look at the fitness bicycle maker and more than that, and plans to go public here is one more look at futures. Were going to get started with trading here about 18 or so minutes from now you see we are set up for a slightly lower open. Were off the lows at least this point on the futures more squawk on the street straight ahead really . [horn honks] man this is what i feel like when i wear regular shoes, cramped and uncomfortable. We can arrange a little upgrade. Which is why i wear skechers. Wide fit shoes. They have extra room throughout. Theyre like a luxury ride for my feet. Try skechers wide fit shoes. I want to ride my bicycle, bicycle bicycle peloton filed to go public the move coming in what has been an eventful year for ipos. Yo beyond meat, led the top performers, up 500 since it debuted back in may. And we had a couple of others. Uber didnt do particularly well lyft maybe not as well as it had hoped. Leslie picker has the details on the peloton ipo. Not surprised to get this. An Important Company and probably very well followed or closely followed ipo to come. They filed confidentially in june we know what the contents of that 200 page prospectus is. Investors are assessing the fitness a Public Company losses quadrupled over the same period Digging Deeper into the financials, though, peloton makes the bulk of the revenue from selling fitness perfects. They dont break out how much comes from the bike versus the treadmill other than to say a sigma majorinificant majority cm the bike about one fifth of the revenue comes from selling 39 a month subscriptions. That allows users to tap into their live or on demand workout classes from home. Peloton says they have about half a million subscribers with triple the number of members this will be considered by investors as they model out a price theyre willing to pay for peloton shares in a die beebut come as early as next month. They say on page three their technology, media, Software Product experience fitness design retail apparel and l logistics company, the decision to be a company that does all of those things was, quote, against prevailing conventional wisdom that by countless Investor Conference rooms full of very smart skeptics, its private investors dont appear too skeptical. Peloton valued at 4 billion and reportedly seeking twice that valuation in the ipo it is worth noting, comcast is an investor in peloton it is only 20 right now. But i would assume that they are going to make the case it will become a larger percentage of the revenues, the reoccurring nature of that is something you may be willing to pay a higher multiple for. Certainly it makes sense once you buy the product, youll buy the Subscription Service on top of the product. Gross margins for the products as well as the services, the subscription, were almost equivalent, 43 for each of those in 2019. Thats changed over time it has gone up for the product for the subscription i was surprised to see they were equivalent that has to do with the idea that the company is vertically integrated and they do control the entire end to End Experience they dont have to outsource manufacturing of the product or marketing of the product or delivery of the product or anything like that. One risk factor was interesting, it relates to our conversations every day, theyre exposed to tariffs they have been hurt by the tariffs already in place u. S. Rates on specified products from china see that as a risk it could continue and have a Material Impact on gross marriage pz. Are the bikes made in china. The wonts acomponents are mn china. It is interesting, you mentioned the timing and what we have seen over the last few weeks with volatility and how the market seems to react and punish certain stocks that are more exposed to the tariffs and reward stocks that arent as exposed to the tariffs given the nature of the tweets and news cycle and all that, it is interesting that peloton given manufacturing in china that they have exposure to debut in this environment. I wonder if the bulls invoke roku device, a trojan horse for a Subscription Service and well be a content provider there after. This is an interesting question you could invoke a roku, they have the hardware, they have the Software Component you dont see it quite as frequently peloton on top of that has the this fitness component, they create their own content, which is a whole different ball game in terms of how you value and assess a company it is interesting. It is worth noting, the ceo talks about endoefrphins and endorphins make people happy exercise makes us feel good simple science. He hoped you got it. I did not credit legally blonde in that letter, but for those, you know who memorized that movie like all of us. May have picked up on that line as we count you down to at opening bell, futures right now. Seeing a bit of a recovery, futures down 52 with about 11 minutes until the open more squawk on the street from the post nine at the nyse when we return. On a scale of one to five . Wait. One to five . When it comes to feelings, its more like five million. Theres everything from happy to extremely happy. Theres also angry. Im really angry, clive actually, really angry. Thank you. And seat 36b angry. Youre clive owen. And youre barefoot. Yeah. Theres also apprehension. Regret. Relief. Oh and theres empathy. Ah, i got this in zurich actually, whats the opposite of empathy . But what if your business could understand what your customers are feeling. And then do something about it. You can turn disappointment into gratitude. Clive, you got to try this. I cant im working. Turn problems into opportunities. Thanks drone. Change the future of your business. Change the whole experience. Alright who wants to go again . I do i do i have a really good feeling about this. A look at our futures. You see we are headed for what appears to be a lower open this morning. Were going to get that open a little less than eight minutes from now stay with us on squawk on the re. Stet through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Oh, wow. You two are going to have such a great trip. Thanks to you, we will. This is why voya helps reach todays goals. All while helping you to and through retirement. Can you help with these . Were more of the plan, invest and protect kind of help. Voya. Helping you to and through retirement. We got a little less than five minutes before we get started with trading here. Lets bring in ken yny pulkari what are you watching this morning . We talked about this on friday, the path of resistance was lower. 2830 on the s p, which has been the lows we have tested three times since this august correction began im really looking at the 200 day on the s p, 2803, a number you want to see the s p to test. You want to see the test and hold, dont want to see it test and fail in my mind, based on everything that has gone around, all the geopolitical news, going to cause the market to kind of thrash around. It needs to test lower in order to find that support thats what im looking at. Wonder how youre reading the move in small caps, hit especially hard in august, down 7. 