Transcripts For CNBC Squawk Box 20240714

Now we are at 29. 80ish we have been going side ways most of the year in 1997, the year started at an alltime high and went up. It is true. You think about where we were Christmas Eve and we had taken a huge plunge. We got it back interesting on the performance. Similar to the u. S. But china lagged significantly where we are in the trade war. Who is hurting more or less. Down about 4. 7 china has closed today but something to keep your eye on treasury yields are up part of that because of a weak japanese option not exactly for risk on reasons. I wonder if the new quarter means youve loosened up a little bit looking even at absolute levels, a lot of that has been weak. At the end of the quarter, it hasnt money too significant well be a bit of a head wind. Still talking about growth from 6 yesterdays day was fractionally better the eurozone manufacturing and final print was a tiny bit of expectations still the worst to october 2012, the Global Growth out look does not look particularly good to central bank this year to the alltime low and the markets are predicting another cut in beijing saying, quote, no force can force their people going now live to eunice yoon. Reporter preparations are under way. 60,000 people are expected to come here including chinas top leaders to celebrate the anniversary. There is an evening gala and later on, a fire works display all of this to send the message that china is great again. Saying that Chinese People and nation from foraging ahead the same time, they rei had rated. In contrast with the military hardware we saw today including an Intercontinental Ballistic Missile beijing unveiled for the first time which is said to be capable of hitting any target in the United States. President xi made a warning to hong kong reiterating that china is very committed to the principal. Another reminder to taiwan in his speech, there was little in terms of reform that was suggesting to many year that china will continue for the hard line nationalistic stance that could have an impact on the trade talks. This is the political back drop of the vice premier who is heading to washington next week. With this type of event as the back drop for him going in to those discussions showing them as a weaker party of the United States i did hear reports suggesting any time there has been weakness in the economy, the manufacturing numbers have come, it has been pretty easy to blame President Trump. What do you hear on the streets there . Reporter people do worry about the trade war. There is also a lot of economists that say we are seeing weakness not only because of the trade war seen here because they have nothing to do with the u. S. The weakness isnt entirely being blamed. How real and widespread will the support be across the rest of china as we listen to people address the gathering . Reporter that is a very good question the security for this event is extremely tight. It has been marketed as an event for state media that regular Chinese People should be proud of the general public is not allowed to come near this place. Our windows of the office that overlook the route of the parade, we were told to make sure the windows were all locked this event is supposed to be celebrating achievements and make sure people feel very proud of being chinese, the government here doesnt necessarily want the general public to take part. The invitations were very few. Meantime in hong kong, protester are clashing with police well go to chery kang reporter battlegrounds here marking the 70th anniversary of peoples republic of china some hard core, antigovernment protesters marking that day. Setting many different parts of the city on fire certainly at a level we havent really seen. In the level of aggression marking both sides certainly, this city is in a lockdown mode smalls have been closed we see several districts of hong kong really suffering from this protest. It is very difficult to find the position these protesters are moving and at least a dozen protests are being made as well. There is a report that one protester has been shot by a live round shot fired. Cnbc has not been able to verify we did reach out they are trying to gather information. This comes in terms of the back drop of Hong Kong Government scaling things down. Fire works have been scheduled certainly tip toeing around so they avoid the worst Case Scenario we are seeing a number of fire trucks and ambulances being deployed you mentioned protesters are moving quickly to stay ahead of the police those pictures, it didnt look like protests were anywhere near the size we have seen in the past reporter it is practically all over the Hong Kong Island. Many different parts and factions or groups trying to dodge arrests and clashes with the police one point i need to make is that the main march happening that involved thousands of pro democracy protesters did manage to march towards the night fall, things do get aggressive as some protesters refuse to go home after marching chery, thank you so much. When we come back, spying scandal hits a Major European Bank lets look at the biggest winners and losers on this first trading day of the quarter just three months to go and our stocks are having the best year since 1997 tops on for the year here we go driverless cars. All ground personnel. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. Todays top corporate stories contain drama and intrigue we go to zurich with the latest. Reporter good morning. Some have described this as having the makings of a risham novel. What we have here is damage control measures put in place by Credit Suisse that started with a disagreement they were near neighbors in a zurich suburb. That eventually led to the head of Wealth Management leaving the business and crossing over to ubs. The coo appears to have brought in private investigators to monitor his movements to make sure he wasnt trying to poach staff. That blue up in their face when khan found out he was being followed and confronted that person the chairman says they want to draw a line under this but the coo will not be leaving the company. I asked what confidence do they have that the coo was actually in control of the business if he never knew that this surveillance was beg carried out. Obviously this was a key focus of our investigation we based our decisions on the evidence we have we have discussed this point the investigators, we asked about this we have absolutely zero evidence that he was informed about it. He will want to draw the line under this there is a Police Investigation into the potential alter indication wi altercation. We understand there may have been a suicide of a Security Officer working for the bank in relation to this story this morning, they only said deep regrets and passing to the family there are still some questions as to how credible the coo the investigators who looked into this said there was some deleted communication on other social media platforms which they were not able to look at. We are just able to keep an eye on the Market Reaction to get a sense of whether investors or stake holders are able to buy in if we can read into that story, how much backing does he have he was a bit of a star hire when he joined a few years back, has he been that successful . It has been a difficult environment, as you know if you look at the share Price Performance since he came into the business of march 2515 the share price is ultimately half eurozone are not likely either so all of the banks have fallen. I think there are those who believe hes done a good job of reducing the risk weighted assets and focused on those specifically in asia here in lies the rub in that story. A lot of that success happened under khan the fact that he is now leaving will cause some head scratching as to whether thiam can continue with this threeyear turn around and deliver more quality earnings investors can feel comfortable with as we understand it, companies that have a little over 8 of the business are worth throwing their weight behind him. At this stage, difficult within the bank or as you look around to find anybody who could step into the shoes and do a better job at this point. That seems to be the market view lets get back to the Broader Markets. October is one of the most volatile months of the year for equities the head of fixed income Capital Markets and ryan payne at the top, looking at big gains but that comes after a big decline after last year. Do you think stocks are stretched at this point or because we are treading water . I say long live the most hatable market of all time youve seen so much which is astounding the biggest amount ever. You have priced to earnings at like 17 economy is strong. Earnings are going to positive this year and next it is hard not to be bullish you say there is one place to look at is the bond market i call it bond hell in my notes. Look into all of the investors jamming their money in with rates. I say god forbid we get some sort of a rate deal. That will be a huge change on the rate market. Big time quickly kevin, you are a bond guy, you agree with that . We are still basking in the returns. I guess i would phrase it, the trade deal or not is a big deal. The fundamentals dont matter until they do. Right now, the concern is if there is a trade deal, that would take us back above 2 . If you dont, it is more like 140. As far as the rest of us go, we are going to look at the potential to get further trig s triggers for the bond market is this going to be death by 1,000 cuts or listening day by day . Im thinking it is less an less likely we say here is the deal that happens and the living in between. This administration has done more for volatility than any other. You applauding that it we have pretty strong vol on one side. You might argue that 2020 will matter even more. It could change the way we view each day. Right now, there is a lot of liquidity in the marketplace i like where we are in the bond market i wouldnt be afraid of it you are not worried about a recession . I do. I think the one thing you had all year is analysts have been lowering expectations. Weve anticipated the market every year again, going back to the bond market where we have about 3. 5 sitting in cash, you have a lot of people in this market there is so much pressure to get those put back in. Do you think there is room for higher valuations on a pe ratio . I think they will right now, you have a lot of disparity with value anyway. You are getting like 25 times of valued earning you have different sides of the market where where would you tell people to buy . Energy, financials. No yields to the bond market you are looking at energy, you are getting fantastic yields Energy Prices oil prices, they dont even stay elevated when talking about such strooem risks. America is the new producer, does that undermine the case for Energy Investment . The fact that youve had Energy Prices kind of suppressed here is good for valuations. Looking at exxon, it trades at 16, 17 times the earnings. They are raising dividends for 25 years straight. Dividend yields are still great. We are not seeing stresses on the long end of credit right now. High quality are more than 2 and give clarity at this point coming up, cue the count down clock. You dont have to wait a first read on hiring when squawk box comes right back. Lower carbs. Lower calories. Higher expectations. The light beer youve been waiting for has arrived. Corona premier. Has arrived. But were also a company that controls hiv, 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. Time now for the executive edge a big week for september jobs joining us now, ceo of paychecks. We saw a nice up tick in september. Growth rate increased in september. We saw wage growth go up and hours worked up. Optimism is a little shaky, the consumer demand is there we are seeing wages go up and hours worked go up because the demand is there. They are trying to hire more people those moves, are you talking september relative to august at this point yes fur looking year over year, the growth rate is a return. We are seeing it across the board. Were we are also seeing it across all j job sectors. Does that suggest smaller businesses are not being weighed down by the trade restrictions and low down in the economy . I think so. Weve seen about 25 , only about a quarter of businesses are impacted by trade and tariffs. Most Small Businesses are local or regional. Those 25 that are impacted will see a big hit. They cant adjust as quickly about three quarters wont be impacted it is good news for september at this point the wage growth for september is worth noting. I could imagine that could create stress for smaller businesses i think the biggest issues has been finding the right people to hire to fill the demand they are seeing i think even some pushup in hours or wages is okay