Transcripts For CNBC Squawk Box 20240713

Stock market as well the nikkei was up about 1 the hang seng up about a quarter. In europe, some active trading, you are going to see some red there. Dax is down. Cac off by. 6 the yields there have come under pressure it looked like they were a little weaker as well. Just above that. The 10year at 1. 53 the two year at 1. 444. China conflict escalating the u. S. Adding more companies to the black list and china scrapping the nba preseason games. Eunice yoon joins us with the latest it is not going to a very good place the financial fall out just continues for a second day tencent said it is suspending broadcast of the games for now, these are preseason games. This came a couple hours after the state broadcaster, cctv which has a very long relationship says it will halt all preseason games as well. In their statement, the cctv said we are strongly dissatisfied with the commissioners defense for the Houston Rockets tweet supporting the hong kong protesters saying we believe any speech that challenges sovereignty and stability is not within the scope of freedom of speech he told reporters when he does come to china and will be visiting shanghai next week, hell have conversations with officials to smooth things over. Those conversations might not go over very well there has been such a swift punishment for those comments. The Chinese Basketball Association has canceled all nba games for october 19 and 20. A couple of minutes ago, vivo said it is putting its partnership on ice after all day, we were hearing several celebrities denouncing the nba saying they were also going to suspend their relationships and the term Houston Rockets is no longer searchable on alibaba and jd shopping site. This shows how challengings it right now when it comes to anyone talking about hong kong one more thing on that the Foreign Ministry today gave a hint in a statement it said about a completely different subject that is the u. S. Commerce departments decision to expand the black list for some of the firms because of the Muslim Population in the far west china said the u. S. Should stop interfering in Chinese Affairs they want the Trump Administration and the u. S. More broadly to butt out of their business adam silver has made some is comments you mentioned he is in asia. He said first of all, wed like those connected to the nba to be sensitive to those he said hes upset weve upset fans but not apologizing for his general manager exercising freedom of expression. In china, they have i believe double the number of fans in terms of people in the the United States. Walking a fine line with some of these comments thats right. It is a fine line they have to walk Chinese Companies as well. Right after tencent made that announcement theyd cut ties, there was a lot of discussion on line here about how they inked a h huge deal to get the rights to air nba games. The comment you could see the most is that tencent decided to choose life instead of money that was kind of a hint. If you want to do business in china, you have to fall in line with what beijing wants. We were talking yesterday about joe who was one of the top executives i know hes just stepped down. He owns the nets here in the United States coming out with that essay almost yesterday argument on behalf seemingly of the Chinese Government and whether you think that was directed that is really hard to say whether or not it is directed. There are a lot of people who said it seemed as though he was saying all the right things you would see in a Foreign Ministry statement. He was trying to make the point that there is some history that has gone back many, many years and the reason why china would feel so sensitive about hong kong and having what they would see as foreign forces. Either american or british coming in. He was trying to explain that. I dont know if it was necessarily going over very well even in china, his background is canadian and taiwanese hes been able to benefit in a way a lot of mainland chinese havent been able to in terms of freedoms his point is, that freedom of speech is an important American Value but there are some, what he described as thirdrail issues that shouldnt be touched. It is not openly discussed on line a lot of people are critical he bought this stake in the nets believing they would benefit given his position and prominence and now, the nba has not taken foreign money as a foreign owner of the league. Did he clear his statement with the nba . Is he now a prop to the degree some believe hes a prop to the Chinese Government the whole thing is a very complicated situation. I think it goes back to what you were saying that adam silver has to walk this fine line it looked as though he was trying to support anybody, any employees that they have speaking their mind. It looked as though he was trying to be supportive of people that would Say Something positive with the hong kong protesters and also with joe that he would want him to be able to say what he wants. That was interesting and you didnt have money interest involved, it seems like a no brainer all of us would say, gosh, we sort of stand with the hong kong protesters we understand what they are saying and we are behind them in striving for more freedom and more human rights. It seems like sort of an inokous thing to say unless you have a lot of money on the line nba players and coaches can criticize here it is going to get worse in terms of two sides i think it started earlier when you saw the debate around the Hong Kong Airline cathay pacific. They came under tremendous pressure and staff, the people that protested to go after some of these people. That sparked a discussion even with American Companies in the region as to how much influence, beijing would have or feel that they could have on the decisions of International Companies you are seeing that spread out into the nba and maybe even other companies. It would appear, the complaints im hearing is that beijing appears to shape the way the outside world discusses china and China Affairs in the same way that the people here have their comments sensored. You dont want to be seen coddling the communist party with the uighurs and the internment camps the uighurs then again, we are in trade talks with china and we deal with saudi arabia. There is a lot of hypocrisy. A lot comes from that there are financial interests involved that sort of take precedent over c conscience and human rights. We have an update from hong kong it was another night of violence as Police Used Tear Gas and a show of force to clear protesters two protesters were taken to court and charged with violating the new ban on masks overnight, carrie lam said they have no plans to introduce more powers and plunging more than 50 tourism and hotels have all been hit hard you know we got the knnoble pri for medicine and today for physics for understanding the origins of the universe and discovering an exo planet, a planet outside our solar system. Now they are out circling other stars. Tomorrow is chemistry, thursday is literature and there is two this year because they didnt give one last year they make up for it 2018 and 2019 wow remember bob dillon won one well see german chancellor merkel told Boris Johnson that a brexit deal is essentially impossible. Merkel is said to be Standing Firm on her position that Northern Ireland would have to remain aligned with the european union. 