Transcripts For CNBC Squawk Box 20240714

And then in europe youre going to see equity futures there also to the upside this morning, gains across the board of better than 1 . Its up a third of a percent and stocks in italy up by 1. 5 breaking news happening moments ago, hong kong leader has now announced the official withdrawal of the extradition bill that sparked months of mass protests there its one of five demands including universal suffrage in the citys elections it sparked a late night rally in hong kong with stocks closing higher by nearly 4 youre looking at the stock chart right there. A loif report from hong kong in a couple of minutes. The other big global story is a political Crisis Brewing in the u. K. He joins us to explain the situation to app american audience that isnt necessarily familiar with the parliamentary procedure. This is not for me this is not for me this is for certain individuals that may not understand what is going on there but go slowly just in case i want to pick up a few of the nuisances and whats happening. Okay. So for two years teresa mays government tried to find a deal so the u. K. Could leave in march. She did find a deal but parliament rejected the deal and extended the deadline from march through to the end of october. Teresa may eventually resigned and Boris Johnson took over as Prime Minister yesterday, parliament came back from its summer break and because hes trying to suspend Parliament Next Week for five weeks getting closer and closer to the october deadline, parliament rushed through a emergency debate to take control of its own schedule. Today the schedule normally controlled by the government today theyll introduce legislation that will seek to block the possibility of a no deal brexit. Boris johnson wants to have that possibility because he thinks that will force the European Union to make concessions because of the economic damage from a no deal brexit but now he wants an election. The problem is he lost his governing majority in the house of commons because one of the Party Members defected to the opposition now he has the majority and hes in power and not in control which means he cant hold the election unless they allow him to they wont allow that to happen until this passes through parliament successfully. I got it. The whole notion is interesting. He doesnt want a no deal brexit he just wants to be able to negotiate the terms of the no deal brexit but when you tell people in the eu, im going to pretend were going to have a no deal but im trying to put pressure on you to give me some things that you want, i dont know, the whole thing seems like a dance and im not sure what finally happened but thank you for the explainer. I was taking notes as i always said, all of our friends in the u. K. Are going to love this but we have copies of the constitution, do you know what i mean . We have xerox them although thats an old term. Send it over. I dont think we would charge that much if theyd like to see how things should be done and adopt our form of government over there and we could all be on the same page tell me italy wouldnt do a little bit better instead of having 16 leaders in 14 months. Pasta is so good. Youre right. Youre right and france. Who cares about all of that other stuff with those rich creamy sauces. Right . Get your priorities straight. You got to get your priorities straight. The wine, Everything Else. How many pages is the constitution i mean in current bring it in and give it to boris. Another big driver for the markets. A long weekend over the Labor Day Weekend in which we saw escalation by the u. S. Side and retaliation by the chinese side. The president tweeting out this yesterday saying that were doing very well in our negotiations from china. Hes sure that china would love to weight him out and deal with another administration and if they do, he said if he wins the deal would get much tougher for the chinese. Meanwhile, chinas supply chain will crumble and businesses, jobs and money will be gone. Later in the day yesterday we got the ism manufacturing number sinking to 49. 1 signaling a contraction in the Manufacturing Sector may be underway we saw a response to that from jay timmons. Hes the head of the National Association of manufacturers manufacturers have also warned the trade uncertainty would effect our industry. Heres what manufacturers need the trade deal, turn the trade war with china into a trade deal with china and reauthorize the Exportimport Bank so the manufacturers there suggesting theres global slowing going on but also saying they want to turn this trade war with china into a trade deal with china as they watch whats happening in the Manufacturing Sector, guys the political challenge now for the president based on that ism number from president is that the president has said the entire purpose of this trade war is to defend American Manufacturing. If thats contracting anyway, the president has to now explain to voters and to investors around the world why that is happening even though hes taking the steps that hes taking right now to defend American Manufacturing. Its shorttermlongterm although we dont know what the longterm is going to be. The president said again and again in the longterm, American Manufacturing will be better for this in the shortterm he acknowledges there may be pain for americans although he says theres going to be more for the chinese. But he seems to be willing to tolerate that pain for now. Thats tail on the dog, chicken and egg. I got a lot of them. We cant necessarily be blamed for all the economic weakness in the rest of the globe, or can we the rest of the economies were pretty slow. They had negative Interest Rates. Maybe you can point it back as well. This ism number, the manufacturing, its really due to just global slowing. Right. And then the critics said well look the global slowing is due to the trade war. Right. So which came first i go back to nixon when all of this started if you really want to know nixon resigned and sort of disgrace. Sort of disgrace. Well, in hindsight, seriously. Ive seen worse. So nixon is what . Maybe we have. Nixon went to china, you know, speaking of china. He did. Did a lot of good things he had a cute dog, checkers. So then you go to jimmy carter and jimmy carter is oh my god, what happened and then you bring in reagan. Lets not go through all of this stuff. You werent around for half of it i dont think even though you have that wising gray hair. Im dying the gray in. Some people would say that president obama benefitted from some of the mistakes george bush and then how do you explain trump getting elected . Seriously. Thats a really good question, joe. Do you know what, every once in awhile, i like that heres the thing and what the president says about this is that hes dealing with all the legacy of all of those president s that you just mentioned. They got us into this hole in terms of manufacturing and the Industrial Base and chinas ascension and didnt do anything about it for decades and decades. He says hes the president that finally has to deal with it. He joked, right he looked up to heaven and said im the chosen one i have to deal with this but hes serious what he means is generationally this has fallen in his lap its a problem he has to deal with. Well, its amazing that theres still support. I think theres a majority of support for dealing with china. Its amazing. Anyway, all right joining us now theyre not all distinct appearances and the last three or four times you have been on have you evolved in your view of what investors should be doing now. We came into this year with a strong risk on bias and globally large, small, u. S. And nonu. S. Em commodity credits and in reaction to what we thought was the market going too far in the sell off in the Fourth Quarter that we were not expecting recession. Were expecting soft landing cat liez the fed moving to much more dovish Monetary Policy and strong stimulus in china we have been dialing back that risk exposure as the year has gone on as markets are rallied and by the end of june coming into the Third Quarter we went to neutral at the overall market beta or market exposure level focussing on areas where we saw good value but not wanting to take significant directional risk the s p was up about 20 over 17 times forward earnings we felt valuations fully and probably more than reflected good news that could come out. We wanted to see earnings and resolutions of the tail risks that were coming up. Trade, brexit, et cetera. Where does that leave us then were still neutral at the overall directional level. Theres more of the same to come in terms of volatility were not going to get clarity on corporate earnings on the path of Economic Growth. Our base case is still the soft landing but we need to see more evidence of it and we need to see the resolution of the geopolitical tail risks. We got good news overnight it takes an external stressor off of the talks i dont think they wanted to tie in issues around hong kong and impressive response. Take a harder line. Then wed have to take a harder line. It reduces our freedom of negotiation. So this opens the door for continued discussions. Some opportunity for compromise and the same time as the president continues to be very aggressive on the trade front which is why we think theres more volatility to come before we get greater clarity is that really what people are in the streets for at this point . I know. They have their five. Yeah. Deep down its overall thats the point. Overall arab springtype freedom. Apparently theres some people from Mainland China joining in and hong kong and if that spreads, who knows. From the chinese perspective, i understand from the American Perspective it doesnt put us in a difficult position where we have to take hard lines that we may not want to take from the chinese perspective maybe theyll be less willing to give on certain fronts because they feel like we dont have anything. One of them is direct democracy. Thats unlikely to be realized or satisfied looking for an opportunity to return to normal the thinking here is that this gives the Chinese Government a card to say look were trying to get things back to normal. Protestors go back to school. Its what the Business Community wants around the globe. Indeed. The soft landing, so thats in the bag were still confident but theres still risk to it our view is that the u. S. Was going to go to trend line growth thats 2 ish per year and thats where we appear to be for the Third Quarter. Thats where we have been first or Second Quarter of this year the Manufacturing Sector, we saw it overnight and you just talk about them and at the same time, the consumer is extremely strong employment levels where they are. Thats 70 of this economy as long as the consumer is employed wages are ticking up its hard for the u. S. Economy to go into recession. The most important statics are the jobs and Employment Statistics and were get more information on friday. Next time, bring in some milk or ice cream thats not you its cheese and ice cream from wisconsin, minnesota, thats my homeland not in my family though. My son is lactose intolerant. Really . The pain, right we figured it out. What do you do . Soy . We do soy and almond milk and sorbet rather than ice cream we do a little pizza what can happen do you grow out of that eventually were hoping he hes hoping he grows out of it but i dont know a lot of people dont. And twins. And only one. And not you. Not you. Im surprised quite frankly. With all my other problems. Were watching shares of google this morning take a look right now because the company is the target of a new u. S. Antitrust probe by more than 30 state attorneys general. Now that investigation will be formally announced next week this coming according to reuters. The probe is focused on privacy and antitrust issues. Google said it is cooperating with that investigation. Still to come this morning, tracking dorian, the new the now category 2 hurricane is beginning to lash the florida coast with winds and heavy rain. Well get you up to speed on the storm, next. And later, guest host sam zell sounds off on Interest Rates, the markets, the biggest hot button issues on business. Right now lets take a look at the biggest premarket winners and losers in the dow. Wcau meteorologist is zwr n joining us now with more. Good morning. What were looking at is a powerful storm along the east coast parallel to the florida coastline. The latest satellite imagery no longer looking nearly as impressive as yesterday but still packing a punch. 105 for the current wind speeds within this storm and its now starting to move a bit more than we saw 24 hours ago. Instead of stationary were talking about 8 Miles Per Hour to the north northwest will which will keep it running parallel to the florida coastline and look at our radar. You will see that its racking that east coast against daytona and jacksonville pockets of the stronger storm activity this will continue to ride the east coast through today and thursday and even friday so lets talk about the track as we move through the next several days and youll see its looking to make the sharp right turn before making a landfall near charleston but the cone of concern does keep areas charleston up to the outer banks in its bounds it will be very dangerously close, possibly only 15 to 20 miles outside of the areas lets talk about the carolinas were talking Hurricane Force winds above 74 Miles Per Hour. Storm surge of 4 to 7 feet and rain totals of 5 to 10 inches. Isolated areas up to 15 inches especially right up against the closest coastlines which would be closest to the eye wall of Hurricane Dorian thats the latest. The developing story in the debate over gun safety and regulation taking action to curve sales of ammunition with walmart taking the lead in that yesterday well take a quick look at u. S. Equity futures at this hour. The dow looking like it will open up 196 points higher and the nasdaq looking to open about 85 points higher were back in just a moment. When did you see the sign . When i needed to jumpstart sales. Build attendance for an event. Help people find their way. Fastsigns designed new directional signage. And got them back on track. Get started at fastsigns. Com. Should always be working harder. Thats why, your cash automatically goes into a Money Market Fund when you open a new account. And fidelitys rate is higher than etrades, td ameritrades, even 10 times more than schwabs. Plus only fidelity has zero account fees and zero minimums for retail brokerage and retirement accounts. Just another reminder of the value youll only find at fidelity. Open an account today. Youll only find at fidelity. For farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice lettuce. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. Welcome back to squawk box walmart is stepping back ammunition sales yesterday i was alerted to this as a surprise email midday yesterday. The largest retailer in america will now discontinue all sales of ammunition for short barrel rifles and handguns. Walmart is eliminating handguns from stores in alaska. Retailer also asking customers to no longer openly carry firearms in stores where open carry is legal the move coming five years into his tenure as ceo. He had been reluctant to speak publicly against gun violence. He has entered the debate. In a memo to employees on tuesday he called the status quo unacceptable he said walmart believes the reauthorization should be debated in washington to determine its effectiveness and also encouraged lawmakers in washington to strengthen background checks as well as Fund Research into gun violence. Something the government has been prohibited from doing this could prove to be a watershed moment in large part i would argue because it can give license to other Business Leaders to enter the conversation kroger the largest u. S. Super market chain followed walmarts move in asking customers to stop openly carrying guns in stores so a big move yesterday in the Business Community i think well see more of this with the i dont know if you saw the Washington Post out today with a full page editorial saying do something mr. Mcconnell. So a lot of this is about what business can do but the separate element of this is what of course lawmakers will do and the role that business is now going to play in advocating for certain laws and i think thats actually another dimension of this but i know that were going to have a larger debate about this in the 7 00 hour. Obviously mcconnell is waiting for trump and trump is trying to figure out what he wants to do in terms of and business is not waiting. Business isnt waiting but you need to change the business can bring pressure to change laws eventually usually you need a grass roots change in public sentiment to elect the people that will enact the laws that you want i harken back, president obama had the house and the senate and he had the pen ready to go for two full years and Nothing Happened now a lot has happened since then, obvious. For walmart, given what happened twice at its stores, this is not a surprise, probably he feels responsible to his employees and customers and everybody else and hes a good guy. But we know what we want to do we want the phil murphy, ten round maximum on magazines. But ill tell you the other things that are important about this that are not being talked enough about they probably have the best practices in terms of gun sales in america right now in terms of how they do the background checks and what their approach is. By the way, it goes far beyond what the law is. They actually film every single sale on camera so that they have it they have a Computer System thats actually very sophisticated that goes through the bad news is theyll be less rigorously followed their market share of ammunition is 20 its expected to drop to 8 to 9 . Its going to put a lot of pressure on the gun makers but the other issue is that theyre going to provide that service for free to other retailers across the country so in terms of stepping up the sort of best practices approach, i think that actually could be remarkable the other thing is hes he lighting the issue of ammunition that doesnt get talked enough about. This is all nuisance and i know that you dont like to hear it and i will concede that if even one round that was purchased atw walmart is used i a mass shooting that maybe you can help in that regard but if you were to look at the percentage of ammunition that was sold atwalmart that was subsequently used in a mass shooting or a crime its going to be small. So if youre okay saying, all right, you other 99. 9 , your rights youre not allowed, you cant come in here and buy anymore because the. 001 . If youre fine he said nobody deserves to own these types of guns if thats okay with you look, no. The larger point is that the business decided for better or worse theres going to be push back. You can push back. Not from me but from certain people, some of the guys in the middle of the country are going to be mad. And people were mad at dicks when they made their decision. They made it twice so they could be on morning shows. I think that thats unfair to ed stack who tried to play a meaningful role in this discussion but the point that im trying to make in this is there are i think you can look at the law as it stands today and its very hard i think for anyone with any common sense to say its working because if it was working we wouldnt be having this. Obviously the law did not work on the most recent shooting in texas because the guy was not allowed to own a gun. Something is not working and lawmakers have been unwilling to take a step. If you understand the money, how money flows, the nra has been much better funded and nobody with real funds on the other Side Business is looking at this and the same way they looked at immigration. So many important issues in this country and are now saying were fog to get thr going to try tt involved in this. You could essentially get rid of the Second Amendment down the road if you wanted to and if enough people that has never been my stance. Im not saying it is. But thats the way we do things here we do pass laws. There was a time when slavery was legal. I understand that. And people with more common sense we fought a war but we do legislate. The elitest do not decide who wins the culture war. I dont think this is about culture war anymore. What about pro life thats about peoples lives. We can have that discussion. Im sure you have an answer for who is right in that too im just saying youre not in a position to make the decisions for the rest what really amazed me about walmart was that think about where we live here no longer youre going to be allowed to carry a gun around in a walmart. The concept of seeing someone in walmart as youre going down the aisle. Its created panics. Im sure that it has. Its just amazing but that shows you how different certain parts of the country are versus back here where people are walking through there with a holster. Its pretty staggering when you read okay no more i didnt know you could walk around with one anyway in a walmart. So saying that you no longer can come in here carrying a gun. By this way, this happened at starbucks and mcdonalds its a big issue across the country. Thats true. Were going to continue this conversation. We certainly are. The vanity fair guy, the yale academic and sorkin. Ive got something going on at 7 15 can i step out you dont need me. Do you need me here . Stick around. Im not a huge gun rights guy. Im really not but anyway, coming up, much more on the news that broke overnight in hong kong about the controversial extradition bill that sparked months of protest and as we head to break, lets look at yesterdays s p 500 winners and losers through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From finding out whats selling best. To managing your fleet. To collaborating remotely with your teams. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Well, were down on china trade tension and the next day we say were bouncing back on a lessoning of china trade tensions were not far from all time highs in any of the averages but we know how quickly that could be lets get to the breaking news overnight to move stocks in hong kong the government there withdrawn the controversial extra bigs bill that sparked months of protests chris joins us with more hello, chris hey, joe. Thats right moments ago the leader of hong kong making the formal announcement that she is with drawing the extremely controversial extradition bill the same one that sparked three months of protests that brought tens of thousands, even close to over a Million People according to some estimates throughout these last three months because people here have been terrified that with this extradition bill were to go forward that would give china license to pluck suspected criminals from hong kong and bring them back to the mainland for questions and as you know, the judicial system in Mainland China is much more opaque than it is here in hong kong its unclear if it will be enough to satisfy demands of protestors this isnt the only grievance that they have they also wanted lam to resign. They wanted the more than 1,000 protestors that have been arrested throughout the movement to be given an amnesty so its very uncertain what this is going to mean for the rest of the movement, joe. Yes, well see. To be continued, chris and well check back with you from time to time. We appreciate your reporting thank you. Coming up, when we return, lincoln announcing its top u. S. Start up of 2019 were going to read the list of the best new companies next. Tomorrow, slack ceo Stewart Butterfield is going to join us to dig through the Companies First Quarterly Report since going public stay tuned youre watching squawk box on cnbc im off to college. Im worried about my parents retirement. Dont worry. Voya helps them to and through retirement. Dealing with todays expenses. While helping plan, invest and protect for the future. So theyll be okay . I think theyll be fine. Voya. Helping you to and through retirement. By the way, shes the it wasnext mozart. G day. As usual we were behind schedule. But sophies enthusiasm cannot be dampened. Not even by a runaway donut. We powered through it in our toyota prius. Because a stars got to shine, no matter what. 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Use promo code get25 to save 25 off your first year and get a free shredder with annual membership. Call now to start your membership or visit lifelock. Com tv 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 have breaking news just out ahead of the public offering, the company now adding Harvard Business School Professor to its board of directors. Cnbc reported in mid august that the company had an all male board at the time whenever s p 500 company had at leastone female director. Sheila fry briefly served as Senior Vice President at uber. Wework is planning to kick off the ipo road show next week. I know that youll be interested in particular is i dont know if you recall this is the audience now, we reported that adam newman, the company ceo had sold the rights to the trademark we to the company he owned the rights and he apparently now has gone back and said, actually, you dont have to pay me for that. It raises all of these questions about Corporate Governance he is giving it back the damage is done by what they already set off with the issues. Theres more well discuss it later. Separately, linkedin is out with its list of the top u. S. Start ups of 2019. With us now to reveal the big names on the topic is the Senior Editor at large at linked in good morning. Good morning. Lets talk about these names. I have to admit, i dont know all of these companies were on the edge of the edge now. Thats the point, andrew. So we have been doing this list for three years and this list, what it measures is where people want to work on linked in right now so these are the companies that are going that maybe you havent heard of that three years from now you will. Lets go snow flake thats like a divisive term in this day and time on twitter i have been called a snow flake before. Do not look over at me. Im just saying if you were working a snowflake you would not. This is one of your favorite this is your cocktail conversation company, with the cloud company. Yeah. He talks about the cloud at cocktail parties. Unfortunately its like a ten second conversation because if they need any details or color i get stuck. You just say growing. The cloud is just very important. Number two on the list is dousist. Im surprised that you dont know this. Its a Cannabis Company. How come you dont know that, andrew im surprised. First time that we had a cannabis on the list of top startups tells us a lot about what will be a fast growing industry. How do you measure it and rank it . How do we rank it so were looking at the interactions that people on linkedin are taking and we figuring out where they most want to work what is that that is first of all, head count, who is applying to these Companies Jobs how many applications they get for these jobs were looking at how people are connecting to people on the site how many people are visiting these Companies Pages and the reason i like this list is its a reflection of what people are doing. This is not a bunch of editors sitting in a room wondering if this company cooler than that. This is what job seekers are telling us that theyre doing. Peleton. Thats going public. People like stuff they do, right . Well, exactly have you been talking about brex its trying to be the next American Express and thats big language but it is run by a couple of 23 years from brazil and this is their second big start up they raised more than 300 million in capital and its two years old. It surprises me for its ambition and the interest in it. We saw compass and we had the ceo of compass on a hand full of times including when he first started the company and we didnt know what would happen to it and its grown to this crazy size are most of those people looking for real estate jobs to be Real Estate Brokers its a lot of brokers with compass its a ton of brokers but not sboentirely if the company falls in a full time position were interested in it. Others on the list, robin hood not robin hood the charity. Not robin hood the charity. But the finance company. So that is another sweet story maybe in silicon valley, a company that people are very excited about. Its hiring fast. How much of this is about trying to get in early before an ipo . Because i would have thought there might be some more companies that are trying to get in so early. This is earlyearly so if you look at say the 2017 top start ups list of the top 5, maybe 3 have gone public this past year. So what happened to the other two . Are they still around . The other two, its possible, right . So maybe this is a good investment list. I wonder. Like if you could look at it two years later. You can look at this list for a lot of different purposes. First of all, its possible that youll lose talent if you compete with these Companies First of all if youre doing things theyre doing you may want to position yourself the way theyre positioning themselves to the talent market and yeah, you should certainly be looking at