Transcripts For CNBC Squawk Box 20240713

S p up by 3 and the nasdaq up by 13 in germany, they are closed for a National Holiday the ftse is down about a third of a percentage point. Youll see this morning, the 10year is yielding 1. 582 the twoyear down 1. 47 . Breaking news. Taking place overnight lamb indicating a new plan that will invoke a power law. The city will ban masks protesters have used to protect themselves from tear gas or to hide their identities. All of this happening within the last several hours pepsi co coming in better than expected. Revenue coming in up organic Revenue Growth and pepsico expects to meet or exceed Revenue Growth. It looks like better than expected across the board. Some of these have such nice multiples. They keep doing it in manufacturing and other areas. Dont want it to be like days of general electric. Remember when coke was 40 or 50 times . Pepsi is trading at 4. 85 times. Price to earnings ratio of four times. Thinking about your story there about the masks. Well have a guest on later who described a recent trip and how everything is so advanced. There are facial recognition cameras everywhere there are no criminals because they are all hiding. I used to worry with your license plate, police now can drive by and take a picture. They dont even have to take a picture. It goes off. It will go off if you have outstanding warrants is that the future with facial recognition . Yes the problem is not just for criminals but for any political statement you make i would never do that but it is a scarey future. Really interesting they have a depopulation they dont have enough workers thats what happens when you have a onechild policy. We are going to have a population soon. That is coming to a Movie Theater near you if you have kids, you know, all youll ever do is deal with your children. Buts that fine thats what we want it is great the trade war releasing a list of goods from the eu. Interesting that the wto gave the go ahead on this we have the cover there. President trump released a 7. 5 billion award saying weve been treated badly with trade a nice victory willem marx joins us now you going to stop these now that you are busted the wto arbitrators have said this is not allowed. The european commission, you may not be surprised to know not thrilled at the prospect a few months from now, there will be a wto victory against them and boeing. In terms of the european reaction, they say they will have no other option but to retaliate and move ahead they say the tariffs are counterproductive. French leader saying they would be an error. Because of the timing, they have talked about an idea to use all of these rulings before that boeing ruling which may no happen until the spring. They are not surprised by this u. S. Move but nonetheless disappointed thank you willem marx for us here, it means an escalation of what we were already dealing with in a market that was down a couple of days i believe Delta Airlines and jet blue came out and said they shouldnt be penalized for orders that have already been placed some u. S. Companies are complaining about this as well tesla delivered a record 97,000 cars in the Third Quarter but that missed analyst targets. About three quarters were model 3. Higher priced models s and x dropped. Tesla saids it exceeding deliveries it would need to deliver 105,000 vehicle in the Fourth Quarter to hit the target of the year you are talking pretty fine margins of things. I think it was 97,000 instead of 100,000 that was anticipated this stock is closely watched and monitored for any time they are going to miss numbers. Elon musk said they could come out on the higher end of things. I think in the email to staff. There is something to be said to underpromising and overdelivering you did see the stock down by more than 4 looking at highs not quite hitting 400. Recently was down under 200. Again, you are talking about 300 cars coming up, more on the market turmoil. Well talk the strategy that could move markets the next premarket winners and losers in the dow. 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. That could allow hackers devices into your home. Ys and like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. Wall street knocked about 800 points off in two trading days joining us to discuss the market now. Global marketi director and managing director. First question, you are referencing i said something yesterday. So you were watching and you thought that was a compelling question i asked about the secular bull market. You were watching . I was watching. Thats why you get the first question we may get to you . Is your answer yes . Yes, it is. If you look at the 200 week moving average, it is a good proxy. The market tends to skip off that longterm trend the market came down to 23. 46. As a definition of what trend is, the market is still in the up trend is that turning . I dont think it is. At this point, we are still in the bull market. You think those could be bottoming in this quarter . Yes, i do you look at financials and industrials. They are weak sharts theyve been side ways and down 8 to 12 months the longterm data is trending bottom i think we are coming into a zone where you have to be very careful being ex sensitively bearish. The shortterm data is getting deeply oversold here wildly bullish, i think there is a high chance the market deflects to the upside i didnt find much for you to like in this market. You think trade issues have been sort of underestimated and they are coming home to ruse now. Interest rates are low i wouldnt say im overly bearish. What are you . Where investors have gotten defensive and youve seen rates go down. Theyve declined i actually think we could head into a period of better clarity. I think the administration, you need to see improvements in sentiment and tone these leading indicators will start to pick up to the extent you are bullish or neutral is this a last gaps of air or do you think there is a lot of room to roll . To roll over . No. In a good way of this going on a lot longer, or like what happens at the tale end . Andrew, ive been saying this is going to be the longest on record we really havent gotten started yet. Value stocks are to bonds. Cumulative growth has not been huge there is no inflation. All of that is con deucive for access to go higher. This is the third time in the cycle we have had a marked slow down first was the debt crisis and the fed. This is the third one. This still doesnt feel like a huge slow down to me weve been rolling through. If you look back to wherewith where we were a year ago we had some turn down in may. Now we are dealing with it again. These are the declines this is not the end of the cycle. It is a pause amid you had a good nights sleep and it is thursday or something. If i read your notes, you were in such a bad mood yesterday as a result, the Global Economy has slowed u. S. Indicators are pointing slower bond market is viewing this as a mistake. Further deteriorates further activity and recession models are slowing growth. Not yet in that territory. I havent seen one positive i was responding to questions being asked were we talking you into negative comments . Far about it from the media to do that. The market is why does the market so bad. Dont tell me this. I apologize. It was on me where i need to push back and say yes, do that. You dont have to be a hostile witness. It is okay. I didnt want people to think i was accusing you of being negative i was like brian is not bullish. No. This cycle should go on long it doesnt have to be this way 2 growth, 2 inflation, all of that should be really good sentiments eroding, the administration could change that in an Election Year and i expect they will. Im really glad we had a moment lets clear this up. Can i go back to your question yes, please people talk about market cycles when we look at the market cycle and separate that, they do track, you look at the average move, you have the market cycle that goes up two years or three years. The minimum is around 62, 65 the 200week moving average is rising it could get worse or better. This doesnt feel like a big pull back to me. This makes fridays employment number even more critical. People are going to look at anything they can. Adding that employment numbers are down people react when they dont know what is going on. We sliced that two days ago when they went down hard. The short term indicators is starting to get buried i can understand your point but we are down less than 3 weve been treading water for a long time. The longterm trend i think we have a bounce before that when you look at the longterm trends, they tend to run in these 15, 17 cycles we have a small sample size. 50, 60, 70 thats your sample size they put people in jail for circumstantial evidence surely we can vest invest on that i like that youve got that ugly construction bolt. He found that on a construction site and it fit. So good it is an ora ring. He says it is just a delay. We may be bottoming. You are a technician but if you need a fundamental back drop, im giving that to you now. At the end of the day, you need to watch does value tend to bottom towards growth. Thats the 64,000 question. It is going to get interesting next timeyou come on, ill call you personally so we can talk thanks thank you for having us coming up, more on squawk box. Well tell you what is going on at our favorite place. Bed, bath and beyond we got to go. Stock is down and dipping further this morning joe and i have been doing a lot of window shopping this year, less buying. I just got a vaporizer no joke. And it is not for the kids. That store and more all part of todays big movers. At synchrony, were changing whats possible every single day. And if you run a business, that means a lot. We create Financing Options for your customers. To help them get the things they love instantly. Our data provides insights into what your shoppers have already bought. So you can offer them what they might consider buying next. Our technology and Financial Solutions are changing whats possible in all sorts of ways. So, how can we change whats possible for you . Welcome back to squawk box. Time now for the executive edge. Well start with some stocks to watch this morning bed bath beyond. Same store sales fell. Despite my humidifier. You bought it there yes on line. The company says it is making progress in a search for a new, my goodness, permanent ceo joe, this could be an opportunity for you. Id run this. What would you do start selling beds. Bed bath beyond. The bed business has not been good casper . Casper has been good. I know. They dont have a lot of creativity you know what they call the company, the Mattress Firm that is a play on firm words. They are firm shares of gopro primarily due to production delays for the latest hero 8 black cameras that is the highest end that gopro is offering. That has been a tough ride 600 million market cap and shares of clorox lowering estimates. Announced a new strategy aimed at increasing growth fast food wait times have gotten longer. Finding 20 seconds more time waiting for food compared to last year, which makes no sense. The chain with the fastest time Dunkin Donuts average wait time. Chickfila was the slowest with an average of 323 seconds. Not that your actual wait time, it is when you are in the line some of these places, i see what people order i get really annoyed when i see six different frapacinnos. At starbucks . Mcdonalds. Where is that happening mcdonalds out of my way they captured that right there. What year was that . So long ago that is like a 1200 hp horse power powered porsche. And botax saved me. I kind of look the same. Keep thinking that. We look awesome i saw someone yesterday on a different network. Did you see beto got his flu shot no. He did his whole flu shot. The person talking about it said i get needles all in my face every three months im 50 and im on tv i dont care who knows and i get needles in my face all the time. Go, girl. Whoever that was i was proud of her. I havent yet but only because im afraid you are 30 years old. Sorkin, you havent yet either not yet but you would i wonder if any of this smaks the podcast. Coming up, well take a closer look at the data. Well also talk about some of the biggest moving sectors this morning, a look at the futures but not by a lot bouncing back at all news on the potential public listing for air bnb that comes after this break lets look at yesterdays s p 500 winners and losers too, if we can find any through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From finding out whats selling best. To managing your fleet. To collaborating remotely with your teams. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Announcer welcome back squawk box. Good morning. Markets in turmoil this morning. Bringing the october decline to 838 points do you 3. 1 this quarter up 11. 