they cant always get it back in prices but at least they can fulfill the demand they are seeing thank you. Coming up, uk Prime Minister Boris Johnson defending new brexit plans plus well hear from former british Prime Minister camryn, we are coming back in a couple of minutes through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Announcer welcome back you are watching squawk box live from the might in times square good morning. We have been watching u. S. Equity futures on this first day of trading nasdaq looked like it is up about 30 points. President trump just tweeting, you cannot judge my stock Market Performance from inauguration, which was very good but only the day after the big win. Went up big november 9 on inauguration this is the president just up and tweeting this morning. True. No doubt all the upside was done by 2018. Where that big upshift came in the markets. Annualized gain is 12 certainly good it is better than average. It is a bull market. I was looking historically to see what happened. In 1996, it began . December, january the following year those big gains that happened definitely paid into that. No doubt the market repriced in a big way basically, the economy would be running at a higher rate no doubt a great performance there the stock Market Performance was pretty good. Due to the election of 2008, he had to drive it down. That rally was more impressive in global news, the brexit deadline just 30 days away i sat down with former Prime Minister David Cameron and asked him which way he thinks things will head. We have to get a deal if not, we have to look at a second way i wouldnt rule out a second referendum we are stuck we cant go on being stuck there are only three ways to unstick it to have a deal parliament would approve or a second referendum i asked him if he thought there could be another eurozone crisis in the years a aid. The reason i launchedt the negotiation. Those are going to have to have a deeper union among themselves, more coordinated fiscal policy and banking. That has consequences for britain. I worry if they do those things, i was worried about how they would relate to that, would they be able to cope with the next crisis that come as long the big question with Christine Lagarde support or not, there is a deep accord to deliver particularly as the power of the likes of Angela Merkel have slipped. On the brexit point, i thought it interesting he didnt even entertain the fourth option, which is Boris Johnson ignoring the law and rolling ahead. Is that an option off those lows at the high. Is it a legitimate option . I dont think most would think it is legitimate, is it plausible . It is just about it doesnt look likely i dont ultimately think he and his government would ultimately go there who knows. It is a third and a half option, if you will. Cameron has expressed some remorse and regret his book is pretty open with him saying, i failed the one big criticism people still have with all of the interviews you got to applaud that part of the commission. Most disagree with that and also could go further to say he called it in order to help his own domestic chances, which helped him to get a victory in the general election some would criticize he hasnt gone far enough in his admission of guilt you also look at that and just an admission of guilt at all is commendable. The other, there has been so much criticism of the lies or exaggerations of the leave campaign i asked him if his remain campaign was truthful, he admitted it wasnt hes gone further of some but did say calling a referendum that was unnecessarily and then writing about that coming up, his stek stock is up one of our next guests top picks. Well tell you what that is. Tech is up big this year even amid all the talk of regulation the sector outperforming the Broader Market with his top picks in the area, good morning, paul good to see you. Good morning, sir weve had a little pull back in tech. Even though it has been pretty strong year to date in that area we did show a mystery chart. What is that pick of yours so i like Micron Technology the Company Reported earnings just last week since then, even though it had skyrocketed in the last year, it has come back. Yes, it has involved the chips on the other hand, i dont know if we are at the bottom of this cycle for memory semiconductors. Im fairly confident over the next year or so, that stock probably rebounds 50 . Is that a general call on the semiconductor cycle or kind of just microns slice of it . We have some scarey underpinnings with the u. S. china tariff battle but there is such a demand for memory in consumer products. That is not just for smartphones. As we get into the connected car, that will only kie rocksky from there the memory chips should do well over time. The recent history, theyve become more disciplined. It is much better run and less boom and bust. Make your case for these levels of amazon maybe some emerging concern about growth rates in the Cloud Services business. What do you think right now about it i still think among the faang, that microsoft is my favorite it has come back a little bit. Not as much as the shared price of micron. Theyll continue to intermitigate one to the other now that they have the web services which is highly profitable i think as it pertains to infrastructure as a service and aws, there is a big pie where early in the enter prize going to cloud infrastructures, so there is a long runway still for aws and microsoft azure. Paul, we have to leave it there. Thank you. When we return, will we get a trade deal by thhodae liy season well debate the odds when we come back. When i lost my sight, my biggest fear was losing my independence. Mmm. Good. So ive spent my life developing technology to help the visually impaired. We are so good. We built a guide that uses ibm watson. To help the blind. It is already working in cities like tokyo. My dream is to help millions more people like me. Welcome back u. S. And china trade negotiators are getting ready to meet later this month joining us is the president of the National Foreign trade council. Thank you for joining us. My pleasure. How optimistic are you ahead of this latest round of talks . Well, i dont think theres been any major breakthrough. No real developments at the negotiating table. I think, you know, maybe people are focusing on the fact that President Trump sort of needs a deal more than he did a few months ago weve lost a lot of export markets in china and theres a lot of worry about how we get those back they did this deal with japan partly to relieve some of the pressure from agriculture, the dissatisfaction with the china trade war. You know, i think its still very problematic dont forget, hes got these he delayed some increases in tariffs that are supposed to go into effect in december and so hes got to figure out a way to kind of kick the can down the road i dont think were necessarily going to get a deal before the end of this year. Rufus, given where we are, is it better just to back down and settle for a soft deal that doesnt really solve any of the major longterm structural issues or better to double down and up the ante . I think doubling down is going to be very risky and very dangerous for the president because theres no question this could be destabilizing dont forget, hes also got other things that hes set in motion like, you know, a deadline on the auto section 232 where hes been threatening to raise auto tariffs on europe and other countries. I think that the problem for him in settling for a weak deal is that hell get attacked by a lot of democrats for, you know, having lost the china gamble that he made becomes a critique of his overall trade policy. So hes in a difficult bind and maybe one of his best options is to just kind of lower the decibels level and back off from the most extreme actions and continue to negotiate. How significant was the japan deal in your eyes . Its not a big deal in commercial terms its, you know, some important agricultural exports that are getting the kind of access we would have gotten had we done the tpp agreement because it was in the tpp, but its good news for the pork producers its good news for dairy its good news for other u. S. Exports. Remember, japan is not a huge agricultural market for us its 180 Million Consumers china is 1. 5 billion consumers, so losing those export markets to china is still the problem. How important is it that usmca passs . I think its pretty important. Its important, first of all, for the businesses that i represent. It means greater certainty that once trump has his north american deal replacing nafta hell no longer try to pull out of nafta thats critical in terms of security in terms of new market opportunities, you know, the nafta agreement itself eliminated most of the tariffs theres some improvements, but its important to get it in just to secure the future of the north american economy. Rufus, thank you so much for joining us. Thank you coming up, its the first day of the Fourth Quarter. We will get you ready for the final trading months of 2019 and then later wework pulling its ipo in a very public debacle but theres a competitor whos already publicly traded and its stock has been up more than 60 in just the last six months were going to sit down with iwgs ceo mark dixon that up snext stay tuned, this is squawk box on cnbc. Everyone, look at your phones. The design thinking, the digital engineering, security, blockchain, and we will be first to market yes. When we do we launch . Unfortunately, in 2 or 3, hours. Why the delay . Cognizant is helping banks use Digital Technologies at scale to advance speed to market. You should be mad at airports. Excuse me, where is gate 87 . You should be mad at nonseasoned travelers. And they took my toothpaste away. And you should be mad at people who take unnecessary risks. How dare you, hes my emotional support snake. But youre not mad, because you have e trade, whose tech helps you understand the risk and reward potential on an options trade its a paste. Its not liquid or a gel. And even explore whatif scenarios. Wheres gate 87 . Dont get mad. Get e trade and start trading today. Bracing for a busy october earnings, trade war and impeachment inquiry on the mind of investors what you can expect straight ahead. Rolling in the dough the man behind the turn around at arbys is look to go do the same thing with papa johns and a commercial real estate soft spot. The rework debacle hitting the market as the second hour of squawk box begins right now. Live from the beating heart of business, new york. This is squawk box. Good morning and welcome back to squawk box here on cnbc im becky quick along with mike santoli and wilfred frost. Check out the u. S. Equity futures on the first day of trading for the month. Youll see we are indicated higher the dow futures are up by 69 points s p up by 7 and nasdaq up by 24. All three of the major averages, the s p and dow up Third Quarter, nasdaq lower on the beat. Heres whats making headlines. The House Small Business Committee plans to invite alphabet, amazon and looking to see in late december the governments probe of the companies that face investigations the federal trade commission and the Justice Department amazon is in talks to bring their cashierless technology that runs its ghost stores through other retailers like airport shops and movie theaters the company can lure its reliance onion line shopping u. S. Consumers plan to spend at least as much this year as they did last year according to results of the 13th annual Holiday Shopping survey. It found that americans expect to spend 637 each. Guys are expected to spend 15 more. Is that right yeah. Does that surprise you . Yeah. Not you no. Your house . All right. Were getting a sneak peak at the cnbc all America Survey Steve Liesman is here. Hes got the details on that. Good morning, becky the latest cnbc all America Economic survey finds americans a narrow margin opposing impeachment. In a nationwide poll of 800 americans cnbc asked if congress should hold impeachment hearings to remove President Trump. 47 oppose the hearings and 44 favor them thats within the margin of error. Thats a much closer margin than when the question was asked in december of 2017 when 54 opposed it, 47 favored it it grew to 9 to 5 on people unsure Micah Roberts sums it up the American People are not jumping towards impeachment, they are cautiously moving away from opposing impeachment. Thats a good way at looking at it look at it by party. 