Transcripts For CNBC Squawk Box 20240714

Showed that chinas trade exports contracted for the month of august largely because entirely because of the trade war with china and the United States well hear more about that from eunice yoon in a moment. Look at whats happening with the european markets that are open and actively trading a in the point. Right now most of these markets are in the green ftse is the exception down by a quarter of a percentage point. Also f you check out the treasury market here in the United States, youll see the yields that we have been watching oh so closely as we get ready for fed next week and ecb this year, ten year under 1. 6 , 30 at 2. 07 . Some news out this morning saudi arabia now confirming it has removed its Energy Minister from the position over the weekend replacing him with the kings son and that move breaking with long time tradition and convention that members of the royal family are not appointed to that position and comes just days after al falih was removed from his role after chairman of saudi aram aramco we had conversations about what wethought was this move coming i had made the suggestion i dont think it was about separating somehow the head thof ipo the Energy Minister from saudi aramco as some internal division among who was in favor and who was not. I think that this probably suggests now that thats whats really going on. Separately and bigger news in terms of whats going on here on wall street, saudi aramco expected to give a lead role to its ipo to jp morgan according to report from cnbc. That said that Morgan Stanley ice bid for the top role was hurt by its handling of the uber ipo. Goldman sachs of course tried to get that top role. Aramco preparing to sell up to a 5 stake in the worlds biggest ipo. The saudis are going to fast track a local listing. Dont expect this to come to the new york or London Stock Exchange any time soon it would first happen there on their local Stock Exchange and then likely a year after they would try to do it on an International Exchange afterwards. Why do that is it because of requirements . I think theres the Biggest Issue about the saudi aramco ipo always has been the disclosure issues. Are they really disclosing what do people know. Theres lots of issues around how theyll deal with this back in the country this at least allows them to run the experiment a little bit and still control it. It can be a controlled experiment where as without if they went straight to the new york Stock Exchange and didnt trade well initially there could become problems very quickly. This way you can at least sort of manage it. None of the big banks are saying im out of this because of what happened to that journalist to khashoggi . Yeah. I thought about that a lot. None of them are saying, you know, not for nothing but were just not going to do this. Were going to take a stand here. A number of a lot of are you surprised a lot of kpeexecutives are gg back to its just proving the point well, i dont know what it proves it proves that none of these they may have written that beautiful business round table statement and youre proving that youre suggesting this proves this is all virtue signaling, is that the suggestion when push comes to shove we know what motivates these guys and what and what theyre going to come down with. Are you going back to the desert because you know how much were looking for an updated shot. Im not going this year. Youre definitely not, no no. Im not going this year. What is it, a matter of time . Thats a really interesting question sit a matter of time i understood why the executives didnt want to go in the immediate aftermath because both from a you could argue as a marketing perspective or whatnot they didnt want to be seen but i think they were trying to suggest they didnt think it was appropriate at that time the question is how much time. Does time heal . Do you wait to see them take other types of steps that might make you feel better about it . They havent asked anyone else in the time between when it happened. They have not. Its a fair and valid question. Its a little cynical viewpoint which i try to bring up many times. You also wonder you know theyre tripping over themselves. Oh, prince look, if you remember, years ago citi group got out of the saudi arabia after 9 11 and within several years they thought it was one of the greatest mistakes of the banks history and turned around and spent the last ten years going to the desert, kissing rings, trying to get back into the country and eventually by the way just recently got a license. Probably literally kissing rings. Perhaps. The other thing you have to realize is you have to weigh what we have spoken with tom freedman about some of these issues and his point has been is look, he has in other areas kind of opened things up, made it easier for women to do a lot of things you have to weigh all of this. Do you do business with regimes that you dont agree with all or any of their decisions or none President Trump said about selling arms to saudi arabia should it be us or russia or china . Someone is selling. Speaking more plainly than most people would in situations like that. Im not even criticizing that im just pointing it out that when that this is not surprising, that they want to be in on the aramco thats what theyre in business for. What this means on cutting back on some of the harshest and most dyed in the wool fanatics in terms of religion he hoped he would loosen that up. Everybody is hoping its a journey its a long journey with different steps and different set backs. And advancements. You had to rsvp on when youre going. When is it . You know for sure that youre not. I dont think im going its in late october, i think. Do another shout out in the hamptons. Maybe well do a shout out im not known for that shot. You should go were not talking about me. I dont go i would never go, but you went you got that great shot without shoes, by the way. I love how we air all our dirty laundry on the air talk right through. What happened to my iraq . Youre done you talked through it. Lets talk about the new trade data that came out of china over the weekend. Lets go to eunice yoon in beijing with the latest oen the trade war. Eunice, good to see you. Thanks so much, becky well the data showed that the tariff dispute with the United States continues to take its toll the exports unexpectedly fell for august a lot of economists had expected a rise thinking that manufacturers were going to front load or rush orders ahead of President Trumps september tariff deadline. Instead the experts dropped by 1 imports shrank less than expected but it was still down for the fourth nont a row. So this weaker data is really fueling expectations that the government here is going to continue to roll out more stimulus measures. Last week we saw the state council announce it was going to move forward a 2020 date for a local government to issue more bonds to boost Infrastructure Spending also on friday, the Central Bank Cut the now say its going to cut the triple r, the amount of money that banks have to have in reserve by 50 bases points for all banks and then another 100 bases points for some of tsmall city banks now they think the central bank is going to cut Interest Rates more broadly sometime in the fall not so clear as to the time. Theyre also seeing and eyeing a political event on october 1st, the 70th anniversary of the founding of the peoples republic of china and the expectation is that the authorities are going to want to make sure that growth is very steady and that it doesnt appear that policymakers are moving too aggressively on stimulus just to make sure that president xi jinping looks very confident as he goes up on the stage and has a speech on that day. Guys eunice, thank you very much eunice yoon. In hong kong more clashes between police and protesters over the weekend chery kang joins us from hong kong. Reporter good morning, joe certainly looks like business as usual near the u. S. Consulate area of hong kong. But, of course, it was a completely different scene yesterday tens of thousands actually rallied to this area. Why the u. S. Consulate really the idea is trying to go beyond the Hong Kong Government and the Chinese Government because a lot of antigovernment, prodemocracy protesters here in hong kong feel like the Hong Kong Government is not really listening because many of their demands have not been met yet. And really if you take a look at some of the slogans, the signs that they held up, its really calling on u. S. President donald trump to, quote, liberate hong kong and theyre also calling on u. S. Lawmakers to pass this legislative act called hong kong human rights and democracy act now, this is something that im going to be watching out for very much closely for weeks to come as the u. S. Lawmakers come back from their recess this week and there have been some buzzes about whether, this is going to get some real traction in washington, d. C. Really the idea is the u. S. Annually assessing hong kongs special status its really about the trading privileges that hong kong is enjoying the United States now, its a negative, of course, for the hong kong economy. Its image and reputation and status as a financial hub, but the protesters are actually wanting, calling on the u. S. Lawmaker to pass this particular act. Why . Because this is going to hurt hong kong status which in turn will hurt Mainland China as well so it really goes to show why the hong kong protesters yesterday called on u. S. President trump for his attention and also Singing National anthem of the United States, waving u. S. Flags. Guys, back to you. Yep thats happening theyre trying to you know, you dont have to do much to draw President Trump into some nationalistic theoretically natchistic conformation of what theyre doing. Theyre appealing to the u. S. Like sort of overtly, playing the national anthem, et cetera any way, chery thank you coming up, a lot more on squawk box this morning. Markets on the move and the dow and s p are just 2. 5 away from their alltime highs were going to talk strategy after the break. As we head to the break, look at biggest premarket winners and losers in the dow. Were back in a moment at fidelity, we believe your money 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. Kmeef u. S. Economist at Deutsche Bank and john lynch executive Vice President , chief investment strategist at lpl financial. Matthew, in just para phrasing what i think your thoughts are, were at low rates the fed did change its viewpoint to some extent, but the tightening was already evident and at this point, they may be behind the curve in terms of where the rest of the world is and where the yield curve is, is that basically right i think thats fair we expect the economy to continue to slow the jobs report on friday showed that were seeing a continuation in the trend in slowing job growth we see the fed cutting rates four more times this year. Four more times in total. Three more times this year one Time Next Year in q1 and i think the bigger question is with intensifying trade tensions and we saw the china trade tensions its not just impacting the u. S. Its hitting china. The ism Manufacturing Index is sending pretty dire signals about manufacturing and cap x. So we see the fed taking some insurance against that. Are there three or four med meetings left this year . We have september, october and december. Only three. You think theyll cut every single time and then have to cut at the beginning of next year. Next year a different they have this policy review on going. Theyre looking to change their inflation mandate potentially. There we think they move to average inflation targeting regime one which theyre trying to get inflation above 2 . Do you think theres any chance the fed actually sees that themselves that they would try to get ahead of things by cutting by 50 bases points sooner rather than later i think its possible and you have seen a bit of a dovish shift in the hawkish member Eric Rosengren seems more open to a cut jim bullard is arguing the data hasnt slowed enough to get consensus on the committee for 50 bases points in december. Mostly cap x. Whats hurting cap x. Trade uncertainty is a trade driver the leading indicators there, export orders have plunged they have been very good indicator for cap x. A world where you have this consistent and persistent trade uncertainty, i think its difficult to see firms being willing to do big cap x. How can you see President Trump allowing the gdp to fall to one and three quarters because of something hes doing himself . You dont think he can connect the dots between the trade war and one and three quarters and his reelection . I think he can. So i think he will eventually back off. Too late . The question is it too late and how fast could growth actually snap back as a result of that. I think there is something more persistent here. I think you need to have a Firm Resolution for businesses to be willing to invest and spend again. John, that doesnt make you get out of the markets youre still looking for some levels above where we are right now in the s p, are you not . Thats right, joe good morning and i agree with your other guest. I think the cap x is really key. Weve got this trade uncertainty going on, but we still have immediate expensing of 100 . The repatriated assets a third still need to be invested in cap x it would appear. I still think from an industrial standpoint where we still maintain an overweight, get some clarity on trade i dont think youll see it any time soon. Youll have the 70th anniversary of the Peoples Congress party coming up next month its probably early 2020 to your point about th president and trying to position for reelection and position for stronger economy, i think we need clarity by the First Quarter of 2020. Got to do it by then. We got see what happens in october, right so, you dont see much in terms of the multiple stays where it is and then youre basing things on where s p earnings come in . Thats exactly right. I think its important i think all too often investors get hung up on a 16. 5 or 17 historical p. E i think the p. E. Needs to be looked at on a relative bay is to the ten year treasury or inflation. You look at the tenyear treasury yield 675 since world war ii going to use the same Historical Data going back on multiple you need to do that on rates and inflation. So, since were so dramatically low relative to market Interest Rates and inflation, we think an 18 quarter p. E. On a number approaching 175 in operating earnings for the s p next year which is still 8 or 9 below the street we are still relatively conservative compared to bottom up consensus. For the e part but for the multiple part you might be above. That brings you to 3150 to 3,200 at some point in 2020. It will be weird when were in 2020 because it will be so easy to say what year it is 2020, like 20 20 vision. Is it not . Well say 2020 a lot election of the 2020 thats a good good fodder for you. Yeah. We have to enjoy that year. Well get to enjoy your jokes. Today is 9 9. 