them for that reason. Nice to see you thank you for joining us this morning. Thank you. You bet. When we come back, markets on the move this morning. Our next guest is going to tell us what the technicals are telling him during the recent volatility and why its a good time to buy apple. Right now a quick check of whats happening in the european markets right now. Up across the board but off the high we had seen a little bit earlier this morning still the cac and the dax up by 1 well be right back. Welcome back to squawk box, everybody. We have been watching the u. S. Equity futures this morning and were getting back a lot of ground we lost yesterday it looks like it will open up by about 200 points nasdaq up by 80 points and the s p futures are indicated up by about 21 joining us right now to talk about some hidden gems amid nervous Market Sentiment is the head of Technical Analysis i cant believe im calling these hidden gems when your first pick is apple. Thats one of the last stocks i would put as a hidden gem. Explain yourself. Apple has the fewest number of buys from the sell side today at any point over the last ten years. So the street has abandoned it as a long. We like it here. The bear market in apple already happened it was last year the stock was down 35 from the highs i have been impressed with how resilient it has been here, despite being in the center of the storm. I think the next move is up, not down. How much is going to be tied to what happens with the china trade talks . What im curious here is to what extent are all of these well known risks well known. Whether its china, whether its brexit, pmis under 50. These have been talked about and articulated for the better part of the last year yet, here we are still in the trading range. So you think all of that is baked in in terms of potential worst Case Scenarios this moves on the trade talks i think you had 19 billion worth of outflows and equity etfs since august. So i think you have to ask the question, what is already discounted at these levels even yesterday, on a bad headline the market actually acted pretty well. Declining stocks only beat advancing stocks 21 very modest under the surface so i have to wonder what is already known here the way the market behaves i think the mistake is getting too bearish. U. P. S. Which is your second pick u. P. S. Has had some pressure on it over about three years now. Yeah, the stock peaked about three years ago. Down 40 from the highs. I think its a curious time for the u. P. S. To be turning up but thats what it is doing. Bottomed a couple of months ago. Off the lows, 50 day has crossed above the 200 so we are seeing the technical signs. Even on bad news, the stock has gone up. So perhaps the sellers have moved on from this one and its a very curious name just given where people presume we are in the cycle. So maybe something is Getting Better here. All the bad news on the economy is already priced in your third pick is sonos, why . Well, it is one of the better acting names in the ipo space. They cut the stock in half from 20 to 10 over the last year. Quietly bouncing around the bottom over the last couple weeks in a tough market actually better i think its one to take a shot in this neglected ipo space. Another, you know, quality of life advance that is under estimated. Outdoor speakers, apple music. Piped through sonos, in the house. Anything he knows. Anything thats ever been that i have ever wanted to listen to. I can play at the tip what is that worth you add that to google maps. What is that worth amazon willing to pay more im saying our lives. You worry about the death of the American Dream we live better than the carnegies, andrew. Because of sonos . Right. Because of sonos. Everything im listening to is like 50 years old. I have some a shock. Yeah. Led zeppelin, i cant believe the drummer i listened to it yesterday. I guess i never appreciated jimmy page and the drummer. Didnt have it on the right speakers yeah. It was on my walkman which is another unbelievable advance. Chris, thank you. My pleasure. Great to see you. Coming up real estate legend sam zell will join us. Hell share his thoughts on Interest Rates, wework and a lot more wee mi bk. rcongac squawk picks is sponsored by wisdomtree the modern Alpha Pioneer breaking news out of Hong Kong Carrie lam withdraws the extradition bill after months. To china to real estate guest host and billionaire investor sam zell is here. His reaction to news out of hong kong and much here is come. Walmart announced a major change to the gun and ammunition sales. Other retailers considering the same were going to discuss the move as the second hour of squawk box begins right now. Live from the beating heart of business, new york, this is squawk box. Good morning, everybody. Welcome back to squawk box here on cnbc im becky quick along with joe kernen and Andrew Ross Sorkin. With us is sam zell and great to have you here today. A pleasure. Thank you for joining us. Watching the markets very closely, i take it reasonably. Reasonably. Were going to show you quickly the u. S. Equities. Yesterday, big down day with the dow off by just over 230 oints this morning though you see things swinging back and a lot is because of breaking news we are seeing out of china. It is official hong kong leader carrie lam says the controversial extradition bill has been fully withdrawn. Sam, obviously youre watching so many things around the globe. So many things that impact your holdings how did hong kong play into anything that you have seen on this issue well, i think that hong kong represents a problem i mean, i think, you know, china cant ignore it. China is kind of, you know, reached over and taken a very strong position with reference to hong kong i think theyre finding out that may not be the best methodology. I think its i think theres a big risk here that this thing could get out of hand. Obviously, this comes as a big surprise to be watching this today. And probably great news for the protesters there in the streets. I wonder though what kind of impact this has on the china trade talks here in the United States because that put us in a tougher position where we would have to take a hardline no matter what happened if china pulls back, what does that mean potentially . I just i dont know. I mean, i would find it hard to believe that the chinese would invade hong kong and put soldiers on the ground i think that would be, you know, worse than tiananmen square. So well see what happens, but i think they have to find some medium you know, medium methodology to both give the people in hong kong the freedom that they were promised and then still preserve the chinese control. Apparently, remember last weeks troop rotation. Right. So the troop rotation and people i was watching this last night people are waiting a rotation means that the troops that were there are ready that are getting replaced theyre supposed to leave and as of this point nobody has left. Yes. So thats thats sending in more. Thats not rotating. But keeping everybody there. When you put troops across the border, i think thats called intimidation. Right what do you make of recession fears . Sam, i mean, probably hoping for one as the grave dancer. Yeah. I dont mean that youre hoping for one, but there are opportunities that are created by people like you but do you think its do you have a percentage . Is it 30 , 40 , 10 . I think that i have been looking for a recession for some time and every time i get a signal that its likely, i get a reversal which i never had that experience what kind of signals does a guy like you look for . Well, we have a company an 8 billion distributor of wire and cable and i have owned the company for 30 years its always been a sign when customers start delaying orders that were about to head into a recession. Six months ago, they started delaying orders. And i said, well, here we go. Right. Then three months ago they reversed it. Picked back up again . Yeah. I think it wasnt the yield curve how many brothers were there only two actually one, two i think just two. There were two. The brothers. Thats who i bought the company from. They must be loaded anyway, so what else other interesting recession signals that you can share with us i mean, you know, prior to the Great Recession was the First Time Since world war ii that we went in to a recession when real estate was not in oversupply we are now in another situation where real estate is not in oversupply. Now its not even with rates there. If real estate is not in oversupply, then you have a recession. So where are you now . That were not having a recession . I dont think so. I think were going to get through the election despite, you know, the headlines. You know, without dealing with a recession. Why do you how would you explain some of these reversals and the signals you have seen, what happened . Well, i think that we spent eight years focusing on redistribution and not focusing on growth i think that produced an historically low growth rate which our country frankly is not accustomed to and equipped to deal with. I think that the change in the administration, the change from redistribution to growth has had a pretty positive impact, much more so than anybody would like to admit and so i think that the overall economy is in better shape than conventional wisdom. Youre a life long democrat too, sam although lately i have been accused of a lot of things but never a life long democrat. But you were a democrat. I was i grew up as a roosevelt democrat. But youre not a hard core youre not a big like i dont think i think youre a free market guy at this point. Absolutely. Do you recognize the if you were a democrat at one point, do you recognize where the Democratic Party is right now and what would that do in 2020 if bernie or liz i said over and over again that, you know, he who fails to learn from history is condemned to repeat it. Yeah. To me, this is 68 and 72 all over again 68 humphrey was supposed to win and everybody was stunned that nixon won. Right the second time we brought up tricky dickey today. Then in 72, the democrats went to mcgovern, that was completely unconnected to where the rest of the country was. And he was right of where mccarthy was which is amazing. And we lost in a land slide. You won like two states, andrew it looks to me like the Democratic Party is going way left and i think that they go that far left, i think were going to see President Trump elected. The latest poll has biden up 12, one of the polls its early do you think biden could be i think biden is a very strong potential candidate for the democrats, but i think that the whole Democratic Party has gone so far to the left that i dont think that biden either can win it or if he does he will have been pushed so far over that i think he will be the 19 or the 2020 version of mcgovern. Are you supporting the president for reelection . Um, i am certainly supporting the senate and i have been very active in supporting people running for the senate. But not the president i have not been a supporter of the president. You worked in his industry. I do. I have had you have had dealings with him. I have had dealings with him, i know him you dont feel comfortable supporting him no, i didnt say that you did. Okay. You have deja vu, because you had to answer these questions before because he knows that youre on record he knows youre on record that you had bad business dealings with trump i dont need to explain that to you. All right. I thought i was we know each other very well. I thought i dvrd this from your last okay. I wanted to understand. Okay. You just i got it. I have supported no one for president. Okay. No one. I am likely going to support somebody and at least at the moment if i were to bet, i would end up supporting the president because i think the democrats are giving me no alternative just like they did in 16. Okay. Okay excellent. We may replay the crock of shih tzu comment you said the last time you didnt say the dog you didnt i said the dog. The most amazing thing about that comment was that was the most that no one one complained. I mean, i mean, i said oh, my god because what you were describing was so absolutely a crock of shih tzu that no one is going to argue with you. You were sitting there and you couldnt you were dying i was dying. This guy kept talking and talking and talking and saying nothing. Sam, you called it like you see it and no one disagreed with you. Something today gets to that point are you ready to pull it out again or youre nobody has ever accused me of ever being too civil. I get email from people here who say they love it when youre on. I know. I know that i know hes going to be here for two hours. Im going i dont know if i can talk to im going to horn my way in there. I bet you will. When we come back, the ongoing debate over gun safety and regulation a number of retailers now taking action to curb sales of both guns and ammunition including walmart. Well talk about that decision in just a bit. In the meantime check out the futures. Up sharply the dow is up by almost 200 points the nasdaq up by 78 ngonowing stocks higher in hg ko up by almost 4 after the moves we have seen there well be right back. This cnbc program is sponsored by ibm lets put smart to work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice lettuce. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. You should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. And you should be mad your smart fridge is unnecessarily complicated. But youre not mad, because you have e trade which isnt complicated. Their tools make trading quicker and simpler. So you can take on the markets with confidence. Dont get mad. Get e trade and start trading today. Im the kind of guy who likes t. Like change my own lightbulbs. I do my own laundry. I even make my own jam. So, when my doctor told me he nd to check my prostate i said, ill do it myself. Can i get the jam back . Dont diy your health. Early screening by a doctor can save your life. To learn more go to pcf. Org go where my baby lives can savb[ growl ]olle s good boy. Hey. Hey. You must be stevens phone. Know whos on your network and control who shouldnt be with xfinity xfi. Simple. Easy. Awesome. Breaking news just hitting the wires on mortgage rates. Diana olick joins us with more did you know this is happening look, after Holding Steady mortgage Interest Rates resumed their retreat last week. But that did not boost mortgage demand total Mortgage Application volume decreased 3. 1 for the week according to the mortgage banker associations seasonably adjusted index it was 60 higher when Interest Rates were substantially higher and refinance activity was extremely low. The average year with conforming loan balances decreased to 2. 