76 of democrats support it. Only 6 of republicans the issue though that democratic number is kind of on the lower side and that suggests to our democratic pollster that depending on the information thats revealed, theres more up side for americans to overall favor the impeachment process depending on what comes out. You can see independents are split 4243. The real bad news for President Trump coming in at a decline both overall and on the economy. Take a look at some of the numbers we have. 37 . This is thelowest number weve been tracking this his entire presidency approving of what hes doing. Net negative 17 the largest. This is only the second time the president has been underwater on the economic rating. Boosting his overall. It has been but its not this time this is a big decline. We dont know if theres spillover from impeachment or concern about that i will say there is concern about the negative economic effects of impeachment take a look at this. 45 are concerned that impeachment will have a negative effect on the stock market, 47 on the economy and 23 on the personal financial situation well get all of this on thursday this is the sneak peek some decline in optimism on the economy. A big decline in President Trumps overall Approval Rating and in his economic Approval Rating. The numbers that you showed with the independents and democrats who are in favor of impeachment, 76 democrats. 42 independents. Is the number that youve seen the increase in, is it coming from democrats or independents compared to last time its independents it is kind of low democrats are already 88 of republicans oppose impeachment. I can show you the other side either way that 76 number is low for democrats according to pollsters. Thank you. Lets talk about how it could impact markets that are bracing for a wild october ride perhaps. Joining us is mandy zoo and samir sanhan good morning to you both mandy, you have a pretty goodwin doe on what is warning or concerning investors right now are you seeing any evidence that theyre kind of pricing in volatility risk, either related to the impeachment or otherwise . Sure. I would say impeachment is an absolutely important political issue but in terms of impact on the markets, the vast majority are much more focused oj longer term issues. What were seeing on the options side is people are hedging that absolutely the number one theme but the focus is on longer deeded hedges. Most of the interest is going out six months to one year rather than to year end. That suggests people are looking past impeachment towards the economic outlook, towards the 2020 election. I would say those are the issues really driving markets, less so on the impeachment front. Your interpretation of that is is it that people are already building up this reservoir of concern that maybe can be relieved down the road in other words, is it a contrarian indicator or the markets might be in for a rocky ride its interesting. If you look at the stock market from the surface, youll say people are complacent, back at alltime highs back underneath the surface especially positioning the derivative market, it looks at the difference from demand for puts versus calls. That measure spiked in august with the trade war escalation but has stayed elevated throughout this entire past two months even as markets have rallied back, even as the vix has come in i think positioning in the Derivatives Market is definitely more on the cautious side. Mike, if were thinking about the macro part of this, how impeachment could affect the economy, i think theres maybe two roads. One is a confidence road whatever you think about impeachment or not, the idea that theres a process going on cant be good for confidence, i think. The other one is going to be concern about a change in the rules that would affect the market, right . Which is with the would the Corporate Tax cuts go away the implications. I think theres two its uncertainty is it more uncertainty than weve lived under over the last several months i dont know. Samir, there you go that is the question how do you think the markets are set up heading into the final three months of the year big gains. Pretty much sideways for years now. Similar gains but with much larger bond yields. You nailed it if everything goes right, at least from our standpoint you dont have a lot of up side in equities the bond yields are lower but theyre lower for inflation equities growth expectations keep coming down from our standpoint the bond market is sending a signal the signal is were getting later and later in the economic cycle. Whether its brexit, getting to a deadline here. Whether its the democratic candidate for president and how they square up against President Trump and the possibility of a new administration so all of those Different Things are kind of playing in at least right now what were advising clients is theres not a lot of up side kind of pulling in those orbs just a little bit. In other words, stay defensive right now . Its interesting you talked about how the bond market is seemingly signaling end of cycle if we had a sloppy bond auction in japanese debt this morning and that seems to be why our yields are up. Wouldnt that suggest that its the global yield environment driving things in part oh, absolutely. Yeah the yields are whats driving pes on the stock side. Theyre impacting how spreads are doing in terms of staying kind of tight. As mandy mentioned, some of the put call ratios have come down, you havent seen spreads go back to their tights. A lot of the markets are continuing to tell you that, again, this is probably a peak in the equity market youre in a good spot to take some risk off the table. You continue to see all of those things continue to tell you that youre a little bit long in the tooth. Mandy, quickly. Weve been talking about how one year ago to the day essentially the market was up 10 in 2018 and we obviously know that we had a nasty selloff for the next three months do the conditions in terms of customer kind of hedging positioning compare to last year so i i think right now the positioning is lighter, its more defensive, right . Froeks, we track net exposure on the brokerage side were seeing that exposure towards the lows, lower than they were in the depth of selloff of q4 last year. That tells you people are not as bullish. Were not seeing a similar crowding in the tech names i think on the positive side, if youre looking for a way to be bullish, i think the light positioning is the number one reason to be bullish everyone expecting a selloff no ones positioned for the up side thats when you can get the up side surprise. That could be a comfort, mandy and samir. Thank you very much. Still to come, trouble at wework surrounding its plans to go public. The shared Office Space Company is stopping signing new leases and putting pressure on the commercial Real Estate Market in new york city. Robert frank will join us with that story in a few minutes. Stay tuned, youre watching squawk box on cnbc obvious. Sometimes, they just drop in. 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. Protests in hopping congress descended into violence as Riot Police Fire Tear Gas at demonstrators. The protests overshadowing chinas anniversary celebrations lets get to cherrykang. Reporter the 70th anniversary. We have some of the hard core antigovernment. Pro democracy protesters taking their aggression to a next level. Many different corners of hong kong on fire apart from the peaceful demonstration that we saw thats going across the Hong Kong Island area and Hong Kong Police responding with a number of rounds of tear gas and water cannon as well and what were seeing at the moment is very difficult to track there, these flashpoints between protesters and police. But at the moment in causeway bay, which is a major shopping district, we are hearing that Police Officers are trying to push the protestors to that area and making rounds of the rest of the evening. This is the day that the protesters are quote, unquote, mourning the day we certainly saw in the peaceful demonstration earlier today many of them holding flags of the United States, the united kingdom. Not that of china by the way because basically theyre calling against the Hong Kong Government along with the chinese authorities because they feel like Hong Kong Government does not really represent the people of hong kong and, of course, there is a report or i should salo call media reports are suggesting that there has been a shooting incident as well one pro democracy activist has been reportedly shot by a live round by Hong Kong Police. Of course, cnbc did try to independently verify that, which we havent been able to do so. The pr office of police have simply said that theyre gathering information at the moment but, of course, moving forward, how much of an angry response will that garner from protesters is one of those crucial questions we need to be asking guys, back to you . Chery kang. When we return, the wework debacle putting pressure on the new york market. Robert frank has more. Reporter good morning, becky. Manhattan bracing for the impact of wework. Going to take you inside the numbers of a wework building ownby adam neumann and this building now for sale. Well take you inside the price and the numbers coming up after the break. Wework has scrapped plans for an ipo for now will the companys troubles put the Real Estate Market at risk robert frank joins us with more on that. Hey, robert. Reporter good morning, michael. Wework is the largest commercial tenant in manhattan with over 7 million square feet of space the Collateral Damage could sprend to landlords, renters and the building behind me is a wework building called 88 place. It is partly owned by adam neumann. Wework leases the building from newman and his partners. Now the building is now for sale this sale is being widely watched as the new bellwether for weworks possible impact on the market the asking price for this building right now is 110 million but brokers say its going to get be tough to get that price that is because neumann and his partners bought this building in 2015 through an llc with his partner, the fashion designer, ellie tahari they paid 70 million. There is debt upon debt. N newman borrowed on this. The debt on this building is now larger than the Purchase Price now the problem here is that manhattan right now has a huge oversupply of commercial space you have projects like hudson yards, world trade center. Wework has absorbed much of that growth so far. If occupancies fall, if rental rates deteriorate because of the wework factor among other things, youre going to see at some point a catalyst thats going to kick off a major repricing. When that happens, you know, its sort of katie by the door. Reporter now we could not get any comment from wework, from Cushman Wakefield which is selling the building or from ellie tahari back to you. Robert, how unusual is it to ask for a price that others think is going to be crazy and youre never going to get anywhere near that reporter well, we see it all the time in Residential Real Estate in man hat take right reporter commercial real estate is typically a smarter market when you look at comps, 110 is high wework would argue theyve improved the buildings and they put millions of dollars into new elevators, new heating and air conditioning and this is a great neighborhood wework argues they make neighborhoods and building values go up this will be the test for what is the wework premium or discount to a building weve seen a couple wework buildings pulled from the market recently because the landlords were nervous about selling this could be the first test. So, in other words, its a tech commercial real estate building not just a real estate building exactly. Robert, thank you. Joining us right now is mark dixon, hes the founder and ceo of iwg thats a Global Company that provides work space and services its wes rival. Shares are up 60 . Thanks for being here. Good morning. Thank you. Lets tell people about it if theyre not familiar with the company. You have more locations in more countries than wework. You have five times the members. You have almost double the revenue. You have a profit instead of a loss your ebida is profit not negative your market cap is 4. 