1. 2236 is the latest trade under a little bit of pressure the dax stands by 1 those declines stand up. The cac is down and the ftse is down as well down by just over 1 in spain. Here in the United States, losses have accelerated too. S p futures and the nasdaq down. All of this talk, tensions with brexit, trade talks, concerns about all of those things kind of putting an impact on articles today. You see that was surprising because the pound really did sell off coming up, dipping and signaling a turnaround in the struggling chip market we head to break, a look at the biggest premarket specifically in the dow i can shine, i can shine, i can shine. Imma do what im made to do. Built for excellence. You start from the foundation up. The excellence is reaching dreams and chasing them at the same time. The excellence is reaching dreams and welcome back. One stock to watch take a look at samsung expecting Third Quarter profits to fall more than 50 . That would beat forecasts thanks to strong sails of the new galaxy note 10 saying that would offset the slump. A 50 drop they beat on the other side. You look at that chart, it is hard to make heads or tails there he joining us now chief analyst and portfolio manager. Both of you highlight the same three issues we are talking about. That preyed issue is number one. You are worried about that trade issue and how earnings played out. Those are the three. Does the nba factor into any of this are those the only three things now . We need to have a better deal than just a quick deal earnings season is about to kick off everybody always resets their earnings where theyll push will be 2020. Which selts up for acceleration and hope through the remainder of the year sos that one thing that has changed. We are a bit caution now importantly revenues are forecasted to increase that val dates remember Third Quarter last year we were at that record Holiday Shopping season. That really seems like why we are down 165 now not saying that trade cant happen there is positives and negatives. The wildcard is what happened with earnings and the out look that will be the nearest data point. Youd be buying dips based on that or lightening up for the long term. Looking at consumer discretionary. I think there is more upside potential. There will belongterm volatility on the way. Wed like to see the Capital Spending come back clearly numbers were not great one bright spot we do see is in taiwan what well see there, youll see samsung talking about memory we think there is a recovery that is a bright spot we are looking to deploy capital. Either of you follow the political implications when do you start to factor those into what you dowith you portfolio . I think those things hit the market once we find out who the democrat likelihood. Right now, not on your radar . Not on my radar there is an article that says it is not too early to start preparing for an Elizabeth Warren presidency. Health care has been hit hard probably a bit because of that i dont think either candidate will stand up and defend they want lower drug prices in an Election Year that sken ar kncenario to be moe cautious on. Mark cuban is tied with beto. You can buy a contract for more than one cent now hillary is up four or five cents thats not even on the radar. Bloomberg is there. It is fair to say Elizabeth Warren now shes at 30 cents now and if Bernie Sanders leaves the race these arent percentages these are bets it makes sense. It is weird because trump is at 40 cents but the democrat taking the white house is at 57 cents it makes no sense. The closest democrat is Elizabeth Warren but she was down after the pregnancy did you see that yesterday what do you think of that . No comment whatsoever thats a lot of noise taiwan semiconductor. Earnings are important when we come back, a weaker out look on main street. The read of health on Small Business in america. Up next. Well be right back. The lexus es. Every curve, every innovation, every feeling. A product of mastery. Lease the 2019 es 350 for 379 month for 36 months. Experience amazing at your lexus dealer. Welcome back. The nfib is out with its reading on Small Business optimism the index dropping by 1. 3 points to 101. 8 as the out look on main street weakens talking about a recession or weaker growth are becoming more prevalent calling it contagious. A look at how this is tracking we are down about 7 points from the biggest high from last summer those who believe now is a good time to expand their business. No gains as job openings and satisfaction were flat the major issue. 23 say it is their single most important problem. Down a few points followed by taxes. Government red tape and the cost of labor tied as businesses continue to attract talent about onethird of members say tariffs have negatively impacted their businesses so far. Not a surprise. Given what weve heard, those are similar. Looking at how people are feeling about things interesting that labor quality is what they are worried about it is really tough to find skilled and unskilled labor. It is so tough to find workers as you said, there is a lot of chatter on the minds now coming up, we got a new backlash on boeing the Company Facing 100 million lawsuit over the grounded 737 max planes we have details. We should mention european rates will make it harder to get this plane off the ground a study linking e cigarettes to cancer in mice take a look at yesterdays s p 500 winners and losers through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Announcer welcome back you are watching squawk box live from the marketsite in times square good morning. Welcome back take a look at u. S. Equity futures. The dow looks like it will open down about 138 points now. Nasdaq off about 38 points and the s p 500 looking off about 15 points news to bring you now on boeing. A new report saying friction between the u. S. Could delay the return of the max to service again. Those expectations would get off the ground in this calendar year if it doesnt win in 2020 and really, is it possible for the faa to approve this plane before regulators or from an optics perspective. Do they have to wait for regulators to say yes, first it used to be the faa was seen as gold standard. In this case, they are concerned, the safety agency, they say the faa and boeing they dont think have adequately reconfigured the safety. They aim to add redid you know redundancy they really feel like they have to wait to hear from other regulators first in this case, given what is taken place. Complicated situation there. Also by the way, in the Airline Industry in the United States that think this has become political and think in this situation with our decision for more tan i haves on things like cheese and other things changing the rules of the game we should tell you there is a lawsuit taking place that southwest pilots have filed a lawsuit alleging the grounding of the max has cost them more than 100 million in loss of wages this is an interesting case. With 34 max in the fleet p when the jet was grounded theying they agreed to by more after boeings sales pitch and they say boeings errors have cost the lives of 346 people, damaged the bond between pilots and passengers and reduced opportunities. Boeing says the lawsuit is meritless but now you have another hurdle in terms of gaining the trust of pilots in the world about this claim you have an ongoing lawsuit when southwest brings this plane back, do the pilots say we are not doing it until this lawsuit is settled it all comes back to money always. If you are boeing 0 do you try to settle the suit this is mice. We know these tests dont necessarily extrapolate to humanitarians but now linking exposure to nicotine to cancer in mice causing dna damage in the lungs and bladder. 