Transcripts For CNBC Squawk Box 20240714

A couple of big stories this morning. Peloton pricing the ipo. Price tag at 29 a share raising about 1. 6 billion now valued at roughly 8. 1 billion makes about a billion in revenue but loses 245 million annually. Now under the ticker pton. The peloton ceo will join us live this morning. If you have questions sen them in peloton. 245 million in losses well talk about the math of that and where they see profits and what it all means. Does anyone know about the treadmill . I do. It is expensive. It is about 4,000 the bike is about 2,000 plus. I have one. The bike is quite a piece of equipment. It is heavy. It is really well made i just got one two weeks ago. You can have someone screaming at you you can go outside. It is there, all free. Eamon javers is with us the hardware is a highmargin product. Higher now than an iphone. It is the services and the investment and the media component costing them they are doing a lot of build outs is that recurring cost or eventually be built out . Their argument is that those are up front Capital Expenditures they need to do they are building in europe, so it is not just trainers with different accents. It is not like you pay a trainer one time a lot of it is building facilities disclosure that cnbcs Parent Company is an investor in peloton. Separately, softbank planning to put an extra 1 billion into wework the deal that was put together before the valuation was dropped. Noting that their talks are in early stages that 1 billion investment would come and benefit some other shares of previous investments so it is not a clean up if it happens, theyll get 1 billion but softbank will get more of the company for that gm and the uae uaw it is early there could be a deal. Dont jump the gun have you heard about a deal . That would be news. The uaw and gm said to be close to a deal to end the strike. Negati negators have been meeting and talks intensifying see, eamon, it is not just you. That is why you are here. I can talk exercise equipment and washington stuff obviously you dont need to health us about that javers. It is written all over wall street is watching headlines coming out of washington this week eamon javers is with us. You spent a lot of time on this with sully awesome. Yesterday was a day covered by impeachment talk. The president really frustrated yesterday that this impeachment talk really stepped on what he felt was a successful week at a press conference here in new york, i asked him why, sir, is it appropriate for an american president to ask a foreign leader for information about his ukrainian rival. He gave a long answer. Here is part of it the new president of the ukraine is looking to stop corruption there is a lot of corruption going on i just told him about senators that threatened him with no votes and no money coming in thats what people are trying to say i did. I didnt do it it was perfect there was no kwquid pro quo he didnt really answer the question today, well see another day dominated by this story. Well possibly see this whistleblower complaint itself it was declassified last night and may be released to the public this morning. Can i say that eamon did that entire thing without anything written. That was all off the top of his head he did not say take a listen that was really good at the end of the day, if you could get rid of take a listen Going Forward. My jargon Going Forward when they talk about the prospects Going Forward. But do you know who said it best yogi the hardest predictions to make are the ones about the future. So true insanity and brilliance, really close to each other so you are an outside exerciser . I need to swim and jog a little bit but i dont get nearly enough exercise you need mental toughness there. I want to take you to one of those marine one departures and you can see the wrestling. Still thin volume impeachment odds are up about 60 cents now. The finishing the first term are down in the high 70s that is low well it is 20 republicans and youve got like a half mitt is like a half at this point. You need 20. Ill tell you what i mentioned i mentioned fliecher hes not a never trump but hes not all in. This is a fiveyard penalty. Not a 15yard or half way to the goal it is not all the distance and certainly not Something Like a spearing or whatever where you would be deliberately hitting the guy on the chin. That was his point i think republicans will probably stick with that in the senate. But maybe quiet yes you saw Lindsay Graham say, if this is what you have nobody is saying this is good a lot of them have been really quiet. Well see that whistleblower complaint. A lot of this will hinge on what is in that complaint the fascinating mystery here is who is this person or why they made this statement. And interesting that Elizabeth Warren is arrest i dont know what happens to the stock market with her. Im not sure if Lee Cooperman said the market doesnt open the day after. Swro he was just kidding i would think the stock market would go up. What is interesting to me, we dont have the Traditional Chamber candidate. Trump is not a free market capitalist in the sense of a mitt romney traditional republican we have seen before he does like the private sector hes a far cry from Elizabeth Warren zwroo it help or hurt trump in 2020 and does pelosi take it to a vote Going Forward we cant rule out what a firstterm impeachment looks like all the bad stuff is happening to the president in the first term i think peoples minds are made up on this president unless we have some dramatic bombshell you are leaving i got to get on an airplane im taking a 9 00 flight. Im going to have breakfast and then go. You should go to the airport and have breakfast sleep is more important than exercise thats what i told the producers and they didnt buy it dr. Scott and then dr. Oz start branding now you are mentally tough even under no sleep well done. When we come back, more trouble for facebook looking to launch an antitrust probe. Weve the details after this and looking at the biggest premarket winners and loses the dow is leading the dow this morning. This is apple card. A new kind of credit card. Created by apple, not a bank. With a better way to track where you spend. A new level of privacy and security. Daily cash you get back every day. And no fees. Not even hidden ones. Oh, and if you happen to be somewhere that doesnt accept apple pay yet, theres this. Nice. Learned ao play second language applied to college applied for a loan started a business started a blog shared a picture shared a moment turn your wish list into a checklist. Learn more. Do more. Share more. At home, with internet essentials. Welcome back to squawk box. Facebook coming under fire again. Reportedly opening an antitrust probe into the company according to a prodding by bill barr facing problems with the federal trade Commission Getting to our guests this morning. Welcome to both of you good to see you guys lets talk about where we stand now. Markets, the dow 1 . S p down 1. 4 . Should we be at these levels one way, we are near annualtime high we back a little above january markets selling this year or next as well that is not a Terrible Market back drop. It is hard to believe well get a huge amount of return at these levels we did see stocks move higher after they said the president could come to a trade deal with china. What would that mean clearly one of the biggest concerns right now is the trade war. Youve seen evidence of that everywhere youve seen pmis here and globally there is no question if the trade war were to be actually resolved, not just a paper deal for a few things but would substantially reduce uncertainty. You would see industrial sector do better. And the impeachment talks, what does that do . Today, with the movement, we are back to where we were before the impeechment proceediachment. Can you see a new nafta deal . A new trade deal with china . What are we going to see hard to predict youll get a tremendous amount of progress moving through those things would all be positive we could come up with a great deal with china. The way to think about u. S. And china, we are longterm rivals it is unlikely youll get a deal so comprehensive to get a deal next or or the year after that getting a deal that would address all of the underlying issues, that would be hopeful. Is it starting to look clear to you that Elizabeth Warren is looking better as you know, im a lifelong democrat but Elizabeth Warrens stated policies are not market friendly but youd vote for her . Probably yes. In we get a recession, President Trumps likelihood goes down and Elizabeth Warren likelihood goes up i think the most likely scenario what do you think the economy would do over the next four years with Elizabeth Warren was president . If you go back and look at the presidency and markets, there is really not that much connection between president and policy you dont think it matters im saying as far as the market is concerned you think 70 tax rates wont be a problem obviously, i dont want those kind of policies the market has worked higher under republicans and democrats. We had 70 tax rates you think it is okay . You need to look down below the surface to the details look at what happened to health care compared to the status quo. You would get a little bit of pax in trade war and that might be good for industrials overall. There is not a lot of evidence to suggest one in terms of another. We are very late in the economic cycle. Regardless of who is elected in the years time, we are likely to face overriding slow down that will be the overriding key regardless that is the key it comes down to fundamentals. Fundamentals of change. If we do get a president where earnings collapse, that will be a negative in the market. Do you think down in venezuela, it doesnt mat who are is president we are a lot different. I know that, things do matter dont want to say you are a socialist. Democratic socialist versus free market sector. Socialism around the world hasnt worked. I think if we look at the tax rate question, it has been the case there have been higher tax rates in the past. The degree of inequality now is close to unprecedent the especially in our lifetimes. It doesnt necessarily mean you reverse to a very slow economy you go back to where you were in the 70s and 80s. Certainly the wealth tax that has been proposed, it could. You dont think over time the higher gdp growth helps . You are not a trickle down person, i guess. I think because over the years, the majority of tax cuts go to purchases. We have to go i didnt have to say a word thank you for joining us coming up, im hopping on a bike with peloton ceo ahead of the companys ipo. I dont know if i should encourage you to see that and dont forget to subscribe to our new podcast. Special content and the latest headlines. If you missed any of the show, you dont want to miss this. It just started yesterday. It is absolute li worth a subscription and a listen. Look every day and go to your favorite podcast app and subscribe. Back in a moment for farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice wedge. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. And now for their service to the community, and less food goes to waste. We present limu emu doug with this key to the city. [ applause ] its an honor to tell you that Liberty Mutual customizes your Car Insurance so you only pay for what you need. And now we need to get back to work. [ applause and band playing ] only pay for what you need. Liberty. Liberty. Liberty. Liberty. 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. Tv aas many safety features powas the rx, the new. The lexus rx has met its match. If theyre talking about you. You must be doing something right. Experience the style, craftsmanship, and technology that have made the rx the leading luxury suv of all time. Lease the 2019 rx 350 for 399 a month for 36 months. Experience amazing at your lexus dealer. Welcome back to squawk box. Big ipo today peloton under the ticker pton. I got an exclusive tour of the control room to see how the fitness startup transforms a studio class to an athome experience you may get to see me on a bike now. Take a look. You are building your own hardware and software. What was that about when you thought about getting into this business originally. We all came from software he we said, can we be a software company. We said, its kind of a dogs breakfast of uninspired hardware we decided we had to build the hardware with the media, we talked to some players and decided we could build more integrated experiences if we build the whole staff including the media. The stricter might break the fourth wall and look into the camera and call you out hanging with amy and tammy k nice work. How much do you think of yourself as a Media Company versus a Technology Company. Let me note, we have everybody on the tread here, his heart rate here. So this is a bit of a tech piece. Right we strooem clo we stream close to 1,000 hours a month. We have 1,000 on hand and almost 1,000 hours of live shows a month. We should mention cnbcs Parent Company is an investor in peloton. Coming up at 8 00 a. M. Well hear from john foley live on the set. It is at the high end and that is good for the company. The company is still not making company yet. It is interesting to see it as a Media Company valuation do you want a Media Company valuation or tech Company Valuation . It is hard. The hardware puts you in an apple plus category, or media or te tech i asked him, what are the comparables. This is a complicated one. We should talk to him about that i am a little naive as you know i was wondering, comcast but it is a Media Company with content. If you think tf as purely an exercise Machine Company the other issue is, soul cycle, other companies are coming out as competitors. Different services or media components this is not eamon oply because at the moment. I would be fine in virtual classes and not going to the gym but i need the sauna the way uber goes to uber eats, maybe well talk about a Side Business in sauna construction i need to be able to do that do you after you work out . The visuals im trying to get away with me it is in the pool section of lifetime. All clothed. I think it is weird you went there. Everybody is fully clothed there is a view of the pool, floor to ceiling windows looking outside. It is really nice. Dont make it something dirty. Im trying not to we well have me on a bike coming up im disturbed by that when the editor showed me i was disturbed. Are they going to reuse that bike they are. The very pasty arms and legs coming up. You may want to change the channel. This morning, stocks to watch including another big tobacco name getting crushed first, a look at s p 500s winners and loosers. Classical Music playing throughout announcer welcome back you are watching squawk box live from the marketsite in times square time for todays executive edge a rash of ceo departures turning out to be a big year wework, juul and more seeing a shuffle for various reasons. From board room battles to investor concerns. There were 159 ceo changes in august that is up 28 from july the most ever in a month since 2019 over 1,000 ceo departures. Changing of the guard at the top. Coming up, the crack down of vaping and stocks getting crushed. Dont miss our interview coming up with peloton ceo. Stay tuned to squawk box an cnbc announcer todays big number 55 million thats how many peloton work outs were completed in the last outs were completed in the last year to managing your fleet. To collaborating remotely wi. Your teams. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. 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. Cool. Sometimes, they just drop in. Obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Shares of British Tobacco Company Imperial brands cut its profit amid regulatory scrutiny in the u. S. Amid vaping industry in georgia and florida, theyve reported their first vapingrelated deaths bringing the number now to 11 altria and fiphillip Morris International have ended merger talks. And juul ceo has been replaced speaking now with cnbc about juuls future. I think juul is well positioned to be highly successful in the near future. Still working through the challenges we knew they would have they along with others in the industry will have to reverse the increase of youth usage of evapor products joining us now, garrett, head of research. You are reiterating a buy on Phillip Morris in the last three months, would you say it has gone 180 degrees . This has been a tough period this is in question now or is it not . No. Thank you for having me. It is a big concern, altria spent 13 billion for that equity in juul last year i dont think they saw this impending ban on flavored e cigarette sales that accounts for about 75 of juuls sales. That is just the mint flavor if you count menthol, that is another 10 . So thats 85 of their sales also a change in their strategy contemplating some layoffs at this point, garrett, do you know what percentage of the usage is what you would call sort of rehab ill tative, trying to get off cigarettes and what is new juul users that are adopting a new way to get addicted to nicotine is it 50 50, do you know sure, the real concern as far as the fda and government is concerned is with teen vaping. Studies show about 25 of High School Students are vaping right now. It is with those flavored e cigarettes there have been no talk of cutting off the tobacco flavor for those transitioning. The concern is really with teen vaping what has happened is significant of increase in the number of states that have raced the tobacco minimum purchase age to 21 thats a big problem for the industry and cover e cigarettes. I would think the number of teen vapors using it to get off cigarettes is tiny but just because you are an adult, if its still a certain percentage of adults just taking up the habit initially using juul, that is not good for the entire health care system. Just like we all pay for people who are still smoking. People can do what they want but it just seems like the reason it should exist is to help people get off other more harmful habits absolutely right. But what has happened is that the flavored e cigarettes have become very popular with teens the Tobacco Industry in the u. S. , we expect to be down 5 or 6 this year in the u. S. Market, cigarette smoking peeked in 1963 companies for years have been offsetting the declines you through price hikes. It seems as a society not talking about europe everybody smokes there this country, weve got it down to Single Digits we were doing receipty well without juul to bring in a whole new generation of people addicted to Something Else there are no new smokers around that i can see no ashtrays or things. It is weird that cars still have lighters. And in airplanes too. We are legalizing cannabis. I hope we thought that through dont miss Phillip Morris ceo at 9 00 eastern still to come, saying that right now is the time to buy old tech before we head to break, the biggest gainer iths e ftse, which is up. Daily cash you get back every day. And no fees. Not even hidden ones. Oh, and if you happen to be somewhere that doesnt accept apple pay yet, theres this. Nice. It also has the highest growth in manufacturing jobs in the us. Its a competition for the talent. Employees need more than just a paycheck. You definitely want to take advantage of all the benefits you can get. 2 3 of employees said that the workplace is an important source for personal savings and protection solutions. The workplace should be a source of financial security. Keeping your people happy is what keeps your people. Thats Financial Wellness. Put your employees on a path to Financial Wellness with prudential. Good morning, everybody. Welcome back to squawk box. U. S. Equity futures this morning are kited higher after gains yesterday with the nasdaq the biggest gainer. Up 1 . The dow was indicated up 65 points 789 s p futures up close to 6 the nasdaq up close to five points in Corporate News mixed quarter for k. B. Homes earnings beat the street revenues came in shy of expectations the home builder says that net orders rose by 24 in the quarter. Kb homes stock is up 70 this year this morning the stock is down 6 10 of a percent. Walmart sams club is teaming up with provideers to offer members discounts on services they might otherwise put off because of the cost starting next month sams can you be club members in michigan and North Carolina will be able to buy packages that include dental, vision and prescription. The range in annual fees from 50 for individuals to 240 for families seems like something people might be willing to check out. Check out shares of beyond meat this morning. They are jumping after mcdonalds said it plans to Start Testing the companys plantbased burgers at some locations in canada. Our next guest is it excited about a couple stocks in the tech sector. Joining us now with his scott walker picks, scott walker picks well call them, partner at nchlsz advisors. Good morning to you. What do you like in this crazy environment right now . Well, weve been seeing a switch from growth towards value over the past few months and that doesnt mean that you have to switch from Technology Stocks into other sectors of the economy. We dont have the same kind of Growth Prospects of tech stocks. You look at older stocks like older microsoft, apple, intel, oracle, great businesses that have pesky metrics like cash flow, return on capital, longterm investors really care about. Yet dont suffer from call it Management Issues like wework or perhaps over valuations we might see from the likes of telecon as it comes public today. Are you a fan of peloton . I have a peloton for years. I have yet to meet anybody that does president like t. Are you a buyer typically or no we dont play in ipos because of pesky metrics we like to see cash flow, return on capital two, three years down the road when it is its had some time in the mark, we think it might be a compelling investment. How much do you think about china when it comes to the tech space . Its hard to ignore china certainly in the technology space, the pieces parts all come from china we talked a little about intel, which as a chip maker is going to suffer if you begin to see tariffs on chips around the globe. Backing that supply chain and moving it towards india, moving it towards indonesia, perhaps south america may provide some relief to all the chip makers. Where do you stand on apple right now . Weve been a lodgeterm apple holder the stock is, call it 19 times earnings and has a very strong business in the most current technology, current in media, current in devices, current in cloudbased services its really hard to poke a lot of holes in the two years, three years, four years out for apple. Were not going to react to whether or not people buy iphone 11 as they wait for 5g phones. Archie how do you figure out what the proper valuation or metrics are on a company like apple . As you mention there is a top end in media, technology, all these different streams. Theyre turning themselves into a Consumer Company by relying on services i certainly think youve seen an apple over the past two or three years a return to a more normal valuation it had been held down in valuation a long time because people thought of it was a device maker, not a software company, not a services company. For that reason they thought it was going to become the next blackberry eventually, where somebody was going to compete away those margins if you look at it, apple has margins on the products, certainly great margins on the software theyre going to weather this storm whether or not iphone pieces parts cost 25 more or not. Unlikely going to shake their business the real risk to the business is whether or not things like alexa earphones change how we interact with technology. Do you think that actually changes the game, those earphones . Certainly theyre catching up with apple on earphones. Theyre very much like ear pods. Whether or not we start moving away from staring at our index card size smartphone the next two or three years, do you really want to be the company thats going to do you really see that happening . Not now maybe not in the next two or three years. I know how you can get the same amount of information off the phone. The ability to read read. The ability to process information off the screen is so much faster than listening its unbelievable. Were talking about podcasts scott walker has new pods. I often listen to podcasts often on 1 to 2 1 2 times the sound setting. When you get up to 2 it sounds like the chipmunks youre trying to get the information. Will the screens be ever present in your life youre interacting with screens all the time, but not the one device youre carrying with you. It wont be part of it really its going to be your Digital Credential following you wherever you are tim, you like microsoft i know, and you like oracle. Yes okay. We will have you back and continue that conversation when we return, a lot more on scott walker senator, tom cotton is going to join us to talk trade then at 8 00 a. M. Eastern, our interview with the big ipo of the morning, so very many questions about this ipo amid lots of questions about the teleconmarket. Peloton c. E. O. Will join us as the company races towards his. Stay tuned youre watching squawk box on cnbc plants capture co2. What if other kinds of plants captured it too . If these industrial plants had technology that captured carbon like trees we could help lower emissions. Carbon capture is Important Technology and experts agree. Thats why were working on ways to improve it. So plants. Can be a little more. Like plants. You should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. And you should be mad your smart fridge is unnecessarily complicated. But youre not mad, because you have e trade which isnt complicated. Their tools make trading quicker and simpler. So you can take on the markets with confidence. Dont get mad. Get e trade and start trading today. Doprevagen is the number oneild mempharmacistrecommendeding . Memory support brand. You can find it in the vitamin aisle in stores everywhere. Prevagen. Healthier brain. Better life. Hour 36 in the stakeout. As soon as the homeowners arrive, well inform them that Liberty Mutual customizes home insurance, so theyll only pay for what they need. Your turn to keep watch, limu. Wake me up if you see anything. [ snoring ] [ loud squawking and siren blaring ] only pay for what you need. Liberty. Liberty. Liberty. Liberty. From wall street to washington, President Trump saying a trade deal with china could come sooner than expected. Meantime, investors are also monitoring an impeachment inquiry. We have the latest straight ahead. Spinning to wall street, peloton set to debut at the nasdaq were going to hear from c. E. O. John foley plus discovery focused on the food network, he joins us to discuss a collaboration with amazon streaming morris as much more as the second hour the squawk box begins right now bicycle, bicycle, bicycle i want to ride my bicycle bicycle, bicycle i want to ride my announcer live from the beating heart of business, new york this is squawk box. Good morning and welcome back to squawk box here on cnbc im joe kernen along with becky quick and Andrew Ross Sorkin u. S. Equity futures this hour up 60 on the dow, nasdaq indicated up 2 1 2 s p up 5 tough to keep this market down you throw trade at it, throw impeachment at it, all these Different Things i guess you got central bankers in your corner but its still pretty amazing, andrew okay, couple big headlines to tell you about this morning. Peloton set to go public this morning its ipo friesed at 29 per share. Its the high end of the expected range values the Fitness Company 8. 1 billion should mention cnbcs parent Nbc Universal is an investor in peloton. Were going to have a lot more on this peloton ipo in a few minutes. Were going to speak with some analysts later, you dont want to miss this, all the questions about the peloton ipo are going to be answered by john phony, joining us on set. Questions about the ipo market thats been a tough one the past several months separately were going to get a look at the economic growth. The Third Quarter expected to grow at a 2 annual rate that would be department cal to last months estimate. Maybe thats going to raise some political questions. Also new york City Building owners are having trouble keeping their retail tenants new figures released by the city the amount of retail space doubled from 2007 to 2017. That amounts to a 5. 