8 thats with a 20 down payment that rate was 93 basis points higher this same week one year ago. Now, surprisingly refis which have been very strong fell for the second straight week, down 7 they were still 152 higher than a year ago but the annual comparison has been shrinking for several weeks despite the substantially lower rates. Now Mortgage Applications to purchase a home bumped up 4 for the week and 5 annually, but the home buying market today is less about lower Interest Rates and more about high prices in a severe shortage of homes for sale pack to you guys. Thank you for that report couple of big headlines to bring you at this hour shares of navistar are jumping this morning the earnings and sales beating both estimates and market share increasing the fed is out with the latest beige book the region by region assessment of the u. S. Economy comes out at 2 00 p. M and tapestry has a new ceo, victor lewis is leaving after 13 years on the job. Coming up, walmart is going to stop ammunition for handguns and some assault rifles in the u. S. Stores. Well discuss the move after the break. Uatonhera of Hurricane Dorian, after living the bahamas in ruins squawk box will return for i, we know how your customers shop. And what theyve already purchased. Like this lamp. And we use those insights to show you what they might consider buying next. Midcentury modern, nice. That way, you can keep sending them offers for the perfect products. And that keeps them coming back. Hows that for changing whats possible . Welcome back to squawk box this morning Walmart Ceo Doug Mcmillon said that the stores will no longer sell short barrel ammunition and eliminating handguns from stores in alaska, the only remaining state where they still carry them as of the Second Quarter report in august, they held a 2 market of firearms and a 20 market share of ammunition in the United States. In a statement, walmart expressed confidence that the actions would cut down the market share of ammunition from 20 down to 9 joining us right now to discuss Doug Mcmillons strategy, two contributors the associate dean for leadership studies at the yale school of management and a vanity fair special correspond jeffrey, ill start with you how you think this changes in the dynamic in the debate in the term of the role that walmart is playing and whether other ceos will step out as well. This is a giant watershed moment and good for you, andrew, in your open letter to Doug Mcmillon as a call to action like the memo in the call to davos a few months ago this was a watershed moment. In the last hour, i heard joe talk about how nixon was hounded out by a hostile press president nixon. This is akinto the summer of 74 when Johnny Carson representing mainstream america said it was time for nixon to step down. That was he was very nonpolitical Doug Mcmillon, hes not, joe is referring to the elitists from vanity fair and yale i guess he must be referring to Stephen Roche or bob shiller. Dont sell yourself short, jeff. This is mainstream america. You know, Doug Mcmillon is a 52yearold who spent 35 years inside walmart and the university of arkansas graduate we are looking at similar moves at krogers with the fred meyers stores that they have done the same thing these are not elitists by any stretch of the imagination and we have seen a huge reaction across the face of other retailers who have already been moving in from the directions from chiles to chipotle to walgreens and walmart. We have seen guns are being banned from stores amc theaters to regal theaters this is there are more people in the country who believe that we need to have uniform background checks than believe we landed on the moon. Bill, let me ask you though in terms of what kind of pushback you think will exist and also how far you think this takes the debate and whether it really does change it. Well, andrew, first of all, again, congrats to you for your outspokenness on this subject. It is much needed and thank you for using your platform for doing it among other people. This will be a very sad chapter in American History when it gets written, Mass Shootings. And while i do applaud the walmart ceo for taking this step and i think its a meaningful step that has to come from the marketplace, where is congress where are our political leaders . Their inability to act on this for so long is a true blemish on the american political landscape. And until congress acts, were sort of left with these bits and pieces of action by the marketplace which i applaud. Once upon a time, it wasnt that long ago in our lifetime we had an assault weapons ban from 1994 to 2004. Whats it going to take to at least do that again at the congressional level . That is obvious but heres my question, ill ask it to jeff as well in terms of how this debate plays itself out. The companies are making Business Decisions and making Business Decisions ahead of what the law may ultimately be. The question is whether they either should or can advocate for these positions in washington they have advocated for positions around immigration before they have advocated on lots of other issues is this still a third rail no. This is definitely something that business looking at two weeks the Business Roundtable statement, many of us are wondering and hoping it would not be empty of rhetoric i think that was the steaming hot bowl of oatmeal that sam zell was referring to when we had a speaker on earlier when he talked about the cliches here theyre putting it into action, not empty words and walmart is a 1. 6 million employees. Thats about 10 of the working population of the country. This is a very big statement but hes gone further. Doug mcmillon has called on congress to act at the federal and the state level just as he did on the earlier issue having to do with the religious freedom acts, the bathroom bills he and the ceo of at t and u. P. S. Who said we dont want this kind of divisiveness. We have seen people call for action from congress before and in this generation we have the genxers in charge and by the way, the nra was for the 1934 crime act and the National Crime act. And they were in favor of the very effective regulations that sadly subsided. Hey, sam zell, youre square in the middle of the Business Community. Is this the right decision what you see walmart doing . Do you want people entering this debate and dialogue . I think what walmart has done is very commendable. I think that the most important issue in this whole arena is to separate guns from guns. Its guns from guns, what do you mean i cant understand why anyone needs an automatic weapon, period theres just you know, you want to shoot deer thats fine. You want to hunt, thats fine. But automatic weapons semiautomatics. Yeah. They dont make any sense. Semiautomatics, theyre different. If you need legislation, the legislation should say if you want to fight an automatic or a semiautomatic weapon you can only do at this a range, period. Is that consistent with sams point sams own senator dick durbin said if you need a semiautomatic to hunt deer you hough to take up fishing its dangerous and not in support of what the 96 of the country says they want and thats it is time to pay attention. But andrew, you raised the question about this, this response larger response of the american Business Community. Joe saying pass a law. Maybe we dont need laws on this one we do. But not on everything. Cornelius vanderbilt said who cares about the law infamously said this ive got the power the Business Community has the power to act and were seeing just last week roll backs by the epa where the natural gas and Oil Companies are saying you know what, we dont want those rollbacks the Auto Industry is saying we dont want those rollbacks to the epa. Theyre going ahead and setting their open industry standards. That is an impressive rebuke we have never seen that before. Jeff, what if the Business Community acts on something that you disagree with . And the university of kansas right now, they dont want chickfila on their campus. Lets say im not saying this is about chickfila but lets say theres a ceo whos very religious and antilgbt. You call, you know, Doug Mcmillon cowardly when he doesnt act and courageous when he does. If this mans own personal viewpoint is that he wants to discriminate against a whole group of the population, would you call him courageous by taking that tack or lets say someone is pro life, jeff. Lets say someone is rapidly prolife and decides that everything he does in his corporation is against suddenly youre on the wrong side of the elitists take on all of these issues, jeff, and, you know, suddenly you probably wouldnt call those ceos that courageous. No, i have served chickfila in my classes and i get reaction when we have a late class. But okay, answer my point though my point is that as long as they come down on the right side, the politically correct side that you decide on no no this is not that at all, joe. Youre deciding which side the culture wars are correct and deciding which are not correct youre selfanointed i didnt anoint you. What the American Public wants. Now an issue of store hours like chickfila or hobby lobby as private companies they can do what they want but as Public Companies they need to look at what their constituents wants and not what the owners want which is what a private company has the luxury of doing. Hobby lobby and chickfila they can do what they want, because they own their company. I dont know if id argue for it you wouldnt argue for it if it wasnt something you disagreed with or something that people at yale or its not a question of personal habits. Its what their constituents are saying you know well, constituents change even 150,000 employees at walmart Public Opinion changes. Signed a petition last week 150,000. Thats a big statement youre hearing this from customers and employees they dont feel safe. This is the reaction were getting is because the ceo of a Public Company has to recognize they have a duty to a broader set of constituents and this is by the way, the Dicks Sporting Goods with the guns those stores are doing better without the guns and looking at getting rid of guns completely at dicks. The company can do whatever they want. Thats true. Public companies and there will be some pushback against walmart but thats fine. But the bottom line is you do need to if you need grass roots efforts to actually change the law thats how we do things here eventually, if youre twothirds of the states if you had twothirds of the states you could get the Second Amendment overturned if you wanted to. You have to elect the people that will vote for, you know, bill doesnt Like Congress is doing, elect the people in congress to do what you you want them to do you had president obama and the house and the senate could have reinstituted the assault weapons ban in 2008 easily because they had both houses of congress they had the pen to sign it. So but the fact they didnt do it is a mistake. Right, okay but thats what youre going you need to actually eventually change the laws and if the public is at 70 or 80 or 90 that will be possible to do it thats how we change things in this country. Sometimes we do miss the moment and it does take the ceos who have a powerful platform and the general public to speak out and Keep Congress on track and the administration to do the right thing. Sometimes we miss the moment sometimes you get caught up in the some people believe that john wayne and Sylvester Stallone or Clint Eastwood were macho warriors thats mythology. They never went to battle. I think Clint Eastwood was a lifeguard during the korean war. All right, jeff, lets say that you have a ceo that fully embraces the Green New Deal as seen by some is of the far left, like aoc, 3 trillion Green New Deal. Youre taking it to the extreme. No. Should they only stop kroger with beyond meat should he take a courageous step he thinks its good for his business, sure. Right but youre going to get pushback from customers sure. But if he thinks he if he believes it will be better for his business what more responsible to the community. Rather than than he should sell should you at 7eleven decide not to sell gasoline to any suvs because you should get at least 30 miles per gallon . A ceo is taking a courageous stand on climate change. Is that okay joe i understand that. But the point is that the law itself is not you can say its the ultimate arbiter of this but business can make their own decisions. Common sense we saw four major automakers say that the administration and epa is wrong well work with california to set higher efficiency standards to have 50 miles per gallon we can do by 2026 the Administration Says go for 36 no, we want to sell not just to california and 19 other states who care, but the rest, europe and the rest of the world. And we as automakers to heck with you well continue to advance our standards. The same with the Power Industry its already invested the 9. 6 billion to clean out the emissions that they were worried about, the mercury the government says stop doing it, no, we want to reap the benefits of it it another great for industry to speak back in terms of this situation, joe, the minority, we care about is suddenly in congress we care about the diminishing strength of the nra. They were originally a Gun Safety Organization themselves and the legislation that bill talked about in 1934 and 1994 they were in favor of it so whatever tortured political dynamics there are inside the diminishing nra instead of paying attention to that, Business Leaders should be concerned about the backlash of all the constituents as a business person whats good for the business, whats the customers what do they want i know that bill has been waiting patiently. Sam . I mean, what what i would say go ahead, sam. I was going to say, you know, you have to be really careful that you all of a sudden pile on responsibilities and moral positions on ceos who are basically in the middle of a market world if they have to compete that they have to compete with i think you have to be real careful you dont get too high on your hog advocating issues. Too late. I just think its i think its dangerous and i dont think ceos are protected enough to take those kinds of positions. Okay. Final word to bill. Well, what i would say is last time i checked were still a free country and, you know, if the ceo wants to take a strategic position on something thats relatively controversial, that might upset a lot of his customers or shareholders and he wants to take that position and if consumers dont like that theyll vote with their feet if they want meat theyll shop at a Grocery Store that sells meat it will get all figured out but we need real leadership in Congress Mitch Mcconnell needs to get off his butt and pass this legislation because its a blemish on American Society at this point. Thanks, guys, for the conversation. Quk xonnu with a check on the markets and a live report from Hong Kong Well be right back. But which ones target your goals . Its not about quantity. Its about quality. No trendy stuff. I want etfs backed by research. Is it built for the longterm . My reputation depends on it. Flexshares etfs are designed and managed around investor objectives. 