57 prechance russ leasons on the bladder. This is what we talk about all the time we just had someone on the other day saying, no, no evidence that nicotine is not harmful. You dont have the tar and the smoke, you just have the Delivery System which is not harmful. I dont know i dont think we know. Telling us you probably dont want to use the lungs as a way of ingesting any drug. Whether nicotine itself is a harmful substance. I made the point, you are not born jonesing for nicotine alcohol, same thing it is not the way it tastes, the feeling you get. What does nicotine do for you . I dont know. Wa walgreens and kroger will stop selling e cigarettes i dont want a nannie state but i dont like vaping. What about secondhand vape . Have we talked about that yet . I dont like the way it looks. You are mostly covered in fog. It is mostly millennials i do see a lot of young people doing it. Im not a fan. Im glad walgreens and others are doing this i know. I dont know what these stores will sell. Im surprised you are not arguing for personal responsibility i am arguing for that youve got your friend from digdi dicks coming on and tax safe havens looking for value. Thats coming up next. And Dicks Sporting Good ceo edward stack, thats coming up on cnbc. Ch 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. Apple is hitting yeartodate highs. Some say there are trade war risks that are not priced in the stock at this point. Looking to be safe in technology joining us now the managing director of consumer technology. Thank you for being here you think things are heating up. I would tend to agree with you what does this mean for Technology Number one, we dont think the u. S. china trade relations are going to ease up it is going to intensify theft of intellectual profit of nonchinese profits. In order to prevent against that which is likely to continue to increase would be to vest in Cyber Security stocks. Those are two calls we have from a note we publish on friday. Another thing is to see continued movement on data out of china the actual products be egg manufactured in china. Outside of china, those are benefit. Iec election tronices out of rochester, new york. Companies at risk of ip theft, you should see stronger protection a couple of companies that would be at risk would be Western Digital and ck apple has a China Business we see the asps are going to be down the question is, are you going to have the volume to make up for it what would be better is the slight rise. If we have an intensification of the trade war, while the past year, you saw the stand of nationalism with price cuts. It is not whether you would be able to stand. A major risk but a risk out there. Tim cook has done a natural job negotiating. You watch what happens with the nba and wonder how quickly that could spiral out of control somewhere about somebody saying something. If you list ton tim cook, he is carefully dancing around that core topic saying, look, these two can economies are linked together we being apple not necessarily the u. S. And china. In the u. S. Interest, protection of intellectual profit should be the number one priority here your favorite pick out of all of these would be one . Palo alto networks. Why is it at a discount i think number one, they have been going through a transition from a per spet youll license usually there is a j curve with that that has led to a legal depression there if they hadnt been doing that, the stock would be at about 250. There would be an upside. Do you look at them ever as a take over target i think would you ever want to build that directly into the stack . Correct it is a 20 million market cap about. It is not out of the question of somebody being able to take it out but its a very, very big chunk. It is absolutely strategic thank you for coming in coming up, the controversy between the nba and china not going away anytime soon. How it escalated overnight and what will come next. A quick check on european markets right now. Welcome back to squawk box. Big news overnight in asia as hong kong is becoming a flashpoint for business and trade war. Theyre dropping their bid for the London Stock Exchange and of course the rift with the nba is growing over the tweet by the Houston Rockets gm in support of hong kong protests joining us to break all of this down is dan primac Business Editor at axios lets do the nba piece of t. Take a 30,000 look at this which is to say what does it really mean on the nba front, is there any fix in sight well, i think the nba thinks its fixed things. Theyre suspended, not cut off theyre suspended, could be a week or month. The nba has made their decision. They capitulated we dont censor, but you did theres a reason he pulled his tweet down. What do you think players are thinking weve seen an outcry. The players are interesting the nba, the players run that league they absolutely run it so a gm is relatively unimportant. Lebron, stef curry, et cetera, they run the league. They could test it this time to be honest, the nba feels it needs china. Lebron needs china, too. But china needs the nba also to a certain extent. People love the nba there. Authoritarian rule if you take the games away from the hundreds of millions of people who love them, youre going to have a little bit of problem there. Youre going to have some push back. Theyve taken big steps you think its temporary i think its temporary. The rockets are temporary. Preseason, too all im saying is not missing anything. I understand people are opposed to the rockets if you were to say were going to cut off the nba, this is a time when the players could push a little bit. Has there not been a single other u. S. Multinational representative of any company that said were standing behind that so as an nba representative, the first one that did it. If a company that does business over in china says, you know, the ceo says we support the hong kong this wasnt the ceo. Thats my point. But, joe, this is the situation. They have more than 600 million fans over there. Thats right. You have an interesting organization here. Doesnt have to be adam silver and the gm the players can do it here. None of them have said i wouldnt expect to see a ceo say it you know joe tsai. What if i tweeted it out . He should be able to have his say. Darryl morey should be able