8 for the year. Remember that drop began tuesday after a key measure of u. S. Manufacturing saw the lowest reading in more than 10 years. Well get a read on the Services Sector the nonmanufacturing sector cover 80 of employment in the United States. U. S. Equity futures ahead of the open right now, the dow would open about 20 points higher, nasdaq about 11 points and s p 500 around 3 points. An update now on the investigation into the 737 max i u. S. Panel has asked boeing to make an engineer available for an interview after a worker filed an internal ethics report after that engineer said boeing rejected Safety Commission in order to minimize costs. Air bnb is set to hire jointly Goldman Sachs and Morgan Stanley leaning to a public listing thanner than an ipo. That the mood is that they stick it to the bankers, to do that. Look at direct listing with slack, that is not exactly an argument for something working out either a different example i think it is a profitable company, it is a digital company. So there is scale to it. There is not crazy costs it is a Global Business. All of these now are valuation story withes we can argue whether wework is a terrible business or others. Have the private markets outpaced the public . What are the latest numbers for air bnb . I think over 30 billion, 35 billion. The latest number now. Whethers that right or not is the question whether these venture capitalizes have marked these up is the issue the other piece, the Public Markets that have done it as well the people putting up the money are not sticking them up at gun point either. Are there still people willing to run it higher i dont blame those people i dont either. Tripping themselves to get into these things. 100 . Stayed in one i didnt do it. Good for you. Someone has one im not a germophobe, so ill be okay. What do you do over there . Organic hand sanitizer, essential oils we like this you are making me uncomfortable. You use it too. Im not pitching it my favorite is, i dont want to shake your hand the guests who come in, sometimes it is their first time on tv and their palms are a little sweaty. Coming up, new data come on new data on moods in americas work force showing cities are becoming more and more popular here to take trade and taxes you are watching squawk box on cnbc your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. Healthier brain. Better life. You get the freedom of what a 7day return policy. This isnt some dealership test drive around the block. Its better. This is seven days to put your carvana car to the test and see if it fits your life. Load it up with a weeks worth of groceries. Take the kiddos out for ice cream. Check that it has enough wiggle room in your garage. You get the time to make sure you love it. And on the 6th day, well reach out and make sure everythings amazing. If so. Excellent. If not, swap it out for another or return it for a refund. Its that simple. Because at carvana, your car happiness is what makes us happy. Servicenow put our this changes everything. Youre right sir. Everything. No not everything, i mean youre still blatantly sucking up to me gary. Brilliantly observed, sir. Always three steps ahead. Six steps ahead. Sixteen. So many steps. You done . A million steps ahead. Servicenow. Works for you. Welcome back, everybody americas work force is changing let me read. Not in size but where they live. More professionals are avoiding high cost cities as more affordable cities rise in popularity joining us now to look at the winners and losers chief at linkedin. The reason these cities have gone up is because more and more people want to be there. The question that comes up is what happens when salaries get too high, costs get too high we are seeing what p happens now. Finally a Tipping Point yes when housing prices exceed 30 you cant keep top talent. San francisco, 51 people are living. They are going to phoenix, minneapolis. These are the new places attracting people. Bad for the big cities good for the companies. Steve has been a lonely voice in this. Hes been right. What is interesting, they go to these bigger cities. Absorb what they need to on Companies Working there. San francisco is absorbing the tech scene and taking it to smaller cities for these companies located in these highcost cities, they are smart enough to think about the Flexible Work forces how do you make sure you can have people in these smaller cities and still work for you. Is this being led by commuters and cost or by companies saying we cant continue to pay people higher salaries to bring them here . More led by Workers College graduates. You want to hire me, i cant afford to live in san diego, seattle or San Francisco im going home im going to nashville is this a good thing or bad thing . I think it is a good thing. It is a great thing someone from louisville, kentucky and always wondered why people dont go back there people are taking longer commutes people spend 90 minutes, two hours commuting. There is a citification happening. Places that used to look more like suburbs when you are 21 and you want to live in San Francisco but you cant so you live in minneapolis. You want all the same services these cities are having to meet the needs of workers who would like to be in cities it is an opportunity. There are pluses and minuses. You think of going to a sporting event in a smaller market and there is no traffic. You go to the u. S. Open here it is great but it is an event getting there and getting out. It is just different in smaller markets. Louisville i love flying into airports in smaller towns it is easier. And you are not spending all of your money on rent. Will employers follow suit . They have to. They have to get the talent in they are competing for the same type of people youve got to follow the people. This hiring is still strong. Monthly job numbers came out 1. 1 increase. There is still a demand for people still a workers market. Still saying this is not the case we are seeing a growth in software, it, anything where tariffs polite be hitting is seeing a drop. We saw 5 decrease in hiring since the peek last year thank you coming up, utilities outperforming those sek trs. Well dig into that sector as we head to break, take a look at the rough start to the tech sector nasdaq down. The worst q 4 debut since 2009 squawk returns right after this. Welcome back to squawk box. The markets have been volatile of late. A sleepy sector has been soaring and we want to focus on that right now. Utilities are on pace now for their sixth straight positive quarter for the First Time Since 1995 although the sector did get hit hard yesterdays sell off can investors continue to hide out in this group . Thats the question of the morning. Joining us to discuss whats working in the group is gordon of evercore. Good morning. Is this the Interest Rate story going on here . The simple answer is no, its not. The classic scenario is when Interest Rates are low and the markets are volatile, people flee to widow and orphan stocks, utilities. And that has been true there is also a tremendously positive business fundamentals for utilities in the u. S. Right now. When youre in a low inflation environment, it actually it actually drives really good consistent operating and Financial Performance for utilities because they operate in a regulatory model called cost plus. They push their costs onto the customers and they get a return on the capital theyve invested. Weve had such a low inflationary environment for over a decade in the aspects of the economy that drive utility costs that theyve been able to lower their costs dramatically in order to make room in the bill to spend capital on things like wind, solar, batteries, smart grid, stuff that enhances the Customer Experience without raising rates. I want to talk about names, but i want to ask you one question about the sector itself which is the val situation story is, its not bumped up in terms of multiples applied to this, dont you this sni theyre at alltime highs if were at the alltime highs, are you still willing to buy the entire sector across the board . You were going to talk about specific names people are going to be listening to you thinking maybe i should buy a utility index. Absolutely not. Dont buy a utility index the group is expensive for good reasons Interest Rates are low, fundamentals are strong. Returns on capital theyre being allowed to earn by government regulators in the states they operate are high if youre not going to buy the index which youre telling people not to do, you would buy what first of all, i would be wary of buying the really sleepy sort of best in class widow and orphan names not because theyre bad companies. Theyre great kptz theyre trading at full valuations wisconsin energy, xcel energy, great companies, great management teams, just really expensive. You have to go down the list to companies that have a little more complexity. Going from complex to simple like first energy, which is really a pure wires company. But used to be a pure wires company that owned merchant power business merchant power business is in bankruptcy theyre in the last months of revising finalizing that bankruptcy plan. Theyre giving away those plants to their creditors, essentially. On the other side of that transaction youre looking at first energy 47. 31 whats the multiple on it now, do you know . Its trading 17 to 18 times its high the best in class compounders, excel, theyre trading 22 times a relative merediperspective, i youre looking to trade this rally that yield 3. 2, you can get other blue chips with higher yields thats my question it was years ago remember when florida power, i think, decided they werent going to be just a yield utility, a total return utility because they were doing other things we were buying it for growth and for Dividend Growth in the future is that still a strategy that utilities are embarking on or are they just yield plays . Youre making a really good point. Why would i buy a utility at 3 ish yield theyre growing dividends at 5 a year a 3 dividend and 5 growth. You have a business model, you look at beta relative to the market, beta is miami heat 7 if you did get 5 growth, think about the risk adjusted return versus the market. If you can buy a utility, you can buy at t with 5 top line isnt growing. But the utility top line is growing more than these wellknown blue chips . Precisely weird okay what else do you like real quick . The other one i like is semper energy. The stock got hit in part because theyre a california utility. California had the horrendous issue with fires and pg e is in bankruptcy they were hit the last couple years because theyre not just a utility. Theyre also a big lng export play and theyre lrks ng export facility got delayed its about to be finished. Theyve also been selling off assets that are noncore to the business they announced a massive asset sale 143. 73. Whats the dividend . The dividend is less than 3 , but growing at grater than 5 a year if you look at the total value of the assets including lng you can get to 165 bucks with multiple expansion i think the multiple deserves to expand because a discount appears. Were going to leave the conversation there its nice to see you dont say we dont give enough attention to utilities have to start doing that happy to be here. Come on back. Thanks when we return, the s p 500 logging its worst start to the Fourth Quarter ever. Well dig into the last two days and what it means for the rest of the week, if anything plus later weworks future is new york citys private office any systemic threat to the work space industry well dig into that question as well stay tuned to squawk box. Well be right back. Beyond the routine checkups. Beyond the notsoroutine cases. Comcast business is helping doctors provide care in whole new ways. All working with a new generation of technologies powered by our gigspeed network. Because beyond technology. There is human ingenuity. Every day, comcast business is helping businesses go beyond the expected. To do the extraordinary. Take your business beyond. Announcer fidelity is redefining value with zero account fees for brokerage accounts. And zero minimums to open an account. At fidelity those zeros really add up. Maybe ill win saved by zero announcer a scary start to october. The dow shedding more than 800 points in just two days. Whats driving the selloff as we head toward jobs friday is straight ahead will the wework debacle drive down real estate it was supposed to be the darling of ipos is coming up plus senator pat toomey on trade, taxes, and the 2020 election what will sway markets well find out 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 joe kernen along with becky becky quick and Andrew Ross Sorkin the dow jones down about 15 points after losing about 3 in the last two sessions. S p down less than 2 points. Nasdaq just turned negative, now down less than a point heres whats making headlines this hour. Shares of pepsi co. Down in premarket trading. A quarterly profit of 1. 