5 billion. When you heard people talking about 47 billion for wework, what did you think i thought it would be great if they could achieve 47 billion because we do exactly the same business as you say in many more countries, many more locations so maybe our price would go up, but, you know, it was hard to understand how that sort of valuation could be achieved it is the same business in every sense. Were you scratching your head for a long time over this . Yeah, ive been scratching my head for a while on it these guys have been great for the industry theyve done a lot of good things overall its been beneficial to our company. Weve grown strongly in all of the past three years as a result of more and more interest and in companies outsourcing, in Companies Getting property off the Balance Sheet and digital just changing how people work and where people work. So validating the Business Model to a certain extent . Yes absolutely one of the things that theyve been so criticized for is growing so rapidly. Thats something for a long time people thought, great, youve got to get big youve got to build the moat what does this make you think about that its dangerous. Ive been doing this for 30 years. I did it with one center in brussels and belgium we have 3 1 2 thousand today if you grow quickly you can take a lot of risk doing that this is a business where i tell people coming into it, there are no short cuts. And its a very operationally intense business you have to execute as well all the time every day. Long term do you think though that their tactic is at work to expand very quickly and get scale was the right one . I mean, is scale important in this marketplace scale is critical what the customer wants is the modern customer, the modern corporation, they want to use space across the country they dont the days of headquarters, buildings, people commuting are becoming less and less and will be a rarity in five years time so thats whats causing the change but you need to be where people live, not just where people work you need to be in every part of the country. I want to go back to the valuation point that becky was saying i think you trade at about 1. 5 times your revenues, and youve done a little spinoff recently that was valued at three times so better than that. Weworks valuation multiple compared to that was far, far higher clearly that didnt work what kind of valuation multiple do you reckon they can get now that theyre in a more limited marketplace for funding . Its hard for me to comment what i can say is that i mean, next time around its going to be difficult. And what you have to have in our industry is Great Disclosure were a public company, huge amount of disclosure thats what investors want youve got to bring investors up to speed with what we do and how we make a profit youre not going to do that with limited disclosure you mentioned the business in most respects. A couple of criticisms was one entering into longterm leases and then offering shorter term leases, right, to tenants . And then also those tenants being largely startups there was an added risk of these businesses have not been around very long. You mentioned corporations is your business skewed more towards Larger Companies yes. Look, we having been through many cycles, every year we do cycles in the middle of venezuela, places like this the world is not a flat place. The most important is managing your risk. Its managing making sure that you dont have too much liability and youve got a good forward audible. You need flex. 40 of everything we do we do in joint venture. Youre managing the risk getting variability. Most of the time on your rent. Youve been through lots of cycles you first listed back in 99 your u. S. Business filed for chapter 11 at one point. Its doing much better talk us through that cycle and whether wework might not be ready for that kind of down turn in macro economic. This is a pretty good market at the moment. You have to be ready for it. You have to be ready for it all the time you just dont know when its going to arrive so getting that flexibility in we learned our lesson in 2001 actually, the year after we ipod. The key is making sure youve got flexibility. Low debt we carry almost no debt today. An making sure, the best thing of all is to make sure you have strong, positive cash flow going into it. Its a Good Opportunity be at this to grow this is an industry which will grow and will grow even more strongly during the next recession when it arrives, the next down turn because the demand for it, from corporations, is very real and grows all the time, especially with the new change in the accounting rules. Mark, not to harp on these same points, but when we had sam zell whos a legendary commercial Real Estate Investor on set, he said, look, ive looked at Business Models going back to the 1950s. It never works out because in a recession theyre the first ones to lose their tenants. How long is your average lockup time with tenants at this point. How long do you lease and then turn around and lease back all of that for us is public information, especially with i16 which is quite rigorous in disclosure so we have about 5 billion of liabilities but we also have a forward order book thats pretty well matched to that and also many of the arrangements are variable and we have much shorter time spans on the leases so we tend to pay a little more to have optionality on leases rather than fixed for 15 we would never do 15 or 20 years. Hard to price that for the long term. Whats your view on some of the Investment Bankers and indeed the ceos of jpmorgan and they have rubber stamped the terms of the valuation and what they were going for . Going on that, i cant really comment on that. Look, they you know, it was there and they must have believed that the valuation was there. You know, in the end well wait and see whether they can restructure, im sure they will do a great job of that, but its a tough one Going Forward. What do you see in the european economies right now because we hear all of this concern about whats happening with the economy and whether that will wash up on the u. S. Shores what do you see in your portfolio . Businesses in europe are doing well spaces brand continues to grow its very popular in europe. Regis as well. The main brand continues to grow were seeing unusually very strong activity in Southern Europe and places like france, which have been flat for a very long time. Theyre doing well u. K. Were very, very cautious of for obvious reasons its more Companies Moving to flexible because they dont know whats going to happen theres a lot of uncertainty really for us the star of our business is United States and canada, which have, you know, seen fantastic growth and youve got more corporations in america switching over to flex space than anywhere else theyre really sort of at the vanguard of changing the way that they support their people a lot more people now starting to work from close to where they live and not being forced to commute into the cities, and that sort of trend is something thats going to pick up we think more and more in the coming years. Where would weworks valuation have to come to for you to consider looking at it . Thats a very good question look, consolidations always a great thing and i think in the coming years i think there will be more consolidation. That will be a result of whats happened with we work in the last couple of weeks so but, you know, its the same business. What can i say your comments are the same business doing the same thing. We have great digital platform its our app thats at the top of Google App Store and the apple app store. Its completely you know, we have all of those things so same business look at the revenues look at the margin you have to think whatever our value, you know, they would have the equivalent. Mark, want to thank you for joining us good seeing you. Pleasure. Thank you very much. Still to come, the man that helped turn around arbys is now working on making pizza great again. The ceo of papa johns rob lynch will talk about the companys turn around and the addition of shaq to the board. Inngig look at u. S. Futures poti hher with 74 points on the dow back in a couple of minutes. Still to come on squawk box, the ceo of papa johns on the companys turn around and the state of the consumer. He joins us after the break. Has there been a shift in the ipo market well discuss with alexis ohanlon, the cofounder of redd reddit impeachment war, trading season. A lot on the plate in october. We break down what you need with your investments in mind squawk box will be right back. You should be mad they gave this guy a promotion. You should be mad at forced camaraderie. And you should be mad at tech that makes things worse. But youre not mad, because you have e trade, whos tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. Dont get mad. Get e trades simplified technical analysis. In the last year, of cybercrime every second. When a criminal has your personal information, they can do all sorts of things in your name. Criminals can use ransomware, spyware, or malware to gain access to information like your name, your birthday, and even your Social Security number. [announcer] thats why norton and lifelock are now part of one company, providing an all in one membership for your cyber safety that gives you identify theft protection, device security, a vpn for online privacy, and more. And if you have an Identity Theft problem, well work to fix it with our Million Dollar protection package. There are new Cyber Threats out there everyday, so protecting yourself isnt a one time job, its an ongoing need. Now is the time to make sure that you have the right plan in place. Dont wait. [announcer] norton 360 with lifelock. Use promo code get25 to save 25 off your first year and get a free shredder with annual membership. Call now to start your membership or visit lifelock. Com tv we love to show our products out here first question in your place as a new ceo, whats the biggest threat to your business . Is it the traditional rival Pizza Companies or is it all types of food given the growth of delivery apps the threat is not necessarily how we look at it. We look at it as an opportunity. You know, technology is disrupting our industry as its disrupted the Restaurant Industry disruption obviously creates opportunity for those willing to dive in. So we feel like the app, Third Party Aggregators can be partners we can work with them to reach more customers and do it more efficiently. So, you know, for us were strategically working with them. I was actually out in california working to build longrange plans on how we can work to be successful. Is your biggest goal to make your apps easy to use so you dont have to give margin away or is it offering new types of food on your own apps so youre not offering pizza as the other apps are our mobile applications are a bigger part of our business. The Fastest Growing piece of our business it grew over 60 over last year. Were making Big Investments in our i. T. Infrastructure to support that, both the consumer facing side and the back end onetoone marketing and all the information that we get from our Loyalty Program allows us to more effectively target our customers. So technology is a big platform for us and in terms of the dialogue that youve had to come back to the investor and starboard, how is that dialogue is it going well its great. Jeff smith is an amazing partner. Jeff was actually the person that reached out to me about this opportunity and, you know, a lot of folks would be a little bit scared, you know, coming into an activist situation jeffs not like that jeff is actually working with us hes very consumer centric hes very, you know, focused on the business actually, is a big idea guy. Has more ideas in the r d kitchens working with starboard and jeff has been fantastic. Is this a situation where you like it . Greg brown said that about carl icahn. Really, how much do you interact with him whats it like when i first joined the company about a month ago he was in our office and he was working with me on a daily basis and he was we were talking about all the things that he had been working on over the last, you know, seven months since he had become a big investor in the company. Over the last three weeks hes stepped back hes allowed me to spend time with our franchisees and our employees to better understand what i need to do. On an ongoing basis we have a phone call once a week but he is very available he tells me, rob, you can call me any time of the day, so i try not to bother him, but hes been hes been really great about allowing me to get up to speed on the business. The industry if you look at just the advertising and the competition, its very value oriented it seems like thats the brand presentation all the time, that you get a lot more for your dollar is that okay for indefinitely . Do you have to try to get away from those constant kind of discounting moves . Thats what im working on. I dont believe and our company doesnt believe that all pizza is created equaling. We believe there is a customer out there who values Higher Quality ingredients. We invest a lot into the ingredients that go into our pizza. Our dough is fresh, never frozen we have no artificial colors or flavors. You know, no fillers in our meats. We do a lot. That costs us a lot of money thats investment, right if we cant make that a return on that investment, then we shouldnt be doing that. We believe that there are customers who want a better pizza. Do you have the same level of investment and quality in terms of things people can order on the side which youre perhaps not as well known for . Is that an area you can potentially improve . Yeah. One thing that a lot of our customers arent aware of how good our wings are pizza and wings go together great, right when people are sitting around watching football or any other activity, we want them to order our wings. Our wings are, you know, come through the oven theyre not straight out of a fryer. They have a little bit of a different roasted texture which i love our sides, we focus on making sure theyre the highest quality as well. Back to the food apps, how much of a percentage do they take from you guys do you think with the broad number of competition and apps that there are in the food delivery space that theyre all going to survive do you think that theres going to be a bit of consolidation there . I think theres an opportunity for consolidation. The way i think about it is what does the customer want, right . Business models are driven by customer demand. The customers have spoken. These apps are growing really rapidly because the customers want these services. So, yes, they have had an impact on our industry. An impact on our business. But we believe thats because we havent worked strategically with them. Its been kind of a zero sum game we dont think it needs to be that way thats why im partnering with the ceos of all of the aggregators to work long term to benefit. Great to see you. Thanks for the pizza, too. Yeah, we love it. Still to come this morning, initi initialized capital cofounder Alexis Ohanian will join us. How Silicon Valley is starting to value some of these ipos too. Take a look at the futures theyre in the green across the board. Dow futures up by about 62 points s p futures up by 5. 