to have his say he didnt address the issue. Do you think hes working on behalf of the Chinese Government and alibaba. On behalf of alibaba, sure. He under jack ma is effectively in charge of the post. Yes, but joe tsai bought the brooklyn nets. He wants to bring them to china. He has a business interest in the nba in china he has to get that done. Larger picture, we also had this news can we ask one more question . Yes is there a backlash coming from the United States if the nba doesnt take im going to be cynical here. People here are going to watch the games, i think i think people are going to watch the games. Okay. Broaden it out for a second. Hong Kong Exchange not buying london how much do you think were now really at this is what an economic war looks like . I think this is what an economic war looks like. With the hong Kong Exchange there were strategic questions they had to kill the deal. Yeah, when that deal was announced that was the issue, right . Brexit was an issue as part of it, too. The political uncertainty. The idea that beijing owns hong kong was a real reason shareholders were on the edge to say no. What do you think the chances are that Chinese Companies will not be allowed to pursue ipos in this country. Really, really low. Really really low yeah. I dont see any real push for it i would never say the white house wouldnt try to unilaterally do something but they floated it out there and pulled it back real fast. Flip it around, what do you think the chances are that u. S. Companies can actually now do any real business in china they can do business in china and they have to do it within rules. We saw gap had a tshirt they didnt have taiwan on the tshirt, a map of china. They apologized for that companies can do business there. They have to do it within rules or they can be google and bail completely but most arent doing that. Before we get too sanctimonious before not standing up for the protesters, for 20 years everyone has benefitted from walmarts prices inflation has been calculated a point lower probably or more this has been the argument of the last 20 year relationship. Because we deal with china and look the other way. But, joe, youve talked a lot on this show about how ceos and companies have taken a lot of political yes. Not even risk. Jumped into politics ceos have become the new politicians in the u. S there does not seem to be the same courage when it comes to china. More money involved. More money involved. Nice to see you. Too bad you cant stick around check it out. Were going to have a social justice lawyer coming on a bit later on the show. Be interviewed by a social justice lawyer. Thank you unbelievable. Coming up, futures its a good thing futures near session lows as we await trade talks with china to resume later this week well dig into what to expect a little later, heres what im talking about, ed stack is our squawk newsmaker well talk about the health of the consumer nsally were going to talk about gu, i think. Stay tuned, squawk box on cnbc will be back is the fund built to sell or built to last . Etfs are only part of a portfolio. So make it easy to explain. Give me a quality fund that helps me get clients closer to their goals. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. You should be mad that this is your daily commute. You should be mad at people who forget theyre in public. And you should be mad at simple things that are unnecessarily complicated. But youre not mad, because youre trading with e trade, which isnt complicated. Their app makes trading quick and simple so you can strike when the time is right. Dont get mad, get e trade and start trading today. U. S. China talks are the focus of investors we head to the first trade on wall street. Plus, fishing for answers on the state of the consumer with Dicks Sporting Goods ceo ed stack. Elizabeth warrens tax feast. We digest the proposals and tell you what each would mean for americans 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, Everyone Welcome back to squawk box here on cnbc im becky quick along with joe kernen and Andrew Ross Sorkin. Were taking a look at u. S. Equity futures the dow futures are down by 200 points this pressure has built up and really accelerated over the course of the last hour. A lot of concerns about whats been happening out there with the china trade talks. Also, tensions with brexit talks. All of those have accelerated losses in the european markets as well. The s p futures are down by about 24 points. Nasdaq is off by 61. Lets talk about some stories making headlines right now. The british pound under pressure german chancellor Angela Merkel has told Boris Johnson a deal is essentially impossible under current circumstances. That report notwithstanding, theyre Still Holding talks with European Commission representatives today. Were going to be getting fresh inflation data in 90 minutes as september Producer Price index is out also, Small Business are declining last month the monthly index fell to 101. 8 from 103. 1 in august the china trade dispute and tariffs were cited as the primary reasons for uncertainty with business owners. Boeing trading lower, sharply lower. Friction between the u. S. And european regulators could return the delay of the max separately, Southwest Airlines pilots union has filed a lawsuit against boeing alleging that the grounding of the 737 max has cost them more than 100 million in lost wages. Well talk with analysts a bit later about the situation. It has pared its losses. They are over 8 earlier, now 6. 5. Microsoft upgraded from buy to hold mean times jeffreys is downgrading oracle from buy to a hold the price target is being cut to 60 so okay it was more of a, look, we are believers in the platform and what theyre doing and what Satya Nadella is doing. 160, i cant do the math in my head. Its 1 trillion its one thousand fortysix billion that would put it well above 1. 1 trillion good old microsoft i guess they still sell some windows stuff. A lot of cloud stuff that theyve done so well with. A lot of things. Wall street in wait and see mode as investors await the wait and see from china thats probably a big part of the reason that youve seen the futures down this morning. Kayla tausche joins us with whats happening and what we can expect good morning. Reporter good morning, becky. The Trump Administration is raising the stakes for talks banning 20 Chinese Security bureaus and eight Video Surveillance companies from purchasing American Parts without licenses theyre punishing companies that they allege have assisted in harming muslim minorities. It was shefd ahead of the u. S. China truce with the g20 no word from commerce on why the decision to do this now. Next two tariffs on 250 billion in chinese goods will rise to 30 barring another truce this week tensions are rachetting up even as messaging from washington is starting to warm in his september 20th press conference President Trump twice said the u. S. Is looking for a complete deal. Not looking for a partial deal asked the same question yesterday about china trade talks, President Trump said this i think that well just have to see what happens. I would much