9 9 19. Always using your noggin. To bring value. We were going to i wanted after you did the teasing, i want to without comment have that picture of you in the desert and it didnt happen. By extending the conversation you give them more chances to do it. There now i wasnt trying to do that i was not who is that handsome man. That is part of squawk box. Its a cologne advertisement. How many are we charging for that cologne not enough. Not enough. The more you charge i think thats the way it works. Premium pricing and people say why pay less thank you all. Thank you. Thank you. Coming up, fall out from the trade war Contessa Brewer is in maine covering a tariff target really, what do you have coming up, contessa joe, these maine districters made Big Investments to open up the Chinese Market to Maine Lobster, then the retaliatory tariffs hit. Now these guys need to find new homes and the distributors are hoping to claw back some of that trade. Ive got it all ahead on squawk box. I got that vibe, got that vibe got that vibe, yeah, i aint petty, looking fly, looking fly, looking fly, yeah, they aint ready. I can shine, i can shine, i can shine. Imma do what im made to do. Imma do what im made to do. Built for excellence. You start from the foundation up. The excellence is reaching dreams and chasing them at the same time. You should be mad they gave this guy a promotion. Chasing them at the same time. You should be mad at forced camaraderie. And you should be mad at tech that makes things worse. But youre not mad, because you have e trade, whos tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. Dont get mad. Get e trades simplified technical analysis. Can i get some help. Watch his head. Im so happy. Whatever they went through, they went through together. Welcome guys. Life well planned. See what a Raymond James Financial Advisor can do for you. The light beer youve been waiting for has arrived. Lower carbs. Lower calories. Higher expectations. Corona premier. Time now for the the executive edge china are targeting the import of u. S. Lobsters with stiffer tariffs. Contessa brewer joins us from maine. We have to settle this now lobster . Reporter yeah. You have to do it because these guys are really hurting. Look, its a busy morning. You have folks packing here lobster heading to hong kong and it looks busy, right well, looks can be deceiving the sales are off 50 . This is a business the Lobster Company that had had invested and expanded and ramped up to supply beautiful Maine Lobster to a newly ravenous Chinese Market and then the trade war erupted. 25 tariffs were slapped on american lobster on september 1st that increased to 35 . It didnt matter to the Lobster Company because their Chinese Market all but disappeared most peoples pockets arent deep enough to sit around and take a 50 hit to your business waiting for it to return reporter you know who is loving all of this the canadians. They have sent 40 more lobsters to china in the first half of 2019 compared to the first half of 2018 before the tariffs came into play. And where are all those lobster coming from . Here is the puzzle the u. S. Is selling 130 more lobster to canada. And theres suspicion on both sides of the boarder that the Maine Lobster are actually going to canada, getting packaged up like this, but labeled caught in canada and then shipped to china any way. Oh, by the way, you know who has a Free Trade Agreement to sell lobster, canada does with the European Union you know who doesnt the United States. Its a real problem that they need to crack. Guys wow. So to speak. Contessa, wait, theyre labeling caught in canada but being caught where reporter i want to be very careful with my words. There is suspicion that the lobster, which populate these cold waters off the coast of maine are getting caught in maine and shipped to canada, packaged in canada and sent to china. Thereby avoiding tariffs suspicion no proof makes sense i can understand why. Then i wouldnt hopefully if this finally eases these guys will be able to renew business with china and still have their jobs. Oh. Reporter you would think, joe. But here is the problem, canada has expanded its facile to accommodate which Chinese Market 40 more year over year they have charter flights flying to china to take lobster there. That doesnt disappear once the United States makes a trade deal with china. The charter this company, the Lobster Company, is very concerned that the chinese customers dont come back, that they already moved on. The charter flights are out of maine or canada reporter halafax. Is there a different margin is there a premium price for lobster from the United States or maine versus reporter here is what were learning, yeah its a great question. Here is what were learning. In all these commodities whether youre talking lobster or rice or soy, there is a premium thats put on American Goods because there is a sense of quality of food safety and of knowing the source that the chinese are willing to pay a premium for and thats why one reason chwhy these chinese markt are so important when we export lobsters the tariffs make no sense. I know where you are. Youre right near kennebunkport. Reporter youre right. Theres a great golf course there. I played one time and guess who was playing the same time . The bushes . President trump Vice President bush when he was Vice President and these guys in secret service came whoa i turned around. They were all running toward me. He was out there and they were yeah he was veep at that point. It was a long time beautiful place, contessa. Thank you for that report. When we come back, boeing shares under pressure after more bad press. Well tell you why next. Plus, tracking the Market Impact of President Trumps tweets we got the details on a new index at jp morgan take a look at fridays s p 500 winners and losers as we head to a break. Feeling hot hot hot through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Will it feel like the wheend of a journey . P working, or the beginning of something even better . When you prepare for retirement with pacific life, you can create a lifelong income. So you have the freedom to keep doing whatever is most meaningful to you. A reliable income that lets you retire, without retiring from life. Thats the power of pacific. Ask your financial professional about pacific life today. Hey. You must be stevens phone. Now you can know whos on your network and control who shouldnt be, only with xfinity xfi. Simple. Easy. Awesome. Announcer welcome back youre watching squawk box. Live from the Nasdaq Market site in times square. I want to be good morning. Weird in so many ways. U. S. Equity futures are up 65. 5 points this morning. Another update is it Interest Rates that just everyday theres the inclination is for futures to trade higher maybe theres the idea that october something happens. Run it up now got to do it. Something happened to the stock market. Yeah, right unless we hear that things sour again. You saw the data theres the export data from china and the other story that if you dont believe their numbers when they give them to you, just say, wow that if you look closer and look at other its weaker than theyre admitting. Supposedly. Boeing is suspending the testingover its new long haul 777 x aircraft after reports that a cargo door exploded reportedly exploded out during a recent faa test. Company Spokesman Says the testing conditions were well beyond any load expected in commercial service and the test was run on a plane meant for ground testing only and not actual flights, but you see boeing is down more than aers in morning. Amazon is holding a career day on september 17th. The company will offer more than 30,000 permanent jobs ranging from warehouse workers to Software Engineers that event will span six u. S. Cities it will happen in chicago, boston, dallas, nashville, seattle home to amazon, of course, and arlington, virginia, where their hq2 is set up. Other big news over the company weworks Parent Company considering further cutting their valuation, now possibly below 20 billion. Do you remember we were at 47 billion originally the wall street journal saying some existing investors are cancel the ipo all together. Of course we will be hearing whispers and rumors and whats the reaction during this road show throughout. But to go from 47 then to slash in half and then to go even lower, at some point and i think the bigger story here to some degree is what happens to softbank because they were the ones who originally put up, a, the most amount of money but were effectively the ones responsible for the writeup of all of these different valuations. What does this mean, right. I know softbank has a mixed performance. Some of their investments have done well but the marquee ones are the ones that have come under pressure. They just raised their second fund off the back of returns the written up returns. Right. Meaning so they went out and marketed a second fund based on wework being worth 47 billion. Cnbc. Com had an interesting piece over the weekend it pointed out the idea that the entire push is he wants growth at all cost. That you have to continue to grow, thats how you win is by getting bigger and bigger and bigger all the way along and dont worry about the losses the question is will the Public Markets underwrite that . I think thats a very fair question. I was going to add to that specifically the issue around wework is has he grown so fast and so big that he is too big to fail that when and if there is a downturn hes going to be able to go to the landlords and say, guys, i need a better deal now. If he gets to that point. 47 billion to 20 billion thats a bigger fail. Are you protected from a downturn interesting. When we come back, more states joining investigations into big tech. Well tell you the latest on the antitrust efforts and what it could mean for the companies that are involved. Stay tuned your watching squawk box right here on cnbc im note burning for you 6 so servicenow put your workflows in the cloud, huh . Mmhm. Your employees must love you. Thank you. Ah, you could say that. So how are things with you guys . Great. Thank you. Thank you, sir. Lunch next week . Terrific. Say hi to the team. Will do. Call my office, i will. Sounds good. Alrighty. Servicenow. Works for you. Have you lost weight . Of course i have ever since i started renting from national. Because national lets me lose the wait at the counter. And choose any car in the aisle. And i dont wait when i return, thanks to drop go. At national, i can lose the wait. And keep it off. Looking good, patrick. I know. vo go national. Go like a pro. Welcome back, everybody. Google about to find itself at the sent ore after major antitrust investigation hi, ylan. Hi, becky wer expecting more than two dozen states to announce a coordinated antitrust investigation into google this afternoon. The focus will be on whether Large Tech Companies have engaged in behavior that stifles competition, restricts access and harms consumers. Theyre making this announcement in front of the Supreme Court which appears to be sending a message that they are not going to back down from this fight im told this will be a buy partisan effort led by the Republican Attorney general of texas ken paxtop this move has been in the works a while. Earlier this summer paxton and seven other state a. G. S met with william barr states have been pushing federal regulators to expand the way they think of antitrust, not just on price but on the value of data and of privacy in a statement earlier this summer, paxton said that Technology Platforms often lack the insent tocentive to users north texas has been fighting google for years the previous a. G. , greg abbott, now the state governor, he launched an antitrust investigation into google in 2010 today texas will have a lot more states backing it up over to you. Ylan, thank you for that. Well continue that conversation right now join us to talk about what companies could be next on that list, ed lee is here New York Times, joe ann litman, journalist and author of thats what he said. Were thrilled to have them here and both cnbc contributors jo ann, when you have state ags do this in addition to the doj obviously looking at them, politically do they come together, do you think are they looking for a quick settlement is this going to be a fiveyear micro soft style process how do you sort of look at the permutations of it all i dont think this will be quick, but think about this, there are Something Like 15 different federal and state investigations if youre looking at facebook and google its going to play out over time, but regardless of how it plays out, whether they get broken up, which is somewhat some fepeople would like them t be or not what well see is a transformation of the digital landscape. We will see changes. What do those changes look like, ed look what happened with microsoft. Google and facebook basically became alive and created an environment where these new competitors came into the place. The changes will ultimately mean theres a chance for new competitors to come into play. Whether its breaking parts off the business or selling parts off, that will be harder to execute, but it will be that much harder for them to operate. I dont know if you want to call it a novel idea what about the idea of looking at antitrust through a different prism which is the way the a. G. In texas wants to which is rather than look specifically at the damage to the consumer or to look at prices, which historically has been required by law that theres actually a different approach and will that actually from a legal perspective even work . Yeah. Look, i think that we are looking at an entirely new way of approaching antitrust. And i think what were looking at is weve had the past 15 years of pretty much zero oversight. And now whats happened is federal and state lenl slaytures have woken up and say oh my god, what has happened . These companies have gotten so large. There is antitrust concerns there. If you look at the advertising industry, facebook and google control 60 of all digital advertising. You add in amazon, its 70 of all digital advertising. Can i make one point, son of antitrust lit gator, we used to have these conversations at dinner all the time, its not illegal technically to be a monopoly theres a misimpression monopoly may be bad, its not illegal you have to actually demonstrate that. But this is the boric interpretation that companies have been using in terms of how to operate for the past 20, 30, 40 years there is a new interpretation where, you know what, its competition. If youre harming competition not just through price or consumers, youre using your mos noly from others coming to the floor. Amazon is hurting other vendors by their sheer size and practices thats another way to look at antitrust that goes beyond do you think this is changing behavior in Silicon Valley facebook has been under so much pressure yet they pick this time to roll out libra. That was a tone deafness okay, were running forward with this obviously a lot of that stuff was set in motion long in advance, but are Silicon Valley players changing their behavior and do they need to in face of this new regulation . Thats a great question not just libra but talk about bad timing facebook announced its new dating app, right . Theyll be collecting more personal intimate data and not only that they will be essentially taking on the tinders of the world trying to put these other guys out of business. They have been operating their business but do they need to change . They need to change if nothing else i think we will see more self regulation because they have to do that defensively. So, for example, one of the things there are several bills right now in congress, theres also Gavin Newsome in california theyre trying to change the way that we look at data right now facebook, google, they own all of that data theres this move toward data ownership that we the users should have some sort of ownership of our data that we should perhaps be compensated when we use our data there are a variety of ways as in the case of the before we let you go real quick. We were talking about wework in the last segment what do you think is going to happen here . What should happen my issue with wework frankly is when the ipo came out. Right. We saw that there were zero women on the board and i know this is like slightly aside from what youre talking about, but i got to tell you, out of 100 ipos this year, 40 have had zero women on their boards. Were looking at then they added somebody. They added francis fry who uber briefly hired after it ran into all of its gender issues. Its little bit of wallpaper over a major problem. In line with that, maybe to answer your question, maybe they need to hold off their, po they keep devaluing it, theyre just signaling to the marketplace, were not worth as much as people thought lets hold off i think thats a way to sort of revise the board maybe and rethink their larger model could be a year out if the economy moves. This is what is going on inside the board room, right . But you want to get your ducks in a row thats the bigger issue. Ed lee, joann, thank you. Family dinners. Okay. With your parent okay didnt you have the same kind of conversations at your dinner . Dont do that now. With my kids. You actually had an interesting conversation about antitrust you have the same conversation. Coming up, vaping might kill you. 