5 , first negative month in three and down sharply from their highs. Way more than the overall market. Thats confusing to me, that the small caps continue. It is interesting. On the down days, they get hit harder it is more the concern about them getting hit so hard on the down days im as confused as anyone the small caps are typically u. S. Centric names not exposed to the international markets, not exposed to the tariff wars and all that it is a little wit bit of a disconnect the small caps are the ones, the canary in the coal mine, telling you the u. S. Economy is going to be is weakening im not in that camp i still dont believe it i think some of the macro data is continues to be stronger than not im still believing that this is just a corrective phase within the longer term cycle. You mentioned 2830 in the s p 500. Were talking 2 to 3 of a cushion to the downside versus where we traded now. Got down to the 2830 level on the s p a couple of times this month. Do you take anything from the fact that the s p is holding above its recent lows, even as treasury yields hit new lows and the yield curve deepens into new lows that there is not as much sensitivity in stocks or stocks just on the edge of a cliff h e here. I think it is the latter. Dont want to give the sense there will be this crash coming. But i do think that the s p hasnt really recognized the broader concerns of the market the dow tested and failed a couple of times, though slightly the russell well below the dow transports well below. The nasdaq and olympic the only two have not tested to see i think the path of least res t resistance is lower and not in here s p will test it it is going to find support there. Im a believer there is support there and the broader conversation about the geopolitics and inverted yield curve is at the moment overdone. Meaning what exactly then i think so i think that i think well test lower, thrash around a little bit and as we move into year end, i think the market will rebalance and yield higher. Wont be significantly higher. Im thinking around 3,000 will be the year end target i think between new and then youll see us test lower, thrash around a little bit and move as we move into as we move into the end of the year. Kenny, thank you. Always appreciated always a pleasure ken yny polcari joining us. Just sort of fatigued and heavy, i think is a trading issue now. Watching the financials. Talk about one area that is not really been able to escape what the yeemds have been doi s hav yields have been doing, it is financials if it is going to bounce, it should happen soon. Might have to see yields bounce transports another one that had a rough day yesterday, down 3. 7 also down 16 from the highs people look at that group as a sensitive economic target. There is the opening bell here at the New York Stock Exchange you see the s p 500 real time exchange, lower open here at the big board, academy of nutrition and dietetics and sinclair, tennis channel u. S. Open has begun in the new york area in queens. Tiffany, we didnt get to it down a little less than 5 on the first trade in the press release they talked about continued strength in mainland china, tough comparisens versus last year. Weaker demand or head winds from demand from Foreign Tourists and disruptions in hong kong. Tiffany had a beat on the bottom line. That was driven by lower expenses cut Digital Marketing costs and some other sgna expenses you saw where the weakness was in sales much weaker than expected overall, down about 3 the weakness was in the americas, we knew they were suffering from decreased Tourist Spending and activity and that is what they highlighted up top. They still get hurt on currency. The numbers were down, but you did see double digit growth in places like china, numbers in japan were down, comps in europe were sharply lower if youre looking for a snapshot of how the Luxury Consumer is doing, it is not so great. If you look at the tiffany results. This was a stock already down double digits in the last few weeks into this report they still disappointed across the board. Doesnt paint a strong picture look at some of their subcategories, like engagement, down double digit. A lot of raw nerves that get struck with tiffany. Another one, silver prices up more than 25 since may. Thats when tiffany shares fell away as well from about 109 down to these levels. Not the only thing that matters. Probably matters less today than it used to used to be a swing factor. Thats in the helping either bright spot, Chinese Consumer of all things. It is interesting to see the lines with costco opening in china yesterday the c the trade war and the weakness in the chinese economy is not hurting American Companies maybe heavy big ticket items like theyre pretty good at saving and maybe Getting Better at spending autodesk this morning. A fairly strong performer, but its guidance is concern iing soe investors. Couple of quotes from the conference call. They said they began noticing changes in demand environments in various areas they serviced to the end of july they felt it is appropriate to adjust expectations for the remainder of the year. Central europe due to a slowdown in manufacturing, and, of course, china due to trade tensions but we should point out there is a company that changes Business Model a number of years ago and still going to put up Revenue Growth of 27 for the year but adjusting that fiscal 2020 guidance slightly down. I think it probably got caught up in this huge upmove in software in general. Business mix and Business Model different than the typical cloud software, peer Enterprise Software players architects and the engineers. More geared toward real world physical stuff that is getting built or not it may be a reflection to a certain extent of what we discussed here, pullback in terms of spending oreg the willingness to invest. It is not just riding a secular trend of Business Productivity it is linked to other things in the economy. It was an outperformer. Up almost 20 for the year the ceo will be on squawk alley. Well talk about client appetite and what it says on the flip side, hpe did raise the full year guidance mixed signals from this Enterprise Spending client skiddishness around trade and macro concerns i think that one was seen as actually a relief. Revenue did slide 7 year over year we know the business underlying has been pretty soft, servers down 12 , storage hardware, 5 taken as a good sign by wall street under eight times earnings. This is a deep valued legacy tech type stock. Relief is probably the word here it has been youll get a decent snapshot of t today. Squawk alley. We call it the 11. Youll get a decent snapshot given autodesk and hp. Also cautious comments earlier in the season from cisco and netapp and intel and how do you balance that with a quarter like we saw from sales force. What is the appetite right now for Enterprise Software spending and for Enterprise Spending in general given some of the head winds. Such a mixed picture you look at the business side of things look at the consumer i was going through the internals of Consumer Confidence numbers. The current Expectations Index of how americans are feeling about their situations right now. Highest level in 19 years. So balance that with some of the weaker signs big spread between that and what people say about the outlook. It is very widespread. A nice chart about that in closing bell yesterday during the santoli. Guys, market has taken a leg lower. You have the ten year below 145. Just at 145. Thats still the same dynamic, the stocks have tried to loosen that connection to a degree. Hasnt been fully successful did want to come back to yesterdays big story. The talks between Philip Morris international and altria, Philip Morris here in the u. S. , but called altria. It is a smaller company. Yesterday we got news of talks of an all stock merger of equals the market starts to react by sending shares higher. We were able to tell you, thats not the case they may be describing it as a merger of equals when it comes to the economics, it is not. Theyre basing it on the respected market caps of the Company Prior to the move in either stock before we started to at least hear some potential resu rumors of said deal. You watched altria shares plunge yesterday. Philip morris also down. This morning, shares as you see rebounding a bit altria continues down. This is a no premium, what theyre calling merger of equal s. There did seem to be good momentum behind it they were talking through the early part of the summer and picking up as that moved along the question is this going to be a company that together will be able to spend more on r d and compete in what or should i say innovate in what is a rapidly changing market given people are not expected or expected to stop smoking the traditional way in greater and greater numbers. Consumers are shifting to vaping and ecigarettes the cigarette sales are declining even further big deal between bats and ve rentals american i wonder if the 13 billion wiped off the market caps of the combined companies yesterday made a difference in terms of derailing those talks that were publicly revealed. They