prefer a big deal and thats what were shooting for. Can something happen i guess, maybe who knows. I think its probably unlikely. Still leaving the door open there. Nec larry kudlow said that he sees opportunity for progress this week. We should note the administration does not craft those messages lightly so we will see what happens in the coming days. Joe . Thank you lets talk more about this lets welcome Chris Campbell, former treasury secretary. Hes now chief strategist with duff and phelps institute. Is there a wink and a nod that this has nothing to do with trade . Im sure that the chinese think it does. Were saying it doesnt. Does it or doesnt it . Look, i think that there is i think im optimistic i think were optimistic about, you know, the future of the negotiations that means theyre trending them in a better direction. Is this the time you do the black listing of the companies is this sending another china does things, too theyve got other ways of needling youre 100 right i think what happened, we came pretty close to a deal several months ago there is a remember, theres antiu. S. Forces in china just as there are antichina forces in the United States. When the respective folks came back to the respective corners you had push back. What weve seen is some cage rallying and the resetting of expectations within each country, each market what sets the tone for i think some good talks coming next week i hope that helps you. It seems like its gotten much more complicated. No question about it. President trump has raised tariff and nontariff areas and i think probably expected to do more in the future chinese are certainly doing what they can to piece their antiu. S. Forces in china. At the end of the day i think theres some reason for optimism. It seems to me that the chinese are also saying, look, heres the things that were willing to discuss and what we arent by nairrowing that, thats part of the reason some of the optimism has left. Yeah. I think its important to think about this we obviously dont talk about this this way. I think the chinese in the United States we have challenges President Trump has taken on china like no other president has. In china they have to have access to our u. S. Markets theyre facing increased tariffs. If they dont, theres going to be a real challenge how they get back into our markets and so i think that theres the next week is going to be complicated as we continue the conversation, but i think at the end of the day, you know, i think were very bullish on good talks. Really . You know, the idea was floated here about a narrower scope, like three weeks ago maybe we do narrow maybe we dont then it was rejected because people say, come on, what are we in this for . Now we hear from china, were taking certain things off the table. Industrial policy issues are off the table. Both sides have pretended that maybe theyre going to try for a kick the can down the road theres Political Forces in china and here that are moving it towards halve measure. Expectations are low. Is that what it is . I think so. China has one more challenge and that is that, you know, if they have to get if theyre going to get to a deal, theyre going to get property protections, theyll have to do a comprehensive deal thats where lighthizer and isnt that covered under industrial policy . Not a coincidence. Intellectual property is i. P they said they were taking i. P. Off the table. They cant do it. Well see. How much impetus is behind President Trumps efforts now given that he probably doesnt want who knows. Hes got a lot of balls in the air all the time it seems. Now we have the syria situation. Does he want to get this off the table with all the other no question a big win would be great for him right now. China probably wouldnt want to give him a big win. If youre china, chinese folks are smart. This is a smart economy over there. They have to if they face a Democratic Administration next time, you know, in your conversation with everybody this morning, theres a delegation of democratic congressmen in mexico what are they looking at labor, human rights and other social issues cramers making the point that Elizabeth Warren might not necessarily be a more favorable candidate or president in the views of the chinese than President Trump. Ive been doing this for a long time, ive never seen them not include that the chinese are great and those are all very, very important issues, but i just cant imagine china is going to settle for any of those. Andrew, thats kind of interesting, right no. I mean, look, there is a view that Elizabeth Warren is farther left they may want to wait this out until the election maybe it isnt in their best interests. Thats the question what would really happen i think if Elizabeth Warren were in that role, she would probably potentially be harder but harder ina different way. Youd be back into a tpp situation. Remember what they were they were going to wait it out for biden. He loves china. No chance, even biden is going to insist on significant theyd love biden. Which means youre going to have labor unions. Irrespective of that, you are president xi popping your popcorn watching this show in d. C. , are you saying i want to make a deal with these folks right now because of this thing getting reversed the dynamic has changed as biden has come down and elizabeth were ran has trained and then he could go chris, very quickly theres a headline thats out there this morning we have seen some additional weakness in the futures after thats out the white house is looking to limit china in terms of putting stocks in Government Funds what does that mean to you is this a negotiation tactic is this something yeah. Its always concerning to have Chinese Government dictate the winners and the losers as well we obviously want a mirror and have the expectations of im sorry, limiting chinese stocks in u. S. Government funds, same sort of thing yeah. Chris campbell, thank you see you again soon youre optimistic though and youre not just saying that . I know a couple of people in d. C. I see okay all right. We have to run. Squawk box returns right after this when we return, he started working in his fathers shop when he was 13 and turned it into a bohemoth. Ed stack joins us and talks about chances of a recession and what hes hearing from the highest ranks of retail on the state of the economy ren qu ine rhts xtig he osawk box. When you retire will you or will you just be you, without the constraints of a full time job . You can grow your Retirement Savings with pacific life and create the future thats most meaningful to you. Which means you can retire, without retiring from life. Having the flexibility to retire on your terms. Thats the power of pacific. Ask your financial professional about pacific life today. Welcome back, everybody. Lets take a look at futures this morning we have seen a continuing amount of pressure thats been put on stocks this morning. At 6 a. M. We were looking at stocks that were down 50 or so, but it started a very quick decline from there, rapid decline. The dow futures are down by about 170 points this is coming as theres a report that the white house is looking to limit the amount of chinese stocks allowed in u. S. Government Pension Funds all of this a precursor happening thursday when the trade talks with the chinese continue waiting for the vice premiere to arrive here. Ahead of that you have seen additional tensions that have ratcheted up between the nba and chinas quick stance on that and some additional measures that the u. S. Government is taking that look like they could be negotiated back. Concern about that, again, has bled through you see it not only here but in european stocks. S p down by 19 points. Nasdaq off 47. European stocks also under some additional pressure on a report from reuters that said Angela Merkel had called Boris Johnson and told him that some sort of settlement was highly unlikely european markets have weakened dax down by 1. 