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 . Theres one thing you can be sure of. Theyre changing by the nanosecond. Thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. 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. Looking into whats causing the number of lung cases joining us with more on this front is dr. Scott gottleib. He recently, by the way, joined fooiz z pfiz pfizers board is it oil, viet a men e oils going through . Is that the common component based on the information weve had what weve seen from the state reports, these are going to be illegal vapes. It doesnt look like these are legitimate vapes those are not safe they still can cause harm. We believe they can cause chronic lung injury with prolonged use, but it doesnt appear theyre causing the kinds of acute lung reactions were seeing. Vitamin e seems pretty innocuous . Why could this have that impact . Vitamin e acetate its an oil. Youre not supposed to put oil into your lungs. Some of the counterfeit Vape Products are being used in conjunction with oils. Theyre using oils as the emulsifying agents these things are regulated by fda subject to manufacturing standards. They typically use a water soluble solvent as the emulsifying agent, not an oil. Putting oil into the lungs is dangerous. What weve seen from these case reports is theyve found lipid laden macrophages. Its the oil thats getting into these vaping products causing these injuries. How does somebody know theyre buying something counterfeit . Could you be buying it online or sold on the streets . They dont really some is sold in stores there are a lot of counterfeit vapes. If you think of juul, there are a lot of counterfeit juul pods buyer beware the states allow these things to be legally sold within states but theyre not regulated by fda so fda would only regulate a vaping product if its nicotine vaping product dried from tobacco. These are falling within a regulatory gap. Thats interesting. No, i was thinking about the mechanism. So your immune system sees this oil in your lungs and its like, what am i going to do here the macrophages come in and youre finding theyre the ones trying to deal with it what kills you your immune system well, theres three kinds of pneumonia. People are getting hemorrhagic pneumonia or a lipoid pneumonia. Its an inflammatory reaction. Immune system reacting and thats what kills you. Right some older people will take certain laxatives and sometimes theyll aspirate and get into your lungs weve seen these kinds of things in medicine where when oil gets into the lungs it causes these kinds of reactions this is appears to be whats going on right now these are cheap counterfeit illegal vapes. Thats not to say that the legitimate vapes are safe, theyre not. There are probably some people getting acute reactions from those as well over time, but the surge in cases that were seeing right now from pure no oil whatsoever there could be longterm effects . Its possible i dont want to discount the effect that there will be historical case reports where they might have had a reaction to ordinary vape people who are vaping nicotine having these reactions probably are vaping illegal products that are counterfeit. Scott, you bring up an interesting point. The states are going ahead and legalizing it. Right. There is no federal oversight of this. Thats a huge gap. How do you think that is eventually recognized . I think we have to have a federal reckoning here the states have allowed passage of use of these. Its far too difficult to get access to cannabis to do legitimate research and make medical products out of these things but the state laws with widespread Recreational Use that gets into the happened of kids and pregnant moms, thats a Health Concern they have moved ahead and they have flooded their markets they dont have an fda or proper oversight. These illegal vapes are getting onto the market. Scott, thank you for joining us dr. Scott gottleib is the former fda commissioner. Thank you. Thanks a lot. Our guest host for the rest of the show. Former honeywell ceo Larry Bossidy is going to join us. Is a new iphone on the way i can tell you it is well tell you more about it when we return what do advisors look for in an etf . Dont just track an index, help me meet a clients need. Is the fund built to sell or built to last . Etfs are only part of a portfolio. So make it easy to explain. Give me a quality fund that helps me get clients closer to their goals. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. As a principal i can tell you this. When one student gets left behind, we all get left behind. This is a problem that affects each and every one of us. Together with ibm, we created a whole new kind of School Called ptech. Within six years, students can graduate with a high school diploma, a college degree, and a pathway to a competitive job. You know whats going up today . My poster. Today, there are more than a hundred thousand ptech students around the world. Its a game changer. Are the trump tariffs working . Putting more pressure on them for more stimulus. Tech under fire. What the investigation could mean is straight ahead. Plus, will apple impress investors where a new iphone what you can expect from the tech giant 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 welcome back to squawk box right here on cnbc on this monday morning im Andrew Ross Sorkin along with becky quick and joe kernen. Take a look at u. S. Equities two hours before the market would open dow looks like it would open up 60 points higher nasdaq looking higher as well. Close to 20 points higher and the s p 500 looking to open 9 points higher now. Heres whats making headlines at this hour amazon is seeking to fill more than 30,000 vacant jobs by early 2020 its announcing amazon career day next week to be held in six cities theyre all fulltime with benefits and are unrelated to the yearly increase in Holiday Season hiring. Oxycontin maker Purdue Pharma is expected to file for bankruptcy after settlement talks were unsuccessful. The First Federal trial is scheduled to begin in october and really it was issues with the satcliffe family that prevented that from happening. Boeing has said that the team encountered issues and halted testing for the 777 jet a cargo door failed in a ground stress test. Load testing involved stresses to the aircraft that are well beyond normal operational conditions boeing shares down by about 1 . Trade will again be a focus for markets this week. More unrest in hong kong as police once again revert to using tear gas on demonstrators. Un eunice eun is in china and sherry kang is in hong kong. Good morning, sherry. Reporter good morning, joe yet another weekend of violence is playing out no signs of these protesters letting up and letting go of their cause. We saw some of the hard core protesters vandalizing subway stations, setting on fire the entrance of one subway station and we saw some of them smashing the stations as well it really goes to show how this protest movement is really about leadership and leaderless i should say movement but the core idea of staying antigovernment pro democracy stays very much the same thats exactly the reason why we saw tens of thousands of protesters taking to this area, the u. S. Consulate building in hong kong. Really this idea of hong kong protesters asking for the United States help to exert its influence on china and in turn on Hong Kong Government. Thats a very interesting idea, and something thats Market Participants should watch for because what theyre calling on u. S. Lawmakers as theyre coming back from their recess to their job this week is to pass this act, this legislative act called the hong kong human rights and democracy act. Its really about washington every year assessing hong kongs special status the trading privileges that hong kong has been enjoying with the United States and this is one of the key elements that set hong kong apart from china and thats whats important moving forward. Andrew, back to you. Chery, thank you for that report want to head from where youre based to beijing where eunice yoon has the latest on china. Reporter thanks a lot, andrew the latest from here, policy makers have to roll out more stimulus measures, at least thats the talk after the trade data over the weekend missed exports unexpectedly fell for august and a lot of economists had been expecting to see a rise thinking that manufacturers were going to rush out orders or front load their orders in order to get them in before the president President Trumps september tariff deadline. That didnt happen exports were down by 1 . Imports shrank less than expected but they still dropped for the fourth month in a row. And so because of that, theres just this big expectation that the governments going to have to do more to stimulate the economy here last week we saw beijing roll out new measures or at least say theyre going to move forward at 2020 local Government Bond which would allow the local authorities to boost Infrastructure Spending. Also they cut the rrr so traders are now betting that theres a rate cut coming sometime in the fall the timing still unclear theres also a Major Political event thats coming up on october 1st. The 70th anniversary of the founding of the peoples republic of china. Because of that theres an expectation that the authorities want to make sure that everything looks really, really stable, very steady growth and that the policy makers wouldnt want to risk creating anything too distracting, including a massive aggressive stimulus. Guys all right, eunice big piece in the journal now were going to talk about on the same topic with more on the latest in the u. S. china trade, rick scott and Larry Bossidy. When they posted 6. 2 , we heard, larry, President Trump say thats one of the worst numbers in decades already now we see this in the journal beneath chinas stable headline numbers theres a growing belief its much worse. Chinas economy isnt tanking but its almost certainly weaker than advertised. Some economists say chinas gdp numbers could be up to 3 Percentage Points lower than 6. 2. Weve always doubted their legitimacy of 6 every year, every quarter so i dont know what it is i wouldnt be surprised if it was a lot lower than advertised. Do you have actual insight into this . No. China can fix this problem xi can do this, stop stealing technology, let the people of hong kong have the rights that he agreed to, open up the markets. This is all xis problem hes causing this. My next question, those are good talking points and everything else, but the question is you see whats happening with Capital Spending here and you see that there at least is the notion that corporations and managers, the uncertainty is causing them to pull back a little were only 2 from the highs in the stock market but theres the idea that both countries are losing in this trade war because there are no winners would you say that were actually getting a leg up from this data and well be in a stronger position to get what we need, larry, or not . I think, joe, it changes day by day as to who has the leverage and who doesnt i do think its detrimental to both countries you begin to see it in the softening of our u. S. Economy and the question is hows it going to get resolved ultimately its necessary, it seems to me, for trump to have a leg up in terms of the next election to get this behind him. Im not sure its easy to do. Senator, would you say we definitely have a leg up i dont believe well get a deal done. I dont believe theyre going to change i think this is going to continue on. I dont think trump will get anything done. Because what youre saying are minor things, massive issues stop stealing technology. Theyre not going to stop selling the no, mill tar rise the south china sea. You dont think both parties are going to claim some type of it would be nice. What happened between now and so october were going back to the if nothing is going to change, then is this worth it, right . Oh, absolutely. Theres plenty of American Companies that are doing better because, you know, you have to be able to buy the products, you know, competing against somebody, you know, with all the tariffs. Yeah, theres plenty of American Companies that are getting better, but some companies arent if you look at this, if we dont fight now, when are we going to fight . Theres going to be shortterm pain. It sounds like you cant win the fight. You can if xi would come around and do something rational what do you think will cause him to do that you dont think he will . No. No whats the consequence if theres no deal here i think the consequences are that theres still American Companies that are going to do better, American Companies will do worse which american politicians are going to do better and which are going to do worse . If theres no deal you dont think that affects the 2020 president ial election . Look at our economy right now. Its continuing to fire on all cylinders. We just talked about amazon. Theyre doing fair because its hard to find workers were on a roll right now in this country senator, one issue. You said it would be nice if everybody could come together and come up with some sort of a deal even if its not the structural changes that were seeing you would rather this whole thing go away . Only if you can get a deal thats good for the country. In the meantime, whatever we get in tariffs i think we ought to reduce it in taxes this shouldnt be something to add to revenues of the country reduce taxes. So but heres the great could he none drum in my mind, which is to the extent you believe the trade war and tariffs have slowed our own economy down at all, meaning having taken anything off of our growth rate, thats a conundrum for us, which is to say there was the passing of the tax bill now about a year and a half ago, if not longer, both on corporate taxes and individual taxes part of that was all based on the growth assumptions which unfortunately are not coming true im not sure they ever would come fully true but theyre made much harder by approaching it the way we have thus far the question is do you approach it at all . Im not suggesting you dont, but maybe theres something to be said about the approach, which is rather than do it as a bilateral effort, wouldnt we have been better off this goes back to tpp or some other approach where you would have had other people join in or force the issue in a way that they they wont. Andrew, they just wont. I appreciate that trump is