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The United States Postal Service makes more ecommerce deliveries to homes than anyone else in the country. Ecommerce deliveries to homes here, hello starts with hi mple. How can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone [ camera clicking ] wifi up there . Ahhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your xfinity store today. Breaking news out of china its official, hong kong leader carrie lam says that the controversial extradition bill has been fully withdrawn we have been watching through some of this seeing what happens with all of these situations we have a report on the situation on the ground there. Chris, good morning. Good morning. Thats right just a short time ago the embattled leader of Hong Kong Carrie lam announced shes withdrawing this controversial extradition bill that started this government crisis to begin with remember the throngs of people, by the tens of thousands, even over a Million People at times marching the streets demanding that this bill be withdrawn. Because they have been afraid that this would give the Central Government in china the authority to pluck suspects from hong kong and bring them back to the main land for questioning. As you know, the government in hong kong, the judicial system excuse me the judicial system in the main land is much more opaque than in hong kong which has a much more transparent society. However, this is not the only demand of protesters they have been calling for carrie lam to resign from the very beginning they have been calling for an independent investigation into alleged Police Brutality at these protests and they have also been calling for an amnesty for the more than 1,000 protesters who have been arrested since the very beginning. Now, its hard to know exactly how the protesters will respond because this is after all a leaderless movement, but if you look at the forums and the chat rooms where they exchange information, it doesnt appear like theyre ready to give an inch in fact, the word on these chat forums we will not give in its all or nothing. This measure right know to withdraw the extradition bill is too little, too late back to you. Chris, thank you very much. Chris livesay. An update on the Hurricane Dorian, its moving northwest after virtually stalling over the bahamas where its caused devastation. It was blamed for at least five deaths the storm surge warning was extended northward from florida to about midway up south carolinas coast its also now under a hurricane warning and thousands along the coastline have evacuated of course we are monitoring the storms movements. Well bring you updates as you come. When we return, your morning market movers. Squawk box returns after this. I can. The two words whispered at the start of every race. Every new job. And attempt to parallel park. electrical current buzzing each new draft of every novel. typing clicks the finishing touch on every masterpiece. newborn cries it is humanitys official twoword war cry. Words that move us all forward. The same two words that Capital Group believes have the power to improve lives. And that, for over 85 years, have inspired us to help people achieve their financial goals. Talk to your advisor or consultant for investment risks and information. Time for a look at the movers dom chu is joining us from cnbc. The markets rebounding, are there some individual names that are interesting on their open in their own right there are some interesting names. We have to get back 285 points on the dow to get back everything we lost yesterday and were doing wit heavy lifting from certain stocks. You can see the solid gains, 285 is our number to get back yesterdays losses the names that could help are some of the ones that got sold off more yesterday within the Dow Jones Industrial average we look to names like boeing Goldman Sachs and caterpillar. You can see here boeing actually the underperformer today, only up 0. 75. And apple and caterpillar up as well those could be helping the cause as we head towards the start of regular trading. A couple of pieces to look at with regard to the macro markets. Just take a look at this first of all wti crude. You can see here up about 1. 3 its staging a comeback late yesterday as well that could have been a nice sign for the bulls looking for a bit of a move and one other place well watch, check out what happened with the Energy Sector spdr yesterday. Between the bottom and top yesterday we probably gained 1. 5 despite the fact it was down 285 points to close the day. If youre looking for certain signs, becky, oil prices and Energy Stocks could be places to look for today for any clues about the direction for the market. Thank you Global Market uncertainty is pushing markets lower to kick off septembers trading. Joining us right now is mandy zoo, chief equity derivative strategist at Credit Suisse and mike santoli mike, why do you think the futures are up this morning . Is this hong kong, a bounce back from yesterday i think its both of those things and also it reflects the fact that we have really just been bouncing around in this range. Yesterday it never got a lot of downside even after the 10 00 a. M. Release of the ism number which is weaker than expected. But it was telling that you have bond yields making a slight new low and the stock market didnt get a lot of headway on the down side to me the markets arent kind of showing the hand right here. Right. You have been in this range for about a month. Sentiment has gotten very, very negative at least on balance its pretty negative, so thats whats being fought out were in a recession countdown camp and then the cost of debt has gone down a lot. We have credit markets that are still in decent shape and profits havent fallen off a cliff and the picture of that is a range bound stock market. Mandy, you dont think were headed for a recession. No. Were not headed to a recession because of the resilient u. S. Consumer but the point that we make is that you dont need a recession to get a significant equity correction. The macro factor is Global Industrial production. We have seen weakness there. For example, in 2015, 2016 we had resilient u. S. Data, but weak Global Manufacturing data what happened we had extended periods of high volatility and equity market weakness here. The one difference, sam, is that this time around youre looking at such low Interest Rates that its hard to find other places to put your money at this point. Well, that reinforces what i said before which is that its very hard to have a recession when Interest Rates are zero for anybody who missed the top of the show, you keep waiting for a recession but every time you see signs it turns out to be a head fake. The fact that im waiting for one is probably a positive sign because complacency is usually the major factor that leads to big surprises. So mandy, you hear Something Like that, could this time be different . Could this time even if were looking at weak Global Industrial production, could this be different at least for the u. S. Markets i would agree theres not a ton of complacency in the market given that its still near alltime highs but we are seeing a repricing higher of volatility and more importantly in terms of the flows, people are hedging. Theyre not chasing the upside as much as they were in previous periods of market selloff if you look at Hedge Fund Positioning theyre cutting their net Long Exposure to multiyear lows as well i think from the range of factors i would agree were not seeing the complacency in the market right now mike, what are you watching you could have an unsatisfying economy and profits that are hit or miss based on the sector and not have a recession. I think thats what the market is trying to deal with you have to have keep two separate thoughts in your mind at one time. At some point, yes, it will technically dip into the recession. But we have had two of the periods this cycle that it seemed like were almost there in 2011, 12 and then you had the profits recession, not an actual economiwide one both of those times you had the market go nowhere for a year, a year and a half and released after that i think credit markets were a key part of that. Isnt the real problem that pundits like you and me and her havent been right about what . About anything. You know is that new this cycle though we sit here and we predict its going to be this and that were worried about this and were worried about that and meanwhile the game keeps going. Sam, what are you doing in the meantime investing in anything . Are you hoarding cash, waiting for this recession to show up . Certainly never had a cash position like we have now. I think were very reticent about, you know, the opportunity. We think theres going to be some significant opportunities but what we dont see is the urgency. What we dont see is the movement thats pushing it one way or the other and i dont see any dramatic i mean, you know, in the Great Recession the whole scenario was compounded by the fact that we were we had mark to market in the middle of a recession i mean, it was insane what was done but that took a difficult situation and made it impossible we dont have anything like that today. We have full employment and we have an environment thats semipositive. Not wildly positive, but certainly not negative when you say you have never had a cash position like you have today, can you put that in context or put numbers on it or give us any sort of well, you know, a lot more. A lot more because youre just waiting. Yeah. And a lot and, you know, anybody whos been in business for a long time knows that the vulnerability that occurs when things change rapidly translates into liquidity and liquidity equals value so youre sitting here and saying when is the liquidity going to disappear i mean were already seeing changes. I mean, right now in the oil patch despite the fact that theres unbelievable liquidity, theres no money in the oil patch. None i mean, the deals that are being done right now are so much better than they were a year ago for the investor its not even its not even comparable so the answer is that theres fear and particularly in the oil patch where they havent used the capital very appropriately you know, theyre basically withdrawing the money. Even though everybody else has too much. Sam is our guest host hell be with us for the rest of the program. Mike, mandy, thank you both for being here. Coming up well talk about this wework getting ready to go public the questions swirling about the Business Models and well ask sam zell about office Space Business and much more out of hong kong this morning that extradition bill fully being withdrawn after months of violent protests trehe what does it all mean and where are we going next . Squawk box returns after this. It was sophies big day. By the way, shes the next mozart. As usual we were behind schedule. But sophies enthusiasm cannot be dampened. Not even by a runaway donut. We powered through it in our toyota prius. Because a stars got to shine, no matter what. Its unbelievable what you can do in the prius. Toyota lets go places. All right. Welcome back, everybody. News just out this morning on wework the company has added Harvard Business School Professor frances frei to the board of directors. Cnbc had reported in mid august that the company had an allmale board at a time when every single s p 500 had at least one female director. She also served as the Senior Vice President at uber reports say wework is is planning to kick off the road show as soon as next week. Other reports also saying that the ceo is giving back the 5. 9 million fee that it got from the company for giving them the we trademark, that he had trademarked itself. Does that include the 700 million in stock he sold . No, it did not. Our guest host this morning is sam zell you red through the s1. There are all kind of things that pop out as red flags. What do you think about it, sam . You know, first of all, i want to distinguish my comments between this particular situation and the overall what ill call sharing mentality in our world today. Im im not in a position to say that sharing is going to be wonderful. Maybe well share cars maybe well share a lot of stuff but i think thats a new movement in our society. Corporate governance is an old issue in our society im the chairman of five New York Stock Exchange companies. Every one of my companies has no separation between my vote and anybody elses vote. The idea that these companies should have multiple votes or forever or not being accountable just doesnt make any sense to me the idea that, you know, i get 201 votes but it goes down to 101 if i give away 1 billion its just preposterous. Wework is not alone in having a situation like that. There are a lot of companies that do that. I dont think any one of the other ones are better than wework in that respect wework is just taking it to an extreme that nobody has ever seen before. You know, you give somebody 201 and if he dies, you give it to his wife and, you know, find me another example of that. Find me another example of creating a company that, you know, loses 50 cents out of every dollar of revenue and explain to me how that works. So you wouldnt be investing in this company is that what youre trying to ay . I had the privilege of investing in this kind of company once before. Okay. As a matter of fact, this company or this kind of Company Began in 1956 with a guy named feejen who went to the floor and then subdivided it every Single Company in this space has gone broke when you say in this space, you mean taking long term leases and then offering short term rental agreements . Yeah. The savings and loan thats what youre talking about creating long term liabilities and short term assets. When they create that, the results are predictable. Why is this any different . Meaning theyre the first ones to go in a recession when things turn down i mean, i used to be the largest owner of container leases containers in the world. I was the marginal container provider so every shipping Company Owned half the containers they needed. The other half were leased from seven international companies. So those seven companies provided the marginal when business was good, everybody did terrific when business was bad, the marginal player lost and the companies did fine do we think theyll never be there will never be another is recession, another oversupply of office stuff this is marginal stuff and it is being described as some holy grail. And its very hard for me to understand the fact that the Real Estate Industry as a whole has committed suicide by allowing give or take 20 of the office space to be in effect noncredit makes no sense to me whatsoever either so do you think the industry is committing suicide by even working with them . To the extent they did. Its okay if you have a weworks space or a coworking space we are talking about 20 the largest landlord in new york, in london, et cetera. What happens so what is the chance they become too big to fail well, thats a different story. Because the right they own so much space when the true downturn happens. But if youre too big to fail, what happens you cant make your payments. Right. You therefore go back to the landlord who says, gee, im sorry i cant make my payments, change the rent. That doesnt do a lot for the equity holder. It may protect the bond holder maybe. Sam has a lot of lessons hes learned over a lifetime of doing these things well talk to him more when we come back. Sam zell is our guest host. Global markets are reacting to news out of hong kong, that the extradition bill has been withdrawn. Well discuss what this means for future trade negotiation and markets around the wldor this is the age of expression. Everyone has something to say. But in a world full of talking, shouldnt somebody be listening . So. Lets talk. We are edward jones. With one Financial Advisor per office, were built for hearing whats important to you. One to one. Edward jones. Its time for investing to feel individual. For farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice lettuce. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. Breaking news from hong kong the citys leader axing a controversial extradition bill that sparked months of unrest in the financial hub. Political crisis in the uk as a revolt spark us in questions about brexit what do investors need to know but we have green arrows here in the u. S. Futures are pointing much higher as we approach the opening bell and the final hour of squawk box begins right now. Live from the most powerful city in the world, new york. This is squawk box. Good morning. Welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square. Im joe kernen with becky quick and Andrew Ross Sorkin our guest is sam zell. The futures are up more than 200 points, 213, getting back a lot of yesterdays losses. The s p indicated up 24. Nasdaq indicated up 83 treasuries have been in this range now. No longer inverted with the two year which is at 1. 46. Here are some of the stories that investors are going to be talking about today. Hong kongs leader has announced the official withdrawal of the extradition bill that sparked months of massive protests it is one of five demands that the protesters have been fighting for, including universal suffrage in the citys elections well hear more later on this hour. Uk Prime Minister Boris Johnson said that the company is making substantial progress on brexit negotiations. Johnson will likely try to call a snap election today, seeking greater political strength as he attempts to pull the uk out of the European Union on october 31st yesterday, there was a defeat on the law that would extend the deadline for brexit by three months around a big announce and a big announcement on gun sales. Walmart announcing that the stores will no longer sell short barrel rifle ammunition that can be used for military style guns and the company is eliminating handguns from the stores in alaska which is the only remaining state to still carry them the moves come after a spate of Mass Shootings this summer including one at a walmart in el paso, texas, that left 22 people dead. New scrutiny on google this morning in the eu. The Financial Times reported that google is saying that google is using hidden webpages that feed personal data to the advertisers. This is according to new evidence given to the irelands data regulator which notes it was submitted by a small google rival called brave if true, the practice would undermine googles own policy and sir cup vent regulations that requires transparency the company is now a target of a new u. S. Antitrust probe this one by more than 30 states attorney general and that will be formally announced next week. This according to reuters. The probe focused on privacy and the antitrust issues. Google thus far has said it is cooperating with all investigations President Trump is sounding off on the trade war in the last 24 hours saying members of the past u. S. Administrations have been quote taken to the cleaners by china and he does not want to be one of them eamon javers joins us with the very latest. Thats right. The president redoubling the commitment to a go it alone approach in terms of the china war with china heres the tweet youre talking about in the past 24 hours the president saying for all of the geniuses out there, many who have been in other administrations and taken to the cleaners by china, they want me to get together with the eu and others to go after china trade practices. Remember the eu and all treated us very unfairly on fair will change so the president is suggesting hell continue to go it alone just as the United States in terms of negotiating with china will see whether that bears fruit. We saw this ism manufacturing number tick down to 49. 1 yesterday. We saw a response then from the National Association of manufacturers who cited the trade war as one of the factors thats leading to the global slowdown jay timmons tweeted yesterday manufacturers have also warned that trade uncertainty would affect our industry. Heres what manufacturers need one, pass the usmca, the trade deal two, turn the trade war with china into the trade deal with china. And three, reauthorize the export import ban. Theyre saying in washington what they want, a trade deal with china and the president signaling hes not ready to do that just yet. Theres some question if theres a facetoface negotiation between the u. S. And chinese sides that had been expected in september. We are in september now. No word on a date. Or an official sitdown between both sides but the u. S. Side is expecting this month to sit down and negotiate facetoface and well see whether that bears any of the fruit theyre looking for, guys. Thanks. For more were joined by the president of the National Foreign trade council. Its good to see you, once again, been a while, rufus you like baseball, what inning do you figure were in here . And is it is it is it a drop dead date some time before november 2020 . Well, good morning. I think you know its probably the its past the seventh Inning Stretch now i think we are with recent actions on tariffs at the beginning of this month were probably in the last couple of innings. But it isnt clear to me that anything significant is going to happen for the next several months i think both sides are hunkering down for a longer battle i think the chinese obviously are going to wait and see what is the impact domestically in the u. S. Of the most recent tariffs which as you know have started to hit on a lot more Consumer Products than in the past and i think the Trump Administration is still convinced that going it alone against china is going to bear fruit. The october 1st date, theres in terms of president xi in china, very nationalistic date coming up is nothing happening before then do you buy into that or could we all be surprised when they agree to either, you know, take half measures and come back to the table later or is Anything Possible before then or are because seventh inning unless we go into extra innings were getting close to the end, right . Yeah, probably. Although, you know, they could be long innings as you know. Can be a lot of runs scored. So i think that the question becomes does trump stick to this plan of accelerating tariffs even further on october 1st and again on december 15th how the chinese react. Look, the chinese have look at the kind of have looked at the kind of reaction going on in the vacillation in the administration on what to do i think theyre pretty much convinced that they have to they have to continue to hang tough for a while. Whether theyre busy trying to put something together behind the scenes and if the two sides are doing it, lets put it this way. Theyre doing it pretty quietly and surreptitiously. Nobody knows about meetings taking place. I wonder if thats i wonder if thats really possible do you think at this point that Public Opinion or how do you explain that suddenly Public Opinion has turned decidedly negative against china and if you had talked about this two or three years ago, asked the average person do you want to put on a trade war and tariffs against china, are they a big problem, i dont think is it a big problem . I dont think you would have heard a majority of people say yes. So someone has done a sales job on the American Public that what were doing is at least something that needs to be done and may not like the way were doing it, but a lot of people are behind this antichina sort of story or narrative. Yeah. I think thats true. But the way you do it is very, very important because if you do it in a way which actually makes it more difficult for you to achieve results im not sure that the battle is worth it. The fact hes taking on china while also not getting along with most of the rest of the trading partners and not Going Forward with a strategy based on tpp and things like that has made a big difference. The chinese look at it and say, you know, the u. S. Is an important market to us obviously but its more its not as big as one would think we take about 8 of chinas total industrial output. And, you know, theyre busy figuring out how to diversify to other markets meanwhile were figuring out how to get supply chains out of china and elsewhere. So there is going to be a certain amount of decoupling of the two economies. I dont think its going to be massive decoupling but this fight ultimately will get resolved maybe by some deals but i dont think the chinese will go as far as the Trump Administration was hoping. I do wonder whether they ramped up the rhetoric a little too quickly on china we all know china has a lot of practices and policies that need to change. But, you know, it may be that both sides just ramped up this economic nationalism a little too quickly and too harsh for maintaining global stability i can think of scenarios in both countries that would bring both parties back to the table quickly. You know, when push comes to shove, i think well see whether well see what that actually happens, its in the best interest like it was in the best interest for both to take a hard line, there could come a time when it comes a time to claim victory with half measures or whatever. I think youre absolutely right. I think that the chinese are going to have to move and do some things. I think the Trump Administration was right to cite the problems there. I think the tactics they have used and the fact that they did it simultaneously with beginning spats with most of our other trading partners is something this hindsight they will regret. But well see if they get it on a better path in the next several months all right, rufus, thank you well be Touching Base again down the road and i dont know who knows where well be by then but we appreciate your time today. Sure. Thank you. I think its interesting that in this extraordinarily difficult period where everybody is beating up everybody else, one exception is have you seen any democrats criticizing our chinese policy no. No. They criticize Everything Else except one thing and that tells you that the country recognizes that china has taken advantage of the United States and that we have weakly responded over a 20year period and were moving. But we have to move. Very good okay, sam. When we return, does the rapid growth of the cannabis industry means other drugs are next well get a special preview of the new in depth look siinde the pop business and ask if this is just the tip of the iceberg. Stay tuned youre watching squawk box on cnbc thanks to you, we will. Aw, stop. This is why voya helps reach todays goals. All while helping you to and through retirement. Um, you guys are just going for a week, right . Yeah thats right. Can you help with these . Oh. Um, were more of the plan, invest and protect kind of help. Sorry, little paws, so. But have fun send a postcard voya. Helping you to and through retirement. But were also a cancer fighting, hiv controlling, joint replacing, and depression relieving company. From the day youre born we never stop taking care of you. Doprevagen is the number oneild mempharmacistrecommendeding . From the day youre born memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. Welcome back to squawk box. I dont i dont know whats going on this morning but let me show you the futures. Im going to do this in the most professional manner. It would be a first. The dow looking to open up higher by 220 points higher. The s p 500 about 25 points higher the nasdaq up about 85 points. Sam zell and i have having a little conversation on the side. Hey, the truth is the truth, man. The truth is the truth. Melissa lee is here whats doing on . Shes investing in the booming cannabis industry, expected to hit 85 billion by 2025 thanks in part to marijuanas new reputation as an all natural cure for illness, boredom or just about everything in between her special high risk, high reward, cannabis inc. Premieres at 6 00. I feel like when im here, sam is all curses. Thats the takeaway. All right. The cannabis industry is growing at a rapid pace and it seems like psychedelic drugs can be next even bigtime investors like peter thiel have started to invest in the space. Heres a look at why psychedelics can follow cannabis all the way to wall street. It might be the new cannabis. Psychedelic drugs synonymous with the 60s. How often have you taken lsd . About four times. Not to mention alarming side effects. People are said to have died by falling out of windows after thinking they can fly. Are now making a comeback in 2019, plant based psychedelics like magic mushrooms were decriminalized in oakland, california, and denver, colorado oregon is now considering