56 a share, 6 cents better than the street was expecting revenue beating the streets forecasts. 4. 3 jump in organic Revenue Growth as a result you can see the sock is up 3 and a third trading up at 138. Ho e. Trade joined rivals for online stock trades. Charles schwab was the first to cut commissions and followed by rival t. D. Ameritrade. All three stocks took a hit when schwab announced the expectation everybody would have to get to this level here we are at the end of the week thats exactly what happened the institute for supply management is out with its nonManufacturing Index at 10 00 a. M. Eastern time today. That index measures u. S. Services economy and its expected to come in at 55. 3 for the month of september that would be down from 56. 4 in august, but still above the level of 50 that separates an expansion from contraction this is really important this time around because earlier this week the isms Manufacturing Index came in below 50 thats what triggered the initial market sell off this week so people are going to be watching this number very closely. Okay. Mr. Liesman is here. He is in the house on the set with the one and only latest allamerica survey im selling it here for you. I am. I want to give joe an opportunity. Just a second let me finish i will not be the same i look forward to every saturday i love ncaa. I do the allamerica survey folk uses on how folks are feeling about the economy. Its been a rough week as we all know on the data front tomorrow is the jobs report, and mr. Liesman as i said is in the house. Tell us all about it its not a laughing matter. Americans attitude toward the economy taking a sharp turn in the Third Quarter. Cnbc Economic Survey with 41 pessimistic about the current state of the economy and the future the poll measured the highest level of pessimism since 2016. A stark change since last year when the index was hitting alltime records the good news, attitudes about the current state of of the economy, the big move came from a 7point drop in the outlook for the future thats the biggest quarterly drop in that measure since 2011. The decline in optimism was picked up across political parties, but in a sign that impeachment could be having an impact, we conducted it last week, the largest drop has been registered among republicans this poll of 800 people nationwide also found that more than half of republicans said they were concerned that impeachment could hurt the economy and the stock market but there was more work than just politics. Other key Economic Indicators in the poll also were down. Just 36 expect their wages to rise in the next year. Thats the lowest since march 2016 just 35 say now is a good time to invest in stocks. The lowest in three years. And with 23 saying the economy only 23 saying the economy will improve, the surge in optimism that accompanied the election of President Trump and grew and sustained over the past two years, its now wiped out back to before the election time still, 37 of the public say the economy will remain the same and that would be pretty good. Only around a third expect recession within the next year but its the first time in the 11 polls weve conducted during the Trump Presidency that the pessimists outnumber the optimists. Can i ask real quick, when youve done how many years have we been doing it now . 12 years. Its been 12 years already . And how good has it been you havent changed a bit how good has it been as an indicator in terms of market and economy and separate them . Its a very good coincident indicator of whats going on in the market alma okay. Its quite remarkable that forward looking or backward looking . Coincident, as the moment it moves really well with the headlines. The optimism on the market, the poll, the people who respond ed to the poll which is different every poll, completely missed the blue market of the last presidency and theyre a little more optimistic now, but they have not people without stocks have been relatively pessimistic when we think about what technicians use, though, for sentiment indicators, its always contrarian. Ive done work, joe, to try to correlate it with stocks. It can be and it is sometimes. Whats interesting, guys, i dont know if you have that recession chart that we did with the 34 expecting recession. How great are they in the babbling there thats little change, which is important. So they dont expect the worst that number tends to get above 50 when were either near or in recession. So thats a pretty good indicator there. Its a good indicator of the job market when people look at their wages. Im really surprised to see that wage number, the wage expectation number to be down. Me, too we heard linked in saying this is absolutely still a workers market lets bring in our guest well continue this. The chicken or egg, we dont know is it the politics or Economic Outlook or Economic Outlook affecting the politics war of words risen in the poll for trump, you have the impeachment overhang weve had discussions about whether president s really matter on the big frame of things with recessions, growth, whatever but there are some people that argue we had an analyst that brought in three parts of the stock market you should be buying or selling puts on if your chances get better. Health care, banks and technology the political backdrop is going to matter on how people feel about the economy. Decline in republicans was stunning 13 points down among those who say the economy will get better. By the way, that was last week, not this week. That was last week this poll was taken last week. I wonder if you took it this week independents, joe, down by a point in that measure. So theyre less affected by that lets bring in investment strategist at blackstone also mike santoli, of course, our senior markets commentator joe, what do you think there are so many signals right now from the ism manufacturing, from what we heard yesterday with the adp report. Are things getting worse are we headed towards resnegs i think things are getting worse. I think markets can sell off further from here. Well see credit spreads widen out. I do think the risks are elevated if you think about what weve seen pretty much for most of 2019, it was a pretty stable environment where you didnt have a lot of volatility and Economic Data points the fed was cutting rates and the markets cheered. We saw the markets going up stocks go up almost 20 . And if you had said a year ago that wed be in an environment where unemployment would be at a 50year low, wages would be rising, home prices would be rising and the fed would be cutting rates, i would say thats absolutely crazy. Thats not how the economy works. Thats exactly what weve seen so far in 2019 now that narrative is being challenged it started with yield curves inverting, beginning of august and september. Repo markets beginning to misbehave. Now were seeing cracks in ism were seeing cracks in some of the leading edges of labor markets. And it suggests that, you know, at this point in the cycle, the question becomes the question isnt if there will be a recession. Its when will there be a recession. Next year, two years from now, five years from now i think the count down timer started from the time that the most predictive part of the yield curve, the ten year to twoyear treasury inverts, you have an average of 20 months before a recession the question becomes, is it going to be sooner or later . Before or after 20 months . Because 20 is the average. I would think with confrontational trade policy and some of the cracks that were beginning to see in the economy, its going to be sooner. I dont know if thats six months from now or 12 months from now, but regardless, were on the clock michael, weve made a lot of the850 plus point decline wev seen in the last two sessions. When you look at the averages, youre still looking at the s p not far from 2900, and that makes me feel like, okay, maybe its not as much of a bargain as people think the s p is 4. 5 from its high it struggled to make headway over a year what theyve told us is august was not just a fleeting kind of late cycle freak out by the market this is the story line and, you know, if you actually have any conviction that were going to avert recession in the next year or so, you would say this is probably is going to pass, this storm is going to pass. I think the market lost its bet you can you cut the fed rate the market has gotten pretty oversold and pervasive what if the ism 306 today better than expected . Yeah. Yields would go up and that would let stocks go up that would be my expectation i know. Keep in mind its a survey. All the mood stuff steve is talking about is on the downside what if its below 50 for nonservices . For services that would be a problem was it did i say 53 or 54 were looking for . Its a great question i think the risk is to the downside when you ask it that way. And i think about the answer if its on the up side, people are like thats cool, thats great. Im not trading necessarily downside would confirm the negative to mikes point, this is a confidence survey. If its up, the consumer we got freaked out over manufacturing which is a small part of 10 anyway, the other thing, steve, you said chicken and egg. If the likelihood of recession increases, trumps chances go down significantly, which brings in, again for reelection. Joe, i have to tell you Something Else were back at 8 00 with another piece of this. The president is not doing well among the public with his signature economic issues. And i have to think that you can have higher levels of optimism if there was better belief in immigration and trade. Its not doing well. You saw you were out the day we reported. His economic approval numbers, the worst of his presidency right now. And the trade i think will continue to linger, right . This is a big issue and it invites a lot of unintended consequence. I think thats what weve started to see through manufacturing, and now where its beginning to spread to the leading edges of labor markets where you have things like your average hourly workweek is beginning to rollover. The number of job openings is rolling over and i think all these things are sort of related to trade adds long as trade lingers, then were going to have to worry about these the downside to a lot of these economic your gamble is the trade issue continues to linger. I think it continues to linger one of the things that is probably missed by a lot of people its no longer isolated between the u. S. And china its now spread to japan and south korea. Emerging market currencies all around the world there are elements of populism or regionalism or inward thinking that are actually, i think, driving this entire global trade agenda, right weve seen it all throughout the world where sort of free trade is under attack. Mike, very quickly set us up for today. Were watching ism watching ism. I dont know anyone is going to be here ahead of the jobs number tomorrow the market is best turned decisively like i said, after two days pretty oversold if you look at the under market of the service index. The makings are there. Its in our heads for a little bounce gentlemen, thank you very much thank you coming up, when we return, weworks capital, look at the companys future and what it means for the commercial real estates market given theyre the largest tenants in new york city and london. Later, the Trump Trade War expanding. Senator pat toomey is going to join us to discuss the implications u e tuned yoarwatching squawk box here on cnbc devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. Welcome back to squawk box this morning tesla delivering 97,000 vehicles, thats the number to watch here, to customers during the Third Quarter. That is the most ever for the automaker. Thats the good news but it is short of the 99,000 deliveries that wall street had expected in large part because of that leaked email that just came out, what was it now, two weeks ago, three weeks ago from elon musk. Were going to speak to an analyst about the numbers in the next hour. Coming up, how the wework fall out could impact commercial real estate. Already has. The Company Running low on capital. And yesterdays bond downgrade didnt help. Then later, the federal government spent 1. 