8 of Available Space thats now available compared to 4 ten years earlier. City officials point to Online Shopping and rising rents as the primary culprits weve talked about in new york you walk down madison avenue and there are so many shops that are just empty, and sometimes people blame the landlords for wanting too much money but i think electronic retailing is a big piece of it its a big piece of t. Maybe they should have thought of that before they ripped down the sny studio and put in more space. Theres more retail space everywhere the question is does that mean the prices really ultimately are going to come down u. S. And japan have reached a 7 billion trade deal. President trump announced the outline of the agreement yesterday at a signing ceremony with the japanese Prime Minister shinzo abe for more on u. S. Trade, lets welcome senator tom cotton, republican of arkansas senator, its great to have you. Thanks. Can you see to my left . No, you cant really see it. There is also a big elephant in the room we may need to talk about, senator. But youre here to talk about trade. Lets talk trade at the start, how was the deal yesterday . Obviously a positive with japan at this point. But just makes me wonder does that make us more or less likely to coddle china and get something done well, first, i think the trade agreement announced with japan was a big win for americans. And arkansas in particular, were very excited about japan finally lowering barriers on beef, pork and poultry also i think the new u. S. japan agreement could be a Gold Standard for Digital Goods the transmission of videos, books, music, what have you between our two nations. And i actually think the agreement will have the happy effect of putting us now in lockstep with japan to try to get better trade terms with china. As we put more and more of these trade deals to bed, couple years ago with south korea, now its japan. Hopefully later this year it will be mexico and canada. That brings our focus more intensely on china which really is the worst culprit in the International Trading system lets keep talking about trade. Through the prism of what weve seen in the last couple of days, in your view, the latest salvo in the, you know, getting rid of trump, latest salvo is based on ukraine, does that make it more or less likely that he decides to do a trade deal with china . I dont know if it makes it more or less likely hes going to do a trade deal with china given what the House Democrats are doing. What the president wants to do is get a good deal for american workers, farmers, ranchers with china. China obeyed the rules of civilized nation when it comes to respecting property rights, not trying to steal technology and use it for military or intelligence purposes. The president s focus is as it should be on getting that good trade deal with china no matter what kind of hysterics you see in the house of representatives. But youve been in washington for a while. You know how everything gets political. You dont think none of this other stuff will have any effect whatsoever how about usmca, is it possible to get that done with this as a backdrop, impeachment as a backdrop i hope so nancy pelosi has said all along that she wants to pass the mexico canada agreement. Bob lighthizer has been working in good faith with her many months to give assurances to her and democrats in her caucus about Enforcement Mechanisms they could live with those measures, donald trump could as well unfortunately the House Democrats have been trying to impeach donald trump since the day he was sworn into office i can they voted three times already on impeachment i hope theyll focus on doing the peoples business, one important part of which is passing this mexico canada agreement. Yes just to get down and dirty, the democrats need 20 senators, i think, if they had all their own senators to go if it does proceed to that level. Do you think that from what you know, from what you heard yesterday and the transcript i dont know whats going to come out with the whistleblower necessarily. Do you think this rises to the level of a high crime and warrants removal from office you know, its a little mystifying to me and i think most americans now that theyve read the transcript of the president s call with the president of ukraine what the democrats are talking about. Nancy pelosi said one of the grounds would be withholding information from the congress and the people well, the transcript has been released publicly. I, a member of the Intelligence Community have read the whistleblower complaint it will be released in the next few days i dont see why it cant be with appropriate redactions for a few classified matters and whats apparent is there is no quid pro quo that the president asked for anything in return for u. S. Aid to ukraine it was a fairly straightforward diplomatic conversation. Certainly its not what joe biden has boasted about doing. Joe biden boasted on television about withholding american aid to ukraine if ukraine didnt fire the prosecutor that was looking into his sons company lets just be clear here a ukrainian oligarch didnt find Hunter Bidens resume on zip recruiter and paying him 50,000 a year he did that because joe biden was vicepresident of the United States senator, let me ask you a separate question. If you find the joe biden side of this troubling, which by the way i think is hard not to, do you find anything about what the president did troubling . Not necessarily rising to a crime, not necessarily rising to a level of being impeached, but in terms of character, in terms of what it says, in terms of being the president in the white house, does anything about this trouble you whatsoever at all or do you think this is completely fine so far as i think the president has reasonable concerns about Ukraine Ukraine is riven by rival factions they point the finger at each other a lot. The president wanted to know earlier this year, president zelenskiy, a newcomer to politics, was going to be better than past leaders of ukraine im not referring to that piece of the transcript. Im referring specifically to the piece of the call related to biden. This is my point, is that joe biden, sitting vicepresident of the United States, went to ukraine and demanded the firing of a prosecutor that was investigating his sons company. Otherwise he was going to withhold a billion dollars in aid. He boasted about that. He bragged about that. That was under a previous Ukrainian Administration now, with a new administration, the president wanted to get to the bottom of whether or not it was more trustworthy, it was going to take a more serious tact on corruption and whether there were past actions that needed to be reopened. Im not saying that there necessarily is anything there. Im saying these are reasonable questions when you look at the facts of a sitting vicepresident s son getting 50,000 a month. Its a common its a common topic of conversation between our president and president s of other nations when were dealing with corruption, and especially with aid to those nations. Not going to get anywhere here, andrew senator, the whistleblower, youve seen it so youve seen it. Its not public yet so youve seen it. I have. Okay. So at this point what would it take to start flipping the 20 youd need 20 republicans and im sure theyre going to be pretty solid in their support. I just i dont know, as they split up, maybe sass, maybe romney what do you need to see where youd actually the president would start losing the support of his colleagues in the senate . Not colleagues, but senators i dont want to get into any detail about the whistleblower complaint although i do think it will be made public. I dont think there is that much classified material in it. Its best that the transcript is public, to make it public. I will say i didnt see anything in the whistleblower complaint beyond much of whats in the transcript thats been released publicly already and whats reported in the news frankly a lot of it tupd on whats public news, not classified sensitive material. Do you think the voters the American Public will have a chance to litigate this in november of 2020 this and almost every other issue we get all the time in washington lets talk about your act of rebating some of the tariff money to taxpayers lets get to that. How does that work sure, weve added tariffs on various countries, various products over the last two years. The Treasury Department is taking in tens of billions of dollars. The tariffs are designed to get us better trade deals with the countries, to protect our jobs, our farmers, ranchers, our foresters. There is that money in the Treasury Department. A good side of it could be turning that money back to american families. My legislation would rebate that additional tariff money immediately, those past two years of money and every year after taxes are filed to the bottom three tax brackets. Anyone making up to 84,000 a year or 164,000 for a family by saying to the effect to the extent this will have an impact on americas families, 700 so we can both try to use those tariffs to get better trade deals, butalso not hit americans in their pocketbooks it would only go to those in the lowest three tax brackets. Anybody who is in that, and its not directly based on anything theyre buying youre saying offering relief to families that inevitably that would be paying higher bills if they get hit with some of these tariffs for the goods theyre paying in the stores yeah, thats right. So we want to concentrate the relief on working families who are in the bottom three tax brackets to the extent theyre going to face any kind of increasing inflation pressures we havent seen that much in the data yet, its possible. But we want to use money coming in from the tariffs to give those working families relief. What is treasury doing with that money right now, what is right now tariff revenue, like income tax revenue or Corporate Tax revenue goes into the general treasury revenue funds. But we do have the ability to created a separate tariff fund to identify how much money comes in on an annual basis and simply turn that money back to working families its several hundred bucks a year in the pockets of working families i think that will make a big difference has the administration signed off on this, are they in favor of it, too its just being introduced today, but weve gotten some favorable indicators from the administration already and i think that we might have more senators joining us in the future and have Administration Support behind it as well. Senator, great to have you on today. Thank you hope to see you again not too long a time. Its been too long this time would love to have you back. Thank you. Thanks, good to be on when we return, peloton pricing its ipo at the high end of expectation andrew gets a little workout with the companys c. E. O. And were going to hear from Nelson Griggs at the nasdaq about this listing. Check out the futures at this hour youre going to see things are indicated up even after the gains we saw yesterday dow futures up by 66 points. S p futures up by 5. Sawbo wl r1 2. Quk xilbeight back. I dont know whats going on. Ive done all sorts of research, read earnings reports, looked at chart patterns. Ive even built my own historic trading model. And youre still not sure if you want to make the trade . Exactly. Sounds like a case of analysis paralysis. Is there a cure . Td ameritrades trade desk. They can help gut check your strategies and answer all your toughest questions. Sounds perfect. See, your stress level was here and i got you down to here, ive done my job. Call for a strategy gut check with td ameritrade. Welcome back, everybody. Facebook coming under fire again. The Justice Department will reportedly open an antitrust probe into the Company Following prodding by the attorney general bill barr. This will be the fourth probe in recent months. It also faces investigations by the federal trade commission the House Judiciary Committee and a group of state attorneys general. Stock is down by about 1 today. All right, check out the shares of beyond meat. They are jumping after mcdonalds said it plans to Start Testing. The companys plantbased burgers at some locations in canada up 13 . 13 wow and coming up, when we return, peloton stinipinning ita to wall street it will trade under the ticker pton and there i am, oh, god, youre seeing it already i took a class and cycled with the company is that your first class . With the c. E. O. This was a private class i dont think they really do classes like this. Then later, discovery c. E. O. Is going to join us, streaming jazz, why content is still king. Squawk box continues after this announcer time now for todays aflac trivia question. Which mall holds the Guinness World co fhererdor t largest parking lot . The answer when cnbcs squawk box continues 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 a new kind of credit card. Created by apple, not a bank. With a better way to track where you spend. A new level of privacy and security. Daily cash you get back every day. And no fees. Not even hidden ones. Oh, and if you happen to be somewhere that doesnt accept apple pay yet, theres this. Nice. Announcer now the answer to todays aflac trivia question. Which mall holds the Guinness World record for the largest parking lot . The answer, the west edmonton mall in alberta, canada, holding 20,000 cars. Peloton making its public debut later today. Under the ticker pton, Company Pricing at 29 a share thats on the top of the target range. Prices the company at 8. 