could have handled, im not sure in terms of it getting out and letting the market understand what they were doing. You need shareholder vote. Maybe some question if this trend continues. Not the greatest way to have your first day of trading when people are at least understanding publicly what it is youre trying to do. Also this there is u. S. Regulation there is always litigation around this industry and this sticking point, altria owns 35 of juul. Fascinating deal. No control whatsoever. No path to control either. Interesting given the premium they were paying. Also in that deal dpreed to not distribute any other evapor products and Philip Morris owns i coast i wonder if that is allowed within that i believe it is theyre talking about rolling it out here and globally. Thats a future product thats a key, right . The thinking behind the deal is that theyre going to need to spend more money on the next generation and the next generation. In terms of shareholder base, what theyre there for, harvest whatever declining business we have, and now put the companies togeth together now it is about investing. It is almost like, you know, legacy media sure you got to invest a ton, but not guaranteed anything on the other end. Right there is somewhat analogous to cbs and viacom, they worked together, separated and now coming back together, conceivab conceivably, in order to have more scale in a rapidly changing the core product is not bad for your health. Not like the overall world of consuming entertainment is going away no, it is not people are doing it in different ways theyre vaping their media these days bob pisani has more. Lets join him, bob . On the downside, again, trade wars, economic uncertain ty weighing on us, look at the global markets, were slowly getting out of august. Good to remind everybody generally down, small move up in the shanghai everybody is down 3 to 4 it is remarkable in august how down the markets are were down 3 , 4 . Shanghai, japan, germany, spain, doesnt matter everything is down 3 to 4 . We talked about the defensive dominance this month with utilities and reits up, Consumer Staples flat and all the cyclicals to the downside. Defensive, utilities and reits up, oil is up, oil is held steady in the mid50s. Oil stocks continue to drop in the last couple of weeks thats not a good sign banks flattish semis, good proxy for growth cyclicals in august. There is your big underperformers. And reits, Consumer Staples, utilities, generally to the upside overall sarah talking about tiffany. Important to point out how important the United States, the americas are it is about 40 of their sales their comp store sale numbers down japan is maybe 15 , down 3 there. Estimate was going to be the upside, europe, down 2 . Thats another 10 , 12 of the revenues generally disappointing across the board. Americas is the important one. Look at tiffanys, here is another sort of proxy for the trade wars big move to the upside, march and april, on hopes that this whole thing was kind of going to resolve itself somehow the minute we saw increased trade tradewarhe headlines, tiffany flat, up 2 for the year right now. On terms of trade wars, political encertainty going into september, there is a bull market argument that could be made jpmorgan tried this yesterday. The bull market playbook is based on more stable economic data, not just in the United States, we had it recently but over in europe in particular and china, thats a big call right now. More central bank easing, of course, and the most important thing is flattish earnings for q 3. Were seeing some industrials and materials move down a bit. Thats not a big surprise. Not a wholesale rush by Corporate America to dramatically lower the numbers flattish is the word we have been using for months now. So far still maintaining for q 3. This is go to be the key to how september acts overall right now, were sitting near the lows for the day, down 100 points in the dow. Bob, thank you. Speaking of yields, to the bond pits, Rick Santelli joins us from the cme group in chicago. Rick good morning, david guns hot in treasuries last several sessions everything but two year note yields, their cycle low is 147 on closing yield basis look at two day of 5s. You can see were lower in yield than we were yesterday yesterdays close was a cycle low. 30 year bonds, theyre down five basis points the previous cycle low 197. We shot under that yesterday by two. Down another four or five. We have seen a lot of movement in what is dmoen known as the ns over knob. 30 year bond trying to catch up in many ways i left the ten year out for a reason it is also guns hot. Trading at a fresh low yield for close for this move. It takes us all the way back to july of 2016 as this chart shows. What is interesting is here we are at 145, you lop off basically another ten basis points, were challenging a Double Bottom of july 2012 and 2016, which are the all time lows bunds, you know, bunds were diverging and im talking just a little bit lately. Treasury yields continue to plummet. Not only people nervous about a recession. At least as evidenced by signals that used to work regarding aversions. But that also prompted speculation. And it really has fueled almost leadership role as of late for u. S. Treasuries. And almost point out another issue, and that, of course, is this notion of banks is the transmission, we learned that in a crisis how are banks doing as we see . More negative rates, the ecb getting ready for more stimulus and thats being led in the cycle of central bank activity, cnbc talks about look at one week of the dollar index. It is continued to accelerate and remain close to 27 month highs. The dollar and the yuan, dollar continues to track higher as you see there. Back to very early 2008. Mike, back to you. Rick, thank you very much some more on todays movers in the opening half hour to Frank Holland the nasdaq coming off the third negative session in the past four, that trend continuing so far in the early part of the day. Costco biggest positive impact on the nasdaq 100 following that huge opening in china yesterday. Monster beverage shares trading higher fox b shares performing. With fox class a shares, negative now. Also trio of pharma stocks insight, amgen and regeneron a difficult start for tech intuit, broadcom and microsoft all off trading lower so far back over to you, sara. Frank, thank you very much. A headline hitting the wires as it relates to trade the u. S. Trade rep, the office and the administration that carries out the president s trade orders, does confirm it will publish friday that 10 to 15 tariff on the remaining 300 billion of chinese imports coming into this country it will go into effect september 1st and december 15th. The breakdown of that list remember, President Trump increased that rate from 10 to 15 last friday. Also, interestingly, the u. S. Trade rep slowed the 25 going to 30 , also what the president announced for october 1st on the prior 250 billion worth of imports. Theyll hold hearings on that to talk about the impact of that. Confirming a big part of what the president announced and what shook up the market, 10 to 15 on remaining 300 billion going into were not at ten yet. No, this is the consumer side at the end of the year well have 15 on 300 billion and 25 on 250 billion all imports from china under tariff. Good way to summarize it, yeah coming up, hewlettpackard enterprise bucking todays market downtrend well talk to the ceo. More squawk on the street, live from post nine. Dow down 30. The move in bonds has been front and center for investors just to show you how dramatic so far this year, i mean, the great rush into bonds has sent yields plunging we are looking at the lowest yields since back in july 2016 we did close below 140 then. That would be in rord eclow territory. Well be right back here from squawk on the street. It is a tale of two economies which for years favored the top. Its now flipping. Lets get more from robert franfran at headquarters. Good morning. For most much the past decade the wealthy consumer was the strongest and the working class lagged behind. Now the high end segments on real estate, retail, art and cars are the weakest and the walmart economy is the main driver of u. S. Growth. Luxury real estate having the worst year since the financial crisis sales of homes priced at 1. 