1 cac off by 1 and ftse down quarter percent. U. S. Consumer accounting for about 70 of the u. S. Economy. Yesterday blackstone grouch Steve Schwarzman said the consumer is doing well hes giving us a read on what hes seeing in his stores around the consumer we can get into some of the geopolitical sports debates. Ed stack is here he bought two bait and tackle shops from his father in 1984 and never looked back. Today Dicks Sporting Goods is the largest Retail Company in the country. Joining us now to discuss the strength of the consumer and much more is ed stack, Dicks Sporting Goods chairman and ceo. He has a book out, it is his first, and this is his first stop this morning. The book is called its how we play the game, build a business, take a stand, make a difference. Well talk about some of those stands and stances in just a moment but it has been a remarkable ride over all of these years lets talk about the health of the consumer given what Steve Schwarzman said. Do you feel it our business is really good our last quarter our caps were 3. 2 we increased our guidance for the balance of the year. We feel the consumers in pretty good shape. We talk every day about china and about this trade war has it had any impact on your business at all in terms of any of the products that are coming in that are being imported nothing meaningful. When we took our guidance up, we indicated that anything that would be impacted by tariffs was included in that guidance. The other piece of this is you may see consumer strength now but do you say to yourself, okay you read all the same reports we do and everybodys not everybody, but theres a vocal chorus saying a recession is coming or at least a slowdown im not sure about that i know that right now for our business what we see, were pretty excited about it. Were pretty excited Going Forward. Things weve seen from people that we do business with, nike, adidas, calloway, what the product cycle is, were pretty enthusiastic. Is it regional . Meaning are there pockets where you say there are parts of the country that seem materially stronger right now were doing really well coast to coast. Thats more positive than potentially would have thought can we talk about the book for a second sure. I want to get to the stance and i know were going to talk about your stance on guns and whats that done to the business and the decision to do that and everything else, but more broadly, we did give the history of this little company. Yes. If theres been one big lesson in this, is it in the book the biggest lesson, and i talk about it in the book, is that you have to have people you have to have people around you who are really smart you have to have people that you listen to. And i knew that right from the very beginning because in 1984 when i bought the business from my father, the two stores, the very first thing i did was put together a board and i had some people in binghamton that were, you know, a little wiser, a little older than i was and asked them to join this board and they were extremely helpful. Is there a Sporting Goods competitor that you think about . Is it walmart or target or online because youre different most of those what was it whats the one with an m theyre in most theyre in malls. Models. You think models, sports authority, everybody else is out of business. Right. Were in malls. Were in some malls. You have a big stand alone super store. Theyre primarily in strip centers with best buy, walmart, costco, all of that. Whos your biggest who do you worry about as far as sell everything you sell and maybe be cheaper or digital theres not many that sell all that we sell we really look at this as we have a broad competitive set we look at foot locker as our biggest competitor the golf a lot of apparel, dont you a lot of apparel. Yeah, were nikes largest retailer. Under armour nikes largest Premium Apparel retailer. I dont know who your competitor is. Who is it . There seems to be a lot of them out there so we havent seen you in quite some time. I wanted to ask you what you think the reaction has been both on your business and in the Investment Community and more broadly in the wake of parkland, the stance you took around guns, taking them out of all the stores what do you think the real impact of that has been . Because i think theres a lot of ceos who looked at that, some of which agreed with you, some of which didnt, but all trying to gauge and understand sort of the implication. Well, when we did this it was kind of a its a really divisive issue we had people who were really enthusiastic and happy with what we did we had a number of people who were really upset with what we did. From a stock standpoint it didnt have much of an impact on the stock price. Our team did a really good job of mapping through that. After we made the announcement each of the three quarters after that we raised our guidance. Stronger sales . Well, sales were not stronger we kind of guided to what we thought it was going to be and then the earnings were a little bit better i think people were really concerned about the impact that it could have, and the team did really a great job we said that it would we thought it would be 1 4 of a billion dollars in sales that it would impact our business. It was just about 1 4 of a billion dollars in sales. In terms of transitioning that business and using that space on the floor for other things, do you think youve ever gotten it back i think were in the process of that. Yes, we have as i said, in the last quarter we reported comps of 3. 