1 billion a head of the ipo i had a private spin class with john foley we talked about the fitness hardware and what he thinks built other companies that have gone public this year. We have 1500 people on this leaderboard right now. Full keep going youre up. 2, 1 where did you rank . Do you know where you ranked last time you did this i dont remember. Im generally in the top 20 in the early days i could win a class, but those days are long gone whats on your wish list for this over time, our wish is to get the price down and make sure, you know, in the coming years, we want to make sure tens of millions of people around the globe are able to afford a peloton bike what do you think you can get the price down to . Who knows through financing you can buy a peloton bike for 5800. Were not going to rest there. Given the ipo is coming up, how much do you focus on the markets . More than i used to recession, problems dominating the headlines these days are in the back of our mind not the forefront of our mind. Forefront of our mind is building one of the Great Technology platforms of our generation but the back of our mind, recession, other ipos that have gone out this year is there one you focus more on than others i am good friends with shaw because hes a friend. Peloton is such a unique business there hasnt been any real good metaphors. Were kind of a category of one. For better or worse, the investors are going to have to sharpen their own pencil and figure out how to value us on their own. What do you think the biggest difference is being a Public Company . Ill tell you theres almost 300 people in our cap today, andrew i dont think much is going to change certainly the capital event adding more than a billion dollars to our Balance Sheet and allowing us to invest in the new growth and continued growth and new categories and new markets is really why were doing it were very excited about it. We still feel like were one of the massive opportunity to impact a lot of peoples lives around the globe john is pretty ripped there and he has a little color. It looks a lot better. Wearing black did you watch that before you allowed that i actually tried to pull some of it back can you do it you couldnt do that . I didnt have the power we have producers who have a lot more power than i do i should mention it is important cnbcs Parent Company comcast is actually an investor in peloton. We want to mention that. So you can see more of the exclusive peloton tour studio and my pasty arms and legs on cnbc. Com way to sell it. Thank you right now i want to bring in nelson briggs. We should say john foley is going to join us live and we have lots of questions for him, specifically straight out of the s1. Youre going to get to hear those questions and answers at 8 00 a. M. The president of the Nasdaq Stock Exchange, its good to see you great to be here again. What kind of environment is peloton walking into today and just in terms of context, obviously theres uber, theres lyft weve now dealt with the past two days, 48 hours of soap opera around wework, an ipo that did not go forward and yet these guys priced at the high end well, its always going to be a company by company market. This year has still been incredible you dont when people talk about the ipo market, they say they have a window yeah. Because there is a mood around ipos. Do you think thats a myth it definitely exists. If you look at the overall market is up 20 the average ipo is 15 for a real healthy ipo market, were talking about positive numbers and this year we passed over the amount of capital raised last year in total. So and the number of ipos will be more its still a Pretty Healthy market and Diverse Group of sectors as well. Goldman sachs had a report just last month that talked about this year being the more companies that were unprofitable, went public this year this is like the equivalent they were suggesting of sort of a precrisis kind of period. Is that reflective of anything in your mind its definitely a year were seeing the most amount of exits for top unicorn weve seen in a long time, mma particularly. Going to ipo obviously they have to have scale, they have to have massive growth and the profitability question is one we know investors tend to ebb and flow about how important it is to get to playoff tablt quickly. That changes as we saw in september when growth sold off that changes pretty quickly. Lets talk about the ebb and flow and where we are right now. When a company like wework comes out and puts the garbage out like they put out there, does that mean every other company has a higher hurdle to leap over, youre going to get the tires kicked before anybody i dont think so. We may in one or two or three situations not necessarily wework, but they look at the overall companies. Look at the market environment they benchmark against public peers. Weve had profitability is all of a sudden a lot more important. Data dog had an amazing ipo this is a unique back to back week, very large new yorkbased ipo, pretty cool you look at a company like data dog did exceptionally well profits do you think this is an issue about how long a company has stayed private yes the reason i ask, delivering alpha last week, we had the interview from jay clayton on cnbc he made the comment he doesnt like to step out, if you will. He stepped out on this and seemed to suggest that the problem right now is that the markets are being used, as he said, for liquidity, for the employees. And that effectively, a nice way of saying, you know, youre leaving the Shareholders Holding the bag. And theres a lot of great points in there. The one thing i comment on, too, in addition to that is that most companies are still doing secondary rounds, six months later, a year later. Youre saying secondary rounds in the Public Markets continue to get to scale and invest and get money that is different from amazon raised money one time sure. And, sure, it lost money for a very long time, but it was not out there constantly raising money for year upon year upon year it wasnt hemorrhaging cash i think you look at understand private theres a lot of cheat money as well as the shareholder jobs act, the two big drivers liquidity demands are there. So but its actually a Pretty Healthy market right now what would be success do you think for peloton at the end of todays trading . So, i host a lot of ipos. Whether its a company that has a rocket ship on day one or muted they say the same thing. Theyre investing for the long term you met john its an amazing company, out the next five, ten years i dont know if well go upstairs its the first time we opened the market at the top of the tower. Amazing show, had fun. They did an amazing job at the road show. Nelson, great to see you. Thanks for having me. Good luck later today the president of the Nasdaq Stock Exchange 8 00 a. M. Peloton c. E. O. John foley will be here with us on set. When we return, the message from c. E. O. S around the country. Former e. Y. C. E. O. And round table board member Mark Weinberger will talk to us about the message to the president and what c. E. O. S are focused on when it comes to the economy. Right now as we head to the break look at the u. S. Equity futures. Up across the board dow up 73 points s p futures up 6 nasdaq futures up close to 6 stick around well be right back. Servicenow put our workflows in the cloud. This changes everything. Youre right sir. Everything. No not everything, i mean youre still blatantly sucking up to me gary. Brilliantly observed, sir. Always three steps ahead. Six steps ahead. Sixteen. So many steps. You done . A million steps ahead. Servicenow. Works for you. With licensed agents availablep when 247,d it. Its not just easy. Its havingjeromebettis onyourflagfootballteam easy. Go get em, bus ohhhh [laughing] cmon bus, cmon hey, wait, wait, wait hey man, i got your flag i got your flag, man i got your flag its geico easy. With licensed agents available 24 7. 49 nothing woo still to come on squawk box business round table, board member Mark Weinberg on the trade war, the state of the economy, and what has c. E. O. S buzzing. Then later discovery in amazon, serving up a new app c. E. O. Is going to join us to discuss the partnership. Then at the top of the hour, peloton c. E. O. , cofounder john foley joins us ahead of the companys first trade on wall street right here on cnbc. Squawk returns in a moment shhh, sorry, i didnt catch that. I said ask how soon they can be here right now . Whats now . He says theyre surveying our property now theyre probably at the wrong house i dont see any hovering his name is hovering . Look up . By automating claims with Machine Learning and analytics, cognizant is helping Insurance Companies advance how they serve even hard to reach customers. Cool whai tell clients, etfs can follow an index, but which ones target your goals . Its not about quantity. Its about quality. No trendy stuff. I want etfs backed by research. Is it built for the longterm . My reputation depends on it. Flexshares etfs are designed and managed around investor objectives. 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. Classical Music playing throughout were changing whats possible every single day. But what does changing whats possible mean anyway . Well. If you run a business, it means a lot. For starters, we provide you with Financing Options for your customers. That way, you can help them buy the things they love instantly and pay over time. And that turns them into serious fans. Hang on, theres more. Want Customer Insights . Weve got those, too. We use data to show you what your shoppers have already bought so we can tell you what they might consider buying next. And you can offer them the perfect products. That ceo gets it. From adding unique capabilities to your companys apps to bringing you loyalty programs, our technology and Financial Solutions are changing whats possible in all sorts of ways. So, how can we change whats possible for you . All right. Welcome back, everybody. We always are wondering what c. E. O. S are thinking b whats on their minds and it turns out whats on their minds right now is whats going to be happening with profits, what their expect asians are with earnin asians expectations coming down the road Mark Weinberger is a member of the round table business board of directors he joined metlife. Great to see you always great to see you we talked to you a lot over the years. You have a good idea whats happening, what c. E. O. S are thinking about because youre talking to so many of them all the time i know that the business round table recently lowered its expectations for growth. What are c. E. O. S seeing . What is this about and what can you tell us sure. So, i mean, bottom line, becky, is the u. S. Is still strong. You know, i think the general feeling would be that the numbers in the u. S. Are holding up the rest of the world is whats dragging down the u. S. Right now. And certainly there is a fundamental mind shift in mize view of this china u. S. Trade deal issue people thought for a long time we were in a tariff war, there would be a deal, you get through that, you suck it of and take the cost yourself or pass it on. Now people are realizing were going to have a longer term trade issue thats going to affect supply chains, a much bigger issue thats affecting the way theyre investing around the world these are topical. Not investing in china if theyre American Companies or not wanting to invest anywhere good question u. S. And china went up the First Quarter first half of this year compared to last year whats happening is its investing in china for sales for china. Thats where the market is where the supply chains are, theyre reevaluating whether they should have supply chains moved to other Asian Countries or somewhere else. Its looking at both ways. Theyre serving china in china and that is growing rapidly. How they serve the rest of the world is being reconsidered. Uh you dont think there is going to be a trade deal reached any time soon or other c. E. O. S, too . The deal, there is a fundamental question whether china will be an ally or adversary over the longer term we had Bob Lighthizer at the meeting and honestly at the business round table business round table. Sorry. There is a question whether we can resolve the issues that are bigger longer term and short term thats why theyre talking about could we get some things off the table, deescalate the tariffs and the war. That would help the Business Investment environment and then maybe look longer term at these issues. Mark, how much of this is a selffulfilling prophecy c. E. O. S are worried, so theyre worried about the economy. It makes it so the economic downturn washes up on our shores i still think thats the case there is no way the Business Community sees two quarters of downturns in the economy, which is what youd have for recession. We see Slower Growth as we talked about but not two quarters of downturn back to back next year want to hear your view of this and respond noah mino was on the show. We got into the thing about the b. R. T. Had a skeptical, dare i say cynical take on the b. R. T. Statement. Suggesting if Business Executives believe that the economy is going to go south or at least down, earnings are also going to go down that by creating new metrics, was her view, creating new metrics with which to judge a company will change the way c. E. O. S are compensated and, therefore it was awesome. For someone who viewed that virtue signalling, at best its virtue signalling. At worst, you can be very cynical. Oh, now theyre learning or trying to curry favor with Elizabeth Warren or Bernie Sanders by admitting you were right all along. Shed like my argument. Hers, i say oh, man, bring it on thats giving me another arrow in my quiver was this you who were you so heres the did you want to do it yes so heres why, though, joe because youre retired. This is not a change. There is absolutely recognition then why do it . Let me tell you why there is a fundamental understanding, fiduciary responsibility to longterm valuation for your company to do that, you have to focus on strategic assets and limit risk. Your brand, your work force, your supply chain are incredibly important to your longterm value. Today the assets on the Balance Sheet of a corporation are 60 intangible so if you get a hit to brand, if you get a boycott on your products, if you have your employees, you cant hire the best, youre going to have risk to your longterm value. Mark, it seems to me the good c. E. O. S have been doing this forever. This is like the public end kind of saying to people who maybe dont follow business that closely, hey, this is what we think is important but to me it was like yeah, no kidding. Great way to impugn Milton Freidman with Elizabeth Warren as a prospective nominee great idea to do that. Great timing to do that. To admit shes right c. E. O. S, 180 plus who signed this a lot of people didnt sign t. What are we going to say at investor calls is it okay to enhance shareholder value . Thats the objective. You get there by looking for if you dont do the other stuff, is it actually deleterious to your employees and to society in general if you dont . Joe, i will tell you no c. E. O. Says, im going to throw my employees, my communities, supply chain over board. Let me ask you a question, then to the extent if we believe this was already taking place, by making this explicit, how do you think this changes the dynamic . Does it yes it does change the dynamic . How so remember the statement on the business round table for the 1990s was only referencing shareholder. It didnt talk about all these other things so, therefore, the question, though, is do you think that companies are going to behave differently . And if so how . I think that now they have to be held accountable to a standard where they are going to be talking more about their shareholders, their other stakeholders, their communities, and so forth i think that is to bring it to the forefront, saying this is what theyre going to do, now they have to be held accountable for it the c. Y. A. Move, the lawyers ram down your throat no, the lawyers as you would expect are fiduciary responsibility listen, this is why i say, joe, if youre a c. E. O. Today and youre running a large business, you are focused on all these things i know that i know you have to believe that is your responsibility. This brings it to the forefront, brings some accountability to it it did engender with certain binnian applebaum o the New York Times come on it engendered the narrative that Milton Freidman has always been a false prophet, and nothing that he said thats unfortunate. You didnt know that was going to be part of the narrative after . Theyre not focusing on that. Theyre focusing on how to lead their business to the future archipelago you sti you still would concur the Profit Sector you need to mind your ps and qs, you need to consider consumers and how you benefit you need to try to beat your competition by providing a Better Service for your employees and for customers, and those are all noble aspirations engendered by the profit incentive, right . The statement starts out our principle is to create great serve skez and products. Good. It starts there the difference is its a longterm Value Creation approach whereby profit is absolutely essential if youre bankrupt, you cant do any good things this is b. R. T. s push back you cant take care of your employees, cant take care of your community, cant satisfy business if you go out of business you cant fulfill your lodgeterm valuation can you maximize for shareholders shareholder profits you get there by focusing on not everyone in the political spectrum thinks youll hear from the left that maximizing profits is an evil thing to try to do. It gets back to the short term versus long term. It does and the short term has been a problem where c. E. O. S are worried on a quarter by quarter basis because c. E. O. S teen youre has dropped four or five years. Its tied to it b. R. T. Also started to talk about you shouldnt have quarterly guidance jaime and warren bump et its tied to be able to help businesses lead the way they need to lead you need to think longer term. Why do you think there are c. E. O. S that wouldnt sign it . Are they greedy . We only have 100 some Steve Schwartz man, are they greedy and unvirtuous people no. Why didnt they sign it Steve Schwartz man is probably the most prominent person by the way, some didnt c. E. O. S who could, meaning wells fargo, for example was a member but still has an interim c. E. O. So there were signatures that didnt come that way for Steve Schwarz man there were two main issues. He genuinely believes i cant survive masters. I heard him, he was on. At the same time, i prefer to focus on one he said that but the second piece of it is that if you understand the blackstone business more than just about any other, hes representing Pension Funds and other investors. If you note, the cii which represents Institutional Investors also has a problem with this. Could you run a private could you run a private equity business could you rationalize the businesses to try to run them more efficiently if all you were worried about was keeping all your employees its not keeping part of it, if theyre your biggest stake hold error community its a stakeholder. Theyre all stakeholders. We have to run. Thank you, mark discovery serving up at amazon a discussion about that partnership right after the backtoback break built for excellence. You start from the foundation up. The excellence is reaching dreams and chasing them at the same time. I need all the breaks as athat i can get. Or, reaching dreams and at liberty butchemel. Cut. Liberty mu. Line . Cut. Liberty mutual customizes your Car Insurance so you only pay for what you need. Cut. Liberty m. Am i allowed to riff . What if i come out of the water . Liberty biberty. Cut. Well dub it. Liberty mutual customizes your Car Insurance so you only pay for what you need. Only pay for what you need. Liberty. Liberty. Liberty. Liberty. Discovery launching a new direct to consumer offering called Food Network Kitchen. Its a live interactive streaming experience with Food Networks culinary stars joining us now to tell us all about it is david. The star. Discovery president and c. E. O. I didnt see the relation with peloton. It makes sense to me everything is interactive. Great guy its a prescient moment, wishing him every success. But when we thought of this product, 85 Million People came to us last thanksgiving. Not on tv, but to ask us questions about thanksgiving dinner so in those three days, 84, 85 Million People came. And i said, like, holy cow, you know, this means something were not just a Media Company holy turkey holy turkey theyre looking to us for information, for help cooking. So i thought of peloton. So i called john we salt down, we had lunch peloton is similar to what were doing. Its live classes and ondemand classes with people that you want to cook with or, in his case, exercise with. So not after the thanksgiving meal you thought of the exercise bike or could use more of that. So could you no, but you thought about the interactive nature of peloton. You can theoretically do whats interesting is the Media Business has 8 or 9 or 10 of the greatest Media Companies of all time trying to do scripted series and scripted movies theyre all chasing the same thing and theyre going to do a terrific job none of them can own all of it theyre all fighting like hell to buy more and more in the end probably 3 00 three f them will be successful and there will be a huge amount of carnage. This isnt really an entertainment service. Its a functional product. No one needs to be alone any kitchen any more live cooking classes every day almost a thousand classes on demand martha stewart, ina, bobby flay. Everybody on our network is doing cooking classes. Theyre super excited about it and we have over 150 other chefs. And so when it comes to the kitchen, its not just taking cooking classes live and on demand, but we did a great deal with amazon where theyre going to be its built into alexa you get the ingredients when you look at the ingredients, you can hit a button on our app and it gets delivered to you how does it work . Youll have an ipad sitting on your Kitchen Table it will be on every device. Its 6. 99 or 48 a year. And you get live cooking classes every day. But you have to hit the amazon button two days in advance, have the food delivered so you can actually amazon, its built into amazon so that you can use it handsfree with alexa. But amazon fresh is one of the providers. So if youre making spaghetti bolanaise and chicken parmesan with bobby flay, its a week before all the ingreed ingredients. You have three choices who can deliver the goods to you whats interesting to us, not only is this a Subscription Service where we own the credit card were providing a service in the kitchen with what people need and they said they really want its also transactional because they hit a button, and we get a piece of that so we have a transactional what kind of piece do you get on the ecommerce side the ecommerce is not just the groceries. The ecommerce is you need a strainer you need a lobster pot on the right side of media is a subscriptiononly businesslike netflix, which everyone is chasing. And thats a great business because you own the customer this is not only subscription, but subscription and transaction. For us, we think that transaction piece, you aggregate a several Million People cooking in the kitchen where you can cook with your friends but on top of is that, you can buy products can i just ask, do you do anything with all that data . Because youre collecting a lot of data on people, too are you going to sell that or is it stuff that you mine what do you do with it we can use the data lets assume martha, if martha is on live two days a week and people love martha, then were looking at the data at how much of her ondemand classes, how well shes doing live. We can sit down with martha and starting next week martha could be live five days a week instantly ramp up for the shows. And you compare that with, lets say, showtime loves billions o hbo loves game of thrones. It takes two or 2 1 2 years and a lot of money to get that product that people love so the cost of our product is low and all the chefs love this idea of getting close. Go to streaming can we switch topics we can return to this if you want are you surprised at some of the events over the last three months in terms of pricing and who has gotten into it and how netflix has responded . Youve seen the share price. The moat was not quite a great a moat as we thought, i dont think. Is it as great bottom for pricing . Oprah winfrey, chip and joanna gains, Natural History. We basically said, you guys go do that. Its going to be massive carnage. We think the reason is we own almost all the great food content and great chefs in the world. We own almost all of the great home content with hg and great home designers in the world. Most of the great golfers. They could never own all the great entertainment. So when seinfeld comes available or big bang every one of them start bidding. You know why near bidding . Theyre all saying the same thing. We dont have enough we need more if we want people to pay 15, 6, 8, 10, we need more stuff we, on the other hand, in our genres, we think that were a Different Company because we own almost all the content in these areas. So people will still get two or three entertainment services, but they still love cooking. Its interesting you say two or three you dont think more because this whole industry is betting on more at the moment. I dont think so. Maybe its four, certainly not eight. And there is massive investment. You know, we see it every day. You can see it, theyre pushing with their pocketbook. There is a desperation we need more content are you a believer the bundle comes undone or do you think people are going to turn around and say, if im getting hbo, showtime, this, this, and this im keeping the bundle 50 of the content people watch is not not scripted series, scripted movies. Were the number one Media Company in america for women we reach more women in america than disney or Nbc Universal, with hg and food and Animal Planet and id and tlc. So what that says is people love our content. In the end i think that people are going to recognize the bundle is quite a compelling value because if you start if you buy all eight of those, its like 100. You dont have news, you dont have sports. You dont have food, you dont have hg. But i do think the bundle is coming under some challenge, and thats why we think this Food Network Kitchen product is more people cut the cord, what does that mean for you . Your advertising revenue was up the last quarter i was looking at all those things but if more and more people are cutting the cord, what does that mean for discovery the good news for us is we own our content and were global were the largest Media Company outside the u. S. By owning all of our content, we can do things like go direct to consumer with Natural History. We did a big deal with the bbc two months ago where we bought all their Natural History and science products in the new world over the next several years as people transition to buying content on their device, we wont be entertainment. But if you love science and Natural History, youll buy from us how much in terms of Customer Acquisition cost in the ott world, how much of that can be driven for free or at a very low cost to you by leveraging the assets you already have in the classic linear world and how much do you have to spend on top of it in the Digital World to get those people to join in . Its a great question we call it, as we look at these issues, a funnel but we have the number one food network and cooking channel. People that love cooking and food are watching us all day long well be promoting to all those people spend off platform as well . We will spend off platform. We have people globally that love food at home. Also with hg and own and id and tlc and discovery, we could take we plan to take our inventory across all of our channels and promote to this the big opportunity is that we already have a selfdefined group of people that love food and all they can do in tr traditional in the traditional world is watch us. When i talked to martha about this, we were giddy. Imagine you hit a button and the ingredients get delivered to you. Youre actually cooking with martha are you now at a point where if someone calls you and wants to talk about, you know, bringing discovery into their, you know, asset mix, are you entertaining calls now would you entertain a call from someone that was serious about it and could give you a great price . Let me answer it this way everyone has called us, but theyve called us for Something Else every large Media Company has said have they called you for that every large Media Company has said were going direct to consumer youre the leader with women and family youre attractive in a lot of places you come with us with your content. Every one has said that. We said no, we need to own all of our content globally. Thats a no and the answer is, we think because we own our content globally we can make t. Great to see you. Come back soon thank you when we come back right after this break, we have peloton c. E. O. John foy. Le hes going to join us live ahead of todays debut here on the nasdaq fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. Ive been a caregiver for 20 years. No two patients are the same. 