5 million or more falling by 5 in the second kwaurds there is a threeyear supply of mansions and lux yuury homes. Retailers to the 1 of falling behind the mass retailers like walmart, costco and target barneys filing for bankruptcy earlier this month nordstroms posting three straight quarters of declines and Neiman Marcus seen the first sales drop in seven years. Art auctions are down between 10 and 20 this year. The annual pebble beach car auctions this month more than half the cars priced at one million or more failed to sell while cars priced at under 75,000, those sold for far more than the estimate. Spending by the 1 is now below 2017 levels. Its fallen during those two years. The share of total National Spending by the top 10 , that is falling, but the middle class consumers are picking up that slack. The top 10 still account for nearly half of all consumer outlays. As mark zandi of moodys rights, if high income coombs pull back any further on their spending it will be a significant threat to the economic expansion you were having that discussion about tiffany which falls in line with this although china was strong, u. S. Sales were weaker. Back to you. That is right robert, thank you. Interesting story there. Robert frank coming up, the ceos of hewlettpackard enterprise and autodesk, those stocks heading in oosppite directions on earnings news. Keep it here good morning and welcome back to squawk on the street. Im sara eisen here with david faber and Mike Santelli live from post 9 at the New York Stock Exchange Carl Quintanilla has the morning off. Taking a look at the markets, actually we have gone into positive territory on the dow and the s p after about a half an hour of light selling on the major averages you have groups like energy, Consumer Staples, health care, financials leading higher. The only two lower on the S P Technology and Communication Services we watch yields continue to make new lows, record lows for the 30 year our roadmap starts with that global yield story the fall recession fears rising does this signal more pain ahead for investors . Cashing in on cannabis. Cure a leaf is going to join us to discuss the latest quarter and the growth of the pot industry. Peloton filing for an ipo what to expect from the fitness tech company. First up, stocks next as we head towards the last trading day of august. Its been a wild month for stocks but should investors be expecting more pain in the months ahead mike, you have been taking a look at some of the monthend dynamics as we look to september. August was choppy as advertised there suchb a litt september, if seasonals continue to matter, definitely headwinds rig right now on average september has been negative about 1 on average since 1928 a small loss in terms of the percentage of years up or down in september, its a coin flip for the last 90 years or so, which obviously is below the average month of the year so if those things tend to matter and sometimes they do, at least in the backdrop, it shows you that the bulls have a little bit of a burden of proof the other things that i think matter is we have been in this very narrow choppy trading range in august. We have held above any kind of critical levels that would say that the overall uptrend is in jeopardy valuation is more subdued, below the fiveyear average as of this week so that shows you especially relative to where bond yields are, we should have some support for valuations as long as earnings dont fall apart. Sentiment i think has become very, very cautious, defensive, a little bit pessimistic if you look at investor surveys and positions and flows into bond funds. All of those things suggest you have the makings for some kind of a floor to be put in if the mack o macro numbers dont disappoint and will the fed give the markets with some traction with a cut. I mean, we are captive to bonds. If you look at the int a raday chart, you saw this pop at 10 00 a. M. Then the markets in positive territory i think a question for september, mike, is that very tight correlation going to still be intact . At what point, if any, does the equity market look at the stimulus that we get from those super low bond yields and say thats a good sign yeah, whether its for the u. S by the way, those highpaying dividend stocks. Whether its the employment number friday or just in general an upturn in the macro data, which you have seen the signs of globally, the beginning of the economic surprise index curling higher its not clear if in fact the bond market is really hearing it at this point or willing to price it energy is having a nice comeback boy, down 11 i think in the month of. Late yesterday we got a pop in oil prices and it rescued the overall market to a degree. We have that inverted yield curve still stoking recession fears. Joining us market investment strategist linsey bell and Rbc Capital Markets economist tom core cele. Tom, has the Economic Outlook changed materially throughout the last few weeks no, it really hasnt. I think a lot of the same fears that people were talking about even several months ago are being talked about today we are sympathetic to that, particularly from a manufacturing perspective. We are obviously seeing some signs of stress there and people keep asking us, look, if the next recession does come, what could it look like i think its a fair which of thinking about it. The 01 recession was business led. The consumer came through unscathed. I am not suggesting we are going to have a recession any time soon its not part of our base case not in the immediate term. If you want to understand what next recession could look like, thats probably a good starting point being cognizant of the idea that consumer is in incredible shape right now so i think thats sort of the but is that a lagging indicator . Is what so the single best leading indicator is jobless claims. They are so unheralded people just sort of their eyes gloss over when they hear this its better than anything. I will be very, very clear on this we have put hundreds of different variables into our model. They are telling us that the odds of a recession in the immediate term are toolly quite low. Linsey, what about the jouk look for earnings . If you look to 2020, 11 earnings per share growth for the s p 500. Of course, we think that that definitely has some risk in it, when you think about the tariffs that are going into place in the consumer goods items in september and later this year. That will impact some of those sectors. You have to think about the cyclical sectors like industrials and materials that have been dealing with tariffs for over a year now. Now they are cycling that. You heard Industrial Companies not sound as dire as you would have expected during the Second Quarter earnings season. Now that may all change when we get these new tariffs put in place and the economic environment in china continues to slow. But that is something we will definitely be watching. Tom, you know, one of the things that maybe gets lost in a lot of the conversation, you say clients are asking what kind of recession we may have, is there is a lot of room statistically between a recession, technically speaking, and like 3 growth that feels like we have great momentum. Yeah. Can we stay in that middle kind of disappointing soft zone for a while . Its a great question dont you feel like thats exactly what this entire recovery has been . This is the most hated economic recovery that i can remember yeah, i dont want to gloss over the risks. We get it. There are risks out there. But we have had a manufacturing recession. We had one in 2015 and again i think we have to just be cognizant of what are the sort of key drivers of Economic Activity. The key drivers almost always is the consumer let me be clear. I have heard countless arguments about consumers, how many times have i heard hours hours slowing is the thing really hours give you nothing but head fakes over history you can continue to grow to 2. 