at least standing up for jobs in this country thats what were doing. Do we want manufacturing in this country or not do i believe europe will ever stand up no, i dont believe they are we all say we would like everybody to come together, k m couns coombaya, they wont. Were doing better than we had. You cant find workers now look how great this economy is everybody acts like we must be some problem if you are any businessman i talk to, they cant find workers. Its great whats going on look at amazon its great whats going on in this country right now would i like there not to be a trade war . Yeah, but id like them not to steal our technology theyre not going to do it. Larry, what happens in october at the next round do you think . I think theres a lot more discussion it is interesting to see to what extent chinas suffering from this i dont think its been welldocumented. To the extent that theyre suffering to a large extent, they may come to the table i dont think much will come of it to the senators point, i think there will be a point where both teams will declare victory. Thats right. Very little had changed but i think thats within the realm of the possible and i would think it would probably happen early next year. Then do we need to revisit it in the next administration absolutely. Weve been ripped offby these people, come on, lets be honest for years and years. Youre going to have to sustain some pain in order to correct it, but on the other hand, i think well make some progress this time but to your question, i think its just the beginning of the next round when this one concludes. So they dont check with you when like you dont know whether there was a phone call or just overtures to mnuchin do you know any of the behind the scenes from a week and a half ago i talked to President Trump about it hes optimistic but i just china wants to do a deal . Do you believe him china really wants to do a deal yeah, theyd like to do a deal but on their terms. Theyre not going to agree to stop stealing our technology. That doesnt sound like a very big ask stop stealing our technology no, were not going to stop stealing your technology. Didnt they in january say they were going to buy our soy beans. Thats something simple. Its a commodity product just buy it. They couldnt even do that theres nothing they do that they ever agree to in the end. All right, senator. Thank you. Nice seeing you. You guys are going to have to do something in the fall, i think, with a couple of these subjects yeah. You ready to do something its a pretty dysfunctional place. Stuffs not working up there. The whole town, i think all right. Hope springs eternal larry will be with us for the rest of the show. Good to see you, larry. When we come back, saudi oil shakeup. Well have the details right after this break. Plus, apples fall product event is tomorrow. We will preview the big event in just a few minutes. In the meantime, check out the futures. Weve been in the green all morning long dow futures up by about 55 s p up by 58 the nasdaq up by 16. Dow and s p have been up for six of the last sessions dow is just 2 below its alltime highs s p 1. 6 below its all time high stay tuned, youre watching squawk box here on cnbc. Are we supposed to dance . Boy bands without dancing are just ok. Get a better than just ok unlimited plan with spotify premium included on americas best network. Only from at t more for your thing. Thats our thing. The move breaks with the Longtime Convention that members of the family are not appointed to that position it comes days after he was removed from his role of saudi aramco saudi aramco expected to give a lead role in its ipo to jpmorgan Morgan Stanleys bid for the top role was hurt by its handling of the uber ipo jpmorgan, hsbc were previously given lead roles before aramco halted its ipo plans both of the banks have declined comment. They plan to sell a 5 stake in what would be the worlds biggest ipo. Saudis are gearing up to fast track a local listing. The countrys Main Exchange and then the idea is that they would try to sell shares on an International Exchange like the new york Stock Exchange, London Exchange the year after that so a grand experiment, at least potentially controlled experiment over the next 18 months to keep an eye on coming up in the meantime. Its been a long time coming, andrew do you think its still going to happen . I think it will this time its been a couple of years in the making. What do you think of it happening on a Saudi Exchange first . Will that give the rest of the world confidence or not . Part of the reason they havent gone public is because of the issues around disclosure and what they can and cannot have. My guess is they have big banks over there lined up which will lend encouragement to the rest of the world. Coming up, a lot more on squawk this morning. A preview of apples big product event taking place tomorrow. Later, google and facebook facing an antitrust probe by other 30 states attorney general. The announcement and what it means for the companies is next. Mike pence is going to be sitting down with joe at the alpha conference it happens on september 19th in new york register to attend now at deliveringalpha. Com. Squawk box returns right after this 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. Thats what happens in golf nothiand in life. Ily. Im very fortunate i can lean on people, and that for me is what teamwork is all about. You cant do everything yourself. You need someone to guide you and help you make those tough decisions, thats Morgan Stanley. Theyre industry leaders, but the most important thing is they want to do it the right way. Im really excited to be part of the Morgan Stanley team. Im justin rose. We are Morgan Stanley. [horn honks] man this is what i feel like when i wear regular shoes, cramped and uncomfortable. We can arrange a little upgrade. Which is why i wear skechers. Wide fit shoes. They have extra room throughout. Theyre like a luxury ride for my feet. Try skechers wide fit shoes. Welcome back to squawk box. Big day tomorrow. Apple hosting the launch event what will the new iphone look like and what should investors be looking for joining me is jim daranpo and hes the founder at the loop covering apple and other tech companies. Also is gene muenster and Larry Bossidy. Jim, what are you expecting . Is there a surprise here well, i think that theres always a surprise when it comes to apple events as much gets leaked, they always have a surprise or two for us tomorrow is not only going to be about iphone but apple video and apple tv plus. So theres a lot of things that apple can bring out tomorrow that are going to help them both in the market and financially. Hey, gene, it seems like most investors and analysts are not expecting something fabulously new and mind boggling. Theyre expecting a phone, my understanding is, a three lens camera, some additional almost incremental improvements and that the big improvement is something everyone is going to wait another year for which is 5g thats one way to look at it. Another way to look at it is to take some context of whats happened with apple in the last three quarters iphone, 60 of revenue has been down 15 its been in a world of hurt here and entering this next cycle. Effectively theyre going to be adding, as you said, these cameras. Wider field of lens separately better low lighting. Thats an important feature. Probably going to be the best mobile camera on the market. What that means when you put all of this together is i think what were going to see tomorrow is going to be enough substance to return the iphone to growth over the next year and then obviously it sets up for 5g which will likely come out next fall. So another piece to expect tomorrow almost every product line will have some form of an upgrade but obviously the focus, as you said, is going to be on the iphone were going to hear a lot about taking pictures tomorrow because the cameras are going to be kind of the signature. You say everythings going to have an upgrade. What other pieces are you expecting . Well, i mean, these are small upgrades but the ipad line, there could be slightly lower price. Faster chips you also we also expect a new macbook, 16 inch macbook the current largest screen is 15 inch new home pod new services some of the things that we may not see are new air pods and then the other piece i would add, ask jim kind of what the surprise could be, is these apple tags unfortunately, i do lose a lot of things. I use these tiles. They help me find things apple could be entering that market as well how do you guys see apple now . I mean, this dynasty, theres better competition along all their product offerings. It seems to me that they have to do more quantum stuff if theyre going to maintain the significant advantage theyve had for the last number of years. What are your thoughts on that subject . I still think apple is ahead of its competition in the markets that it competes in and, you know, its coming up on services now which i think will benefit them financially in the coming quarters and years, both with, you know, apple arcade, apple tv plus, even apple cart all of this is adding to the Services Revenue that the company is looking to improve on hey, jim i would just add to that. Go ahead, gene. I would just add, i think the story, even though it is scrupulously studied is grossly misunderstood. I think as analysts talk about the multiple range, i think they miss kind of the core and have just taken a step back and what were going to see tomorrow all of these upgraded products and the products that fit Better Together im in the belief that this story should trade more at a Procter Gamble type 24 multiple that would yield a dramatically higher call 350 share price i think this is a large opportunity that is scaring everyone, but just too good to be true. Gene, one other final quick question were talking about these ags going after google today there was a story over the weekend or maybe it was just published today in the times relating to apps, the app store. In terms of apple putting its apps higher in the search algorithm than the others. Do you think theres going to be real impact regulatory wise on apple . I really dont. I think app jims saying no gene just really quick, i think very little to no impact. Very little to no impact. We will leave it there on that note. Gene, i dont want you to feel inadequate about your facial hair versus you know, ive seen i understand a 15 inch screen. I dont think ive ever seen a 15 inch beard, jim i just got to ask you, i mean, are you careful around machinery and stuff . You dont use a blender, do you . Im careful around everything everything. Youve got to be. Im worried for you that is how long can you imagine with a blender, making margaritas whoa how long have you been growing that baby . I shaved this morning you are a manley man, jim you are a gene, do not compare yourself to him just dont no problem. It says nothing about you that thats the best you can do. Aspirations. Your blender impression played on a loop on a loop and theyre both from loup. Andrew, come on. Im with you. I tried to grow a beard like that. Thats not going to happen forever. Never. Seriously, i would be scared around like shut a car door, whatever anyway jim, thank you. Blender. Larrys going to be sticking around for the rest of the program. Let me see if i got that right. Is that what you did wei weirdo. Mixing margaritas, he was killed lets get serious coming up the opening bell on wall street. We are expecting more than two dozen states to announce a coordinated antitrust investigation into google. What it could mean for your investments straight ahead right now as we head to the break, u. S. Equity futures up side bias once again. Dow futures up by 63 points. S p up by 9. The nasdaq up by 17. 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Call now to start your membership or visit lifelock. Com tv still to come on squawk box this morning, a look at what will move markets plus, the fed in focus as we get ready for inflation data coming later this week. And then a Major Investigation into antitrust practices at google ready to be announced this afternoon well find out what it means for your tech investments. At the top of the hour, the china trade war and the trump economy. House minority leader Kevin Mccarthy is our gut. Es squawk box will be back after a quick break. As a principal i can tell you this. When one student gets left behind, we all get left behind. This is a problem that affects each and every one of us. Together with ibm, we created a whole new kind of School Called ptech. Within six years, students can graduate with a high school diploma, a college degree, and a pathway to a competitive job. You know whats going up today . My poster. Today, there are more than a hundred thousand ptech students around the world. Its a game changer. Welcome back to squawk box. What should investors take away from fridays jobs report. Steve liesman has done nothing but think about the jobs report since friday. Really . No, i wont that just for fun. Played a gig on sunday thank you to all people who came out. Wall street economists noticing two separate job points. Not a lot of people have put them together. Key point number one, job growth slowed and its been slowing steadily all year. Average job growth just 158,000 last month, last month it was 223,000. Often revised upward but the trend is pretty unmistakable key point number two, wages have been steadily rising lets annualize the past three months theyre rising at a very healthy 4. 2 fastest pace since 2008. At the same time jobs have slowed to just 129,000 on the annual threemonth average basis. It would be slower if you took out the census hiring. This is more or less what you would expect in a tight labor market job growth would slow because workers are harder to find wages would rise because labor supply becomes more scarce its something the fed has got to be watching to see if strong wage gains show up in inflation data which we get pretty soon. For now it should propel consumers to keep spending and low inflation should keep the fed on track to cut but this dynamic of slow job growth and strong wage gain, we have to watch this this is what the theory suggested was going to happen. Now we have three months in a row of it happening. Well have to see. Lets open this up to a broad conversation joining us to talk about the markets and the economy is david bianco hes dwis americas cio. And Larry Bossidy. Mike, let me start with you. We are looking at the markets indicated up once again today. I think right now the s p is only 1. 6 off of the alltime high why this up side push . Its sort of this fascinating reassessment after we got through august yes, the s p is relatively close to the alltime high a lot of the components are way below the high more than half the stocks are down 10 from the high that actually turns into a good thing if the market is getting more comfortable with the Economic Outlook you say look at all of these beat up cyclical stocks. Buying yield going up also is the Financial Markets relaxing a little bit about the imminence of a down turn all of that put together leaves you with a sense that stocks and bonds got very stretched in their relationship and now its pulling back a little bit. If there are some battered stocks in there that means there are some that are more than pulling their weight do you worry about those or do you think those are fair valuations certainly theyre making the market appear more expensive or as expensive as it is. I dont know if i would worry about it its in a way natural later bull market behavior where you have these kind of consistent winners. Also, Profit Margins among smaller and Midsized Companies are much more vulnerable and theyre not holding up as well i do think everyone is hiding where theres resilience. David, thats almost counter intuitive just because if the small guys are getting beat up, you would think its the multinationals that have more to risk because the market trades on the Headline News out of trade talks with china every day. The Small Cap Companies tend to be the more vulnerable businesses, more dependent on ingredients to their manufacturing. Supply chain disruptions mikes right, that theres been some interesting things under the surface of the equity market where defensives have gained a lot made strong gains during the summer Growth Stocks continue to outperform the market is only 1. 