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John foley live fresh this morning, the latino impact to the u. S. Gdp. It could reshape the economy in years to come. And one of todays stock Corporate Leaders on a huge business week thats not even over yet former aol c. E. O. Steve case will talk about ipos, we work and much more. The fienlt hour of squawk box begins right now announcer 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 the futures have actually picked up a little steam, um 80 now on the dow. The nasdaq indicated up 8 1 2. The s p indicated up about 7 treasuries, the real treasury story was maybe a month ago. Weve been stuck around 1. 7 for a while. Its something to watch if it either heads to 1. 5 or back to 2. Today going on 1. 7 big ipo, fitness bicycle maker and treadmill maker peloton making its debut on wall street, ticker pton. Its the top of the original range valuing the company at 8. 1 billion joining us first on cnbc is peloton c. E. O. John phony. The Parent Company is an investor in your company thank you for coming on on this important day in your journey. Thank you for having me were you surprised, maybe you werent, you were able to price at the top end of this range given all the questions that seem to be surrounding the ipo market right now yeah, it was, it was a thing. We were following it like everybody else there was a ton of demand. I obviously got off the road the last two weeks, got in front of investors, fun process learning. Its my first ipo. I think the demand was there, highquality investors so we were able to price at the top of the range were excited. What has been the lesson, though, as youve traveled the country over the last two weeks, also amid swirling questions about wework, which of course has been in the headlines, where uber and lyft and so many others have priced . As a business person, im fascinated i read and follow the stories like you do. Today obviously were celebrating pelotons ipo so were excited about this moment on the peloton journey we think weve built an Incredible Company the foundation is great, economics are great, Business Model is great, the team is great. We feel like we are special. Your first ipo, i love that really our cfo, joe woodward who ive been on the road with two weeks has taken 26 Companies Public im a nube, as my son would say. The reason i mention lyft and so many others, one of the things thats interesting about this particular vintage of ipos, you have a fastgrowing Companies Like peloton, a company that has revenue of nearly a billion dollars, but also losses, meaningful losses they increased over time as the revenues have gone up over time, 195 million in losses and so there is a question about the path to profitability and how investors think about that sure. Lets reframe it lets use semantics here i call them investments. We are investing and we are in investment mode and prioritizing profitability over growth now. We are investing in the treadmill, joe, to your point. We are investing in europe so we are in the u. K. , one year in and were investing in germany we go to germany in the next 60 days with six stores in the six major metropolitan areas of germany. Were hiring instructors, opening stores, doing logistics. All of that is obviously expenses out in front of the revenue. So we call it investment stage we think its disciplined investing. In terms of, though, how much of those are onetime capital costs, meaning the development of studios and new technology and other costs which i imagine are obviously ongoing. Stores, new instructors. Yep employees yeah. So think about its both, some op ex, some capex. Here in new york city were building a 50 Million Television production studio down the street where were going to have four send it back to you in the studios under one roof boot camp, yoga, come out with other categories were doing a 50 million studio in london, similar story our german instructors are going to coach out of that studio. And so you think about the fixed cost leverage in our subscription business over time would go north of 70 gross margin on that because of the fixed cost leverage. Over a thousand basis points of Margin Expansion because of the leverage those are onetime costs, 100 million alone right there and what year do you expect to be profitable . I think were showing 2023, fiscal 2023 in the fiveyear plan and one of the other questions thats come up amid a lot of ipos, specifically wework most recently. Across the board is this a dual class structure . Sure. You have one. Why for better or worse, weve raised a billion dollars at peloton as of today, north of 2 billion. So were well capitalized. But that billion dollars through eight rounds of financing have crammed down the team, including me so i have less than 6 of the company and im the founding c. E. O. , and i think if you looked at a range generally founding c. E. O. S have 8 to 12 so we couldnt do 10 to 1 voting class because the leadership wouldnt have any control. We feel like we have the right experienced Leadership Team in place. The board feels good about us, my partner the president william lynch, our cfo, founders are still all together we feel great about the team and we feel great about the opportunity. Do investors ask you about that it comes up at a quarter of the meetings, brought up dual class. John, how much of this, people try to figure out what kind of company you are. Are you a bike company, are you a Media Company, a Technology Company . What do you think you are . Becky, its a great question. I feel like were six or seven Different Companies in one our true north is delighting our members. In order do do that, we had to be a retail company, logistics company, hardware, software, media. We have a fashion line of apparel, we sell close to 600,000 units of apparel this year we bought a music platform integrated with our service. You can probably name five or Six Companies on two hands that have direct longterm relationships with all the major labels and publishers, which we do spotify has the same style relationships we had to go direct with. It is a unique mod earns company that is focused on one singularly focused on one experience, better fitness in the home but in order to get there we had to do a lot of things. You are pretty reliant on the consumer and Consumers Health for your business. Its an expensive product. Its not cheap to sign up for the subskriepcription model if that turned down, could you describe the spend could you quickly pivot to deal with the downturn in the economy . A peloton bike at this point is 58 a month, 0 down, 0 financing. Divide that by two 29 per livein adult. Its the same value of riding a bike we looked at the last 15 years of fitness spin, becky in 2008 and 2009 there was increased spend. Its recession proof spend on what fitness dollars as an industry people werent cutting their gym memberships during 2008 . When you look at the bike, when you look at the treadmill treadmill is 4,000 price point, bike is 2,000 price point. They are high margin products for you now. Sure. When you look at the mix between the hardware and longterm the services or software, how do you see this playing itself out where is the hardware right now seems to be the earn jen yeah, youre absolutely right, andrew. Because the 200 price point and 30 a month subscription, top line is 80 hardware we double the Company Every year since inception. Obviously the law of large numbers says you cant always do that its a hyper growth company. To the extent we can continue this kind of growth, hardware if we had this conversation five years from now, do you think youll have more subscribers to pelotons service broadly that own the hardware . I know you can buy this you can buy the Service Without the bike these days. Thats right. So, yeah, if youre one of the 34 million americans with a treadmill in your basement today, you could download our digital app and be transported into a peloton boot camp class, streaming live from new york city, with one of the best instructors in the world on your 60inch Television Screen in front of your dusty old treadmill in the basement. Absolutely is that a Better Business for you or not i would assume it is in some ways you can reach more people but you dont have the same lockin whats the hook on the treadmill . Is it soft on the knees . Whats better about your treadmill . This isnt just for me asking for a friend are people going to shame me if i have it set at 5 miles an hour, am i going to get yelled at by the instruct er . Sure. We are inclusive 5 is not that bad if you do it 5 miles an hour. Creep like a snail the fact you showed up, we celebrate that any fitness is great fitness people laughing at me theyre laughing with you yeah, people doing im not going to win any of those contests, thats for sure. So, you ask about why the treadmill it does have a Slat Belt Technology that has cushion. Think of the highend cushion tracks its better on your body over time our equipment is the best piece of equipment ever created. It is it comps the 12 to 15 that is a crowded space to get into you could have stuck with bikes. Andrew and i talked about this a couple weeks ago. I love the boot camp workout full body where you spend six minutes off the treadmill then grab your weights and circuit training, you think about how big orange theory is and cross fit. People like this workout where your upper body gets a workout and thats what treadmill even for calorie burn its not just cardio its muscles, more calories. Couple quick questions out of the s1. You want investors to focus on adjusted ebitda, contribution market, average monthly fitness churn, the figures youre focused on, i raise those because they do exclude lots of things including stock stock compensation and so many other things so, you know, when investors are trying i know its very hard to comp your company against Something Else how should they be thinking about those numbers . Yeah, we want people to focus on growth and net new subs think about netflixstyle Media Business net new subs is kind of our true north as a business and more members and changing more lives is our true north on the consumer side. If we get to ten years from now tens of millions of subscribers, were making allowing people to live a lot better healthier lives. I think the street would be excited about that if there was one stat next quarter or quarter after you would say investors should be looking at, it is what on your business growth. Just growth straight across well, disciplined growth. Top and bottom line, were going to be proud of both. I mean, were not irresponsible company. Were insanely disciplined, unit economics. What does success look like i know this is not a oneday story. But success look like today for you in terms of where the stock ends the day it is an important question i think because some people say if it goes up 10 or 20 thats a great thing. Some people say you might have left 20 on the table for i saw bill gurley talk about this a couple weeks ago. And so i know what youre asking about. We hope it prices up i think thats we care about our brand and our employees and were not trying to top tick the valuation. Youre amazing. You just sent me a message from our founder and c. E. O. Just hit at 8 14 from you thats very cool. It was in my pocket to my fellow members did you write this . I did as a peloton member cant you tell . So cool that was weird the way you did that but as you watch the stock today, youre looking for what how it opens how it closes . Both. We want you can yo, you know, sy c. E. O. Said we dont want to be a dollar smart we hope it prices up you said you left something on the table i dont know if im allow today say that, but i feel like we werent greedy. Dont say anything else its going so well lots of luck. We appreciate you being with us first on cnbc this morning thank you a note, peloton is number 9, we should tell you, on the 2019 cnbc disrupter 50 list i think we should start a disrupter 50 etf because if you really think about it could be very interesting. Anyway, today will become the First Company from the 2019 list of ipos. You can find special coverageful todays ipo, you can follow it on cnbc disrupters did you fear something, couple basis points . If you look at our disrupter list which Julie Boorstin has done a great job there will be failure. Lots of failure. But i think you would have you would have made a lot of money. Yeah, much better than all your efg stuff that performed, andy thank you for the confidence thank you again when we come back, a special interview with long time executive, sol trujillo. New data out this morning on the Economic Impact of latinos in the United States. Heres a hint for you. The number is bigger than the gdps of most countries well talk about all of this when squawk box comes right back 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. A revealing new report is out this morning on the gdp impact of latinos in the u. S. The report comes from california lutheran university, and it measures the value that latinos have contributed and suggests that they could become critical to the new american economy. Joining us now for a look inside that report and what it means for big business in the u. S. , sol trujillo, executive and founder and chairman of the Trujillo Group among other things, and latino donor collaborative. He joins us from san diego and latitude, latitude conference of which hes also a cofounder sol, we go way back. I dont know if everyone knows, you were telstra, i think u. S. West for a while long career in telecommunications and other businesses thats correct. And good morning, joe and becky and andrew today is kind of another day, and i love the last conversation you had talking about peloton in the sense of always looking at fundamentals and numbers and having run businesses around the world just as you described, joe, i always like to look at our economy here in the u. S. And saying, okay, so how are we doing . How are we really doing from a fundamental standpoint in business you always talk about customers and you always talk about workers because you dont need workers if you dont have customers and if you have customers, you need workers to help you get there. One of the big issues in the u. S. Is how are we growing today . Have we taken a snapshot to look at it . So as a result, we started this process of looking at one cohort, the u. S. Latino cohort a couple years ago, and now today we have a new study done that shows that the u. S. Latino cohort is generating 2. 