5 pace. We have not seen the tariff rates increase on the consumer its starting in september its culminating in december will that influence your rosy forecast so here is the unknown question to that where are those tariff increases going to be absorbed is it going to be passed through the consumer thats what the hasbro said yesterday. Most of the cryptocurreneos some of it. They are reluctant to say that, but they do. I think most of it that said, it doesnt amount to necessarily that large a number. Thats the thing. A couple of things one, they are not going to pass i think it will be difficult to pass all of it through. Thats a really important idea two, even if they did, what is it actually worth from a Growth Perspective in the United States i mean, again its really easy for people to say, hey, im really scared about these tariffs. Has anyone actually gone through the math to understand what its worth . Of course we have. And its really i think linsey may have also. I dont know. Its only worth a few tenths to growth. Tariffs in isolation from china into the u. S. Is literally worth threetenths to growth. Not only that the consumer, i was going to say the consumer has been resilient. You have seen Consumer Staples companies raising prices and passing that through even some of the industrial prices passing through on the tariffs. So the consumer has been resilient. I would expect them to remain somewhat so into 2020 as long as unploim is low, wages continue to grow above 3 . What about business sflechlt that is a key here it is not growing the way it was certainly. And we hear and i hear it firsthand, many ceos are stepping back drn. And the fed chairman is herring it. If you look at the Business Confidence numbers they say they are going to reduce Capital Spending in the next six months or so. Once they start cutting capex, they could potentially stop hiring thats where the biggest risk lies i believe. If i could make a last point. In the context of all of this, again because i think there are ideas that are being missed. One key idea is that look at private savings in the United States over the last year, year and a half private savings is up 1. 8 trillion. Excuse me. 1. 8 billion. 1. 8 trillion . Wow. Seriously, thank about that we are talking about tariffs again on the face tv, just 25 tariffs on everything, is worth 150 billion in the United States but weve actually sorry. 1. 8 trillion in increase in private savings over the course of the last year, year and a half where is that number being talked about why isnt that a mitigator to these tariffs in china i think thats something people dont appreciate. You are not worried about the Global Growth . The doll ser stronger. We are we are tighter than the rest of the world. The president complaints about it that weighs on of course, to the conversation we were talking about, it weighs on the capex picture. Capex is going to be challenged. The s p 500 is largely a businesstobusiness index, right . The consumer matters but in the scheme of things, its more a lever to Capital Spending and International Activity than the u. S. Economy is. And the other issue with when you think about s p 500 earnings and the business that they do is that the dollar, the strength of the dollar, 50 , almost 50 of sales in the s p 500 come from overseas so while we see Central Banks around the globe lowering their Interest Rates, becoming more accommodative, that does not bode well for the dollar here or for what the fed is going to have to do going forward. But it sounds like you boept are pretty optimistic. We will leave it there. Optimistic is relative. After all that . You were very optimistic. Define that as you want 2. 5 growth i think is pretty good. It feels pretty good given the last several years. Is that optimistic or what we should expect . Optimistic compared to other people who come on. Relative to expectations. Relative optimism thank you both very much. When we return the Worlds Largest Cannabis Company cure a leaf forecasting more growth ahead. The executive chairman is with us. As we head to break a look at the best performing stocks on the dow. Nike, trade sensitive, united health, election sensitive leading thwae y today. Squawk on the street will be right back dont go away. Stand up if your. Stand up if your. 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. The mini refinance boom may be going bust. A sudden refinancing surgery treating Mortgage Applications to purchase a new home are down from the Mortgage Bankers association. They say refinancing volume will be up 38 this year from last year with us the president and ceo of the Mortgage Bankers Association Robert brooks. Robert, give me a feel for the market here. You could imagine people who follow the tenyear yield see it plunging think what a great time to refinance, but its not always just about that. It is about conditions in the mortgage bond market as well are refinancing rates following sort of our broader retreat and yields yes, they are in fact, you mentioned that refinancing is down just a little bit week over week. But its 167 higher than at this point last year so almost, more than two and a half times rates are down about 1. 25 Percentage Points from the high in november of last year, and that can translate to about 2,200 a career in savings on a 250,000 mortgage. So its quite significant. It is are we seeing ma you migwhat yot expect given that potential savings . Are we seeing as the vroom of refinancings one might anticipate yes, at the Mortgage Bankers Association Members report volumes are at alltime highs in some cases lots of people are taking advantage of these rates it is a real opportunity to look the why you are mortgage, especially if you took it out in 2016 sorry, 2017 or 2018 because the rates were low in 2016, but they are now lower than they have been since 2016 so a good sign for activity that refinancings are up so much Mortgage Applications to fibuy o a new hope fell 4 last week why isnt that filtering through into people wanting to take advantage of low rates to buy . Thats a great question because with rates so low, we would expect to see purchase applications increase more they are up singledigit year over year, say 5 year over year, but there is a supply constraint there are not enough homes for sale, both new homes and existing homes, to meet the demand, and its especially difficult for firsttime home buyers where prices have gone up more quickly than they have in the Broader Market so were seeing a supply issue and, of course, some of the uncertainty over volatility in the market as well but given these low Interest Rates, we would expect to see the purchase applications increase more as well. Robert, we were watching tenyear treasury yield towards record lows, below 1. 5 . Does the sensitivity of Mortgage Rates to treasury yields change much at these very low levels . In other words, lets say treasurys continue to go down to 1 would it bring Mortgage Rates down in equivalent degree, or is tlg go to be a kind of stickiness there generally speaking, they would come down pretty much in lock step. You are right to point to the tenyear treasury as opposed to a figure that lot of people look at which is what is the fed doing with shortterm rates, which of course do not drive mortgages because its a longterm product. So the tenyear treasury is still a reliable indicator if it keeps dropping, Mortgage Rates will follow suit what about home prices . Whats the relationship there between how long it takes for rates to impact the overall price of homes, which in june i guess rose 3. 1 annually, but clearly there is a lag there. Yes i was just going to quote that 3. 