5 off the highs. Very complacent given the risks. The earnings estimates for a Third Quarter and Fourth Quarter are frankly unrealistic. They will be cut and my view is that the s p, im not going to go so far as to say im bearish. Im in a very corrective mood. I believe the s p is likely to fall 10 or more in the coming months. That doesnt sound very bullish. Corrective. Corrective. Thats what we put on it larry, go ahead. What is the consequence of this do you see a recession, therefore, coming in 2020 or do we muddle through the election and worry about 2021 six months ago i would have said the chances of a correction are only about 15 , not any greater thanusual. Ive made the case this expansion should be 10 to 15 years long but right now i think the chance of a recession in 2020 is more like 25, 30 . Im of the view, and those odds reflect my view that all of these tariffs get phased in and are likely to be with us almost all of 2020. Larry, does that sound like it fits into your assessment of things or not . I dont think well have tariffs all through 2020 i like to think that they wouldnt anyway. It may be thats the case. I think the republicans will do everything to conclude this trade thing before the election. Now whether it takes two to do a deal and whether they in fact can accomplish that, i dont know i think there will be a major effort in my mind, itll happen. The interesting thing is that the when the market starts to get nervous about a rising probability of recession as has happened recently and you see buying yields go down so much, it looks a lot like whether youre actually going into a recession or if its another scare. A lot of this stuff if you go back to the last time you saw yields this low, valuations in this area in terms of stocks versus bonds, its 2016. Its not back to the last time you were entering into a recession. So the best buying opportunities in this bull market came at times that looked a lot like this but at some point theres going to be a time that likes this that ends up in a recession. So i do think were not kind of i dont see an escape from this debate or from this you know, from this kind of cycle of worrying about it until you get something besides market loves when trades set aside. I think when you have a date for a meeting its not every single day pins and needles. Breaking news but thank you all for being here. Lets bring in breaking news Elliott Management sending a letter to at ts board of directors after taking a stake in the company arguing that they have a fourpoint plan effectively for at t which it recommends to increasing what they call their strategic focus, formal Capital Allocation framewo framework. Theyre also talking about enhanced leadership and oversight. Looking at that stock now at 37. 90. 4. 5 up on the news that elliotts taking a stake i like the assets. What that means, you know 3. 2 billion of the stock in a 64 billion company. This is a company, as weve talked about, ever since the transaction with time warner originally they took on net level i think the peak was 180 billion in debt they are on a plan this year they have about 26 billion in Free Cash Flow, thats their expectation. 14 billion would go towards dividends leaving 12 billion for paying down debt theyre planning to disclose between 6 and 8 billion in noncore businesses which theyve monetized and continued to pay down debt. What does management think. Yes, 38 or you can look at this two different ways you can look at this in one way and say this is a i think its a vote of confidence in the asset mix, no . Maybe in the underlying assets, but at the same time most of the time that elliott has gotten involved elliott. They have gotten involved things and that has not always been a great situation. Elliott. Elliott. Phone home. We will see where this your e. T. Impression is bad. Major effort to diversify and the question is how successful will that diversification be and obvious elliott has an interest in it. Yeah. Larry, i mean, there was a time when seeing an activist investor taking on a company like that was not uncommon obviously its gotten much more common how effective is it when they take on Big Companies like a 264 billion . It goes both ways you can point to a situation where theyve made a contribution and you can point to others where its been a negative involvement so who knows. In this case i think at t is strong but as i said theyre trying to diversify and the question is whether theyll be successful or not. Elliott wants to have a hand in that, i take it. Pretty good looking chart there, larry yeah, it is yeah. All right coming up, state attorneys general expected to target google in an antitrust probe today. We will discuss the latest increase into the Company Practices after the break and then at the top of the hour House Minority leader Kevin Mccarthy will join us. Whats ahead for congress, possible tdera deal. Squawk box will be right back. Phone home with technology that helps you offer shoppers a better experience. Take your companys app. We can add in all sorts of capabilities, which help your customers manage rewards, offers, and payments on the fly. And now, applying for credit can happen in a flash. That way, more people can start shopping with you on the spot, wherever they are. Hows that for changing whats possible . 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. Welcome back to squawk box this morning more than 30 states attorney general are expected to announce an antitrust investigation into google later today joining us now with what to expect is michael ferdick, the founding and managing partner of heroic ventures and chase kelly. First general counselor. Guest host this morning is Larry Bossidy. Michael, its always great to see you. You kept the beard but not like the beard we saw earlier i dont know if you saw that beard. It was a different beard. This is about three days of facial hair growth what do you expect the states attorneys generals to do and how do you see it playing itself out . Its a very serious moment. Attorney general paxton of texas is very serious. Hes a tea party republican. This is not an attack from the left there are attorneys general from the left and right who seem to be very interested in what google is doing and in going further, perhaps, than the u. S. Federal government, the Justice Department has been going in its probe, perhaps as far as europe has been going in its strident activities in google in the antitrust type activity that theyve been investigating for a while. I think this is a time for google to be worried the main thing for mr. And mrs. America out there to know about antitrust is that the law in this area is governed by three statutes basically one from 1890 and the others from i think 1914. So theyre quite old, over 100 years old. Case law that has followed since then of course but the tests, the tests that the u. S. Courts have generally applied until very recently, this is a key switch in time that may make the difference for google, the tests have generally been asking the question, is such and such arrangement cartel, alleged cartel, alleged monopoly good or bad for consumers . Typically is it good or bad for the prices that consumers have to pay and the last few years some very serious people, including academics but also including the regulators have been talking about antitrust in a different language much more stridently, much more strongly on the topic of whether behavior by a very powerful, very Large Company can be anticompetitive just by nature, perhaps by nature and therefore suppress innovation and suppress the growth of Small Companies that they either kill or buy and in this digital age when you dont need capital expenditure, you dont need rails in the railroad, you dont need physical brick and mortar businesses you just need a global reach with one computer, one server the Large Companies have a quicker reach and faster reach. This different analysis may actually carry a big price tag for Companies Like google. Chris, what do you think that price tag is its not clear exactly what it would be from a price tag perspective. I agree theres been a shift in the discussion focusing primarily on just bigness and, you know, ability to have quickness to market. Were in the early days though of a world that looks like that and obviously there are a variety of industries and maybe other places that are being disrupted in a really major way. It doesnt necessarily mean that you can kind of take a sharpie to antitrust law and write that in automatically its a hard road to hoe so i think there are going to be some real challenges for state ags and for federal enforcers here. Larry, what do you think is going to happen here to some i dont know. There is precedent for better or worse in our american legal system, the prosecutors are very good at using the sliver of precedent to expand a new category into a new category of prosecutorial law. We can say that is a bad thing in some cases i would urge us to consider the bad thing but in some cases its how law, quote, unquote, innovates there is tradition,set of president ial law thats very deep, very robust in the american antitrust legal space in which the big company basically forces the Small Company to sell itself to the big company and that pretty much bang on describes a lot of the perceived behavior here in Silicon Valley of some of these Large Companies. They basically copy you and then beat you into submission or threaten to copy you and beat you into submission. I dont think its as sort of a broad a jump look, google is deft theyre very smart, technically able and politically able. So is facebook they set up big lobbying shops in d. C. To in some cases i think obfuscate the truth. In some cases to rally for their interests, of course, thats how they would say it. The state ags are not in d. C. And there are many, there are 50 of them. I think this is part of the laboratory of experiments that we have in this federalist system we have which is so clever and ingenius. You cannot be in trouble in d. C. And in trouble in texas and i cant tell you which is worse sometime. What were you going to say, larry . I was going to say, i think this is serious but its somewhat the rite of passage you saw it in the day with ibm, you saw it in the day with microsoft. They ignore these things for a number of years and decide to descend. Hopefully they have a target in terms of what theyre looking for in terms of the breach of the code, but i think theyll come through this fine there might be, in fact, some requests to spin something or other off, but by and large i think theyll come out of this fine. I think thats right. It will come up with a request to spin something off. You could actually see shareholder decree value and release value and unlocking it in that way. My guess is this is just a guess, but my guess is that prognostication is right the outcome is some finding but probably a request to spin something off. I think that sounds just about right. Do either of you look at go ahead, chris. If theres a good, hard analysis of what the anticompetitive conduct is, the problem that ive seen in most of whats been asserted so far is that its well, these companies are just too big and too powerful thats not an antitrust argument at the end of the day. That is a sort of, hey, were worried about a variety of things lets talk a lot more about what are the variety of things were worried about instead of just too big and too powerful its been a really incoate thing and it needs to be defined better youve seen some of that in what weve heard from the new york ag already and i anticipate what well hear today when you get down to it, its where do you have some sort of bottleneck control that you exploit in an improper way to stifle competition the allegations have been more specific than that. The allegations have been more specific than that for a while we dont know whats coming out of the ags office yet but there is more specificity. The advertising platform arising from the done click acquisition in 2007. The youtube acquisition in 2006. These are things that come up a lot. Sort of the major platform control and, look, a lot of these Companies Like to call themselves platforms or even dare i say the word utility but they want to describe themselves as utilities and get the economic up side of utilities and platforms but may not want to take the responsibility of being a utility and platform yeah, youre right you have to look at these things under a microscope and thats what the regulators are going to do we shouldnt be quick to judge this in the twitter sphere moment of history. I think the allegations have been more specific. Can i ask both of you real quick. Two related questions. One is i dont know if you saw the story in todays New York Times related to the app store with apple and it really shows that over the past several years apple apps have dominated the search results if you put in tv or music or Something Like that into the search, you get apple and oftentimes multiple apple apps before, you know, spotify would show up, you know, a dozen apps down the list do you think that apple is next . Do you think that your former chris, your former Firm Facebook is next . I mean, i think that there are a lot of people looking at a lot of different pieces of conduct in this space, and i think thats for the most part a healthy thing, but we have to do it within the lens of how do consumers benefit from some of this, too . You know, the classic statement about antitrust laws is that it protects competition, not competitors. So when these companies are competing with each other and when theyre also competing with global dominant firms that operate in a number of different jurisdictions, from china especially, you have to look at it in an overall context in that way. That you cant just say, well, you know, this company like its too big i dont i dont understand how much power it has. And thats not what theyre saying im sorry, chris, thats not what theyre saying. I know thats what it sounds like theyre being much more specific about that adding to the list, by the way, you might examine amazon, youve had the experience on amazon, you might see that amazons own sort of off brand competitive product is one of the things that they have is amazons choice. Mike and chris, i want to thank you. Playing us out with the music. Appreciate both of you getting up early to help us through this you bet, thank you. Great have a great day. You, too. Very quickly take a look at shares of at t that stock is up by about 7 last time i was just looking 7. 5 were going to talk an awful lot about this it owns 3. 