1 trillion on health care in 2018 today the president will unveil a plan to boost the Medicare Program and improve its fiscal position well speak about the Nations Health care system and talk stocks in the sector when squawk box comes right back. Announcer time now for todays aflac trivia question. What was americas First National park . The answer when cnbcs squawk box continues coach saban we have Health Insurance. Did Health Insurance pay for everything . No, we still have bills. Aflac gives you money directly to help with those. Aflac and your deductibles, knee brace, whatever you choose. Aflac sounds like a winner. Umhum. Umhum. We try. Get help with expenses Health Insurance doesnt cover. Get to know us at. Duck aflac dot com announcer now the answer to todays aflac trivia question. What was americas First National park . The answer yellowstone, established in 1872 its a question being asked on wall street a lot these days. Does weworks implosion pose a Systemic Risk. Leslie picker joins us now she has more on how the company went from 48 billion valuation to bankruptcy in six weeks its a phenomenal story to watch. I cant believe its been six weeks. Seems like so much has happened with the company with the ipo market in general as a result. Wework scrapped ipo 10 billion of fresh capital for the company. With staggering losses and now dwindling cash on the Balance Sheet, wework is now in survival mode wework slid to an alltime low this week as s p and fitch have slashed the companys Credit Ratings further into junk territory. The Ratings Agency has highlighted the risk that amid all this turmoil wework customers could hesitate to sign new agreements and megadeveloper don peebl said wework could default on real estate obligations. I think right now whats going to happen is theyre going to begin to see a significant pull back in access to any kind of capital. Im not sure lenders would see them as a significant Investment Opportunity any more to sure up kashl, wework has considered selling off stake in the wing and is said to be look for buyers for its other businesses such asmanaged by q, conductor, meetup, team. Wework could get a negotiated Credit Facility from some of its bankers and anticipating a new cash infusion from softbank next year the question is whether that will amount to enough to support weworks losses and liabilities, guys were going to continue this conversation right now wework as we just said, strapped for cash but the issue for the we company could affect the Real Estate Industry the chairman of rxr realty, managing over 20 billion in Real Estate Properties and investments. And there is a concern, given that wework is technically the largest tenant in new york city, the largest tenant in london, whether it could actually have a real down draft on the price of commercial real estate in terms of office space in these big cities lets start, i think, with weworks business itself fundamentally its core business, right, is sort of on track people are living, working, playing, staying differently they aclittle had recognized that and began to build office space that created that sense of community, highly curated Companies Looking for flexibility. Flexible office space short term lease was appealing and one stop appealing. The question now is wework is at this critical juncture as leslie said, is there confidence in them moving forward. I think theyre trying to take the right steps. If i look at what theyre doing in terms of putting two new coc. E. O. S in place. You like them he a like their core business. Obviously they went off. They had a business that was working and they tried to expand too quickly. The other thing thats important this is intensive and operationally intention i have business its hard to expand the scale they did and get into schools and this Network Effect. If youre a landlord today, would you rent to these people thats a fundamental question in terms of growing the business. This is grow or die, the economics the way theyre currently structured wework today needs to pull back wework needs to shed noncore businesses, slow down their growth, regroup, refocus on their core those are the steps theyre taking they have to grow the core otherwise i think they need to regain the confidence of their customers. Wework is in two businesses, the core business is in the coworking space and the enterprise space the enterprise space is 45 of their business, is backed by Companies Like bank of america, j. P. Morgan. Theyre the ultimate tenant in those spaces they need the confidence they can continue to fill the space how much do you care the talent to the extent there is talent there, is going to walk ought the door by the way, the talent that works for wework, they historically didnt want to be in the real estate business. Were attracted by the sex appeal of what this company was supposed to be, the idea of an ipo. Theres a lot of things going on a lot of people there saying i need to run for the exits. I am tarred by adam newman tarred they actually think that theyre going to run for the hills. What does that do to the whole franchise . Listen, they kept two coc. E. O. S the critical point now is the capital side they have to be able to validate in the market place that they have the capital to get their business to the point where they have a path to profitability do you think they can get out of some of these leases . There are questions, i dont understand if you understand the structure better than i do how wework is set up such that there are various organizations that could effectively file their own bankruptcies without necessarily hitting the core the one area wework was disciplined on from the very beginning was actually not putting up their Balance Sheet and fully guaranteeing leases. Most of weworks leases are either off of subsidiary entities, shortterm guarantees that burn off. For example, if theyre attending 18 months what landlord in the world is going to continue to allow that to happen in the future . That wont happen and i think thats already started to shift out of the market place most landlords are starting to move to more of the managed lease agreements when we do a deal, were signing managed lease agreements, were putting in capital, sharing in the revenue up side and not relying on their guarantee, relying on an underlying business is there Systemic Risk . We talk about theyre the biggest tenant in places like new york and london. Theyre only 1 of the commercial real estate in new york city. Its 5 of new york city. I think the Systemic Risk is a good question. When you think about the scale, very small the enterprise space as i mentioned, its 45 of their business so take our lease that we have at wework. Its 100,000 square feet bank of america is on that is the tenant in that space they occupy another ten floors theyre not leaving that space if wework leaves if you pull that out of the equation, there is some stability. Where youre going to have issues is absorption theyve been growing and absorbing a lot of space thats come onto the market too quickly. Cuts down on potential increases down the road. Particularly class b space. What does it do to valuation of other businesses trying to be wework im thinking of the wing whats the valuation of wing half a billion dollars. I thought it might have been a unicorn. The question is does a businesslike that still get that kind of valuation . Do all these other guys, are they now going down or are they going up so im an investor in a Company Called convene which is somewhat of a competitor wework does also meeting spaces which is the base of their business when you sit in our board room, there is a clear path of what are the fourwall economics for each of the centers that they open what are those return on equity on that economics. Whats the return of capital in the economics, whats the path to profitability i dont think anyone ever believed the valuation that wework or invested in the valuation being applied to wework i think that was part of the problem. Wework was being pushed by this valuation to go expand into other businesses to try to justify a Network Effect in a capital intensive operationally intensive business, this is difficult. This is not airbnb could that be part of the solution more like a moral hazard situation where people who are potentially losing confidence in wework could turn around and say, well, softbank has so much at stake here. Maybe they will help keep this thing afloat so i would be very surprised if softbank and the other investors dont put together a capital plan that keeps wework afloat, the confidence to keep the business going thank you you may be sick if you invested in health care humana, down 25 or more well discuss the sector and the president s vision for medicare and much more. Squawk box well 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. High protein. Low sugar. Tastes great high protein. Low sugar. So good high protein. Low sugar. Mmmm, birthday cake pure protein. Find our coupons in sundays paper. Still to come on squawk box this morning, Health Care Stocks and your portfolio. With the sector getting bruised over the last year, is now the time to buy . And then new tariffs on the e. U. And the ongoing trade war with china senator pat toomey is here to talk about the trump economy also a little later this morning, a rough start to the Fourth Quarter what you can expect as we head into the end of the year squawk box will be right back. When it comes to your customers expectations, theres one thing you can be sure of. Theyre changing by the nanosecond. Thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. Cool. 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. Welcome back to squawk box this morning here on cnbc. Lets take a quick look at the futures now. We have 2 1 2 hours less than that maybe 2 1 2 hours to go 2 hours to go before the open. Dow opened down 22 points, round up s p 500 looking to open down well call that 2 1 2 points President Trump will be giving a speech today about his Administrations Health Care policy and is expected to announce an executive order entitled protecting medicare from socialist destruction where are Health Care Stocks moving in 2020 thats the question. Bertha coombs joins us with the answer theyre on pace for the worst year in the great recession. Its a lot like a patient with one chronic condition. You get one calming down, another one flares up. After ten straight years of gains, Health Insurers are the worst performers year to date. White house and congressional proposals to overhaul pharmacy benefit fees have weighed on players with big pharmacy benefit units now like cigna, United Health and cvs all year but movement on regulation in congress and from the white house has not been as decisive, it hasnt moved as quickly as people feared. But now that democratic hopeful Elizabeth Warren is surging in the polls, thats renewed fears about medicare for all shes advocated getting rid of private insurers and pbms altogether biotech firm and pharma squarely in regulatory crosshairs, they have lost nearly all of the years gains but they actually have performed a little bit better than the overall market this week with the impeachment standoff ramping up there is some conventional wisdom that will likely put drug price bimz on the back burner because washington will be distracted and then j j, endo farmer up for the week after signing onto a settlement in the ohio opioid litigation this afternoon the president expected to sign an executive order. 9 thought is hes probably going to extend a lot of things medicare is already doing for seniors and a lot of new Medicare Advantage plans have extra services sort of longterm Care Services for people who are in lower incomes, for example, if you have breathing issues they might try to help you with your air conditioning bill or get you an air conditioner to help you, things like that theyre looking at perhaps extending some of those things and we are just two weeks away from medicare enrollment, so its certainly good timing when seniors and seniors who vote in areas like florida are thinking about medicare bertha, thanks. Joining us now, anna gupta, health care analyst. Anna, youve been coming on for a while. Did you foresee the weakness in most of the stocks weve seen, humana and some of the others . I think almost every time youre on, you would say there are these external things, but that these are well positioned to flourish in any environment in terms of whether there was obamacare reform or whatever they were doing. And that clearly has not been whats happened with this. You know, i think weve seen the movie before im going to stick to my guns on this one i think the fundamentals that are actually very good, not just for the insurance industry, but importantly for American Society. And theyve done, you know, a lot of positive things which i actually support and ive said this many times in Medicare Advantage. Its the blueprint for how Public Private partnership should work. Its saving money for seniors. Its saving money for the government humana is the stock that i think on the team of medicare for all i know you might laugh, but its going to play itself out. The question is when i mean clearly warren is picking up a lot of ground now with sanders and the health issue, biden and the ukraine issue and all of that. And so you might have overhang persist if she wins the primary. The polls are beginning to show that and if she does, then it persists into the general until unless she moves more center but if the senate is still republican, nothing is going to happen they might be