5. Nasdaq up by 22. First trading day of the Fourth Quarter and squawk box will be right back welcome back, everybody. In washington big tech is facing intense scrutiny from lawmakers and on wall street the performance of the 2013 ipos may be signaling a shift in the market joining us to break it all down is Alexis Ohanian. Hes the cofounder of reddit. Thank you for being here great to see you. Very good to see you. Disappointed im not there for the pizza party. Me, too lets talk about what youve seen so far with the ipo market. How has that trickled down into the valley is that changing the way Venture Capital firms are looking at new funding theyre putting to work today . You know, what is clear i this ipo road show trend is falling out of style i think one of the things that has been most apparent to most ceos of late in tech is that for all of the virtues and the excitement of becoming a publicly traded company, the way that the Public Markets work in terms of incentivizing ceos to focus on short term versus long term is a challenge. We were early investors in Longterm Stock Exchange which wants to be a way for ceos to get their companies some liquidity but to do so in a way thats responsible for longterm investment. Alexis, its so interesting to hear you that i that because i was talking to a guest last week that said the mood in Silicon Valley is to try to stick it to the bankers. Theyre sick of getting held up with whats happening with the ipo, if they can hose the bankers for another 5 cents theyre going to do it then if you look at Something Like the direct listing that slack just listed, that didnt perform so well either so whats the answer i think a different model for even how these exchanges can work is really in order. One that incentive advises people who have had positions in the companies for longer terms to have a bigger vote. But also one that really takes into consideration the fact that, you know, stock prices change every second and yet the actual value of companies dont change nearly that often so how do we really think about even the fundamentals of how these marketplaces work that allow for liquidity to happen but at the same time take into account we Want Companies to be focused on longterm growth as opposed to quick impulse decisions. I think thats part of the problem but lets also just confront what the private market valuations have gotten out of control. When you start looking at a lot of them involved with softbank where they were looking for the long haul, building growth at any cost try selling that to the public that youre going to continue to lose money for an indefinite amount of time and youll get nosebleed valuations is that just over . Yeah. I think in a lot of ways later stage private investors have been valuing companies differently than the Public Markets which are much more ruthless its going to sound very obvious but Gross Margins really do matter here. There is truth to the fact that every Business Needs to be a Software Business now. I really do believe that the difference, however, though is the private markets been valuing a lot of companies that are a lot Less Software than they are other things and the margins reflect that they dont have Traditional Software type margins, whereas the companies that have ipod this year, zoom being one of the most prominent ones, have performed well thats a reflection of the fact that they are much more true to those Gross Margins of software. Its the later stage private ma markups that have been hit. Thats a great point building on that. How would you value a company, im just using these as examples because theyre out there, wework being a commercial Real Estate Company versus being a tech company and so many of the other ones out there how do you find a fair valuation for the companies saying theyre Tech Companies using that just like i ever other company is now . Yeah. Look, there is a difference between companies that are sort of not traditionally Software Companies but that have the product teams and the Software Teams internally that are able to build it, but at the end of the day i think commercial real estate is a great example of a space where companies should be judged on their ability to generate cash flow it is a really straightforward metric its one thats been used for a long time for the companies and its a great way to show they are on to something and building something that is sustainable and doesnt look like 10x on revenue which is how Software Companies tend to be valued. Alexis, whatever the precise numbers are on weworks most private round and its value today, have you as an investor ever gone into something and seen within a year, 18 months its value be some 25 of what you had invested in . And if so, would you expect to get a pass and still have your credibility Going Forward . How many passes do you think investors in Early Stage Companies should get for those errors were fortunate we do such early, early stage in investing. Were often the first check that we do see the down routes but theyre not that significant the amount of the money invested is very, very small relative to what were talking about here. I think there is a real question now, it is it has been something weve talked about on air before, that these private investors have been able to enjoy up rounds as companies have held off going public that normally Retail Investors would be able to get were seeing that now really get dialed back and i think theres going to have to be a lot more sobriety when these later stage firms are doing these valuations because, you know, the markets in many ways have spoken on how these companies should be valued i do at the end of the day think there is a truth here, which is every business doesnt need to be a Software Business, but every business should not necessarily be valued at softwaretype levels. Is the take away though from that alexis that ultimately with the volume of money still in Venture Capital hands looking for these big opportunities and if you dont have that ultimate exit from the Public Market thats willing to kind of bless those aggressive valuations, is there just not too much money chasing a more finite group of great opportunities than we thought before i still believe in the value of the entrepreneur. I still believe in innovation. I still think a few of these companies that have had disappointing ipos are going to actually in the long term be very, very viable businesses so i still really believe theres a lot more innovation to come yes, while the later stage is awash in capitol right now, there are many Great Companies being founded, being invested in and are going to make good use of that money. One more quick question, alex alexis when you look at all of the noise in washington and other places where regulators are checking out whats happening with big tech, is that something thats flowing down to the vc level . Is it changing the way people are investing in Silicon Valley . We love investing in david against goliath and if these these wins are any indication, those goliaths are going to have a lot more scrutiny and actually probably see some form of regulation or another. That means more opportunity for the davids, more opportunities for the up starts to start to challenge them so if anything, i suppose it gets us a little bit more excited on the early side of things because we see opportunities for companies to come in and drink their milkshake. At the end of the day we dont do our jobs because we want help from washington to regulator enforce, we do our jobs because we are entrepreneurs providing real challenges and real improvement. Alexis, thank you i always love having you on. Come here, well get you pizza and well catch up on the gossip. Deal. Thanks for having me coming up, the latest on the china trade front, national day and your money we break down whats moving the markets at this hour plus automakers getting ready to report public sales. Well discuss the latest on the uaw strike, the latest on the industry squawk box will be right back. But were also a company that controls hiv, 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. The home stretch wall street picking off the Fourth Quarter with the best quarter since the late 1990s more turmoil in hong kong. Protestors clash with police in the Asian Financial hub on the 70th anniversary of chinas founding. Does taxing the rich really work what the 2020 candidates want be to do about it as the final hour of squawk box want to do right now. Live from the most powerful city in the world, new york. This is squawk box. Good morning. Welcome back to squawk box on cnbc we are live from the Nasdaq Market site in times square. Im becky quick along with wilfred frost and michael santoli. Joe and andrew are off today the futures have bins been indicated higher dow up by 65 points. Nasdaq up by 25. S p up by 6. 5. It is the first trading day of the quarter so well see where we get a little later in the trading session, too in the meantime, take a look at whats happening in the treasury market there was a bank of japan japanese Debt Offering later today that looked a little disastrous from how people were there because of the pension fund and the bank of japan supporting it for the first time that has led to what you see around the globe tenyear yielding at 1. 73. 30 year at 2. 179. Some of the stories investors will be talking about today. Protesters clashing with police today in hong kong even as chinas rules celebrated the 70th anniversary of the countrys Founding Police in hong kong fire tear gas, rubber bullets and live rounds of ammunition while demonstrators threw gasoline bombs. It all comes on chinas national day. 70 years since the peoples republic of china was founded. President xi jinping said in a speech the country would pursue Peaceful Development no force could stop the Chinese People and the countrys development overall. Credit suisse has cleared the banks president u. K. Cs. Consumers plan to d as much this year as they did last year. The Online Survey of 1500 u. S. Consumers found that americans expect to spend about 637 wall street will be watching the latest out of washington today as it does every day another person close to President Trump facing intense scrutiny this morning. Eamon javers with more. Reporter yesterday we learned mike pompeo the secretary of state had himself been on the ukrainian phone call thats at the center of the latest controversy even as democrats now move to subpoena Rudy Giuliani, the president s lawyer, for information about his end of those dealings last night on fox news Rudy Giuliani suggested that he hasnt yet decided whether or not to comply with the subpoena. Heres how he put it ill get all my evidence together ill get my charts i dont know if they let me use videotapes and tape recordings that i have so Rudy Giuliani saying hes undecided as of right now. He wants to know more about what hell be allowed to provide the committees that are investigating all of this. The president this morning tweeting in frustration again about all of this. The president saying the congratulatory phone call with the ukrainian president was perfect unless you heard little adam schiffs fraudulent version of the phone call. Together with the partner the Democrat Party hoax. Meanwhile, you get the sense