2 billion in at t shares it has a fourpoint plan for value creation. Sell a lot of assets. Were going to talk about all of this coming up at the top of the hour also, House Minority leader Kevin Mccarthy will join us after the break toal tk china trade tensions and whats on deck for congress. Historys biggest ipo. Wall street jockeying for position to help saudi arabia stateowned oil company go public one bank may just have gotten the inside track. Back to work in dc Congress Returns with an altered trade landscape and a long to do list well speak with House Minority leader Kevin Mccarthy. And a short seller lobs bombs at a Consumer Product giant. Ben axler will make his case on church and dwight. It has the backing of some of the top wall street analysts the final hour of squawk box begins right now live from the most powerful city in the world, new york. This is squawk box. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square im joe kernen along with becky quick and Andrew Ross Sorkin Larry Bossidy is here. The futures have been around here all morning long. You know, it is september. Were ready we had a pretty volatile august. Kind of interesting. Everybody should be back and now all the players, so well see. Its the first day though. Monday up to about 57 points. Up 16 on the nasdaq and s p indicated up 10. 5. Treasuries today, i figured the ten year when i woke up, figured it would be about 1 6 and its 1. 587 now and the two year i below that, 1. 55. A couple of big stories that investors will be talking about today. Lets go through them. The big one just crossed the tape moments ago shares of at t are popping this morning but good news may be bad news depending on where you sit this morning that follows news that Elliott Management has taken a stake in the company, unveiled a plan that it says would push at t shares over 60 by the end of 2021 at t has not had a pop up like that, more than 6 , since march of 2009 and hasnt had a oneday jump of more than 7 since november of 2008 just to put a fine point on whats happening here. Elliott saying the company is under performed by 150 over the past decade relative to the s p 500. Also calling for the company to review divesting many of the companys assets calling the transaction related to directv to be damaging questioning the rationale behind the time warner transaction saying that it is too soon to tell whether value will be created but they remain cautious then going to on to say we arent alone in our cautious outlook. Jeff bucchas said the rationale is, quote, fairly suspect. So we have a lot going on this morning and i think youre going to see while the stock is up, if youre in the board room of at t, this is a material issue. Lets talk about the debt that that company has taken on at t had 180 billion in debt after the time warner acquisition. It was 40 billion that they took on for the acquisition of time warner. To this point the company has said that it is on track with what it has seen in terms of its targets for drawing down that debt and paying down that debt they make about 26 billion in Free Cash Flow 14 billion of that is committed to dividends that leaves about 12 billion to pay off the debt theres another 6 to 8 billion that the Management Team has targeted in terms of monetizing. It was on track for some of that it sold hulu and hudson yards, the stakes it owned in those properties for 3. 6 billion. Again, the question is what happens in terms of that debt, how it gets brought down we should probably point out that time warner is a 264 billion company. Its got a yield of 5. 6 . At t . At t does, yes. And thats what people have been watching so closely for some of these issues, too. I still think it just depends on your perspective, andrew. You can say this is a bad thing. Even if elliott wants the company to take these actions, the underlying value of the assets theyre talking about given the right action is 60 and we are down at 35 before any of this happened so when i say depending on where you sit, yes, you can argue and look at this and say not just from the stock price today. Okay. So there are assets here that if sold or if or if led in a different way might get you to 60. Right. It will highlight the value of those assets. Right. It also will highlight the challenges to put it lightly. Exactly yeah, but activists dont go into a 35 stock that they believe is worth 20. They go into a 35 stock that they believe is worth 60 given certain actions. The only sthing at t has laid out a strategy they dont believe in the strategy, they believe in the assets. At least not all of it. Historically if you look at the companies that elliott has gone after the management at the top has not necessarily stayed in their seat. So when i said that depending on where you sit, you could be happy or not this morning. And but i do think its going to create a huge narrative and new conversation around at t by the way, it becomes a different narrative now around time warner, all of those employees that had just been acquired and what theyre trying to do there. How does that what kind of pressure does that put on them theres a lot thats going to happen here. Larry . I do think this, that at t has done a lot of work to try to restructure their strategy and get into more diversification. If theres a beef, it would be theyre not moving fast enough i havent read what elliotts trying to do i know that you mentioned theyre going to ask them to disclose of some assets. Whether thats good or bad, i dont know my guess is they want them to move faster. Some of their Strategic Moves are very appropriate others are probably subject to question so well see how it plays out in the next six months. How do they with a stake at 3 billion whatever it is versus the market cap of at t, whats the next step they do they want some whats that . Its probably 1. 5 stake. Whats the next move . Theyll get someone on the board . What do they do, sorkin . You line up other investors. Right so the first first step is youre going to find other hedge funds, other Institutional Investors who they will try to bring on side. Right. Then theyll try to use that pressure they have to buy at t, too . They have to buy at t or own at t hopefully they go to some of the biggest investors. Lets press for this. Will you vote for me on this come with me on this. Then you start to see pressure on management and the board and then you see where they land whenever this happens in the history of activists its always sort of a love hate. Its like a good news bad news, right . Theres value being seen by someone, and a lot of times the companies will say, we appreciate the blah, blah, blah, the interest that someone is showing i would bet if youre a blackrock, vanguard or one of the major longterm shareholders of at t, todays actually a good day for you. Right. Yeah. I think that if you are inside at t it is a very complicated day. Complicated. At best you know, the other thought is generally when these things happen theres been discussion with management fwhoerds what they want them to do whether its happened here or not, i dont know. It seems to me in many of these cases theyve reached a point of concern with each other. Do you think thats the case in this situation . Elliotts not always elliott sometimes comes at it a little more quietly than others. They might. My guess is that theyve talked with at t management and they probably have reached a point of disagreement and have taken this action but i have no facts. Youre a journalist you wrote a big book, andrew right. Right now give me the at t response to this how do you write it . The at t response to this i want to hear it is we are in the midst of a major transformation of the company. We are 600 days into our acquisition of we appreciate elliotts interest. We appreciate their interest. It demonstrates the great value of our underlying assets and if you and we will be you know, we plan to continue executing on our strategy. No, no, you dont even say that. Were continuing to be executing on our strategy and weve laid out that strategy and we believe that this is affirmation that if we execute properly we will get there maybe well engage in some conversations. Maybe wait a couple of weeks for this to press on a little bit longer and then you can you didnt say any of the bad stuff that youve been saying. So you are a real sociopath then thats how you would spin this you asked me how would i spin the story . So they just all lie . Do you believe what you just said or do you believe what you said earlier which part . You know what im saying. That is what you hire people for, to write but i think theres more truth to what you just said than what you just said even though you you said it but you dont believe it, which kind of makes me wonder when i can believe you but learn from the best in the meantime, economists are digging into new trade data from china and it seems to be reflecting pressure from the countrys trade war with the United States. Kayla tausche joins us she has more on what shes seeing good to see you. Reporter good morning, becky. The effects of the trade war are becoming more noticeable imports to china falling 5. 6 in july or in august, rather, as domestic demands softened. Exports to the u. S. Falling 16 in dollar terms. Overall exports were down just 1 but this figure has now declined four months in a row and it comes after china made several moves last week to spur lending and spending amid a softening economy and as officials from the u. S. And china are set to resume in person trade talks, we dont have specific dates yet but white house officials have now outlined two windows for these talks, mid to late september for deputies and early october for principles but theresanother date that people close to the talks are now buzzing about, and that is the mid november apex summit where World Leaders will gather in chile its a bilateral meeting for President Trump and president xi if these next two rounds of trade talks do progress. President trump attended this in 2017 when it was in vietnam. Last year he sent Vice President mike pence in his place as tensions with china were escalating theres no formal announcement whether President Trump will attend this year usually that decision is made very close to the event, becky, but its certainly something that people around the talks are looking at very closely. Kayla, thanks so much well check in with you again very soon. Right now for the latest on capitol hill as Congress Gets back to work, lets bring in our squawk newsmaker, House Minority leader Kevin Mccarthy. Mr. Leader, thank you. Its good to see you lets talk about what kayla was just talking about, where we stand with the china trade talks right now. Whats your best guess well, it shows to me that were getting very close to being able to have a deal, but the most important thing that we can do to make sure we get that china agreement, this month lets pass the u. S. Mca. That makes it stronger going into negotiations with china last month mexico now became our largest trader and canada our second this is a critical time that can only make us stronger. If it comes to the floor, it will pass. But the challenge here is one person controls all of that, the speaker of the house calling it up to the floor. But it could help us end whats going on with china and make us stronger in those negotiations come november. The last reporting i had seen suggested that nancy pelosi is in good faith talks with the administration right now working on having that happen. Is that your understanding of the matter weve been in good faith talks for more than eight months on this. I mean, we should have we should have had this done before we departed. I think light hiezer has done a tremendous job from the Administration Point of view with the speaker answering all the different questions. Ive been in with the speaker talking with trudeau from the Prime Minister of canada when he laid out all of the arguments of why this is a good deal. Mexico has already ratified this by voting on it. Canada is waiting for us to act. Theyve got an election coming up in november now is the perfect window in september to get it done it brings more than 170,000 new jobs, makes our gdp stronger think about that when youre sitting down with china to negotiate a trade agreement. What are the sticking points in these goodfaith negotiations i think thats a question for the speaker because when i was in the room with trudeau, every question that they brought up with environmental and others, they said those are the exact same points that we have and we got an agreement and we think its a good one. I dont know that there is anything left out there to try to negotiate other than trying to make it political look, what im finding from the democrats, they should find ways to actually bring america up instead of focusing on just trying to bring the president down thats the key part that i think comes with this. Take the president out of it and put the Country First and there will be no question that usmca gets called up and voted on and makes america stronger. Mr. Speaker, talk a little bit about the hong kong situation. It looks like the latest provocation has been somewhat concluded. Do you think this is the first of many . In other words, do you think china is going to continue to interfere in hong kong in terms of trying to dictate what they do and exert more control in the days future i think so. The answer is yes. I think america should stand with anyone who stands for freedom. Look, my first trip to china was back in 1995 and i remember seeing this clock inside Tianamen Square. It had the number of days and number of minutes until hong kong came under their control. This is something long term that theyve been trying to focus on, but their agreement with having hong kong was fundamentally different than what theyre doing today. Theyre more controlled theyre more concerned about how they control their people. Everybody has a social score inside china today if you want to buy an airline ticket, just because you have the money doesnt mean youre going to get a ticket, its based upon your social score whether theyll sell that to you or not so, i mean, yes, this is a real concern. Here we are in hong kong looking back 30 years from Tianamen Square it looked like the statue of liberty directly across from the portrait of mao with the craving of freedom of speech what are they craving inside hong kong today . Just freedom and america stands with anyone who stands for freedom remember, america is more than a country, we are an idea, an idea of selfgovernance, that power rests with the people. I think just as back in the 80s withstood with the Shipyard Workers of poland, we stand with those in hong kong today. Leader mccarthy, can we go back to the idea that you think were in a good position with the china trade talks . What do you know what are you hearing what makes you think we could be getting closer to a deal well, any time i analyze a deal i analyze the makeup of both individuals i feel the timing is right on both sides ive watched new car sales in china drop more than 10 i watched the Clothing Sales drop i watched the gdp which to me are like madoff numbers. You cant really trust them but at their lowest point. I watch them continuing to pass new stimulus thats moving through. I see the effects with inside america today. The timing is right. I watch whats happening internationally. The hong kong situation does play in, which ties the hands of xi jinping, especially when the hard liners want to pressure him on what he can and cannot do i watch october 1st being the 70th anniversary that chinas going to display something much different. They want hong kong to kind of go away to dispel whats happening there. I saw they pulled back the extradition of what they wanted to do. So maybe theyll try to calm that down. After october 1st the timing