a little bit more noise after november 2020, but, you know, at that point the stock should work. I guess i agree with you, though, that headline risk is going to be a key element and a driver in how these stocks perform. You need a catalyst and the catalyst is the election if we can, we try to avoi talking about candidates, whats going to happen. But its impossible in this arena right now. And you say from a stock market perspective, the performance of this sector is dependent on the eventridden time line leading up to the primary and going into the general election now, you do make the point that so many times we hear that, well, even if we did get Elizabeth Warren, shes not going to do all the things she says its impossible to get those things done. You make that point. But you also make the point that if trump were to win it, that would be a Huge Positive for health care. For stocks. Health care stocks versus for stocks it would be. The whole Health Care Sector in general, more so id say the services side, managed care in particular to some degree the hospitals less so for biopharma. I mean, the drug pricing bill probably has made the most progress and has more bipartisan alignment than any other legislation weve seen so far. If Elizabeth Warren did win the primary and did win the general election, you point out the possibility of single payer medicare for all is still very small. But the overhang of having that possibility would hurt the stocks yeah, through the general i moon, if she actual i mean, if she doesnt win the general election its limited what she can change through the administration in some sense, anna, we have seen a change. And i looked back. And in the September Quarter of 2015, which is sort of in the same point where we are in the election, in that cycle, we had a huge downdraft throughout health care because of all the rhetoric we were hearing from both sides about reform. Right and this time it seems as though that has caught on in washington, although right now with the impeachment distraction, some of that may be on hold. There is bipartisan support. I wonder whether trump or a democrat wins, whether that is not going to move forward. Bipartisan in terms of medicare for all no, in terms of price reform and trying to really rein in costs. The trump administration, cms has been trying to home in on the hospitals as well to make them much more transparentabou their costs, and also to try to sort of make more transparency about these deals that oftentimes end up working against the consumer because of the out of pocket costs. All of that is fair i think its a 3. 8 trillion economy. We have obamacare. They had 85 of the premium dollar going to medical spend. You know, the entire Health Insurance industry does 50 billion in post tax. Almost 4 of 4 trillion economy. All of the costs, they reside in the hospital economy, 50 of all spent. Its largely price driven. Its not consumption its moderated and slowed down to low Single Digits unit Price Inflation is being attacked on the drug side, with drug pricing legislation its a rational bill that the house has put out and Senate Finance is largely aligned and trump is aligned for that matter the hospital economy, they are finding legal loopholes with the site neutral payments, surprise billing. Theres been a lot of entrenched interests in that. Private equity firms owning a lot of positions team health, envision, you know what happened with blackstone and kkr and all that. I think im bullish on the middleman, pbms and Health Insurers because they dont make a lot of money theyve moderated spend and i think you should be buying cvs cigna and united the pbm Smear Campaign by biopharma has failed i think so. I see people keep railing not just Democratic Candidates whenever i do a story on pbm people say, theyre stealing, theyre terrible you know, the secretarys efforts around pharmaceutical rebates, they were shelved because those rebates were going to healthier people rather than those filling scripts. Its like where do the subsidies go its not going as much into the pockets of the pbms. Theyre not. Where are we going now america is subsidizing health care for the rest of the world you stop a subsidy, redirect a subsidy, plug the hole in that subsidy. I think maybe the average man is easy to say. The pbms are the bad guy theyve been under the gun theyre not really making that much money i looked at their financials in great detail the senate flips, lets say for single pair, are you going to start to take up technology, cover a Different Group . You know, the end of the day, my belief is that while politics tend to for awhile they dominate the headlines and they make efforts to do things, Public Private partnerships, in the end policy makers have been relatively rational. Cms is doing a good job today. Even in congress when things are going really somewhere thats not that rational and economically not that sensible for American Society thats amazing. Well see thats amazing. In the government . I think so. I think you know, i really think drug pricing legislation has moved from a rational place it wont hurt innovation. You just said we innovate for the world because everybody caps their prices its not going to go. Pelosis bill is pretty left it will get more center is about 250 drugs that are the highest priced drugs in congress right now impeachment is low. Shes probably going to try to get to a floor vote. With impeachment overhallie jacksoning things, theyre not going to pick up thank you, ann a. Theyre playing the music. Senator pat toomey will join us next. Meantime the futures this morning after two incredibly difficult days, youre looking now at the futures turning down once again weve been up by about 20 to 30 points for the dow futures earlier. Were down 40 points after the dow has lost 850 points in the last two sessions. S p futures down 5, nasdaq off by 8 squawk box will be right back. For farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice wedge. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. That could allow hackers devices into your home. Ysste. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. All right. Welcome back, everybody. Lets take a look at the futures because they have turned negative even after the two big days of declines weve seen the first two trading days of the month and for the quarter. Right now dow futures are indicated down by about 57 points s p futures are down by just over 7 points. The nasdaq down by 16. If we can take a look at rates here, i think it would be interesting to see whats happening with the ten year, the 30 year, the two right now those yields have been under extreme pressure the yield is 1. 458 . Youre seeing pressure across the board. Ten year is at 1. 573 . We do get those numbers on ism nonmanufacturing later this morning at 10 00 a. M. Eastern time thats something the market is going to be watching very closely. Of course it all leads up to the big jobs report tomorrow the question is whats happening in the economy now senator warren taking aim at Corporate America once again the president ial candidate proposing a tax on lobbying which would Cost Companies millions of dollars. This comes after tax the rich proposal in her campaign senator pat toomey has spoken out on some of the tax plans weve heard from senator biden we havent gotten a chance to talk to you about what you think of the most recent plans weve heard coming from not only Elizabeth Warren, but also Bernie Sanders well, good morning, becky and i have to start by noting that allentown and bethlehem featured in the bumper music coming into this segment are doing quite well i noticed that, too theyre closing all the factories down forgot about that line coming into it. Theres been tremendous recovery in the works for many years. But one good way to do a lot of economic damage in these incredible tax proposals, it really, really far left ideas that we havent entertained in america in, governor brown, i dont think in my lifetime the idea that will confiscate peoples assets. Huge tax increases on business, on capital, on income. And, you know, if god forbid our democratic friends take complete control of the elective government, they will do these things theres no doubt in my mind. Its really important that we push back. With all of the talk of equality and concerns what youve seen playing out, its probably no surprise youre seeing this baltimore l take place at this point. What do you think okay. So, i look at it differently. I think its amazing to me that the at this moment when we have record low unemployment, alltime record low unemployment for groups that have historically traditionally higher unemployment. We have wage growth accelerating its accelerating the most at the lowest end of the spectrum in this economy were narrowing the income gap this is the moment when the u. S. Is outperforming the entire world, when asset prices have been very strong this is the moment when socialism is on the rise and our democratic colleagues are deciding, never mind all this. Its incredible to me. Senator, i dont know if the democrats approach is the right one or not ill tell you what i find amazing. What i find amazing is we have remarkable inequality in this economy, you talk about it being as good as it is deficits rising at record rates. Thats whats amazing. My question to you is, okay, if you dont like the democrats plan, which i completely accept on its face, what is the republican plan to deal with these issues, both the inequality issue and separately the deficit issue. Well, so, two things. First of all, what were witnessing right now as you know is accelerating wage growth. And accelerating wage growth at the low end of the income spectrum so strong growth is proving to be diminishing the gap in income and the inequality gap as far as deficits go, look, ive said for decades now weve got to restructure the big entitlement programs they are not sustainable they are designed to grow faster than gdp, and no program can grow faster than gdp indefinitely these giant plans are doing exactly that even if we all decide there is fraud and waist and all sorts of other things, lets say you can cut it down to 10 which would be a minor miracle right now. The question is do you need to raise more revenue, and how do you do that . I dont think thats the best way to do this in fact, raising more revenue doesnt solve the problem of big programs going faster than the economy. The revenue wont grow faster than the economy so theyre not sustainable. We dont have to make draconian cuts what we have to do is pick a date in the near future and modify the program does it satisfy did his answer for the inequality thing huhyou didnt acknowle if he answered about income inequality if wages are growing the fastest they have in years, is that if youre asking me the question no, i am. No, im just wondering whether did that speak to you . It speaks to me all right because i thought he answered that question. The great news is, youre right. On the bottom end and by the way, you want to bring that down. Its not that i want to bring it down the benefits have been remarkably uneven insofar as were going to lose him in just a minute. Senator tomby, lets get back to what you were concerned about. Do you think the market is right to be sniffing out some of these issues that are out there watching every economic number closely right now. So, my view is that the combination of adverse trade developments and uncertainty about where were going on trade has had a Chilling Effect on Corporate Investment that seems to be the area thats been leading the deceleration, fortunately really strong on the service side and consumer side so i dont think were heading into a recession any time soon we dont need a new war, we ought to be working hard to get those resolved i commend the administration for making progress with japan on expanding trade. We should really try to avoid a big trade war with the European Union so youre against the tariffs. Youre against the wt action and the tariff that were looking. So, the w t o announcement weve known, they subsidized airbus boeing outperforms airbus. They had record sales. The only american competitor thats done great in those ongoing subsidies. I hope what the administration does is to negotiate the settlement here. Lets get an agreement were not going to have subsidies for these giant companies. I think the europeans are in a place they might be willing to do this. Thats how this ought to end what do you think about the trade war with china i know youve given the administration kudos, but you dont like the tariffs, where do you think this winds up. Clearly thats the tool the president used to pressure china to change their ways i do put china in a different category than our allies but i hope we dont have, you know, a continued acceleration in this. I think there is a reason both sides ought to want an agreement by early mid next year, and i hope we can get there. Senator toomey, thank you for your time. Its good to see you thanks for having me. Futures are worsening down 80 now on the dow squawk box will be right back. Announcer coming up, whats causing the sell off plus Washington Capitals owner and businessman ted leonsis on quk xetnsig bet sawbo rur after a break. Ah come on lets hide in the attic. No. In the basement. Why cant we just get in the running car . Are you crazy . Lets hide behind the chainsaws. Smart. Yeah. Ok. If youre in a horror movie, you make poor decisions. Its what you do. This was a good idea. Shhhh. Im being quiet. Youre breathing on me if you want to save fifteen percent or more on car insurance, you switch to geico. Its what you do. Lets go to the cemetery market turmoil stocks stumbling out of the gate in october President Trump ramping up the trade war on europe. The u. S. Getting ready to hit the e. U. With new tariffs. And Sports Betting makes another move into the mainstream what if you could bet inside the actual arena where the game was taking place he stepped on the line. No, it was legal. No, he stepped on the line. He made the shot. Who has 6,000 . Squawk box begins right now. Yall ready for this announcer live from the most powerful city in the world, new york this is squawk box. Good morning. Welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square im joe kernen along with becky quick and Andrew Ross Sorkin the futures right now have worsened, down about 70 points given yesterday and the day before who knows. Might seea big snap back today. You could not right now thats my point. And it was a weak sort of a rebound earlier, too probably talk to cramer later. A lot of times he doesnt like a rebound after two days right anyway, treasury yields are back below 1. 