1 figure because its actually a healthy thing that home price growth has slowed to a point where its about equal to what wage growth has been thats a good sustainable level. If its rising much faster than wages, then its unsustainable and can set ourselves up for a fall but seeing these home prices moderate to the 3 range is a good sign for the market. All right robert, appreciate your insight. Thank you for your time. Thanks for having me on. Meantime, Purdue Pharma offering to settle more than 2,000 opioid lawsuits for 10 to 12 billion. Meg with the very latest. Hey, that proposed settlement would wrap up a massive set of cases tweens purdue parma and the Sackler Family that owns it. That 10 to 12 billion settlement would entail purdue filing for bankruptcy and restructuring as a trust the company would donate 4 billion in drugs, including those to help treat addiction. The Sackler Family would pay at least 3 billion whats notable here is that the settlement potentially would be with both states as well as cities and counties marking a possible step towards a global settlement for all of the outstanding litigations seeking to hold the drug industry accountable for the opioid el paso there a epidemic there are a thousand cases across the u. S. , from cities and counties they have been consolidated into a huge federal case in ohio the judge is pushing for a global settlement with all parties. It hadnt been clear that states would come to the table. Of course, guys, the news comes on the heels of johnson and johnsons loss in oklahoma after which j j said they would consider a settlement in the Ohio Consolidated cases. The thought is what does this settlement do for all of the parties potentially involved guys i know we have to focus on all of the parties it is extraordinary when you think about the maker of oxycontin going out of business, the Sackler Family well, i dont know how much of their net worth is going to go towards this they have become pariahs, havent they, in the broader world, in the fill an tropical world, which they were a big part of as well . Yeah, absolutely. This would be a way for the Sackler Family to dissowsia yat itself from the opioid crisis, becoming not affiliated with them anymore, potentially selling munddy pharma, another set of pharmacies that work in this area and giving some of the proceeds to that settlement. So for the sacklers probably thinking lets be done with this as you say, some people dont think thats enough. I think forbes estimates their net worth at 13 billion if they are paying three to four and a half billion, you know, people wonder is that enough and is that enough for Purdue Pharma is another question analysts are raising this morning. The markets are hashing out what it means for those publicly traded companies that might have their liabilities change based on those cases meg, thanks a lot. When we come back curaleaf executive chairman with us discussing his companys latest quarter and where the pot industry goes from here. Squawk on the street back after this indistinguishable muttering that was awful. Why are you so good at this . Had a coach in high school. Really helped me up my game. I had a coach. Math. Ooh. So, why dont traders have coaches . Who says they dont . Coach mcadoo you know, at td ameritrade, we offer free access to coaches and a full education curriculum just to help you improve your skills. Boom mad skills. Education to take your trading to the next level. 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We had revenue of 55 million this quarter, up about 35 on the last quarter we have had consecutive annual growth rates of over 300 . This year will be another 300 growth year for us next year we expect to do over 1. 2 billion in revenue. The most important thing about this quarter, we turned profitable on a ebitda basis most incremental dollars will flow to the bottom lin we expect to finish positive on the ebitda line. Next year one to 1. 2 million in revenue with a 100 million ebitda line and will be profitable. Thats a big milestone. So you have done so many acquisitions, notably sect and grassroots talk about how much of your business is the products that you are making, the Skin Care Products you also operate retail locations, dispensaries. How does it break down our business is broken down into wellness product range, just cure a leave. Thats between the Legal Business where we sell to big box retailers in the country we have come up with the new skin care product we launched in judgment thats going very well for us we also have the wellness cannabis products sold through our dispensaries around the country. We also have the adult use brand which we bought select which we are now distributing which is being disbutinaed on the west coast. After the merger it will be distributed nationwide. We havent talked to you since you ran into some issues with the fda charging you with misleading marketing how are you doing with that . The biggest problem the industry has is there isnt enough transparency and regulation so the fda, what we had is we had Congress Pass President Trump signed the hemp law december of last year. The fda started hearings in april. They came out with some recommendations after that, but they havent come out with their regulation for the cbd market. So its difficult to understand what you can or cant do in in o in in our case it was the company had thirdparty research on the websites, for instance, National Institutes of health because we like to educate our customers. The fda took issue with that we took that off it was a 24hour issue we no longer have any of those thirdparty links to Research Reports about what the benefits of cbd are h. How can consumers get better educated we are hoping they will work on regulation. The industry can be transparent about what it is that we are selling. Today we cant say anything. How do you view the Competitive Landscape . Philip morris and chronos, 45 which is owned by altria they are talking about innovation as to one of the reasons they want to get together do they become a powerhouse down the road absolutely. I think you will see the big alcohol companies, the big cigarette companies, consumer goods brands, Drinks Companies will get involved. I think they will all be there in canada its federally legal, so they can all invest in Canadian Companies the u. S. , which is a bigger market, they cant at the moment the u. S. Companies are going if alone they are building their own product ranges once we get movement out of congress and the president maybe in the next 12 to 18 months we hope that we will start to see them invest that would be the big we have no sense at this point in terms of a legislative calendar that there is going to be any point i think the last time i was on i said we are in a funny season with the elections and i think it will be difficult to get anything through congress during that. Period of time. A surprise by trump before the elections if he is running behind and he thinks he can get the Millennial Vote by rescheduling cannabis, which he can do with the sign of a pen. He doesnt need congress, actually, to reschedule. But we doubt it. Its not really an issue that the administration has jumped on we think it will be after the president ial election. As proi jekt to where this industry will get, you mentioned it kind of seems like a combination of agricultural product piece of it, which is kind of a commodity, and then personal care brands and some Beverage Consumables as an investor, for all the excitement how this this is a new industry and we will get legalization and the rest of it, those dont suggest massive growth over the very long term, those exact categories what are your expectations i think this is like most companies if you look at even starbucks in the 1980s a lot of companies had vertical integration. They owned the coffee beans. Today they dont, right. They just produce the product, brand it and sell it through the retail pipe. I think you will see the same thing in cannabis. The farming side of it will go off to the agricultural world. They are going to be doing that. And then the brands will get bought by Large Consumer companies or you will see hopefully some survivors afrom cannabis that are stand alone brands in the market thats how i see it developing. A question with the wellness products how do you establish yourself as a brand in nase ent country when the customers dont know how to distinguish ybetwee you and your competitors and who is legitimate and regulations and cracking down. Size and Balance Sheet