2 . Our eps number was up and were looking at what were going to do with the stores last year in the Fourth Quarter we took all hunt out of ten stores and reengineered that space for what was really was that the sales youre talking about, just not selling that stuff or was it some people decided some people decided i wasnt shopping for anything . Yeah. On the flip side, because you go online and youd see it on twitter. Some people saying, im now going to shop im absolutely going to shop at Dicks Sporting Goods. Others im absolutely never going to shop at Dicks Sporting Goods. How do you think that netted out . More not than positive. More people didnt shop than actually came to shop. And so when other ceos look at what you did and say to themselves, i dont want to be in a position where more are not shopping with me than shopping with me, right, how do you square it . I think you have to take whats the longterm effect on your business . We look at this from a longterm standpoint we thought this was the right thing to do for the long term. I was trying to figure out. Youre entitled to sell whatever you want you dont want to sell tents, dont sell tents but youve got to satisfy the board and the board has to satisfy the shareholders so do you know whether any shareholders voted with their feet and said, im out of here or any that said, gosh, i love dicks i can tell you, joe, we never had any shareholder who called us the board didnt have a problem . We talked with the board. We had two conversations with the board before we ever decided to do this so the shooting in parkland happened on february 14th. We made our announcement on february 28th. We were really thoughtful in how we were going to go about this, what we were going to tell the street, what we were going to do our Management Team was very involved, our board was very involved to your question a second ago, joe, we never had one shareholder call and say, hey, what you guys did, im out flip side, we never had any shareholder who said, hey, you know what, based on what you did, i love it, im buying your sufficient. We should point out he was the first in terms of leading this in that walmart, the largest retailer in the world and largest employer in the country followed suit. It took some deaths in the store for that to take place nonetheless, what do you say to other ceos others have signed on to a number of efforts to both lobby in washington, change rules, not sell guns, use their leverage in the system whats your view on that i think if you see something that you think is a problem and you have an expertise in it, which we felt from a gun standpoint, we saw what the issues were and we found out we sold a kid in parkland two months before he did what he did in parkland. It wasnt the gun he used. When we saw that, we stood up and said, this system is broken. Before we let you go, i do have to ask you about it because its the news of the morning weve been talking about the nba in china you sell a lot of basketballs and uniforms and other things. Do you think that u. S. Customers are looking at this and are going to be debating the sort of freedom of speech element of this and sort of coming out in support one way or the other we havent seen anything yet. Whats going to happen down the road, i dont know i think its a tough situation i think everybody is trying to do the right thing what happened in terms of when you were selling nfl gear when kaepernick was taking the knee and there was a whole issue around freedom of speech there yeah. You ended up selling more kaepernick jerseys it was kind of a wash there were some people who were upset about it that werent going to buy them, others werent going tobuy them it was kind of a wash. Thank you for being here. Thanks. Congratulations on the book ed stack, we appreciate it the book is called its how we play the game, build a business, take a stand and make a difference. We appreciate it. When we come back, what wall street is watching including Producer Price index data d an trade negotiations with china. Squawk box will be right back. With Portfolio Managers focused on the long term. Who look beyond the spreadsheets to understand companies, from breakroom to boardroom. Who know the only way to get a 360 view is to go around the world to get it. Can i rely on deep research to help make quality Investment Decisions . With capital group, i can. Talk to your advisor or consultant for investment risks and information. Coming up when we return ten cent is suspending broadcast of nba preseason games amid controversy over hong kong antigovernment protests. Details on that in a bit as we head to break, take a look at u. S. Equity futures the dow open up off close to 200 points back in a moment sfx [phone ringing] you still have service . Call the Insurance Company its them, calling us. Its going to be a week before they can get through on these roads shhh, sorry, i didnt catch that. I said ask how soon they can be here right now . Whats now . He says theyre surveying our property now theyre probably at the wrong house i dont see any hovering his name is hovering . Look up . By automating claims with Machine Learning and analytics, cognizant is helping Insurance Companies advance how they serve even hard to reach customers. Cool all right. Welcome back, everybody. Breaking news this morning a lot of headlines out there none of them making investors feel too good about the prospects of trade talks with china, the United States or with brexit a lot of things have been happening. When we first came in at 6 a. M. Eastern time you are looking at futures weaker, but not nearly by this level. The dow futures down by 50 points right now down by 200 points we have seen steady weakening over the last hour and a half. A lot of this was stemmed by reports like this. White house looking to limit chinese stocks and u. S. Government Pension Funds also, some news that Angela Merkel potentially, this is a reuters headline, Angela Merkel called Boris Johnson and told him that brexit talks would not be very likely as a result, youve seen futures down here. Youve seen european stocks down and the active trading taking place there. U. S. List of chinese stocks all weaker across the board as well. You see the pound under some pressure under the potential talks too. Right now its at 1. 2215 all of this happening and its been a steady trickle of headlines that are creating some unease when it comes to cross border relationships and what its going to mean for trade talks down the road. Joining us right now is paul hickey cofounder of spoke investment group. Also, mike santoli, cnbcs senior markets commentator were waiting for the talks on thursday none of the opening ploys or negotiating tactics are making people think were going to see much coming out of it. It didnt seem like there was tremendous hope. Whatever optimism there was for truth is bleeding away i think the brexit headlines are significant, too m yesterday the stock market didnt do much treasury relaxes didnt happen. Were still knocking around this range. Last weeks low was about 2 below, 3 maybe below where we got to yesterday the high so i think its still just kind of bleeding away some of whatever residual enthusiasm there was going to be for some kind of deal. Thats what im trying to figure out how much of this is left in the market at this point because if you sawreally things end badly and nothing come out of this, how much more do you think the market would sell off versus if it looks like a bit of a truce and they walk away i still think the next round of tariffs is the thing that hangs in the balance the idea that that would be imposed is probably the negative push, but if its status quo, i dont think its necessarily, you know, that big of a deal for the outcome. Do you think whats been done with the black listing and now we just heard about the companies, is that another salvo . It seems like it. The chinese officials saying were no longer calling