6 on the ten year after the first two days of the quarterly. 1. 58 today lets talk about some of the other stories that investors will be talking about today. Shares of pepsi are higher in premarket trading. The beverage and snack giant reported quarterly profit and revenue that came in above the street expectations. 4. 3 jump in organic Revenue Growth that was better than the street was expecting as well. That stock now up 2. 1 , up as much as 3. 3 earlier President Trump opening a new front in his multi nation trade war. Senior officials from the trade rep office say they will impose new tariffs on the European Union. A 10 tax on aircraft from france, germany, spain and the u. K. And also some Kitchen Table tariffs. 25 on single malt irish and scotch whiskeys, 25 on cheese from Different Countries shares of tesla delivered 97,000 vehicles during the Third Quarter. Thats its best number ever. However, that was still 2000 below the numbers analysts expected this is a company where every metric is watched closely by the street stock is down by 4. 8 . The economy has traditionally been a winning issue with trump. The latest version of americas Economic Survey have potential issues as Economic Data start to raise red flags. Steve liesman is back to tell us about concerning data. If finds disagreement with the public on several of his signature economic issues. A majority 55 of the 800 americans we polled last week nationwide disapprove of the president s handling of Border Security and immigration 36 approve. Plurality of 47 disapprove of handling of relationship with china. Broader concern with the tariff issue. That has led as we reported earlier, the worst economic approval numbers of the Trump Presidency only the second of our polls in the trump era where he has been under water in economic approval it could bounce back as it has in the past. The numbers, worse on the board approval section, fell 6 points from the may survey for all adults driven by a 9 point decline among democrats and 10 point not enough to offset the change. It could show the president pleases his base, but at the expense of overall approval. Attitudes about chinas havent gotten more negative net negative another problem, the president appears to have failed to convince the public that his big issues are the most important ones that should be worked on. We asked people whats the number one economic issue that elected officials should be working on 11 said the minimum wage. 12 said tariffs and trade 12 said taxes 13 said the budget deficit. Then look at that, 41 are naming Health Insurance as the economic issue i did the math for you thats more than the other thing behind it combined Health Insurance is the number one issue for democrats. Its number one for independents, also number one for republicans. Much less. They also mention the budget deficit as an issue. 28, 23, independents much higher all three groups of political persuasions. Lets dive deeper now and try to figure out the trigger for the market sell s. E. A. L. Off is it the run on trade war or all about economic weakness or whats really happening in washington and is it all related . Joining us is joe, chief economist for the americas at i never matixis as well as cnbc contributor sam is here, chief investment strategist at cfra what is it the fed its all the fed it is i made this point a long time ago. If you look at chinas data, they had cyclical slowing well before the president put tightening in place. Germany has been weak, auto emissions in china, not that the tariff issue isnt a concern for people, i argue monetary policies the last six, seven quarters has been housing which is a function of rates to me its all about the fed do you agree with that . How much of it is a trade story . Im thinking of cascading events the trade situation overfloelg into the weakness of Economic Indicators then forcing the feds hand to lor Interest Rates joe is absolutely right. Expectations in china have weakened we are looking for 5. 1 growth versus 5. 6, a stair step down from the prior years it is very much a global issues investors have to be concerned with youre not bearish generally speaking i describe myself with a bull but lower case b were likely to see some sort of economic slow down were looking for 1. 6 gdp growth in the Third Quarter which is done slightly from our estimate every quarter through the end of 2020 will be up 2. 1 or more how much of this is going to be an overhang for the election . The next 12 months i dont think it will be that big an issue coming back to the trade for a moment, im going to Say Something heretical. Theyre happy what the president is doing it gives an excuse to diversify their supply chain to get out of china and not have shareholder backlash some c. E. O. S are rationalizing that now i dont think that was their view months ago. The public view and private view cant be different. The Unemployment Rate is low, andrew its still sub4 . Even in a 2 ish type economy, thats going to bode well for incumbents do you think there is a solution to this trade war preelection in an environment where there is impeachment proceedings on the way impeachment is totally overblown. Because it didnt happen or because you dont think its going to impact anything else . No, i dont think you dont think the chinese are sitting there going like this, okay, im going to wait this out i think thats a mistake because i think xi is under a lot more pressure to deliver than people think. Their economy structurally is softer than the u. S. s no where are you at . My feeling is weve got three outcome scenarios. One is that basically we take what is offered to us and we call it a day so that the president can then focus on getting reelected. I think a better scenario is that there is some sort of agreement both sides better scenario or better likelihood better scenario for both sides in which they can go back with facesaving proposals the third scenario is that the administration digs in its heels and says no, we want you to agree on everything. I think the best chance for reelection will be the middle scenario because then its not something that would have to be readdressed. Steve, where do you stand in all this i disagree with joes theory in the case in the following way. I think we had a surge in Economic Growth. The fed raised rates to a place that was just barely neutral and then if you look at the current real Interest Rate, which is minus inflation, were below zero now and i think we had an expected come down from the surge in growth in the 2018, and that was made worse and has created greater concern because of the trade war. If we didnt have the trade war, we would have been okay at a 2 1 2, 3 fed funds rate maybe a little lower im not precisely sure but substantially whats happened now is fear of the unknown and Global Economic concerns that i dont see that the way the fed so gradually raised rates to a point that remained on a real basis or inflation basis below zero restrict the economy you and i have a fundamental disagreement i think real rates is mum bow jumbo. If you look at the yield curve, dollar and commodity prices, youre correct, steve. Historically real rates were low. But Market Pricing is clearly telling us that u. S. Policy was much too tight relative to the rest of the world. And thats, i think, a fact that manufacturing is so weak the trade war this is way before the trade war. And the stock market has told you we have this argument as colleagues, but the stock markets been flat for 18 months, and thats pretty much dating back to the trade war i disagree with you on that, steve. Whats that, joe . After a huge move up, though. It was a huge move up, it did go flat for a while. You know, joe, weve been bouncing between tweets on trade. It seems like you can just off the highs which are up almost 50 in some markets. So a small b in bull, thats a male cow i looked that up that is not i dont think [ laughter ] utterly ridiculous. Why did you look that up udderally ridiculous. I looked up what a stear is. Steve liesman thank you for bringing this, not on a saturday, a thursday where do you go, big 10 only quarterback and left tackles. I believe them to be the most important people on the field, left tackle first. I think offensive line is left tackle i did a story in 1987 how they were paying the first tackle a Million Dollar a year. They start today realize theyre going to spend 2 million on the quarterback. They should spend a million on the left tackle. You know what, steve . Coming up, Sports Betting makes a move in the mainstream well talk about a new partnership this morning between Gaming Company william hill and Washington Wizards owner monumental sports and entertainment. And youll know the guy, big time ted leonsis will be here and william hill, joe ascher we couldnt get william hill. Anyway, stay tuned well be right back. Devices are like doorways that could allow hackers into your home. And like all doors, theyre safer when locked. Thats why you need xfinity xfi. With the xfi gateway, devices connected to your homes wifi are protected. Which helps keep people outside from accessing your passwords, credit cards and cameras. And people inside from accidentally visiting sites that arent secure. And if someone trys well let you know. Xfi advanced security. If its connected, its protected. Call, click, or visit a store today. Welcome back to squawk box, everybody. The futures this morning are indicated weaker this comes despite the big declines we saw weve seen over the last two days combined decline of over 850 points for the dow in the first two trading sessions of the month. And the quarter. We now see the s p indicated down by about 4 and the nasdaq is indicated down by about 9 dow futures off by 41. Weve got some big news in the sports gambling world this morning. A new partnership between Gaming Company william hill and the owner of the washington, d. C. s wizards, mystics and capitals. Joining us is ted leonsis, chairman and c. E. O. Of monumental sports and entertainment. That is the Company Behind the teams. And joe ascher, c. E. O. Of william hill this is news this is actual news, is it not, guys can you tell us whats happening . Ted, you start out, or joe, since youre william hill. Go, joe yeah, were excited today weve been working with our friends here at monumental for a while to try to get over the line and we have and were going to build a planned new sports book herein side of the capital one arena in the heart of washington, d. C. Were really excited about it. Its going to be accessible to folks from the street as well as from the arena it will be the first sports book inside of a, of a sports arena here in the u. S. Were looking forward to getting going with it. And im very excited about using Interactive Data and the sports book to make a more exciting experience for our fans, give fans a reading interest in the teams. And we will work very, very closely with the people at william him to make sure that is best in class, most modern sports book, but more importantly we want to start to drive toward the future and game ification for sports gambling. Whats the state in