a similar measure. Free the spores all this as advocates echoed the same arguments that worked so well for the Marijuana Industry smoke some weed and smoke some more. Including the most powerful of all theres more research on the medical efficacy of certain psychedelics than for cannabis just as it was for pot, investors are taking notice including billionaire peter thiel. The biggest and earliest backer of Cannabis Company tilray, hes now quietly investing in the medical psychedelic space as well which makes you wonder could psychedelic eventually follow marijuana all the way to wall street psychedelics may be the future but cannabis say pot stocks are the best pet right now youll hear why they think another cannabis boom is around the corner around the factor and the factors that can separate the winners from the losers this this has been done before i mean, you remember Timothy Leary and all of the you know, the electric koolaid acid test and all that. From there therapeutic yes, theres anecstasy based it was approved for ptsd theres purported health ben fits they have, compared to marijuana and cbd. This is the tip of the iceberg marijuana in the truest sense could be the gateway drug for legalization are you talking about the lsd 25 or what all of those Different Things theres mescaline. Depends on what the treatment is for what disorder. Amazing but opioids, ptsd. Is this a conversation around a bunch of people who never tried any of this stuff . Well, yes i tried one 40 years ago. And it blottoed me and i dont understand how anybody could possibly compare lsd or quaaludes to pot. I mean, its just completely different risk and different impact. Sure. It seems like it would be used for some type of intervention or a mental illness. You wouldnt want to go out and work no, youre not just taking lsd. Its an open secret in silicon valley, they microdose because they think it unlocks creativity. A whole new world. Its an old world too yeah. This was done i remember very well that, you know, all the beatles. Everybody experimented and sort of had the see if you would i dont know. Get closer to the metaphysical back then. Im not convinced harry stiles said he was doing it to write music and he bit a piece of his tongue off. Yuck. Wow. Shivers. That smarts all right. Youre not taking are you going back to doing any of the other you have had some great specials over the years. You have had some great specials youre speaking about one in particular. Well, you delve into the dark side there, melissa, with some of the stuff a lot of vices. I delve into what people are interested in. Yes, you do in some cases they do involve certain vices. Thats my only point. Theres bitcoin great right. All right. Well leave it there i wont go further on this anyway, i thought you becky, i thought you were here to sit in. Ill stay over here. Shes here for sam. Here for sam. Trying to get another one of those moments. Coming up, a fresh look at the trade deficit. Updated numbers are just a few minutes away were one trading day now into the september, markets are seeing heightened volatility that can that mean for the fed d hebig decisions this month . Well debate that when squawk box returns every curve, every innovation, every feeling. A product of mastery. Lease the 2019 es 350 for 379 a month for 36 months. Experience amazing at your lexus dealer. At cdwwell weve made our happy,office pet friendly. S. [ bleat ] [ cooing ] maybe a little too pet friendly. Well you know cdw can design a Mobility Solution with light powerful devices from lenovo to make your people more productive in or out of the office. Anyone have any questions before we go . Thats great cause i really need to get out of here. Snake people are freaking me out. Hey sheryl, you have a sec . Nuh, uh. For work place productivity you need lenovo, and it orchestration by cdw. People who get it. Welcome back we have been watching the futures this morning and after a down day yesterday for the markets you are seeing a big resurgence today dow futures right now indicated up by about 228 points after losing over 280 points yesterday. S p up by about 25 points and the nasdaq indicated up by about 80 points. Okay coming up when we return, breaking Economic Data the latest trade deficit numbers. They are out after a quick break. Dont go anywhere. Squawk box returns right after this hi. This is the man thats going to check your eyes grandma. Cognizant ai solutions are helping Healthcare Companies advance diagnostics and prevent blindness in patients with diabetes. Everything looks good. You have beautiful eyes. I like to make my life easy. romo mode. beep bang good luck with that one. Yes thats why i wear skechers slipons. Theyre effortless. Just slip them right on and off. Skechers slipons, with aircooled memory foam. Welcome back to squawk box. Live from the Nasdaq Market site in times square. Were seconds away from the latest trade deficit data. Lets look at the futures quickly. 226 now on the dow some of the best levels we have seen the s p up 25 the dow is almost getting back yesterdays losses got a little more to go. Could have been much worse yesterday. Down over 400 at one point the nasdaq is indicated up over 80 and the ten year is now wow. Almost up to 1. 5 which is above where the two year is. So its not inverted Rick Santelli standing by at the cme in chicago hell bring us the numbers the numbers. Absolutely. Our trade balance which most likely will be a deficit and indeed is it for the month of july minus 54 billion 54 billion. Of course that negative is about 1 billion heavier than we were expecting. Were expecting the number a little lighter than that rearview mirror, slight recision minus 55. 2 stands at 55. 5. So we have lost 1. 5 billion at least with reference to history. Of course all eyes are continuing to focus on whats doing on with Interest Rates around the globe whether its italys dropping rates or the uk or the u. S. Of course new cycle low for ten year notes they went from over 147 to under 147 in terms of their closing yields thats all i really look at. Intraday are exciting but what goes into the history books are closing and that was the lowest close since may actually since 2016 excuse me, from july of 2016 and also remember july of 2016 is no noteworthy for something else. That was the second of two double bottoms july of 2012, july of 2016 right around 137 so of course were all going to focus in on that it does seem as though there will be a test its just a matter of when andrew, back to you. Thank you for that. Steve liesman is here. He is looking very studiously at his i mean, do you guys remember when we ever spent any time within the International Trade data now very, very important economic and political data. I went to with the trade balance with china before that, i want to give you quickly the overall which is that exports were up 0. 6 . Imports down a little bit. And it may be that the reason why we have a little bit higher trade deficit is because of people trying to jump in ahead of the tariffs let me tell you what happened here exports to china fell 2. 3 s and imports from china rose 6. 4 so that kind of spike depending upon where whether or not those are potentially tariff affected goods maybe people are trying to get in ahead of these tariffs. I mean, we had the jumpiness in the trade data what i did is i looked at trade year to date very quickly i want to show you one way of looking at this shows the u. S. Winning the trade war and what i looked at was the first half of 2019 versus first half of 2018 okay, year to date through june. This is not todays data it shows that imports from china have fallen by 30 billion whereas exports to china have only falling by 12 billion. Looks like a win, not when you look at it in percentage terms because the chinese imports are so much larger chinese imports are only down 12 versus u. S. Exports down 19 . This is the problem of economics well talk about in a second on the one hand were winning in dollars on the other hand were losing as a percentage lets look at where the winners and losers are computers and electronics are down agriculture down 20 machinery im sorry, u. S. Exports to china transportation equipment i think thats boeing and by the way the one thing to think about in the manufacturing data from yesterday and plus the export data i dont know how whats happening with the 737 max figures into the data. A lot of the data boeing has a big influence on so we just dont know how to do that however they have their own problems. Thats another issue so thats why transportation equipment may be down. But very important, agriculture and machinery is down. A lot of people say everybody is losing well, you can make your own determination from the data right there. All right, steve stay right here joining us to talk more about the economy and the feds big month ahead is bin ya appelbaum. He has a new book called the economists hour. Well come. Joe, you would love this book. I dont think i need to read it. No, you should read it. You would love the book. This is your im living it. But economics is a science. Right here. I saw it its dismal, but its not a science. The idea is there was this revolution, a quiet and important revolution starting in the early 1970s where economists become a lot more influential in policy making. They really reshape the way that the government is managing the economy. And that has an effect on all of us it reshapes all of our lives for the better or the worse i think both in some respects there are ways in which economists have improved significant policy making but on the whole, one of the big consequences is that economists told us we should focus on growing the economy as much as possible not pay as much attention to distribution and thats been a big driver of the growth of inequality i think that has been really bad for us. Can that be undone . I think it can be undone slowly when your problem is inequality, the solution is to start focusing on inequality and to make policies that are aimed at reducing inequality thats something we havent been doing for the last generation an something to start doing. Lets look at whats happening today and front of mind is this month of september. It can be a scary time do you think this is a september to remember or one we kind of forget about i hope its one we forget about. Theres a lot of risk out there. But we have a lot of uncertainty about trade and its putting a lot of pressure on the global economy. Central banks are really wrestling with how much capacity they have to help. Theyre trying but it doesnt seem to be making a big difference and they dont have that much ammunition right now so i think theres a lot of reason to worry. Mark grant has this very interesting theory that things are going to get crazier from here he kind of says all of the other Central Banks are really direct arms to the government they do what theyre told to do by the governments in power there. Thats why were looking at zero and negative Interest Rates all over the globe, i guess 17 trillion in negative Interest Rates do you think thats why . I dont know if id describe the ecb as the arm of the government i think it has a mind of its own. But its clear that policymakers are putting tremendous pressure on Monetary Policy to be the solution and to really the only part of government that appears to be able and willing to address our economic problems i think theres far too much focus on Monetary Policy right now. And the problems are in trade and in fiscal policy and everybody keeps talking about monetary. When you say the problem is just inequality and not growth, it sounds like what youre saying is that the problem is not enough redistribution. Not enough taxes taxes are too low and Government Programs and social safety net and those sort of things are not enough. So it sounds like what youre saying is because the economists urged or motivated politicians to keep taxes low and grow the economy that not keep taxes high and redistribute that thats the problem. I think they argued that inequality would not get in the way of growth and it turns out that inequality actually impedes Economic Growth. Those with high levels of high inequality experience slow Economic Growth over time. What do you think the role of the fed should be relative to the politics of the moment im thinking of phil dudley writing the controversial oped that the fed should be pushing back or at least not enacting policies that help the Trump Administration he then sort of backpedaled and the other oped theres been a back and forth on this what do you think the official policy of the fed should be in these type of instances . I read dudleys remarks as a cry of pain because the fed is in this difficult position right now. But i think the obligation has to be and the best way to demonstrate the independence has to do to do what is best for the economy. It is limited but its real and trying to sort of play game strategy and figure out what trump is going to do in reaction its not going to work over the long term. What they need to do is stay focused on heres the economy in front of us. If it needs lower rates it needs lower rates. If that gives the president more room to go off and exasperate his trade war, you need to deal with that when it comes too. Your job is Monetary Policy. Do you think jay powell recognizes that as well . I think he does i think hes struggling with the optics of it its hard to say that independence consists of doing what trump wants but thats where we are right now in order to demonstrate the independence, the fed needs to do what the president wants. What do you think the feds reaction was to dudleys column . I have heard from many people that it made them really up comfortable to be uncomfortable to be cast in that light. Even paving the possibility of paving politically was uncomfortable for them there. What is the right way to talk and get it right i think the economics has moved in the positive direction over the last generation we have more Empirical Research and trying to construct more accurate models of the way that people behave in the economy we have seen a recognition that psychological factors play a big role i think economists are doing a better job to some extent. Particularly in the academy of offering constructive advice i dont think thats migrated into the policies yet. I think they have a job to do educating the policymakers about the inequality and the need to address it. Who are the false prophets that youre referring to Milton Friedman who dominates any room hes in even though hes the shortest person in the room one of the opponents once said you only want to debate him