that theres a couple of things going on inside the white house today. One is some second guessing of the decision to release that complaint and the transcript the white house has said publicly that it was the right thing to do to put the documents out because it shows in their view that the president didnt do anything wrong, im picking up some disgruntlement inside the white house about whether or not that was the right call or not. Also, the white house now trying to put together a team to respond to the impeachment inqui inquiry. Whether or not thats going to be an internal team or involve a team of outside lawyers, they are working now to put together a strategy for how to go forward in what now looks like it will be long and heart fought. Whats the significance that secretary pompeo was on that call reporter pompeo is a witness to the transaction between the call between the president of the United States and the president of ukraine he could be called to testify to give his version of what happened the version of the call we have publicly are notes that were taken by a notetaker in a contemporaneous way. Democrats might want to know from pompeo what he knows about what else happened on the call if anything. Its interesting that pompeo has been asked since the story broke on abc news what he knew about all of this. He deflected that question and referred to the complaint and said he hadnt really seen it, et cetera. But now we know that at the time he gave that answer he was actually fully aware of what was on the call because he was on it. Eamon, thank you very much for that you bet. Joining us for what this means, stefan seeley Clete Williams a partner and a cnbc contributor very good morning to you both. Clete, do you think the threat of impeachment has any impact on the trade talks with china i dont think that it does and regardless of whats happening in the United States, it remains good policy and good politics to try to get a deal with china where they change some of the structural issues that weve been concerned about. And i dont see impeachment change being that. I think its also important for china to note that regardless of whats happening in the United States, regardless of whos president , regardless of whats happening in the election, this policy on china is here to stay and its not in chinas interests to try to wait this out and see what happens its in chinas interests to friday to get a deal just to give you one example where i think impeachment has been hasnt had an impact is on usmca and the reports that im hearing from the hill this week are that republicans and democrats continue to try to Work Together on that issue regardless of whats happening on impeachment i think it shows where the substance is right, the sides can put these things off to the side and Work Together stephen, given where we are and given the position the president and china has already put us in, is it best to up the ante here or back down would it be worth doing a soft deal it isnt and it wouldnt be i think this confusion i think is part of the problem, which is these issues that face us with china are fundamental. Theyre fundamental because in many respects a market economy and a nonmarket economy are incompatible dealing with intellectual property theft, counterfeiting, dealing with market access, dealing with state support, the Chinese State support of their companies is endemic to the way those economies run. The notion today as china celebrates the 70th year of communist party rule, that they are going to give up that control of their economy, which is so central to how they retain power i think is unrealistic. Stefen, watching all of the festivities and seeing video footage, youre right. It seemed like it was kind of firming up their stance, hardening their stance its hard to imagine how you can convince them to give some ground given what theyve been showing off to the world. Thats right. The deal the Chinese People have made, becky, is as long as you increase prosperity in our country and keep us safe, we will cede power to you, the communist party, Going Forward thats not a deal i think is likely to be unwound any time soon. Clete, if in fact both sides are relatively entrenched in the longterm positions, it seems like the conversation perhaps most immediately is going to be about the next round of tariffs and whether they go into effect and is there any way to handicap that from your view . Look, i think the december 15th tariffs are going to be more disruptive for both of our economies than anything thats come before so i do think that from an economic standpoint there is an incentive for both sides to really try to make some progress between now and december 15th. I agree withstefen that the nationalistic sentiment in china, that kind of stuff is going to make this difficult the economics do line up that gives me a little bit of hope i think if youre china you have to look at the fact that the things that the u. S. Is asking for, thats good for you if your companies are moving up the value chain. If youre china, you need pork right now because you have swine flu and then from the u. S. Standpoint, like i mentioned, the december 15th tariff spiked so you dont want to see that happen also if you look at things like huawei you may realize if you arent granting licenses for some u. S. Companies, that production is just going to move over seas and chinas going to still be able to get some of those components so theres interest in both sides in trying to come up with a way to resolve this before december 15th. That said the politics of this are very, very difficult thats why i think it is going to be pretty hard to get there clete, treasury denied that thez ever considered blocking investments between the two nations. Do you think they should consider that as a threat to get things moving if necessary look, i dont think it should be related to the trade dispute per se, but the underlying issue here, the question of whether or not china can block our regulators from accessing the financial audits of their companies is a legitimate issue. I mean, that is unfair and it also puts u. S. Investors at risk so i do think its something the administration is right to pursue and, again, this has a bipartisan history here. Theres legislation with senator rubio and clklobuchar whos running for president asking the administration to take this on so they should be looking at this that said, i want to give a little bit of note of caution in terms of the option of delisting the Chinese Companies because if the u. S. Goes down that path and goes it alone and doesnt work with other countries, these same companies can just get listed in london or tokyo or hong kong and so theyll still be able to raise capital without actually addressing the underlying problem. So the administrations right to go down this path but they need to be very careful and make sure anything they do is wellcoordinated. Stefen . The issue of decoupling capital flows between china and the u. S. And prohibiting u. S. Investments in china and the investments in the u. S. Is different than limiting Chinese Company access to the u. S. Capital markets. So fundamentally Foreign Direct Investment in the United States is a powerful driver of Economic Growth and prosperity. Over 7 million u. S. Jobs are supported by investment in the United States of which around 2. 5 million of those are in manufacturing which the administration is so focused on. I would be quite careful about playing with this lever because in many ways i think it would be biting our own nose despite our face. Gents, leave it there thank you very much. Stefen and clete. Thank you. When we return, the Fourth Quarter has barely started and we have important data on the way. Well hear what the auto Sales Numbers could signal for the future stay tuned, youre watching squawk box on cnbc welcome back lets check in on the futures. Pointing higher after a nice little gain yesterday. Up about 75 points earlier on the dow. 60 points higher on the dow. Nasdaq up 22 china and hong kong closed today. The nikkei is up 0. 6 . Europe is mixed to lower at the moment we are expecting fresh data from european car makers followed by u. S. Tomorrow. There are concerns about a rise in prices. Probably down 4. 5 . You have two less selling days and last year the Labor Day Weekend was included in september. This year it was included in august i think if you look at the twomonth total, it probably gives you a better indication of where we are i would say that data is probably better than what people expect. Were still kind of clocking around a 17 million annual rate it seems as if the auto cycle is kind of plateaued but not really rolled over right yet. What does that mean for i guess some of the stocks in the coverage universe . You know, its funny. The cycle in the United States, the auto sales cycle is probably an ideal position right now. Hovering as you said about 17 million units. Underlying demographics are stronger than theyve been shortterm economic variables are all positive we see that elevated level of demand extending over the next two to three years very positive for the group, especially for the dealers thats reflected in the dealer stocks this year they beat the market on average by 35 our topics on the dealer satisfies side are group one gpi, Penske Auto Group pag and we also follow autonation. So the distributors that are best positioned by implication, the oems, the manufacturers maybe not so much . Ford and to a lesser degree gm the stocks have had a hard time getting out of their own way. They have theyve been market performers fords beat the markets by 8 year to date gm and ford, one of the things the market has not caught up with yet, both of the companies have reduced the breakeven levels by 50 . There are questions in europe but gm is out of europe. China has hurt General Motors and ford to a large extent this year i think as some of those things subside a little bit, the companies are in a much better position than the market gives them credit for, especially in north america. The general view on the gm uaw strike which continues at this point is that probably not a tremendous blow yet to the company but how do you think its going to play out what does it mean to gm . Its unfortunate, thats for sure, because over the last 10 to 20 years the industrys relationship with the uaw has improved greatly from back in the 60s and 70s when it was much more tumultuous its unfortunate this has gone on in my opinion, its been the lack of communication on gms side and the uaws side. They used to have a uaw representative on the board and they havent had one over the last three to four years thats hurt. Its something theyve need and its helped the communications. What does that mean for how it might get resolved and when it sounds like theyre close. They have the main issues at the key table at the top bargainers. It becomes futile if you just continue to go on with one or two sticking points. So my guess is they get it settled by the end of the week the next trick will be for it to be ratified by uaw membership. There will be a desire for them to ratify it because there is an 8,000 sign on bonus which im sure the uaw employees would like to get. Where do you stand overall on the Ride Sharing Companies and what that means for the autos long term . I think the Ride Sharing Companies, i cover lyft and i have a sell rating on lyft i think theyre over priced. Primarily because i dont think the growth is going to be what they think it is one of the things that theyre trying to sell is the prospect that millennials arent going to drive and data just doesnt support it millennials, like prior generations, as they move into the 35 to 44yearold category, they are getting a license to drive. The biggest increase in licensed drivers in 40 years, they are buying houses. They are going to follow the normal life pattern of previous generations. I think some of that is over stating the potential growth of the Ride Sharing Companies in addition, they have a cost issue. Lastly, i think theyre depending on fully Autonomous Vehicles becoming common place i dont think thats very likely over the next decade or two decades quite frankly. What do you think of gms investment in lyft look, they made that investment, it was a smart move. You know, theyre getting the money out of it, but its a minor investment if you look at the scale of General Motors. So if millennials, younger people are in fact buying cars at a similar rate to previous generations, i mean, whats the affordability equation right now . Is it still okay with financing Still Available . I mean, there has been some talk of some delinquency rates going up. Delinquency rates are certainly elevated from the lows but theyre within the normal boundaries if you look at some of the debt metrics. I think as far as affordability of ownership, if you look at disposable income and the percentage that is spent on new and used vehicles, youre below the historical average under 4 and so i think its still pretty affordable on that basis not a bad deal. Michael, thank you very much appreciate it. Thanks for having me. Still to come, does taxing the rich work . Its a debate thats only going to heat up as we approach the next election. Well dig into the topic and try to understand where the political left and right are staking out their positions. Stay tuned well be back in a moment. 