d. C. With legalized gambling is it september 30th the key date, joe . Well, there is not a specific date and you bring up a good point. Its all subject to Regulatory Approval but the d. C. Legislatures passed a law to legalize Sports Betting at a number of locations most prominently for us is right at the arena so the legislature permitted a sports book to be built within the arena. Not only will people be able to go and bet over the counter, but you can bet on your mobile phones anywhere in the arena precise timing, we dont have that yet we have to get through the licensing process with the d. C. Lottery and hopefully get up and running in the not too distant future whats the future look like, joe, in terms of this . In five years will there be betting everywhere in arenas for every sport . You know, look, right now this is rolling out on a statebystate basis the Supreme Court ruled last year its up to the states to decide what they want to do with Sports Betting some states are moving quicker than others. And the states are all doing it a little bit differently thats to be expected. Clearly in the future, the bulk of the betting is kgoing to be n mobile thats the case where we do 70 of our business on mobile devices, its a higher percentage for us. Elsewhere that will continue, but there is a big role to play for retail sports where people can congregate, get together with friends for drinks. This will be a great Bar Restaurant working with one of the leading guys in the industry to develop a great concept for it it will be a place people can come, not just transact, make their bet and leave. But spend a few hours and great social experience. He brings up a good point for people who own venues like we do here in washington, d. C. It brings the building alive on a longer basis right now most of our activity is 7 00 to 11 00 during game nights we drive 200 people through the turn styles. We can bring people coming in, watching on all the televisions here, games from around the world. They can learn about odds, they can learn about gaming they can place bets. As joe said, we want to wring a fine Dining Experience and make this a destination for the city. We kind of do that here, i think, people watch us, we can do things on our mobile phones, things like that are your teams going to be worth more what does it add up to, ted, for professional sports . And ratings ratings and gambling . I think this is a big part of the future of the game not only is it a new revenue stream i think it will make our media rights more valuable i think we have seen through fantasy gaming that the more interactive a fan is, the more theyre understanding what data they can interact with the more theyll watch the games on television. I also think coming into the arena, we have to make sure were investing in new technology and working with william hill. The sports book is a part of what the Fan Experience is guys, let me ask you a skeptical question about this. How much do you worry about a backlash were not there yet obviously. At some point, this happened in the u. K. And elsewhere you had situations, especially on mobile devices and other things so much of this is regulated if youre from vegas and you bet on a sports book and youre drunk, they cut you off. Both from the alcohol and the ability to bet that becomes a lot tougher when it comes to mobile, when it comes to some of these other environments then there becomes a liability issue, a headline risk issue how much of that is on your mind look, i think its always on our minds, to make sure our customers are behaving enjoying a product in a responsible way. You point out theres been regulatory backlash in other parts of the world, in the u. K its not specific to sports. Its gaming more broadly and so i think the American Gaming Association im on the board. Its something that we pay a lot of attention to. And i think it is incumbent on all operators to act uponably. Is there something you do differently . Is there a Lesson Learned in the experience across the pond, as they say yeah, well, i think the big lesson is to be careful and watch out and try to get ahead of these issues before you do have a big backlash. Whether thats monitoring what customers are doing very carefully, keeping an eye out for folks who may be having a problem, or the other type of inappropriate activity whether its in your facility frankly, its something i think applies across the spectrum for Business Owners more broadly and its obviously something in our industry that were very much focused on were very focused on it. One of the reasons we partnered with hill, theyve 85 Years Experience theyre solely focused on Sports Gaming and betting theyre not a general casino kind of business we want to focus on creating new products for a new generation for me, the focus is growing the market we dont want to keep this in a niche. We want Interactive Gaming business that has relevance and can serve all of our fans. Hey, ted, i always used to call you billionaire you have investments all over the place. You still got investment in the stock market and did yesterday, the day before, did they give you pause . Did you sell everything . Are you not sleeping well at night . No, im sleeping well at night. Most of my investments are in private companies and through evolution in private companies and right now the ipo market is pretty choppy, and so i like where we are with a lot of our investments. A company like sport radar which were an investor in which is also in the Sports Gaming business is doing very, very well and i try to look at the Global Business environment and right now the Sports Gaming industry on a global basis is growing and very healthy i think hes happy, too the capitals won their open and the mystics are in the finals. Yeah, a Washington Team theyre doing pretty well. Hope springs eternal for the redskins thanks, ted and joe. Thank you coming up, when we return, technology tanking, but when does a sell off become a buying opportunity . Stay tuned u wchg quk x right here on cnbc one to five . When it comes to feelings, its more like five million. Theres everything from happy to extremely happy. Theres also angry. Im really angry, clive actually, really angry. Thank you. And seat 36b angry. Youre clive owen. And youre barefoot. Yeah. Theres also apprehension. Regret. Relief. Oh and theres empathy. Ah, i got this in zurich actually, whats the opposite of empathy . But what if your business could understand what your customers are feeling. And then do something about it. You can turn disappointment into gratitude. Clive, you got to try this. I cant im working. Turn problems into opportunities. Thanks drone. Change the future of your business. Change the whole experience. Alright who wants to go again . I do i do i have a really good feeling about this. 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. Jobless claims come this morning. Stick around squawk will be right back. [upbeat action music] pilot were going to be on the tarmac for another 45 minutes or so. Welcome back to squawk box. Rick santelli live here on the cme floor with breaking news initial jobless claims this week are up 4,000 from 215, 15, to 219,000. If you recall, 215 wasnt the way we looked at it last week. It was 213 they upgraded it to, move it up for where you want to be continuing claims we move from 1. 656 down ever so slightly to. 651. These numbers continue to remain at low levels. Maybe not the lowest levels, but for a thick pencil low enough. For any information were going to glean from them big bat a coming out of andrew ism manufacturing has the biggest audience to dig down to the number ive ever witnessed several days ago, given the super week ten year low on the manufacturing side we turn to see pressure in Interest Rates for all pralkt cal purposes, were about the same levels we were the equities might be up a little bit in prefutures we all know that story its going to be all about the 10 00 eastern data back to you. Rick, i was honestly saying before we came to you this is the first time in history i care about the ism nonManufacturing Index to look it up and figure out what this might become in on ive never cared about it before there are two ways to look at it i was there for the manufacturing number i also caution, no matter how it turns out for viewers and investors that are watching, not even several hours will determine the outcome. There are grand issues like trade that need to be resolved even if they occur tomorrow, even if its the best deal, it will take time to filter through. The markets have a lot on their plate. This is a sentiment indicator. This isnt whats happening its a squishy number it is the places youve seen because of weakness in whats to come. Absolutely but it is oficanado of the markets. Okay, rick, stand by. Obviously 10 00 a. M. Is going to be the big moment. Of course we have the jobs number tomorrow. We have the initial jobless claims steve is on set with us looking at those if were having weakness in the jobless data one thing we dont talk a lot about, putting it in other times and expansion under rate those who are covered by insurance and employed in getting insurance. Thats down to a record low of 1. 8 when we have trouble in the economy this shoots up 5 or higher it was up near 7 . Part of this is harder to get employment some of the state level stuff thats happening i dont know if this will be quite like the jobs market tormz. If c. E. O. S were concerned. Thats not showing up in this data thank you chief global strategist at Morgan Stanley investment, i want to talk about one of your latest pieces on china and your recent visit there just in general terms ism services, the overall economy in recession fears are justified, yes or no. We just discuss the data at lengths jobs market data that in a newly shell tells you whats happening in the Global Economy. The single reason why Global Growth was a decade or two ago, demographics hasnt been selfishly internalized per capita returns, its not bad including japan. We are still so focused on headline gdp growth numbers. Our bias is still what happened between 1950 and 2008. When it grew 4 because of a demographic, just as you had the Global Crisis in 2008, it was seeing a demographic cliff the working population of the world was beginning to really fall off very sharply after having exclude you had in the post war even in china we think there are a lot of workers utilized. Thats amazing i was in china as you referred to whats remarkable there now, they cannot grow at 6 any more. That is or close to full employment at whatever growth rate we have just now. Why do we need to citing this recognition that what Economic Growth used to be in the postwar era just isnt any more because of the four ds the most important one, demographics, the World Population growth rate is half what it used to be in 2008 thats amazing. I thought automation was going to take over and we would have too many people. Thats the opposite of what happened we need robot to help us they are. When you went to china, there were some today. The working population is too old or shrinking, so you need robots to complement rather than youve been worried about this awhile. Its helping, not hurting. The global rate today is close to an alltime low despite you have the single most important reason you have slow Economic Growth. Second, dee globalization. Everywhere now, this is not just about strayed. In terms of focus and globalization. Even people flows, as in china when i was there, the digital system is totally independent, what entinternet services you c use. You have that on those four vectors. You ha you have too much debt that causes Slower Growth it wasnt there in the 1980s, 2000, when you have debt surging, it was helping Economic Growth as well and the fourth d has to do with declining productivity declining productivity. Thats a p declining productivity therefore i think the defining feature of the Global Economy are 4 ds, that accounts for half of economic are we having a problem with demographics demobilization keep the surplus labor from getting to the surplus demand for labor of course one and two are working with peach other. We have this information slow down but our ability to out source and going down in fact, this is what we do now. Dee globalization is happening because of social reasons. The fabric in many parts of the world has been torn a bit because of the influx weve had. Thats a reality it should be countered by more reality. We have this reality of the four ds which are dragging down Global Growth everywhere there is not one country in the world today that is growing at a faster pace compared to a decade ago. Right thats a remarkable thing, did you see this landed in china with an Indian Passport the scanner speaks to you in automated hin difficult. No clerks, only a scanner that recognizes you as the person who 3w50kd the room. You open the key with just your