when hes not in the room because thats the only way to win the argument so hes this tremendously important figure in mid century america. I think the economists do have the greatest influence on modern American Life and his message is simple he wants government out of the way and thats the solution to any problem. Hes remarkably successful in convincing the government to adopt his proscriptions from getting rid of the fixed exchange rates, ending military conscription his influence is vast and still underachieved. So stiglets and others theyre true prophets . Well, i think its hard to say how accurate other places have tried their ideas. There are countries that you know have pursued different economic streams one of the favorite statistics look at france and the United States economy, everyone knows the u. S. Has grown more quickly than france, but if you take out the top 1 and look at Income Growth for the 99 its actually been much faster in france not just aggregate growth that matters. You have to think of distribution too. Thank you very much for joining us great to have you here today mean time some news while we were just talking here, check out the shares of starbucks, theyre falling right now. Its down 3 they said it sees fiscal 2020 earnings quote below the ongoing growth model of 10 and the next starbucks Earnings Release is scheduled for october 30th this surprised the investors this morning coming up well go live to london for the latest developments on brexit and the uks precarious political situation. Then well head to hong kong for an update after the citys leader there withdrew the extradition bill that caused street protests. Stay tuned squawk box will return pressures to find returns and finding hidden risks this is solve it from jpmorgan Asset Management im here at the Nasdaq Market site with a Global Market strategist at jpmorgan Asset Management more companies are staying private longer but are there unintended consequences . Its because theres more private what capital and more and more money as in flowed inwho private markets because theres been a return premium there. What is driving that though i think it comes back tothe fact that when you look at Public Market returns over the next ten to 15 years, theyre not doing to be sufficient to general rate the type generate the type of income that investors need if theyre tapped out youre forced to play on the private side of the equation. Also a concern though nontraditional lending which is growing more than half the market. We are seeing a lot of synergies between private credit and private equity which makes us a bit nervous you are seeing late cycle behavior in the fact of ebitda adjustments being a regular thing. The lending strategies oftentimes entail more risk and more caution is warranted Going Forward. Thanks, david. Thanks for having me. For more, search jpmorgan solve it online. Welcome back to squawk box this morning take a look at futures right now. Ahead of the open, we are about 45 minutes away. Looks like we have green arrows with the dow looking to open about 228 points higher. Nasdaq up about 81 points and s p 500 up about 25 points were watching two big Global Developments closely. Chris livesay is in hong kong where the citys leader has withdrawn the extradition bill that touched off the months of the street protests. First though, lets get to willem marx in london and the latest Brexit Developments i saw a lot of flashes coming out of parliament and the Prime Minister today i mean, new things since the last time we spoke update us. Essentially, joe, whats happened over the last couple of hours, Boris Johnson is facing a barrage of criticism during his weekly Prime Ministers questions inside the Lower Chamber of the parliament here earlier today and essentially what he was facing in terms of that criticism was this demand that he allow a no deal brexit to be ruled out. And that he answer questions about what a no deal brexit would mean for the public because his government has refused to publish some of the details internly in terms of the criticism of the opponent hes pushing for an election after he last night and looks likely to lose a another vote tonight theyre seeking to block the no deal as a possibility because they think its so economically damaging he says he needs it as a negotiating tool with the European Union to try and wrest some fresh concessions out of them to get a deal through parliament after his predecessor theresa may failed to do it three times in terms of the possibility of a fresh election, thats very much out there but the opposition here in the uk is saying they wont allow fresh elections until no deal is ruled out. And because he needs a majority to call for those elections and has lost that majority yesterday hes now relying on the opponents to allow him to go back to the polls nationally all right, willem, thank you. Lets get over to Chris Livesay in hong kong on the latest on the withdrawal of that extradition bill chris . Hi, joe, yeah, just a short time ago, the embattled leader of Hong Kong Carrie lam announced she would withdraw the controversial extradition law that sparked off the three months of protests, protests in which we have seen hundreds of thousands, sometimes more than a Million People turning out to the streets. Terrified that this law would give china the ability to pluck them from hong kong and bring them to the mainland for extradition and for trial where they face a much more opaque judicial system. Joe, back to you. Very good, chris. Thank you. Andrew we want to get back to our guest host this morning. Sam zell, chairman of the equity group investments. You know, given that we have been talking internationally and about china, the one thing i wanted to pick up from the earlier conversation we had about sort of pushing on this and the point that you made the democrats have not really come out against the policies of the Trump Administration, maybe the approach my question is about the approach do you think the approach is right . And what do you do you know, i cant help but think about the army mule, you know they tell a story about the army mule, you know, how do you get an army mules attention you whisper in his ear, but first you hit him over the head with a 2 x 4 i think thats what were dealing with in other words, you know, the chinese are very adept at not you know, not accepting anything and so you have to hit them over the head and i think thats what trump is doing. How long do you think this plays itself out for i know youve been waiting for i dont know the answer to that i mean, theres so much here in my opinion thats in chinas interests to correct and theres so much interest in the u. S. To do something that i think that sooner rather than later people will come up and face reality i think well end up with end up with a solution thats dramatically better than where we are today. You know, people who are who spent time over in china say that the chinese get their back up, you know, they have pride on the line in this too how do you find a solution as somebody whos a made a lot of deals over time, who do you find a solution and make it look like face saving all around i have been involved in an awful lot of transactions and i have been involved in a lot of, you know, face saving scenarios. And the answer is if people decide that they dont want to be embarrassed, quote, and then they wont be. And if they decide that they wont lose face they wont and i think that the issues are much broader and much bigger and the impact of what trump is doing to china is not lost you you know, among the most protectionist policies forever is sitting there saying, gee, are we next . Maybe you are. You have to basically change the rules. The United States cant just like we cant defend the world and pay for it, we cant run a system where we run an entire economy for the benefit of other countries. People forget that, sam, that if trump said, all right, everybody over there remove your tariffs, well remove all of ours, we would do it. Sure, in a minute so it is not the way it happened the American People today probably think that all these other countries dont have i know. I wonder why. Because we had a philosophy keep ducking the reality. Keep not acknowledging the fact that the u. S. Has been subject to tariff, you know, terrorism for, you know, 50 years. The post world war ii reorganization was nothing more than a reorganization in which the United States took responsibility for the defense and the economics of the world let me ask you this to the extent the tariffs are considered by some a tax on the American Public, how long can that go on if a deal gets done, is it a real deal . Does it have teeth does anybody care . What happens in the markets . Well, i think that, yes, i think it can be done number one number two i think people wont care because it will upset precedent as to what people are going to scream about or not scream about. So i think it is doable. But it requires everybody in everybody on the same page everybody pulling on the same direction. And we have created an environment over the last since the end of world war ii where the United States took all the responsibility and the result has been relatively disastrous. Given all the uncertainty around here now, what is the zell family doing with its money . I think the zell family is very conservative, very diversified, very liquid and it is very concerned. Waiting for what . I think waiting is the wrong word i think preparing for what you think what i think are very volatile times, where flexibility is going to be the primary asset everybody has. Even though you dont see a recession coming between now and the election, you think it will be a lot of volatility and the market will be chaotic. Without question. Down 285 yesterday, up 220 today, down 300 tomorrow it has been going on now for, what, months. Youre not somebody who is waiting for it to drop one or two or 3 , youre waiting for that moment it drop 10, 15, 20 , right . Im not waiting for the market to do anything. Okay. Im waiting for the economy to, you know, use supply and demand to modify the demand. And modification of the demand leads to a Slower Growth and therefore opportunities to invest against the grain back in real estate or in other places i think i wouldnt make a distinction just on real estate. Matter of fact, i think real estate is less likely to be benefited because it just is not having an oversupply scenario which is what ultimately makes real estate attractive if you had to buy real estate now, is there a place you would buy . I think the answer is that we dont buy places, we buy buildings. Right and so there is always a building worth buying. There is always a building worth selling. You say to yourself, right now, given the trends going on in the country, i like atlanta, for example, a lot of people think thats a hot market or i dont think atlanta is a hot market i dont think they may be hot markets in terms of activity, but both of those markets are markets with an enormous amount of supply that is going to basically dramatically impact the performance of that real estate what is a market that five or ten years from now well be sitting here thinking, man, we missed it. That assumes that the u. S. Real estate market loses its ability to build when money is available. And the reality is that money, when money is available, we will build and we have a lot more capability to build than we have capability to absorb sams our guest host. Stay with us were going to be right back fencing with the fencing master. When we come back, well get you caught up on all of this mornings market action. And dont miss melissa lees investigation into the booming cannabis industry. High risk, high reward, cannabis inc. It premieres at 6 00 p. M. Eastern time here on cnbc. Well be rhtac every day, visionaries are creating the future. So, every day, we put our latest technology and unrivaled network to work. The United States Postal Service makes more ecommerce deliveries to homes than anyone else in the country. Ecommerce deliveries to homes by the way, shes the it wasnext mozart. G day. As usual we were behind schedule. But sophies enthusiasm cannot be dampened. Not even by a runaway donut. We powered through it in our toyota prius. Because a stars got to shine, no matter what. Its unbelievable what you can do in the prius. Toyota lets go places. When i needed to create a better visitor experience. Improve our workflow. Attract new customers. Thats when fastsigns recommended fleet graphics. Yeah, and now business is rolling in. Get started at fastsigns. Com. Welcome back to squawk box. At t has named media boss john steinke to a number two role this sets him up to the successor to randall stephenson. He will serve as president and chief operating officer of the company, continue to run warner media, that houses hbo, warner bros. Studio and the companys cable channels hes been ceo for 12 years and hasnt indicated when he plans to retire. Hes a baby. Hes still in his 50s. Still a lot of time. A baby. A lot of things to, you know, put together a totally different at t and need to see the fruits of being born out look where we are on Interest Rates. Might have been the time, pretty smart, at this point if the dividend is safe, at t is trading at new highs, isnt it checked it out lately. Any in the tea leaves, any reason to think that randall wont be there for another five, six, ten years. I have nothing which would suggest hes going anywhere anytime soon i dont either. I know that i know john stankey. Hes a tall man. Very tall man. Very large hands when he shakes your hand, swallows it up which i think that is good for a ceo, right . Right . Firm handshake, big guy. But no time frame as far as you can tell no, not one i know about. Has he played golf . Thats a whole other issue. Okay, all right how much time we got . I cant find the clock up here. 20 seconds, joe. 20 seconds now. Sam, thank you thank you for keeping it clean today. As far as everyone knows as far as people at home know. Thank you, guys, for restraining me appreciate it. That was a restrain well all be back again tomorrow i have no idea what kind of show it is going to be tomorrow we can only guess. Make sure you join us. Squawk on the street is next yes, so crazy right now most incredibly your girl b your boy good wednesday morning. Welcome to squawk on the street. Futures bounce, dow looks to open up 200 as hong kong withdraws that extradition bill. That prompted months of protests tons of Corporate News from starbucks to wework, american eagle, alphabet. Europe up about a percent. Bunds selling off. Ten year below 15. We get