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In our headlines this morning sources tell cnbc that amazon is in talks to license the technology that powers its cashierless ghost stores to other retailers. That includes movie theaters, airport mini marts and concession stands, sports stadiums and arenas. Sony says the head of the play station Gaming Division is leaving the country. Shawn laydon has been with the company for more than 30 years theyre expected to launch the new play station 5 later this next year, excuse me a group of vape shop owners are suing massachusetts over its ban on vaping product sales. Massachusetts governor declared a Public Health emergency last week and announced four month sales ban on all vaping products this includes tobacco and marijuana. The retail shops say its off base and the real problem is illicit problems containing thc. When we return, wall street and the balance of power in Washington Well see how the biggest ways of a democratic winner could impact the markets u wchg quk e. Yoreatinsawbox on cnbc ive been a caregiver for 20 years. No two patients are the same. Predicting the next step for them can be challenging. Today were using the ibm cloud to run new analytics tools that help us better predict and plan a patients recovery. Ultimately, its helping thousands of patients return home. [upbeat action music] pilot were going to be on the tarmac for another 45 minutes or so. Welcome back to squawk box on cnbc. Live from the Nasdaq Market site in times square. Bernie sanders and that brings us to one of the key questions this election season the income inequality. Steve liesman. Mike, thanks. They cannot solve the problem. It does reduce the gap its got a basis which is not science. Back over the years but inequality has grown taxes can help reduce inequality for Public Investment when its well spent not so fast. The oecd emerged and they have distribution and a constant tradeoff equity high marginal tax rates can act as a disincentive for instance for investment economists think there are ways to tax some wealth na do not distort growth the monopoly and market factors. Research is mixed. Overall, wealth taxes view pretty negative. One suggestion has a lot and were talking about this reducing loopholes that exempt or reduce taxes for the wealthiest the income is seen as minimal and even positive that they reduce it. Excellent question. Why have we not talked about it more . The idea that you have to rewrite this and create new taxes when you can fix the loopholes in the existing system the conservative on both sides. The tax cuts and you dont have any of the democrats just tax reform. The concept when you reduce economic distortions you get more bang for the buck theyre talking about stag guard ip comes for the average household. You dont want a huge split. Theyve been climbing after a long time of being sideways. Income inequality is seen as something bad for growth bad for democracy. You want to reduce it. Earlier. A rising tide lifts all boats. Why do some boats go up higher than other boats why do some boats not come up. Look if youre invested in equities, youve done better thats right. Arent there rents out there arent there places where people are getting beyond which the market would otherwise give them things like in urban areas, land in urban areas things like the Real Estate Development industry overall by the way is a heavily undertaxed industry and there are places where ceo salaries heres one of the interesting things about Bernie Sanders wealth tax on salaries in some cases you can imagine that the ceo of salaries are not really set by the market, okay so you could tax that and it would not necessarily be negative for growth if you could find those places where theyre not. However good luck. All right okay all right. But theoretical. If reducing ceo salaries will not raise the janitors salary because one doesnt necessarily arbitrage the other. There may be more money around if you pay your ceo less but you wouldnt pay the janitor more if the market for if the supply of labor for the janitor position is not higher or lower. What about a new higher level of income tax added onto the top because if youre just taxing people more over a million bucks, that doesnt really hurt the economy, does it its not like they were spending all of that money straightaway that year. It reduces perhaps how much theyre able to save for the long term. Wilf, youve done a great job of pegging the unknown theres a curve out there and a way to reduce the distance for the incentive if you raise taxes. We dont know at any one moment where we are on that curve what you can do is you can kind of grope your way in the dark, you can feel your way in the dark and say, okay, if i go up a bit on this, what happens here a lot of talk about raising the taxes would destroy growth it didnt destroy growth by the way, the lowering the Corporate Taxes has not created a massive amount of incentive to invest we may not have been at a critical point on the lapper curve. You can try to grope your way around. It has done things to make us more competitive versus other nations. Absolutely. Absolutely. In Corporate Taxes. Thats accurate some money and there have been positive effects what there hasnt been a massive positive effect is on equipment spending i wonder if thats uncertainty because of whats happening both with the economy around the globe and the trade wars. That could be a big part, becky, for sure. However, we may not have been at a critical point where the tax was the wedge. Because corporations already had so much capital . Right or it may have just been that, you know what, the tax at that point is a small part of it. Youre right though, we do not have a pure experiment because of the trade war every time we thought weve had a pure experiment you can point to someother external factor. Thats right. What about the tax revenue from the tax cuts in that we have a huge increase in spending so we dont know what that effect was. Stick around, steve lets continue this conversation for more on the income of taxes on income inequality is Sarah Anderson welcome to both of you sarah, im going to start with you. A lot of talk we just went through about how this could be misguided. Why do you say go ahead . Were talking here about a proposal to increase the Corporate Tax rate on companies with really extreme gaps i think this is a sensible one its not just been. It contributes to lower employee morale. It sends us a message that the contributions of people throughout the company are infinitessimal compared to what they are at the ceo level. I think we all know thats not true it would be good for business to narrow these gaps and if companies refuse to do it, they would have to pay more taxes and that money could be used for social goods to help reduce inequality. Aparno, what do you think would this be good for business . My problem with this proposal is simply that, you know, by its not directly raising taxes on ceos. What its doing is raising the Corporate Tax rate on the company. As economists what weve tried to show is that the Corporate Tax is actually borne by combination of factors one of those factors is workers. So if you have high Corporate Taxes, companies have lower incentives to invest they have less of funds to invest which leads to low Capital Formation and that in turn affects worker productivity and worker wages my problem is if youre trying to address income inequality, a direct tax on ceos might make a little bit more sense than a tax on the company as a whole because the company is you know, is not the ceo company is shareholders, its workers, its consumers. And when companies are taxed, they try to pass on the tax to each of these factors in different ways and, you know, several papers now show that a lot of that tax is now born by workers. If youre trying to address income inequality, i think trying to Tax Companies is exactly the wrong way to go. I also, you know one of the things you were discussing earlier is that it doesnt really tackle the issue of income income inequality. It doesnt get to the fact of why do low wage workers have low wages . Is it skill . They didnt get good education that they didnt get to go to a Good Training Program . I think this proposal doesnt really address that. Its a form of taxing and punishing the rich rather than really helping people at the bottom. Sarah, id say thats the strongest argument are you going to bring wages up at the ottom i find it amazing that we are still hearing these arguments about how lower Corporate Taxes will be good for workers that was the argument leading into the republican tax cuts weve seen the evidence. What did they do with the Corporate Tax windfalls . They blew it on more than a trillion dollars of stock buy backs to enrich their shareholders and ceos. Census came back to show that Median Household Income has not changed. I think we need to get beyond that argument. The idea that ceos are these brilliant leaders, they deserve to make hundreds of times more than average workers, thats an argument i thought we would have ended after the financial crisis i was on squawk box in 2007 and i was ridiculed for criticizing the paychecks going to wall street ceos, the same guys who then shortly thereafter ruined our economy so i had hoped that companies within the corporate world would have addressed this problem internally they havent its time for Public Policy to give the right incentive to companies that they need to narrow these obscene gaps. Sarah, why would if im a company and i pay my ceo less, why would i pay lower workers more isnt the wage of the workers below the c suite determined by Market Forces and supply and demand of labor in those markets and not arbitraged by ceo salary the stocks would just be one tool that is necessary to reverse our extreme inequality we also do need policies to help balance the power of workers with employers we need to make it easier to form unions, to bargain collectively we need to put workers on corporate boards, other tools, but this is still an important tool to give incentive to narrow those gaps, either by lifting up the bottom wage scale or bringing down the top. I hope thatcompanies respond b doing both what about a higher minimum wage so i my issue with a higher minimum wage is, again, that you would basically be displacing workers with a higher minimum wage we know that companies, again, have costs of highering workers and if youre raising those costs, you know, the effects could go either way. My personal proposal for helping lowincome workers is to expand the Income Tax Credit Program and as the proposal talks about income inequality, i think a lot of the there are several other good ways of helping people who are struggling to rise up the ranks of the income ladder, like good schooling, good education, Good Training Programs, good access to social network and jobs we need to look for better policy ideas to fix that again, this idea of sort of trying to raise revenues by taxing rich ceos or taxing companies, we had the highest Corporate Tax rates in the oecd before the tax cuts and jobs act and we were still raising less than 2 of gdp from Corporate Tax revenues we need to look for other ideas to get money i think looking at broadbased taxes like a consumption tax or vat or other means of raising revenues would be a lot more effective in addressing the problem of income inequality than the current proposal. Isnt one of the problems that we just dont have tried and true programs for reducing inequality if you told me there was a program where if i spent x i could reduce inequality by y, i would spend a lot of money on that. Aparna just mentioned the earned income tax credit is something that democrats and republicans have talked about. Right but if the issue is education or infrastructure, we can and should spend money on. We know were underspending dramatically in infrastructure whats interesting, thats a bipartisan thing we cant get any progress on that we could spend more on education but the issues of people who are displaced from technology, people who are displaced from trade, we dont have very good programs in order to solve those problems. Steve, apara, sarah, thank you all for your time today. Thank you so much. Still to come, top stocks on the move as we get ready for the opening bell on wall street and what to expect as the Fourth Quarter kicks off. N ll talk markets and how you caget ahead as we enter the final stretch of the year. Were back in a couple of minutes. Each day our planet awakens with signs of opportunity. But with opportunity comes risk. And to manage this risk, the world turns to cme group. We help farmers lock in future prices, banks manage Interest Rate changes and airlines hedge fuel costs. All so they can manage their risks and move forward. Its simply a matter of following the signs. They all lead here. Cme group how the world advances. Under an hour till the opening bell at wall street. Dominic chu joins us with a look at some of the mornings biggest stock movers good morning, dom. Good morning, mike. Lets look at analog share devices. Theyre up roughly 2. 