face and you have a Digital Payment app because no one has catch this is all is this all seems like its good in china it is. My second story which is that we were all concerned me about the fact china may face a financial crisis because of the incredible debt it had built up how did it avoid this . The single business has avoided that because of the the biggest revolution is happening in china if you look at many key internet services, many tech services, chinas penetration levels and usage is at comparable levels to many countries, in some cases even higher than whats here some of the sophisticated Department Stores you will see in the world are in china. With drones and without any cash i was there and i saw that the other thing which is remarkable how they cleaned up crime. Facial recognition, all the criminals left we talked about that, too. Theyre doing it with license plates i know one thing, there are going to be a lot more robots when this is over. We trailed japan i know people want fewer of them you dont watch tv you dont watch squawk box. I find when you go to these places, you get the story line 4 d is hitting the entire world. Thank you. We have another story breaking this morning which is tesla announcing a record 97,000 vehicles delivered the stock is down sharply because that number is actually short of forecast. Joining United States on the 99 to helping us break this down published a note on this topic you look at these numbers off by about 2000 vehicles, what does it say to you . Sure, thanks for having me. We thought it set a new quarterly record in terms of sales, the q2 number and also there was this email that was leaked in recent days that elon musk was telling employees they had a shot of hitting 100,000. So, they fell short of that. The stock is trading lower, significantly lower but dont we have the situation, this is a quarterly email gets leaked how great the numbers are good as the email indicates. In the old days you would tweet it out thats right. We think the company does itself no favors by playing into this, you know, quarter to quarter score guarding if they said heres what we think the Company Looks like three, five, ten years down the road you think the stock is half what it is today we do this is our top short idea, 135 price target more than 100 points lower to be clear you are far for being as bull 106,000 cars, did they make it we think there is a chance because they do it will be coming on line we think, in the next elon musk speculated i dont know speculated. Suggested he can build 1,000 cars a week. Will thats high. Thats what theyre building towards. Startups take longer than many anticipate so how much of this is a supply problem, meaning cant get the cars out the door fast enough, and how much of this is a demand problem, visavis, cars coming online or cars period . The problem is in a deep downturn right now chinese auto sales are down to the date in a very inopportune time elsewhere they have a lot of competition that will be coming very soon. We think theres 30 years e. P. Models most will be available for the u. S. Tax credit. Thats going away at the end of the year that places them at a sick to the competition. We appreciate you jumping on the phone after the news broke talk to you soon thank you still to come, Technology Take down is the sector helping to fuel the sell off, or simply getting caught up in it . Were going to survey the biggest names and possible buying opportunities when squawk box returns welcome back to squawk box here on cnbc take a look at the futures right now. We are off about 31 points nasdaq looking to open down about 6 points right now s p 500 off about 3 points all right just under an hour to go till the opening bell on wall street. Dominic chu is standing by he has a look at the top stock movers are there any on the up side there are some on the up side well kick it off with crowd strike up 3 at this stage, roughly 12 to 15,000 shares premarket volume the Cyber Company gets upgraded at sun traft Robinson Humphrey it was a hold rating the price target stays at 830 bucks. They say it has made a Cyber Security product that will define the industry and they like the trebnds in market shar. Thats up in the morning so far. Next up is google parent alphabet, also up albeit fractionally the internet advertising video and search giant are up fractionally around 2000 market shares volume. Class a voting shares. Analysts of Deutsche Bank upped their stock to 1,600. It was 1475. They keep the buy rating they cite Google Cloud Services businesses, those shares in the green. Well end on shares of Delta Airlines, down 7 , this is americas Biggest Airline by market value it gets downgraded from a neutral to buy over at buckingham research. The price target goes from 58,000 to 74 they see the shares lower and lower through 2020 regardless of Economic Conditions stay steady or get worse they do ad if you have a time horizon, some investors may find value at current levels. Two green, one red ill send things back to you great to see you. Stocks taking hits yesterday some of the Biggest Technology names were the biggest decliners. Taking a look at the sector and whether now is the time to buy or sit on your hands is from canaccord genuity. Lets ask first on this, michael, what do you think is this a time to be selling or was yesterdays sell off a bit of a piling opportunity . I think were close to a time to be buying not close to a time to be buying out there, yes. A little more than a few weeks ago. Have you head winds building up. Especially political pressure. Were heading into an election cycle, usually a tail wind, but some of the regulatory scrutiny of stocks but, overall, we dont want to be too offensive and avoid this sector too much when the market comes back, there is real growth here. What about valuations overall . Overall valuations are reasonable you know and we do our advising folks to be a little more focused on some of the more reasonable valued stocks like google and facebook. Two stocks that arent, dont really have a lot of valuation support but we think are going to be the new leadership, a lot of us are looking at the tech selloff sort of coincides with those ipos you think there is a lot of fundamental upside there we will come back lets get your thoughts, too you Like Technology . Particularly the internet stocks or not we like the valuation you look at facebook, its 17 times next years earnings, 10 per hair you are getting to a point where valuation is reasonable. Everybody left because they crowded the regulatory headline, they put it into software and software went to a point of no return in some of these names. I think effectively the internets group has underperformed, the nasdaq under performed, the Broader Software group if you look at the rest of the tax. As michael said, some of the valuations earlier it was down in the teen, facebook 17 times now on texture earnings number it looks more reasonable tactically investors are in defense mode they dont want to touch the group until were in earnings. I think were in a shortterm vacuum we had clients last month. Theyre not ready to go on the long term. Tactically i think there is a short pause. You dont worry about the regulatory overhang like facebook we do as i have been saying this regulatory overhang has been hon the stocks for the last year you look at google the last few weeks with the new regulatory overhang, googles stock has held flat. Its up a little the rest of the group has come up hard. So were off 14 from the top. Google has been hit less hard because of it was already embedded in the stock. So i think a lot of the regulatory overhang is there i think thats now kind of baked into a lot of these stories. Michael, why do you like uber and lyft i think that they are building great big businesses that are going to grow for a long time. You look at uber works announcement this morning, where theyre having a gig worker job finding app that you know folds to other drivers, but other workers can use to find work theyre taking a platform that theyve built to a lot of new businesses which sounds a lot like amazon, a lot like google go then you think about a situation where we work where they expanded too fast, too many businesses how do you come down to a profit where you do those things and go ahead and try to grow . Beth stocks are down 45 from their ipos it reminds me a lot of facebooks ipos. Five or six months after facebook was public it was trading 18 to 19 a share. Its up 90 since then it was profitable back then it was profitable. Thats a big difference thats the thing i dont get about this well, weve seen with amazon that over time the public investors are willing for Good Management teams and good strategic positions to under write. Can i ask you a simple question i think there is a vast, i think that there is an amazon myth out there and all these Companies Want to say, im amazon, im amazon, im amazon, guess what amazon raised money once in the ipo. That was the end of it it wasnt multiple things that had to happen, it wasnt endless red. They were able to finance themselves you tell me how this looks like amazon him im not telling you uber or lyft are bad businesses. I dont think theyre comparable ive never understood that comparison well, theyre not comparable now, they just got started. Lets look at a calendar, do you remember when they started because this is not just getting started. Its not a couple years out here. They are fully funded like theyre not gentleman to need to raise more money. Ever ago en unless they want to its not going took need they enough cash stocked away to get them through this investment period you just got dramatic growth in that seconder. I think the sector will get a lot bigger i dont know one person who is using lyft or uber less than they were before boy, i hope you are right. Michael, thanks, for coming in brent, its good to see you again this morning. Thanks, meantime, we want to get down to the New York Stock Exchange where our good friend jim cramer is with us what do you think of this uber lyft call right now before we get to another top sick in. Looking uber has a couple growth businesses, theyre not one to know. Theyve got this absolutely terrific uber, id say its a trucking and fleet business that really is making it so that prices are much lower for truck transport. Because they have brought a whole new group of drivers in. I think that was working uber 8 pla freight. Uber eats is doing well. Those are a part of the ecosystem. Without that, andrew, its a cab company. We have a couple other numbers out. You got tesla. We were just talking about it. We also have pepsico numbers out and i want to get your gamble on. I think tesla people are going to come back and say they really do make a lot of cars its down right now, the bears are trying to press their bet. I think that may turn out to be not a great bet. Remember, amazon did a convertible bond, they raised about, they were trying to raise a half a billion they ended up raising 1. 25 billion. People had such strong demand. We have to remember people liked amazon from the getgo because it added a model that demonstrated they could win on scale. Weve got a lot of models that lose on scale. Just say no to airbnb. Can we just go on strike right now . We dont need the airbnb deal. It will hurt the stockmarket just say no, andrew. We will have a longer conversation about that one next time we have an opportunity to talk we got to run. We will see new a couple minutes, squawk on the street. We tell everyone, dont miss an interview on mad money with bill newland, the ceo of constellation brands, that comes your way at 6 00 p. M. This evening. Stay tuned squawk returns if just a minute as a principal i can tell you this. When one student gets left behind, we all get left behind. This is a problem that affects each and every one of us. Together with ibm, we created a whole new kind of School Called ptech. Within six years, students can graduate with a high school diploma, a college degree, and a pathway to a competitive job. You know whats going up today . My poster. Today, there are more than a hundred thousand ptech students around the world. Its a game changer. Ptech students a[upbeat action music] pilot were going to be on the tarmac for another 45 minutes or so. Well check on the markets the dow jones has paired its losses, its down 80 or down 50 now. The nasdaq indicated down 12 or so the s p indicated down now about 6. A couple of tough sessions well see how things play out today. All Important Service i had coming in, in about an hour. Make sure you join us tomorrow squawk on the street is next [ music playing good thursday morning, its squawk on the street futures just south of the flat line after the first backtoback 1 declines of the year for the s p everyones on watch as joe says for some services in an hour which did fall into contraction in the uk. Ten year yield on a ye