is right for november, but the timing for november to be right for america would mean the usmca should have to be passed in september. Wouldnt you want as an american to have the strongest argument going in with this agreement with china would you want to have this talk 20 years from now when their economy may be stronger or their military be mightier i dont think thats the case. No. If i look at timing and i look at history, now is the moment so why wouldnt we as americans collectively say we want to put our best foot forward . Lets build america up instead of concerned about taking President Trump down that is what we all should be focused on as we come back here, and that should be the first thing that we do. Fair point about usmc i know a lot of our viewers in particular would like to see that get passed but back to the trade talks with china, sizing up both sides. I know that right now it seems like resolve is very strong, even on both sides of the aisle, to play pretty tough with china at this point. Will that resolve continue if this timing gets pushed off into next year, if it gets closer towards the election, if we start to see more pressure points on our economy . I guess from a reasonable perspective if youre looking at winni winni w a looming election, what happens . A lot comes down to china i saw the president want to make an agreement in good faith we put it on paper and took it back to china and the hard liners said no. It comes to a point can china make an agreement . Theyre hurting every single week it goes through that supply chain continues to leave. Theyre feeling it but they also think in dynasties while we think in every twoyear elections. Long term we would be better to make sure that we get an agreement at the end of the day. Anything that we can do to strengthen the hand of america in this negotiation we should do thats why i do go back to usmca but also in most negotiations if you follow the business and others, when they get raised to a point where its affecting both sides, thats normally when both sides come to the table and find a time to have an agreement. Weve gone through the challenges weve gone through walking away with the agreement before and now i think its a time really when you look at the future get past the 70th anniversary. Hong kong calms down it is an opportune time really to come together and i think that will only make us stronger in the long run and make the next century ours. Leader mccarthy, thank you for your time. We are at a point to have this negotiation. No, go ahead. Finish your point, sir. Were at a stronger point ever to have this negotiation. Unemployment look for one point for the last 13 months straight hourly wage has gone up at or above 3 were getting the raise in the wages to those who really need it you look at the Participation Rate for women, the age of 25 to 54, its 76. 3 it has not been this high since 2002 this is opportunity and the moment where america should have this discussion and come to this agreement with china. Kevin, thank you for your time its always great to see you. Thank you. Coming up, much more about todays big stock mover. At t soaring after activist elliott takes a stake. lta tannast next. I can shine, i can shine, i can shine. Imma do what im made to do. Built for excellence. You start from the foundation up. The excellence is reaching dreams and chasing them at the same time. Todays top corporate story. Elliott management has taken a stake in the company jonathan chaplain of news streak research where have you been on the stock in recent like quarters, jonathan have you been bullish . Have you been frustrated did you like the acquisition of time warner but wanted more . What have you been saying . Weve been frustrated for a long time with at t stock. Like elliott, in some parts of the business weve seen the potential there for years. So this is a really interesting move from elliott. If they can shake things up and get the Management Team focused on the opportunity, its certainly compelling its a company with a better set of assets than verizon today with margins 5 or 600 basis points lower, with growth thats been significantly lower for years. Thats where we see the opportunity. The challenges are going to be dealing with the issues of the directv business and potentially down the road with time warner i think there are structural challenges there that will be difficult to address even with good management. So thats the question, jonathan if youre sitting in the Corner Office of at t today, what are you thinking so if i was in the Corner Office of at t today, to be honest id be looking at breaking up the company back into its three constituent parts. I honestly dont believe that there are synergies between the wireless business, the tv distribution business and the Media Business im assuming thats not on the table as a potential strategic remedy, at least as of this point. I see the opportunity in the wireless business really being capitalizing on the position theyve got and starting to deploy whipping out a lot of inefficiencies and costs and driving better margin in that piece of the business, which is slightly more than 50 of the company overall. Thats the piece where its an immediate opportunity to capture value. With directv, its not clear what can be done to fix it with time warner i think the most immediate fix is putting somebody who really understands the Media Business in charge of that asset at the moment its been run by john stanke who is a great executive but not a media executive. There have been reports of the business being such a Competitive Industry right now this isnt the time to let talent exit the Media Business. Jonathan, lets just walk this through you have time warner, which obviously is one of the biggest assets that the company owns now. Its been run by john stanke in terms of this transitional period at least. They brought rose jenrosenblad o help with that who would you want in there . And can the current management thats there do the job that youre talking about so i think just elevating greenblad would probably be a positive step. I dont know greenblad all that well but hes very hes a well thought of, credible figure in the media space hes been in the industry his entire career and i think creating sending the message that at ts focused on retaining talent in the Media Business and theyre going to create a great place for talent to create great content would do a lot to drive sentiment within that business and prevent it from sliding any further. Right okay jonathan, thank you for joining us, joe. Yeah. Lets go ahead. Appreciate it. When we come back, were going to question a short seller publicizing what he sees as big problems at Consumer Products giant church and twiedwight well ask ben axler if thats true dont miss that interview. Youre watching squawk box on cnbc you should be mad they gave this guy a promotion. You should be mad at forced camaraderie. And you should be mad at tech that makes things worse. But youre not mad, because you have e trade, whos tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. Dont get mad. Get e trades simplified technical analysis. Theres one thing you can be sure of. Theyre changing by the nanosecond. Thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. Welcome back to squawk box. Jpmorgan has devised anew index. Its called the volfefe index named off the covfefe tweet. Coming up probably. Coming up when we return, our interview with short seller ben axler whos been lobbing bombs at church and dwight you dont want to miss this. Trust me weve had segments like that. Why some wellknown wall street analysts are wrong. Stay tuned youre watching squawk box on cnbc i promise you dont want to miss it [upbeat action music] pilot were going to be on the tarmac for another 45 minutes or so. At verizon, were building the most powerful 5g experience for america. Thats why the nfl chose verizon. Because they need the massive capacity of 5g with ultra wideband, so more screaming, streaming, posting fans. Can experience 5g all at once. This is happening in 13 stadiums all across the country. Now if verizon 5g can do this for the nfl. Imagine what it can do for you. Welcome back to squawk box on cnbc live from the Nasdaq Market site in times square. Here are some of the stories investors will be talking about today perhaps. Amazon wants to add more than 30,000 new fulltime workers by early next year. Its planning to hold a six city career day Event Next Week to hold those jobs one of which will be in long island city. Ranges from warehouse workers to software workers do you hear that, andrew 30,000 new workers, none of whom will be in long island city. None of them. None of them thank you, aoc. San francisco is offering pg e 2. 5 billion to buy the lines. They face billions of dollars of liabilities in connection with Deadly Wildfires check on the shares of at t again. Theyre surging. The company up almost 7 . Another potential bump in the road on the way to an ipo for coworking space giant we work leslie pickers is here and she has the story. We works advisors are becoming increasingly concerned that the deal isnt going to happen thats according to sources i spoke with over the weekend. Theyre having a hard time finding investor demand at a valuation that the Company Seems is speakable i spoke with them trying to find someone who was interesting in buying or someone who knew someone who was interested in buying most of the Corporate Governance and managerial risks were too much to stomach regardless of the price. Thats the dynamic causing bankers to think below that 20 billion valuation that theyve been testing with select Market Participants now plans for a road show launch are still very much in flux. As a result im told there was a call meeting yesterday but still nothing was decided. We work still hasnt even picked an exchange where to list its shares, which is oftentimes a prerequisite to making plans for its debut. So, guys, the longer this drags on the more difficult it will be for we work to actually complete an offering which could mean foregoing billions of dollars in equity at an additional 6 billion through a concurrent Credit Facility. I have two questions. One is given that they were planning to raise funds as part of this ipo, how much time just looking at a calendar do they have looking at the run rate before they need money thats the tricky thing too also the calendar is difficult for this company if you dont go out in the next couple of weeks or so, then you run up against the jewish holidays theyre losing 1. 5 billion in operating losses a year. So i think they have two or so years before they run out of money. Okay. Dont quote me on that because i cant remember the exact theres time. Theres not a crunch in the next six months no. Theres also the idea thats been floated about which is that soft bank could come in and contribute more. I dont think they can necessarily just punt this ipo and not have any that was the next question. What is the thinking inside soft bank we were talking about the fact that soft bank raised a second fund on the back of a heightened evaluation of we work. We see this where you have an investor in one of these unicorns then they come in subsequent series to help keep that valuation higher soft bank could theoretically do that, come in and continue investing at a higher valuation than they might get at an ipo. No to the have to mark down the value of their investments thats a possibility most of the soft bank investment, they did invest in at the 47 billion range but they also inbe vested at something in the 20s right. So their exposure blended rate. Yeah, its a blended rate their exposure to this is more complicated. If they did contribute more capital, would they do it at nobody is talking about 47 billion anymore. What were they thinking of . Given the leaderships practices and judgment of going with an ipo in the first place and, secondly, can the ceo survive this its a good question. So they have a triple class share structure. Theoretically if the ceo wants to survive this he can survive this because he does maintain control through that structure interestingly you bring up some of these Corporate Governance risks which they came out with their first filing and they said Little Things like Little Things, 5. 9 million that was awarded to the ceo for changing the name of the company essentially. You know, they didnt have trademark. Trademarking the we Company Versus we work also they didnt have any women on the board subsquiequently in the last weer so they have backtracked on those things to clean up some of the Corporate Governance but they still have the triple class share structure. They still have 12 pages of conflicts of interests laid out and related Party Transactions they have laid out in thei prospectus there is a lot of work to do to make this a clean shot with regard to Corporate Governance. Larry, i was going to mention to you talking about Corporate Governance jpmorgan, you used to be on the board of jpmorgan. I was. Theyre the bank behind the ipo. They have enabled this and ostensibly known and understood about the governance issues because they were loaning money to adam newman they were financing some of the company and the sales themselves now and the Credit Facility. And the Credit Facility related to it. I would say if thats the case then were in an embarrassing situation. That that none of this stuff seems to me to set the any kind of a path for Public Offering i mean, they ought to go someplace and hide for a while how do you think Something Like this happens though with regard to you know, this isnt something that just kind of happened out of the blue. Well, is there a board of directors here is there anybody exercising any oversight . Doesnt look like there is okay. We are going to leave that conversation there weve got another one that were going to start right now this one about Consumer Products giant church and dwight. It has now found it selves in the cross hairs of a short sell. Church and dwight is behind many well known brands including arm and hammer, obviousy clean it issued 90 plus pages questioning its accounting practices. Its sending shares down 4 before they saw a bit of a rebound. In the past 12 months they have risen almost 30 in a statement the company told cnbc the following, we have confidence in our longterm plan to deliver superior returns based on our evergreen Business Model and our strong Second Quarter results demonstrate our continued momentum this report contains a number of false and misleading statements and is simply an attempt by a short seller to negatively Impact Church and dwights share price for its own benefit. Joining us on the set is the author of that report, ben axler. Good morning to you. Good morning. You heard what they had to say. Make the case. And then i have a lot of questions about the report that youve issued. Sure. False and misleading points, id like them to lay that out, number one the case here is very simple this is an Iconic Company thats used a stable brand, arm and hammer, to diversify into other brands that have started to under perform. They brought in a new ceo whos also the chairman. Governance concerns along that matter but now theyve gotten more aggressive with their financial Acquisition Strategy as we pointed out some accounting issues, some levers theyre pulling to pain themselves bonuses for noncash gains last year the Gross Margins went do you know to a threeyear low. They claimed it was a great year paid employees 15 bonuses the recent acquisitions of the water pick and the flawless hair kit, we have particular issues with we think theyre going to under perform like many of the past acquisitions under the Management Team. Let me ask you about your own incentive structure. People look at short sellers and say, what is their intention. Sure. You have shorted this stock walk us through this position. Full disclosure, we are short the stock. We think theres extreme over valuation here. Is this an issue for you in terms of over valuation in terms of the overall multiple. It is a high multiple. I dont want to discount that. Thats part of the story. Our perfect short is we look at a company thats using aggressive accounting, we look at evidence of bad Corporate Governance we have extreme over valuation of the of the 19 analysts, only 4 are above. What do you think a fair price for this stock is . We could see the stock down 50 , right its trading at 20 times ebida multiple many of the acquisitions theyve inquired is 13 or 14 times ebida. Thats their longterm historical multiple. If you believe me that this is bad, why would you pay a premium multiple for a company like this let me ask you about that struggling because you look at organic growth year to date 19 is up 4. 