3 trillion of equivalent gdp as though if it were a stand alone country, which makes it the 8th largest gdp in the world, and its growing faster than any of the developed economies, the top 10 developed economies in the world, which is a great thing for our country because what sets us apart as the u. S. From other countries is that we have a demographic cohort in the u. S. , u. S. Latinos, that are driving a lot of our growth today. So the report shows the whole series of numbers that are compelling in terms of how we should think about this cohort, and ultimately how we think about another issue, which is Labor Force Growth rate. And so this cohort is driving consumption. Its, you know, fulfilling 82 of all the new jobs that are being filled in the country today. We have 7 million unfilled jobs, 7. 2, already in this country today. So we need workers and on the consumption side, the u. S. Latino cohort is generating about 42 growth over the last study period of 2010 to 2017, and its growing 72 faster on consumption than the rest of the economy. So its a great story, a great item that we should understand but if you dont mind, id like to go to the second point. Labor force growth rate is an issue in our Economy Today because if you look at the trend line of gdp as a core metric over the last 20 to 30 years, youll find that weve been in a fade and, you know, this year last quarter we were at 2 gdp growth adjusted most forecasts for 2020 talk about 1. 8 and one of the fundamental drivers is Labor Force Growth rate we have now reached in recorded history one of the lowest points weve had in terms of Labor Force Growth rate. We need more workers we need more in order to grow our economy, both on the labor force side for outputs of goods and services, and at the same time more consumers that are buying our goods and services here in the United States because were a consumptionbased economy. You know, so weve all been for the last couple of years, were very aware of the growing latino population in the United States. I think most of us probably understood the huge economic contribution, not to the extent that the gdp is greater than russias or i dont know if everyone was aware of that we also are told its much harder to grow gdp because we dont have enough workers, enough population. So were aware of all these things how do we fix the system so the stigma goes away thats associated with illegal immigration what do we need, comprehensive Immigration Reform and what would it look like, sol, to bring in the workers we need and so theres no more stigma about how its done no one feels bad theyve been waiting legally and other people get in beforehand. What should it include do you have a fix for this well, i have my views, because ive been studying this since i lived about eight years abroad, you know, running orange and over in telstra and i saw the conversation that had evolved in the u. S. Which concerned me which is why were getting this data. Your question is spot on my view is whether we need walls or not my issue that as i think about answering your question is we have to fix our processes. What does that mean . Were a sovereign nation we have borders and we need to know who comes in and who goes out. And we can solve that with systems and processes. We have broken processes today in terms of how do we process somebody that comes here to work, somebody thatwants to come here to work and ultimately become a citizen we have logjams almost everywhere in every part of our system well, those of us that have run big businesses, we have tens of millions of customers, we built processes and systems. If you go to disneyland, you look step people they process every day versus the people riding the rides, they used to have long lines. They built systems to process quicker. I think right now we need to look at our processes and we can fix them because we know how to do that. In a digital era, we can build databases to check people coming in we dont want criminals. We dont want negative people. We want people that actually want to come here and work theres ways to do that and we have to shift our conversations away from all this negative stuff, but more into the positives about lets fix the process. We need more workers it just so happens also that the people that have moved from the latin american countries, this latino cohort, they have the highest Labor Force Participation rate they come here to work, not to go on welfare, not to do other things, but they come here to work they have the lowest crime rates of any cohort in the u. S. And so there is a positive answer here, joe its about lets focus on process. We can solve that. We have to understand quotas, in terms of how many people we need because we need workers of all types. Not just double ph. D. S because if you look at the 7. 2 million unfilled jobs today, a couple hundred thousand requires those ph. D. S there are 7 million that are part of our eco system in our economy. So we need a come presence i. View we need to encourage workers that want to come here and work and maybe not stay, and those who want to come and become citizens thats the Great American story. The founding of our country whereas a bunch of people that left their native country. They were workers but they didnt have representation they paid taxes and all that, they didnt like that system we want pay system thats american and i think your question is the right question i think there are answers, but i think people, People Like Us need to solve them, not have a political conversation about it because Everybody Needs this is good what youre doing and youre going to continue throughout the weekend, get the word out this is a good start maybe somewhere else, but this is a good start for getting the word out, sol. It could be the beginning of a solve which hopefully it is. Anyway, appreciate good luck godspeed thank you come back and update us on the progress all right, joe. Thank you. Youre welcome. When we come back, weve got some breaking tan da ou. S. Gdp stick around 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. By the way, shes the it wasnext mozart. G day. As usual we were behind schedule. But sophies enthusiasm cannot be dampened. Not even by a runaway donut. We powered through it in our toyota prius. Because a stars got to shine, no matter what. Its unbelievable what you can do in the prius. Toyota lets go places. Welcome back to squawk box. Breaking news. Our third time around the block on Second Quarter gdp, exactly as expected, 2 . Rearview mirror, thats what it was our second look and thats what it is today personal consumption, however, dipped a bit, but keep in mind it dipped from 4. 7 to 4. 6. These are still really powerful numbers. On our core personal consumption expenditure, quarter over quarter, up 1. 9. The price index 2. 4. The 1. 9 is a little hot. Now, lets look at our august read on trade balance, which is a deficit. 72. 8 billion, sequentially following 72. 3 and thats actually just a smidge higher than the 73. 4, 73. 5 we were expecting all right. Lets get into jobless claims. Last week there were 208 that get revised to 210. Add 3,000. 213,000 is the new number. And 1. 65 million on continuing claims which is a bit down from 1. 665. You think were done no, were not done yet we have some inventory numbers for the month of august, retail inventories on chains, hotel inventories up 4 10 of a percent. Thats a big jump up 4 10. We want to monitor any potential changes that come in through that revision process that affect gross domestic product. Andrew, that was a lot of numbers. Interest rates havent moved much Still Holding gains in preopening equities. Back to you. Thank you for that, rick. Stick around dont want you to go anywhere. Joining us now is harry knappe, senior economics reporter mike santoli and steve liesman. Steve, youve been on the computer looking so professorial im thinking of a bugs bunny cartoon. You look in the kitchen, turnoff the lights, mice come out, turn on the lights they go away, everything is fine its super boring. It was 2 , it is 2 . Its running 2 q3 going on all around the 2 is the trade data which is boosting the inventories which will be run off in the inventories youve got boeing, accumulating planes which is having a longterm impact i had a long talk with mike england about the impact of boeing which makes the 737maxes but doesnt sell them. That boosts inventories. You come up with all that drama on the outside with 2 and i watch the data come in every month, every week, every day, and they go into a rapid update and it comes out 2 the consumer 4. 7 we had this little slow down its important to talk about in Business Investment. It was up 4. 4, now down 1 the big change there is going to be in structures, down 11 theyre not building buildings i guess is the deal. Government purchases are reall helping. And the consumer so bottom line, the government by the way, just kind of a little footnote here everybody had wrong the government spend forgive 18 they held counter in 18 its still helping in 19, that big surge in spending. You have the consumer doing well partially because of that. But also because wages and unemployment are doing well. Thats the story i see the roadrunner where coyote runs you off the end of the cliff. Hes fine until he looks down. I dont see it that way im pretty optimistic. Thats what scared me thats where i thought you were going. Weve been able to maintain 2 the world trade is falling, some of our partners are doing very badly. You could probably put back a quarter to half a percent, i think be, if global gdp were doing a little bit better. It would surge our exports but world trade is falling you know, people were talking earlier this morning what would be the impact of endling the trade war. I think it would be pretty substantial. In terms of what it means for the numbers on trade or in terms of what it means for the markets . Well, the markets, theres lots of smart people who deal with the markets economics point of view, we might be shaving a quarter to a half a point off of our gdp, in part, because its coming off of their im not saying trade is the only thing bugging the world, but wes knwe know its oe of the big bugs of the world the issue youre getting at but most important here, in 2018 on the back of the tax cuts and jobs act, we had an absolute surge in Capital Investment in structures for six months. But more importantly, in intellectual property products, in software investment, and that boom was likely related to that surge we had in productivity, which has now gone on for and the tax cuts. Dont forget that was a big part the surge that was my point, on the back of the tax cuts and jobs act. You had this big surge so if you think about whats gone on this year, you had weak consumption in the First Quarter largely because of the stock market crash in the Fourth Quarter a year ago it rebounded in the Second Quarter just like what happened in 87, right . And now its kind of trending back towards this 2 and three quarter or so trend. But the mix has shifted. Youre no longer getting that surge in investment. Its been cut in half. That to me is the trade war and the uncertainty that hits the business confidence. By the way, thats what Mark Weinberger told us earlier today. Thats what c. E. O. S are doing. Were in a really critical spot for that right now because the longterm trend is investment tends to run, Capital Investment tends to run below trend in president ial election years because of policy uncertainty. Right getting some sort of trade now and restarting the Capital Investment would be crucial to getting that momentum. Some of this is secular, right the investment in software is clearly secular. But getting that restarted would be crucial and then that the issue, too, is the mix of growth is more inflationary this year than it was last year. Last year was a supply shock that lowered the trend inflation. This year, being skewed more to consumption and less to investment actually spurs it, inflation. Guess what, the last four or five months were running well above the fed target on every measure. What do you say the numbers today pretty much confirmed the markets premise domestic economy is holding up fine the u. S. Has been friendly to the market roughly 2 inflation at the upper end, and maybe we getbac to 2 ten year treasury notes. Thats kind of what the market wants to see in a way. It looks to the bond market to decide if a number is good or bad or worrisome this number seems to be not worrisome. The stock market really wants the pop in treasury yields yesterday to hold and so far were in a 2 as of today but as steve liesman, my rabbi on these things, my mentor, 2. 6. Bless you, my son 2. 6 is the number dont forget that. Someone else tried to forget that and it is 2. 