and marketing dollars matter this is an industry unlike the cannabis industry where you didnt have to market because people came to you in the wellness area in cbd its just like any big product. You have to compete against other companies. So there its about marketing dollars. Its about presence. Its about how you present your product. I think that in that part of the segment we are competing with everyone else. Whats good though is the big players havent gotten involved. The big consumer companies, cosmetic companies have not gotten involved with cbd which gives us a head start by getting our brands out in big box retailers why not its new my prediction is they will be there in 12 months. Thank you. To sue herera for a cnbc update at this hour. Good morning. Heres whats happening at this hour everyone. The u. K. s parliament will be suspended in september just days after mps return to work and a few weeks before the brexit deadline Prime Minister Boris Johnson asked the queen for the suspension measure the move limits the time for those who are opposed to a hard brexit as a result of that, Opposition Leader Jeremy Corbyn opposed the move calling it a, quote, smashandgrab on our democracy. Deutsche bank told a federal Appeals Court overnight it was in possession of tax returns belonging to President Trump, his family, and his Business Associates the Appeals Court did not say when it plans to announce its decision regarding the public release of those tax returns. Australia has completed laying under sea cable bringing highspeed internet the Solomon Island and pap away new guinea struck deals with huawei to lay that cable chinas first costco announced a 2,000customer limit. You heard that correctly on the shanghai store. That store was forced to close early on its first day due to intense crowds the store apologized to the customers for the early closure. You are up to date thats the news update this hour guys, ill send it back to you david. Thank you, sue. When we come back right here a roku ride for shares of tiffany after the Company Reported a mixed quarter you can see a positive reaction. We are going to dig through the numbers when squawk on the re tus. Stetrern rodney you know what my favorite part really is is when i greet students when they come in. Because i know what great things we have in store in the classroom. Marisa when they come into my classroom, theyre able to really get in touch with who they are. Rosanne my favorite part of teaching has always been this opportunity to make a difference. Ever every student has the right to quality education. No matter what neighborhood you live in. Rosanne we are cta. Ever we are cta. Marisa we are cta. Narrator because we know quality Public Schools make a better california for all of us. Take a look at shares of tiffany. They have done a turnaround this morning. Beating on earnings but missing on revenue estimates the company did get a boost from strong china numbers saying doubledigit growth there despite the on going trade tensions what is being embraced by wall street that bottom line the better expense control, better sg a control, lower Digital Marketing spending being rewarded also its known that taures spending has been hurt in this yank country. The top line misses across the board, i mean, i think a top line beat would have been a better quality clearly,the market has already priced that in europe down two. Japan worse down three asia pack was better up one. We did see last week with some of these real beaten down Retail Stocks they almost any glimmer was okay at least for an initial bounce. Nordstrom is another name that was not a particularly good quarter. To your point, down so sharply prior to reporting that it went up. Exactly. The Broader Market, we are at the highs of the morning. Dow up 73 points its been waffling around a little bit we are joined by ubs floor director art kashen. We have been tracking the yields any sign that there is any change in that relationship or what sort of levels or triggers are we looking at right now . There was some hint that the connectivity was bringing down yesterday. Then it came back and reasserted itself later in the day. I think they are trying to figure out where they want to go you get the sense, as you discussed earlier this morning, that the temptation is to think we are going to retest some of the recent lows anyway that wouldnt be a healthy thing for the market the twitter account has been quiet you are speaking too soon we have we got one our Federal Reserve cannot mentally keep up with the competition other countries. At the g7 in france all the other lead derse were giddy. Germany is actually getting paid to borrow money. Zero interest plus no clue fed. That kind of tweet is relatively harmless. He can abuse the fed all he wants. What spooks the markets is if he gets into trade talk again so if there were any further weakness, i would be watching the area down around 2834 and finally 2822 if we test or come close to that and hold, i think that will give the market a sense that they cleared another hurdle and maybe we can get back to an honest rally. We are kind of skirting this sort of decision point, you guess, in terms of the trading range. I mean, the president s tweet, yes, a reiteration of the case he is trying to build towards the fed for a while now. We are in this threeweek window before the fed actually meets. What do you think is baked in, not just for what the fed is going to do, about you whether they can sort of get ahead of this cycle that we have had here of they cut and the market asks for a lot more the market is asking for a lot more going in. Yeah. And you have heard several economists here on this network say that they really should do a 50 percentage point move that would help the yield curve. Then they could back off for a while. But im not sure they are quite ready, willing, and able to do that certainly after dudleys mildly inflammatory oped, things are heated up there a little bit but i think that as long as we stay away from the trade wars and whatnot, the market can kind of build on itself here and well see. The fed, im assuming its going to be 25 basis points and we are still data dependent and we go from there so i think the market will express a mild disappointment in that there is nothing else they can do i would be careful, however. I believe the ecb is going to be meeting before the fed does. And if they want to do some shock and horror before miss lagarde comes in, that could sthap what powell and the team will have to do then. Im glad you brought up the dudley oped a pretty unusual thing the fed had to respond in a statement that they dont make policy off politics. But the point at the former new york fed president , that he made, that the pedestrian it the fed would be enabling the president in his trade war, his trade fight to ramp up tariffs and make that kind of trade policy by lowering Interest Rates in a seemingly pretty Strong Economy do you think that razenates on wa resonates on wall street i think he began with an attempt to defend the fed and trying to keep that separation out there, but i think in building his case he left himself open to not only saying dont operate on the president ial politics, but almost saying dont help this guy get reelected. Yeah, that last paragraph was a little partisan. Thats what got a lot of people excited but i think were past that now. I would keep an eye on the ecb as we get closer to the meeting. Will do, art. Thank you. On the president s tweet, guys, i think its important to note that the fed does not compete with other Central Banks. Its got a dual mandate, right, for price stability and maximum employment as far as the fed members say, and Steve Liesman interviewed a number of them at jackson hole, asked every single one this notion of, do you have to match stabs to the bottom . Do you have to compete with them because our dollar is stronger and they have lower rates and apparently they are giddy about it they said, no, thats not what we do. We make policy for the u. S the u. S. Consumer is in good shape. We are taking insurance by cutting rates. Thats their fstory. Its hard to believe they would be giddy about the fact can you imagine yeah. When we return, no spin here. Highend Fitness Company peloton getting set for the public debut. We have the details. Crude Oil Moving Higher after the Energy Department reported a bigger drop in weekly inventories. Crudes up almost 3 squawk on the street will be right back are we supposed to dance . Boy bands without dancing are just ok. Get a better than just ok unlimited plan with spotify premium included on americas best network. Only from at t more for your thing. Thats our thing. One wall street bear says the markets are facing a makeorbreak moment find out what he is watching on tradingnation. Cnbc. Com more squawk on the street is coming up. 