7 . It is up 3. 6 over the past decade that would be higher than its average the peer group which is really about 2 so how does that square in your mind in terms of the Operational Success or lack of success that youve described it would appear to be more successful. We have two points with that. Number one, the near term organic growth has been overstated why . The company put through price increases. Those are set to lapse next year number two, we found evidence of undisclosed acquisitions in some of the companys International Units so we think that those undisclosed acquisitions have actually been used to boost the organic growth we dont have confidence in the organic Growth Numbers that theyre portraying nor do we think its sustainable getting back to the valuation, the market is signing a significant valuation premium for, what, 2 . 2 , you know, increase in the organic growth. Larry has a comment to make, but i think theres a distinction between saying we think this is an over valued Company Based on the multiple, based on the math. Thats one argument. Its another to go with the accounting, claim that the company is not operating the way they say they are to say there are governance issues. Maybe its a stew or a mix of all of these things, but i think people are trying to sort of make a distinction between sure. Well, again, i think its a combination of everything. Plus, you have to look at the leverage here. The leverage has gone up under be the new ceo when you put more debt on, you know, low growth to potentially declining growth, that becomes that should become a real concern what kind of safety do investors have here . If youre a church and dwight investor, youre getting a 1 dividend most cbg is more were a hedge against clorox you are yo g youre getting a 2 dividend if people are thinking how do i implement this we expect this to implement the better quality peers. Full disclosure, matt farrell who is the ceo used to work at allied signals he understands financing maybe you dont like the way he understands it, but he does. Debt goes up when you do acquisitions they have done a lot of acquisitions as you point out. Thirdly, these acquisitions really havent had time to determine whether or not theyre going to be successful yes, they started out quickly. They began to ebb but i think theres a third leg before we know exactly what happened from my standpoint at least, i think its a wellperforming company. Your peers didnt agree with you in terms of other share owners in this. I noticed a lot of people who had different opinions so im wondering why you picked them as a target look, i think we picked them because we have real concerns about the financial performance, particularly the recent two deals. They bought a water flossing company. They paid a billion dollars. They paid five times what the private equity owners. They bought a flawless hair product. You can go to Dollar General and find it next to light bulbs. We dont think the brands theyre buying have staying power. We think theyre commodity products with inflationary product segments with more debt on top of lower quality positions they need to be careful. Let me ask you one other question you talked or in the report talked about what you think is a slowing dividend but it looks like now they paid first of all, theres a dividend theyve been paying for over a century it looks like it increased by 5 in 2019 which, again, is higher than the peer group, pg e, rickett and others all lower im trying to square the two sides of the story. Sure. Again, a lot of people value dividend paying stocks on a Dividend Growth model. When the growth rate is coming down, the share valuation should come down. We cant understand why the multiple has expanded recently as its become more evident that cash flow one other point we have to raise here is the company just increased their ar factoring facility that for us as short sellers has generally been a positive red flag in identifying companies that are struggling. Cash conversion cycle is going down again, undisclosed acquisitions. Were seeing a lot of signs of streaming here a final point if i have to make one, look what the insiders are doing. Constantly selling stock three directors sold in the past few weeks at 79, 80 a share i follow what insiders do. Final question, have you talked to them we have not heard from them our number is open they said theres inconsistencies or challenges to some of our points were happy to correct them if they can prove them wrong. Maybe well set them up with a lunch. Thank you. When we return, some stocks making the biggest moves ahead of the opening bell on wall street were going to bring you all the premarket hhlhtigigs and talk stocks with squawk box returns. Well be right back. With sofi, get your credit cards right by consolidating your Credit Card Debt into one monthly payment. And get your Interest Rate right. So you can save big. Get a nofee personal loan up to 100k. We think you would really shine in the aflac program. Aflac coach saban we have Health Insurance. Did Health Insurance pay for everything . No, we still have bills. Aflac gives you money directly to help with those. Aflac and your deductibles, knee brace, whatever you choose. Aflac sounds like a winner. Umhum. Umhum. We try. Get help with expenses Health Insurance doesnt cover. Get to know us at. Duck aflac dot com less than an hour until the opening hour joining us now, barbara re reinhart i think you want to stay long but theres a lot to worry about. Is does that kind of sum things up i think thats accurate. The way i said it too. I would say theres a couple of things were looking at that give us some confidence on our desire and positioning to be long so first of all theres a number of meetings coming up this week, very specifically from the ecb. Theyre likely to cut rates in october. We think theyre likely to restart their Quantitative Easing Program if bond yields continue to fall, there is some concern it wont be effective, Central Banks are pushing on a string, and then, of course, what happens are bond yields start to rise, and equities start to go with it so we did have some oversold sentiment conditions in late august, early september. Which certainly meant that the market, at least on a shortterm basis in august, did get somewhat washed out, which is very positive, at least on a shortterm view and we think that equities will be higher going into the end of the year. You said other people say that, larry, in that the pushing on a string argument is very compelling and a lot of people say it is not going to work in europe, it is not going to work here but what they fail it doesnt work immediately, but history shows eventually there is a positive effect from that. Has that been your experience, larry, or it file l finally jus doesnt work ill apprehensive about it. I always have been you can look at the past where it has worked. There is also cases it hasnt worked ive never taken it too seriously. It is an interesting point to make. I think the cases where it hasnt worked is when there was no confidence in the Central Banks or the Central Banks were politically motivated. I dont think we can say that about the ecb. You dont have the same sanguine feeling about the bond market the bond market has become very overextended. And it got very emotional through the course of the summer and we do think it is overextended itself to the downside we do think that the employment picture for the u. S. Is slowing. But is in no way, shape or form to the dire stance that the bond market has priced in at that time. So the september or the rally we started to see from trade concerns, two, three weeks ago, were back to less than 2 from the highs. Yes. In september, will we go to new highs . We think so one thing were looking very carefully for is the path of the u. S. Dollar. The u. S. Dollar is the road to better corporate earnings in the u. S. So we see that if you can get a 10 decline in the dollar over a one year basis, it acts like a very big elixir and nice boost to corporate earnings, especially to large cap companies. Thank you well leave it there. Thank you. At t shares jumping this morning after news Elliott Management has taken a stake in the company. Lets get down to the new york Stock Exchange where jim cramer is standing by jim what do you think . Well, look, i think that it would be stating the obvious that at t is really underperformed i think a lot of the ideas that elliott has very simple, it is about execution. The company itself could be a leader again but the companys bloated. The last few moves were questionable and i think that the company is staffed by old at t hands. I didnt say hats because one thing that people have to recognize is this is one of the more statesmanlike and gentle lets say trying to figure out how to put this best had these guys go after someone, they typically go after someone really hard. They did not there is a lot of room for elliott to talk with Randall Stephenson, make something happen i think theyre being incredibly constructive but i think all shareholders would welcome this because the company has been undermanaged for way too long jim, i know it is early and were just seeing some of these suggestions that they made, was there anything that really jumped out at you that you thought, okay, this makes a lot of sense, this makes a lot of sense, this makes a lot of sense and why you to think theyre going soft is that because they havent had extended talks with at t management to this point they havent. I do think that their ideas for directv, the real bleeder, not as bad as theyre not saying it is a disastedisaster, just il advised, anything they do with directv would be very positive but, really, when you go over what theyre saying, it just seems as if the company just piled on a lot of different assets but really didnt keep the right people and has made it so that they could take down such huge amount of costs even just half of the costs that verizon takes out regularly. Really be back in the game so i thought, a very constructive set of comments, if i were Randall Stephenson, i would sit down with these guys, i would try to change the board to have much more many people who recognize, i guess, entertainment more, because the last two acquisitions are really not in the sweet spot of what Randall Stephenson knows best. Somebody earlier suggested even if it was greenblatt running time warner that that would be great hes there anyway. Maybe hes doing some of those things what do you think . Maybe, but the turn over here is really outrageous i wish they had someone even senior to greenblatt someone who understood the importance of making it so that entertainment if you keep entertainment, you got to make it so that it is about bigger factor and telco doesnt dominate or you wont ever get from the 9. 9 to the 12 , to the 12 pe. It is a pe analysis that they did. It is not an attack calling for stevensons head i think thats important because i think Randall Stephenson has plenty of opportunity. I would bring a couple of their guys on the board. And let them have a shot at really trying to make this so that there is a organization that is meaningful. Jim, thank you. Were going to hear much more of what jim has to say about this in a few minutes by the way, dont miss an exclusive interview with the ceo of zoom video tonight on mad money. Stn meomes your way at 6 00 p. M. Eaerti stay tuned well be right back. You traded options. Funny, i tt im not really a wall street guy. Whats the hesitation . Eh, it just feels too complicated, you know . Well sure, at first, but jj can help you with that. Jj, will you break it down for this gentleman . Hey, ian. You know, at Td Ameritrade, we can walk you through your options trades step by step until youre comfortable. I could be up for that. Thats taking options trading from wall st. To main st. Hey guys, wanna play some pool . Eh, im not really a pool guy. Whats the hesitation . Its just complicated. Stepbystep options trading support from Td Ameritrade when you retire will you or will you just be you, without the constraints of a full time job . You can grow your Retirement Savings with pacific life and create the future thats most meaningful to you. Which means you can retire, without retiring from life. Having the flexibility to retire on your terms. Thats the power of pacific. Ask your financial professional about pacific life today. 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. From the day youre born 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. Our guest host today, larry bossity of honeywell and cnbc contributor. Larry, get it off your chest one thing ive been coming on squawk box for more than 20 years and as i approach my 81st birthday, it is time for me to move on. So this is my swan song. I want to say thank you for everybody for putting up with me for many of these years and all the best going forward. Larry what are you talking about . Finished. What are you talking about . You got to get some new blood in here. We love having you here your experience, what you know, what you bring to the conversations of every topic we discuss. This is not the last time larry bossity will be here. Did you get a head injury whats your problem . No, you just time always time for people to move on my time is youre not allowed. I would like to say this was just your decision, but, you know, im afraid you know what, this is kind of weird to be, you know, fishing for us to beg you to keep coming back. Im not. I see whats happening here wait a second, youre not allowed to do this. Yes, i can. I dont believe it. Anyway, thank you, everybody. Remember when the stupid boards told you youre 65 and you had to leave and it was wrong, that was the wrong decision this is the wrong decision i think. You dont take a lifetime of wealth and wisdom and information and not use it for other this is not the final decision people at home youre coming back. Im not accepting people at home, dont well see larry in a couple of months. Thanks for being here. Make sure you join us tomorrow, and always to see larry bossity. Yes is this you . Squawk on the street is next. It is time to go. That was news, larry, were going to miss you. Good monday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber at the new york Stock Exchange. Congress back to work, apple event, this new stick out of elliott has at t on the move, good macro on the uk and germany, ten year 158. Road map, shares of at t popping premarket. Elliott management with a 3. 2 billion stake. One of the firm