6, which is 30 higher than 2. The trouble you have, joe might go down we dont know. Let me point out the interesting uncertainty here if you guys put that productivity chart back up and get barry to comment on it barry is not talking about i want to praise what youre saying not talking about investing tomorrow next week or next month. If these productivity numbers youre look at i guess thats over here, whatever. If they change, look at that elevation right there. If that can sustain itself, it is a new ball game because we aint changing you cannot give birth to a 25yearold. Right . You just cant happen. Thank god thank god, right . It just cant happen the people who are going to work more or less are working we can adjust up or down their hours. Its the productivity numbers. Its innovation. Its efficiency. That is the key to whats going to happen in the stock market and in the economy and barry, now i set you up. Ill hit it really quickly here i know were running out of time leisure and hospitality and restaurant sectors, right . One sector you look at unemployment is going down wages are rising at a percent and a half faster than the overall wage rate. Yet margins are going up starbucks was on after the earnings and said our comps went from 0 to 5 in the last two years because of technology. That Technology Adoption innovation is whats driving that productivity growth heres my best example of that go to terminal c in Newark Airport and try and pay a human being for a cup of coffee. You cant do it. You have to use an ipad. Running out of bodies and adopting that technology is whats likely driving that productivity growth and that means we can grow at potentially 3 only with 7 10 of a percent population growth. If you get the 3 right you need the strong productivity you might like it better than 2. You probably would all right we have to leave the conversation there gentlemen, thank you all right its me. Coming up on the morning of ledge endriz legendary Business Executives, we have one of the greats help us close out the show. Aol cofounder steve case who orchestrated one of the greatest deals in history literally joins us to break down pelotons ipo, not the c. E. O we liked him stunning fall from grace and the u. S. Tech sector uernd fire. Stay stay tuned. Youre watching squawk box on cnbc 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. I need all the breaks as athat i can get. Or, at the same time. At liberty butchemel. Cut. Liberty mu. Line . Cut. Liberty mutual customizes your Car Insurance so you only pay for what you need. Cut. Liberty m. Am i allowed to riff . What if i come out of the water . Liberty biberty. Cut. Well dub it. Liberty mutual customizes your Car Insurance so you only pay for what you need. Only pay for what you need. Liberty. Liberty. Liberty. Liberty. A new kind of credit card. Created by apple, not a bank. With a better way to track where you spend. A new level of privacy and security. Daily cash you get back every day. And no fees. Not even hidden ones. Oh, and if you happen to be somewhere that doesnt accept apple pay yet, theres this. Nice. Welcome back to squawk box. Check out the futures indicated up about 36 points u. S. House Intelligence Panel says it has received the declassified whistleblower complaint that they were waiting for. In fact, we had dom on, he mentioned he had seen it it is from the office of director of National Intelligence and they have received it now. In a new Quarterly Survey Tv Technology council weighing in on antitrust investigations into tech more than 55 of respondents say that facebook is a company most likely to face punishment as a result of the various antitrust probes 17 say it will be google. And about 7 say amazon. Now, councilmembers manage Technology Functions at Companies Across all sectors of the economy. You can look at they support the investigations interestingly enough 28 oppose it. More from this quarter survey is available at cnbc. Com tech you should check it out because its pretty interesting stuff. Now were going to talk much more about big tech. The ipo landscape and recent drama surrounding wework joining us for that is steve case, c. E. O. Of the Venture Capital if i recall revolution best selling author and former c. E. O. Of aol, of course revolution announced a new 215 million fund to invest in earlystage companies and, steve, its great to see you great to be with you. You go around the country looking for great new companies that are not on the radar, theyre not in Silicon Valley. You see Something Like we work, how do you judge some of the ipos weve seen recently we category around spaces and service, the momentum they built in the last decade is extraordinary. Some of the challenges theyve had in terms of governance and valuation and things like that, have to put it aside a little bit. The core idea, we back the company, its a little different, convene is working with landlords on space ands service. Its a big market opportunity. We work this week and also peloton this week, its also an example, now theres two companies, you know, significant companies, 10 billion valuation Type Companies out of new york city and ten years ago most people said San Francisco owned the future and new york was having trouble breaking through were trying to have that same dynamic in other cities around the country. How do you get more 10 billion companies in chicago and detroit and indianapolis and columbus. Thats what its all about whats been your biggest Success Story . A company in detroit we seeded we had a billion dollar valuation. They went from five employees in detroit, i was there last week visiting, they have 700 employees in detroit the perfect example of innovation happening most people think stock ex would be in Silicon Valley its in detroit. Weve backed over 100 companies in 70 cities and were excited by what were seeing momentum is building still a lot of work to do, but were seeing great momentum. I think stock ex has more street cred because theyre from detroit. Once you understood the story, it gave some broader credibility. The other piece were working on, released a play book other cities in columbus, 65,000 square foot former shoe factory and turn it into kind of an Innovation Factory so cities all around the country are doing Amazing Things you go to our revolution. Com website, you can download that play book for free is that part of what has to happen, you have to have somebody willing to invest a lot and be an anchor tenant or be something that is a magnet before you can build around it its a mix. Having Something Like that lead the way is helpful having successful exit when salesforce acquired exact target for 3 billion in indianapolis salesforce staff moved from 1,000 people to 2000 people. But some people left, including scott darcy, left to start new companies. Now theres 30 Enterprise Software companies in indianapolis and again, even five years ago, certainly ten years ago, nobody would have thought of indianapolis as kind of a hub for Enterprise Software company. So the story here is starting to emerge that you have Venture Capital, still focused on the coast. Last year 57 of Venture Capital went to just california, new york and massachusetts three states are getting more capital, ohio, pennsylvania and michigan, virginia, all less than 1 of Venture Capital so the entrepreneurs are there, the ideas are there, the ability to build Breakout Companies are there. The capital is not yet there we need to fix that. Thats what were trying to do with the est are what about the stories and investigations into big tech there is something coming from regulators no question, im not surprised. When i wrote the book, the third wave, three years ago, i said the role of policy was going to become more important. Predicted a bit of backlash against Silicon Valley it ties with the thesis, the sense in parts of the country, innovation happening in places like Silicon Valley is creating disruption there, creating jobs and wealth there, but displacing jobs in the rest of the country. People are starting to recognize that more and more companies this third wave of the internet policy is front and center being in washington, d. C. Do you encourage investigations will you come down on the side if they asked are you in support of these things, in favor, against it . Where are you at im in favor of Silicon Valley, innovators in general engaging with policy makers in washington, d. C. , brussels let me ask it to you in a different way. You have stakes in a lot of companies that invariably have to use facebook and google in terms of Customer Acquisition. There is no other way to get oftentimes these customers if the department of justice called you up and said, steve, come to my office, i want to hear your view of whether this is anticompetitive or not you would tell him what . I would say the Big Companies have a significant presence in the market its not quite 20 years, 25 years ago i was involved in the microsoft antitrust. At the time i think 97 of operating systems were microsoft and windows and it became an essential i dont think its quite there. But the dominance a few companies have does have a chilling impact in terms of innovation you think it does they do it illegally thats the distinction i dont know all the details im not suggesting they do. I would say it is difficult to imagine Venture Capitalists Funding Companies that compete directly against facebook, for example, because they have such a lock on the market now, that can change over time obviously i had an experience when i was running aol, had 50 of the internet traffic and obviously has been diminished. Things can change. The bigger issue is the role of policy regulations in the future people dont like to hear about this particularly in Silicon Valley when youre dealing with peoples health, drones flying in the skies, driverless cars, you need to have regulation. You need to have constructive dialogue whats the right balance how do you usher in innovation in a way thats right for society . Having that discussion around the role of policy and the role of big tech is important and having more people focused on innovation all around the country and not just in Silicon Valley is a step in the right direction. With he wee were talking aboe health of the market overall you hear about people worried about the window and getting out. What do you think as somebody who has companies all over the country . The ipo market has been strong what has changed in the last couple decades is now companies are going public like a peloton when they are very welldeveloped and very high valuations when aol went public in 1992, it was the First Internet Company to go public, we raised 10 million in the valuation that day was 70 million. When amazon went public, it was 300 million. Microsoft was about 300 million. Now theyre waiting until theyre 5 or 10 or 20 billion. That deprives individual investors of the ability to have that growth. Generally the companies have gone public because Institutional Investors decided its time to pass the baton. Pass the baton or pass the bag, one of the two. The up side of 20 years ago is not there today thats not saying the companies cant continue to grow peloton is a great example of a great idea couldnt raise Venture Capital initially. People didnt think it was going to work. Less than ten years later its 8 billion, probably trade 10 billion or higher. The great thing about entrepreneurship, we need to encourage it for more people in more places, not just folks on the coast. What do you think about the valuation numbers overall . You mentioned it in reference to wework some of the numbers are like made up numbers. Apples to apples the late stage private valuations, last round before ipos has gotten inflated there are a lot of folks who are trying to pile into these companies. They know theyre Winning Companies and theyre just trying to get in and sometimes theyre not sensitive as valuation as they should be. They are so eager to get in, theyre willing to agree to any terms. As a result you are seeing some ipos that are sincere rounds were staying in the revolution. We dont play in that. We have a seed fund, venture fund and growth Fund Growth Fund is looking to identify companies when theyre worth 2 or 300 million, make them billion dollar. Great to see you. At the new york stock exchange, jim cramer joins us. Peloton priced at the high end does that say anything about the environment for ipos at this point . Are they better than what weve seen the last few, i guess, in the wework situation i think it does look, i think that this is one that theyre portraying as an eco system, portraying the subscription economy, a longterm runway versus other vehicles people stay in shape versus a Health Care Company i think its a company that is an exer cycle. I think its great they can portray these things i wonder where it will be two years from now people get excited about a stock like this. They shouldnt be. I wish this would take place in 22, 23 and go higher this will be exciting today, tomorrow, and then i think well look back and say what were we thinking its a very good my wife has it she regularly hangs laundry on it which is terrific because i dont want that laundry on my closet but frankly, i think its something that its not a flash in the pan but its not something people should be so excited about this is how people get hurt. The Wire Services say stock sell off and bond yields fall after they the House Permanent Select Committee on intelligence released the declassified whistleblower just out moments ago. I looked at it already. You can click on it. I scanned through it pretty quickly. The market didnt sell off that much bonds went from ten year, 1. 71 to 1. 69. Saw the gdp number im not sure its affected that much, jim. I think youre right. The whistleblower complaint versus how the president handled himself yesterday, the idea that perhaps the democrats went too far, that was the narrative of the stock market the narrative of the media is the president is in a lot of trouble. Theres a big gulf there, joe. You know which one i care more about, the market. I think the Mainstream Media is trying to portray this as really big. Meanwhile, the ukraine funny man leader basically said, i dont know, i wasnt pressured i find it somehow became a sideshow again maybe the president is very good at making a sideshow there will be people who say, jim, how can you say that . Youre obviously on the hook with the president im not. Im saying the stock market didnt go down, joe. It didnt go down. Maybe were kind of Like Old School thats the first thing i looked at two days ago when it first started really breaking, and andrew and i talked about it this morning people thought we were crazy they didnt want us talking about it in fact, the market was up 115 points that doesnt look like a constitutional crisis. What does it have to do with the price multiple with nike nothing. Well see you a little bit later for Elizabeth Warren starts getting starts getting some traction. Maybe the market will sit up and take notice of that. Shes not going to confiscate my house i have that on good authority. Not my house thats over reaching by people saying what shell be up to. I get to keep my house thats a second term. Thanks, jim. Well see you. Depends, if youre bernie, she can choose from three or four houses and dont miss an exclusive interview coming up at the top of the hour with c. E. O. Of philip Morris International. Who is that, andrew . And you should be mad at simple things that are unnecessarily complicated. But youre not mad, because youre trading with e trade, which isnt complicated. Their app makes trading quick and simple so you can strike when the time is right. Dont get mad, get e trade and start trading today. Thats all for us today. David faber now waiting in the wings with the big interview here from the nasdaq in a moment make sure you join us tomorrow squawk on the street begins right now. Uno, dos, tres good thursday morning. Welcome to squawk on the street, with jim cramer at the new york stock exchange. Well have an interview with the ceo of philip Morris International. The futures are green. Well get a look at the whistleblower complaint, ahead of