5 . Analog gets up to an over weight rating from a prior sector weight now theyve just returned from a trip to asia they did all their channel checks and what they showed was that overall demand there still remains weak but things are not getting worse. They think this is a true bottoming out process thats taking place Microchip Technology and semiconductor mentioned as up. Next up are shares of mcdonalds if you take a look at those, golden arches are seeing 30,000 shares of premarket volume down 1. 5 jpmorgan reiterating their overweight rating. They are reducing Third Quarter sales growth at established restaurant locations due to what they say is less traffic environment given fewer promotional pricing. Those shares off 1. 5 . Well end on shares of Phillip Morris up 1. 5 roughly 7,000 shares they get upgraded to a buy over at bank of america from a prior neutral. The target price stays at 96 bucks. They cite among other things Phillip Morriss lack of u. S. Vaping exposure, the growth of the iqos heating products and theyre up 1. 5 , wilfred. Dom, thanks very much. Now ahead of the open for the first trading day of the Fourth Quarter lets welcome mona majahan good morning to you. Good morning. Thank you. Snapshot first of all, are you optimistic for q4 . You know what, we think theres some room tore defensive here there are a few things were watching as we enter the Fourth Quarter. First of all, the trade situation. Two dates to watch, october 15th and december 15th. Both dates tariffs are supposed to escalate. Were looking at q2 and q3 earnings and then finally, you know, last but not least the political situation. Geopolitical situation not evenly here in the u. S. With the impeachment hearing but in europe as well with the brexit situation coming to bear a lot of things, a lot of moving parts coming to bear and worried about. How close are you watching yields as to whether that impacts general risk sentiment yeah, generally what we saw in august was yields probably fell too far too fast. Yields tend to be a proxy for not only whats happening in the u. S. Economy longer term but whats happening with the global rate sentiment our yields are being dragged down with the negative yielding bonds globally were looking at risk factors on the economic front when our yields stabilize over the past month, it probably was an indication that some of the Economic Data and indicators stabilize the. Were seeing that come through the question mark is are we going to get that stabilization coming into q4 or not. You mentioned trade and potential down side forecasting into next year the big question is, whats already priced into the market on that . In other words, would we be terribly surprised if trade doesnt get solved in the next couple of months you know what, i think on the trade front theres less optimism now with the geopolitical tensions, impeachment overhang i will say from the earnings perspective, 2020 earnings are still about 10 and so if that starts getting downgraded to closer to 4 to 6 where we think it should be. We could see some volatility around that. What were looking at this quarter is will the retail side of the business really hang in there like we saw last quarter with the targets and walmarts outperforming . Will we see some downgrades on that front as well thats important to watch especially in light of trade and manufacturing. With trade, is it a big deal if we dont Reach Agreement or is it a big deal if tariffs kick in and we see more and more ramping up yeah. The best Case Scenario is we would reach a deal and the tariffs would roll back. Thats probably the least likely scenario another good scenario would be if those december 15th tariffs get pushed back further, they are going to impact consumer sectors. Think apparel, textiles, footwear, toys so really things that could impact the Consumer Spending pattern and Holiday Shopping season we already had them pushed to december 15th. You know, right now were not expecting a further push back, but if that happens that would be incrementally positive. Do you focus much on impeachment possibilities or is that not so much a factor . The good news is markets tend not to really discount political noise until something material happens especially that could be market moving. What were looking at is from a process perspective it does seem like impeachment may not be likely once it hits the senate the 2 3 vote would require 18 or 19 republican senators moving over to the yes side probably a low likelihood scenario from a market perspective, you know, could this have incremental impact on headlines, volatility, but also incremental impact on trade. Are the chinese looking at this saying whats our incentive to come to the table when theres additional political turmoil here in the u. S. Thats probably the market impact. When you say theres room here for investors to be how does that manifest itself . Yeah, you know, from our perspective, you know, across Asset Classes were up in quality, were defensive from Equity Perspective in particular, we continue to favor that barbell approach. On one hand, you know, the tech story is still interesting to us s it th it has longterm legs. On the other hand, that defensive size of the portfolio, that includes your staples, your reits, your utilities, parts of healthcare just because they have lagged so much. But really important to it helps investors over the last quarter in particular and beyond the equity side, you know, areas like dollar, investment grade, court ponds, even gold we think is interesting here. A good defensive portfolio going into the Fourth Quarter makes sense. Dollar a big winner on q3 how much does that weigh on earnings the Dollar Strength could have an impact it tends to have a two or threequarter lag impact maybe not this year, but into next year, thats where we see the downgrades coming from that. We continue to see the dollar being a flight to safety asset class. We think the u. S. Relative, you know, economic strength and relative even Interest Rate strength could support the dollar a little further here mona, thank you for joining us. Great to be here. Lets get down to the new york stock exchange. Jim cramer joins us now. Hey, jim, how are you doing . All right, becky. Whens going on . I want to get your take on mcdonalds today after the jpmorgan call, they think theyre not going to be coming in with numbers, comp store sails fsail Sales Numbers. Theyre concerned about promotional activity and not being able to bring in enough traffic. This is one of those tracking stories, theyre using some alpha to track it. There is not necessarily a lot of correlation i think this whole sector is on fire so im reluctant to go against this thing a year from now, it will be much higher promotion that may or may not be working, i dont know. Look, i like yum best. I think yum is the one that is consistent and has a low basis i like quick serve that qsr restaurant brand, more than i like these guys. Then you have to include mcdonalds, big three. I think to get rid of it on this corner is too hedge fund again, they have surprised so many times, heading into the last recent quarters. Could have anything up their sleeve what do you think about papa johns. Doing a lot of technology stuff. Im sorry, go ahead theyre doing a lot of technology stuff, but if you want technology, you go after chipotle i think chipotle can go it a thousand i think it is a great stock here they have got a lot of good things in the pipe theyre doing they have delivery all over the country, very meaningful. The stuff travels real well. I dealt with them. The expectations are they have a new item on their menu for the first time in a bunch of years that one is working. Thats the one you want to be in. What is the new items the queso. Carne asada there was no delivery in new york city. That was worth anything. We have a ceo of papa johns on this morning, the new ceo, has an activist investor who has been talking to him pretty frequently and in his office quite a lot. He talked a lot with what hes trying to do with the new guys like the door dashes and uber eats and the rest of them too. Trying to make sure both sides can get something out of it so it is not a zero sum game. What do you think . Thats why dominos has been hurt i talked to the activist there, there are very few ingredients in a papa johns pizza, the millennials like the label the fewer the better i think they have a good story to tell. I thought the guy was very clever i think that shaq is a good addition i like that story. I dont like dominos. Everyone is playing with door dashes i think the if you can deliver and door dash is willing to lose money on you, i think thats fantastic. Jim, great to see you this morning. Well be see you in a few minutes. More of jim. Dont miss an exclusive interview coming up later this morning with u. P. S. Ceo david abney. Thats coming your way on squawk alley 11 00 a. M. Eastern time stay tuned well be right back. [upbeat action music] pilot were going to be on the tarmac for another 45 minutes or so. Schwab is eliminating u. S. Stock etf and options commissions, all the Online Broker stocks are getting hit on this news, it follows last week Interactive Brokers went to a similar structure zero commissions on those etf and stock trades the race to zero in commissions is well on. The race to zero is well on. A couple of people already there. Already there everyone has to get there, yeah . Theyll be some ways that theyll eventually still charge, you know, whether it is an annual fee for the account or perhaps they make money on the back end, a lot of these firms are gathering assets, charging a fee on the account, or just making it on the trading side as they make markets and different stocks it is very interesting, because for many years, the traditional Online Brokers and retail brokers said we charge 6, 7 a trade, it is not that big a hit. But the pressure of a lot of the startups has been those are significant moves there. The ameritrade down 14 , etrade down 13 , does it really drastically change the Business Model . Different degrees for Different Companies and thats exactly showing you that right there. The ameritrades and etrades more degeared to the commission the question, mike, as you point out, in six to 12 months there is more rationalization between all of them and they make it as big as before. Not almost as big as before i think thats all automated up there. You can make it up, but it shows you here, i think the fact stocks are getting hit hard to imagine it was a cozy setup, you think where we were 10, 15, 20 years ago and where the numbers were. Schwab used to be the cheapest at, like, 30 a trade 25 years ago. The other point, you look at schwab, bad 18 months, share Price Performance, but had a fantastic 16, 17 getting hit by the fed cutting rates. Not earning as much on the balance. Yes but it had a good run in terms of the market share and the way their market cap caught up with the falling market share of goldman sachs, for example, those guys were in a good space as you got more automation of trading, a structural thing that supported the fees when it came down. All right. As an asset gathering platform, they have done really well. Lets take a quick look on markets, one final check before we hand things over to squawk on the street. We have been looking at the futures indicated higher, first trading day of the quarter the last quarters with a good one for the dow and the s p 500. The nasdaq off slightly for the quarter. You see the nasdaq up by 29 points dow up by 87 s p futures indicated by 9 thats it for today. Join us tomorrow now it is time for squawk on the street. Good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber at the new york stock exchange. Welcome to q4, getting kicked off with futures up nearly 100 amid the global bond selloff today on the heels of a rough jgb auction. Europe red on a weak pmi 457, inflation near a three year low. Our own ten year near 175. Road map begins with questions