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. Down near the morning hours. The cme group in chicago, Rick Santelli with the santelli exchange. Thanks, mike. If there is a beacon for the fixed income sector, this is the man. Jim grant of grants Interest Rate observer, lets get right into it. I dont know listen, i dont mind the president yakking about the fed as long as he doesnt make policies or do anything crazy directly to the fed. The latest tweet, he is envious of the ecb and european Central Banks. That is way out there in the fat tail range of logic. Your comment well, i think he is talking his book as a former leverage real estate speculator indeed, if that were the case, you would want the ecb on your side well, the problem with the ecb on the side of somebody who wants to borrow money cheap is that in the end really many borrowers dont get fantastic rates. What they get is nasty returns on large quantities of paper that they are looking too keep quote unquote safe oh, yes, indeed this word safe is kind of a puzzle you see it a lot modifying the word government and then bonds as if there is something intrinsically safe about a bond less than maturity confused on the application of his word safe. You know, right now everybody is preoccupied with the yield curve. Of course, at some point there will be a recession. But what i think about is this notion that if the lower more negative rates go, that sparks an attitude to buy more, that pushes them lower, even more negative isnt that exactly whats going on in u. S. Rates and it says far less about the economy than it does about that dynamic . I think its true i think that lower rates beget still lower rates and radical policy begets more radical policy thats the way its been for ten years. Im not sure where it ends i guess it ends with a tweet but it will be interesting to watch. You know, and thats the key. All traders really want to know is exactly how it ends everybody thinks its going to end really poorly. Yet three decades later japan is still manipulating and i havent seen any major rocky knockout punches, just a slow dwindle is that the model for the globe . I think the tempo for the globe is faster. Everything about china is, as they say in the chicago symphony orchestra, adiago. I think the monetary drama ends with a higher gold price thats my firm and perhaps predictable idea, rick all right and finally, i guess the last point i want to make, were always preoccupied with currency manipulation why is it we speak so rarely of the asset price manipulation you referenced in your letter with the ecb, the bank of japan and the Swiss National you have 30 seconds. Talk about how bad that is. Let us not forget blackrock, which is pressing the ecb and now common stocks, failing to actually give money to the citizens of the eurozone we have suggested what they ought to do is give people kind of a Gift Certificate for blackrock mutual funds thats probably the more desirable way of manipulating asset prices in the modern age nobody seems to be standing up for the price mechanism. Rick, let us join hands and affirm our loyalty to the price mechanism. Absolutely jim grant, without market signals nobody knows where theyre at on the map of pricing. Thank you for your time today. David faber back to you. Okay, thank you mr. Santelli. Now time to send it over to jon fortt so we can get a look at whats coming up on squawk alley. Two earnings, two significant stock moves, both called out trade tensions, macro uncertainty, Hp Enterprises up about 3 , autodesk is down about 10 weve got both ceos and insights into what this means for the markets coming up on squawk alley. 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The Company Bringing in almost a billion dollars in revenue in the year through june, doubling its figures. The company did report widening losses as well jumping to a 245. 7 million from a net loss of around 50 million the prior year we should note cnbc parent Comcast Universal is an investor in peltoton explosive growth. From leslies report, obviously having read through the s1 only 20 from the subscription fee you would expect that to rise over time. Also interesting that the margins from the actual bicycle are as high as the margins from subscriptions, you want to put these things in, get the install base and then ramp up the subscription part of the service. Youre going to get a higher multiple on that typically and the recurring revenue that occurs from that. I do wonder how investors are going to try to calculate the real Addressable Market here i mean, are they going to be observing a lot of fitness club memberships, just how many people are going to be able to pay up for these its expensive. Bicycles exactly. So probably it needs to get away from this idea that its sort of a niche fad, elite type product and service, and i think that i probably, you know, have gone pretty far in that direction with how much theyve grown already. The ultimate size of the market is going to dictate whether this is a company that you feel like is on a firm path, that has multiple years of growth easily ahead of it or kind of asking what the next act is from the beginning. Here was a key line according to our research they say the total Addressable Market is 67 million households, 45 million in the u. S they estimate 52 million households are interested in learning more about our connected fitness products without seeing the price yeah, i mean, bike, what does the bike cost . In theory. 2,000 2,000 bucks right and even more for the treadmill. Yeah. The Subscription Service. 39 bucks a month, yeah. The dow is actually pretty much at the highs of the morning up about 138 right now we did see a bounce around 10 00 a. M. , yields did start to lift a bit, the s p 500 up 4 10 of 1 . 2880, and the nasdaq is kind of trailing behind a ril bit helitt here we did see a move up in crude oil prices 5630 after we got some Inventory Data it seems like another bounce attempt here as we sort of kind of whip saw around this range for most of august. Hard to pin it to any specific trade headlines or anything like that. It didnt seem like a news item. The bond yields did come off their lows as youve been stating that relationship is still intact you wonder, are we in any kind of period where the month end woshs a works are starting to come through . In theory we should be. Weve had such out performance in bonds than stocks ive seen some calculations of pension Fund Rebalancing should be over 10 billion out of bonds into stocks. Not a huge number in terms of the overall market, but it creates an excuse for a little bit of an idea that you have some reversion to the mean in how much stocks have lagged. Battered Energy Leading the charge today, oil prices doing nicely after that Inventory Data, also that group was down 11 going into today for august. When we return, shares of autodesk are plunging on trade concerns, the outlook that company gave well speak to the companys ceo next on the quarter. Squawk alley is coming up. Dont go away. Dows up 118. Good morning, it is 11 00 a. M. At peloton headquarters in new york city. 11 00 a. M. On wall street, squawk alley is live good wednesday morning, welcome to squawk alley, im jon fortt with sara eisen and leslie picker live from here at the New York Stock Exchange. Carl and morgan have the morning off. Left me all alone, but i got a good pair. Not all