this a special envoy. Theyre trying to pull any significant but it could flip in an instant. The president saying, who knows on hong kong at least in their minds seeming to link those things i dont think the hopes are very high that they wanted to deal much anyway. Very optimistic, he said i know some people in washington, Chris Campbell well, theres only so many people i could think of you would be talking about because he worked there. Im very optimistic Something Big happens. Maybe its managing expectations we also decided that china maybe wanted biden but now that hes sort of faded, warren might be tougher on china than trump right i dont know how much that calculus is getting played out every week that goes by is closer to november of 2020, right . Thats true. Weve got china is part of the issue. How much of that do you think is going to be impacted these headlines that err would talking about back and forth, nobody knows whats going to happen with these talks by the end of the week and, b, this isnt going to get solved this week so this is going to be a longstanding issue, but its in both interests sides to not just go full throttle and raise tariffs and go the more complicated and the more tensions that build up, the tougher it is to kind of step back from those stances that theyve drawn. Right i think its in both sides interests to come together the Chinese Services pmi, sevenmonth low. Chinas just not like sitting back and relaxing and enjoying a great economy with all of this. Sure. I think in the short term the brexit headlines, what really drove the futures lower this morning was news of the brexit talks potentially falling apart. So i think thats an issue for the short term thats coming up at the end of the month. You know, overall for the market, this is a very volatile time of year historically, mid september to mid october its been the worst time of the year for the market like if you look back to 1980. So i think a lot of this is just we had 20 in the first three quarters of the year on october 1st we saw selling. We had a weak ism but the magnitude of the miss in the ism didnt warrant the type of selloff we saw in stocks i think part of it is profit taking after three very strong quarters and i think Going Forward for the remainder of the Fourth Quarter, theres nothing to suggest that we cant see at least average returns, which is positive for the year. Right the other backdrop to all of this is earnings were getting into earnings season and this is when its put up or shut up. The industry will take another close look at that. Right the consensus has already been driven down to negative 4 for the quarter. A lot is going to depend on whether that ends up being the trough and it looks like right now based on consensus it will be market has been nursed through this period of very flat earnings with this drop in treasury yields, determined by the fed to be a little bit more accommodative. That can last if, in fact, you think youre getting a pickup. By the way, i dont think that the on paper estimates of 10 growth for 2020 are really in the market at all. I mean, i think its on paper. The analysts are saying it. But the markets not a believer yet. But i dont think the market right now is necessarily pricing it. And, paul, id be remiss not to bring up the idea that jay powell is speaking today, too, at nave and the fed has been the huge issue which of these three major things, is there anything he could say that would either spook the markets or make them feel a lot better about things who knows what he could say he could conceivably Say Something, go off script, you know, and cause some angst in the market i wouldnt expect to see too much i mean, the fed has gotten the last couple of speeches by powell have been much more corehoreographed and sticking to the notes. Earnings season is coming up expectations have come in. Analyst revisions have been lowering forecasts a lot to mikes point, they constantly lower estimates as the results get closer and closer, but the bar is set low heading into earnings season. So, you know, as we get into october investors will be focusing on that and i think well see pretty positive results overall. Paul, thank you mike, great to see you. Thanks. Coming up, boeing under pressure this morning after the southwest pilots union sued over the grounding of the 737 max were going to speak to an analyst after the break. Squawk box coming right back we break down and then add up all of the taxes proposed by president ial hopeful Elizabeth Warren and tell you what it means for your money and later, is President Trump winning in his war with fed president jay powell adr testories plus youlast helines when squawk box returns. nervously ready . Ok, ready sweetie . Nice, you ready to go again . Are you ready, dad . Im ready. Imagine if your Life Insurance could help you live for today and safeguard tomorrow, so youre ready for anything. Life insurance designed to protect generations of families. Thats the power of pacific. Ask a financial professional about pacific life. Welcome back to squawk box. Boeing trading lower right now i want to show you whats going on we have a new report showing the friction between u. S. And european regulators could delay the return of the 737 max. Joining us is Carter Copeland to break it down for us good morning to you, carter. Good morning. Help us understand the wall street journal article effectively saying european regulators are going to have a bigger say in what happens here than even the faa. What do you know well, im not sure its a bigger say frankly, a staggered return to service of the max has always been a scenario, you know, some, including myself, would say its more likely. When you say staggered, starting in the u. S. And going elsewhere . Yeah. I would say with a u. S. An faa based and coalition of some of the worlds other regulatory bodies and then followed by others. I make an argument to you there, carter . Sure. My view, this is one mans view, if other regulators in the world dont approve the plane but regulators in the u. S. Do approve the plane, i think that boeing is going to have a true challenge on its hands in terms of getting customers on those planes yeah, andrew, another mans view is if you get the plane in service in one major region, you will amass flight hours that show safe operation in pretty short order. I dont know if the american customer is going to want to be the guinea pig there the reason im saying this is my understanding of the boeing strategy was to try to get all of the regulators around the world, especially international regulators, on board in a way to credentialize the plane and credentialize the faa approving the plane giving that the faa is the one that pushed as hard as it did the first time around. Look, i think that is the most ideal scenario, but at the end of the day the question is, you know, these are somewhat black and white evaluations where you come up with a testing regime and then you test against the test points and then once its verified, its verified if other regulatory bodies say, you know, i want a different testing regime, it can take longer. Carter, do you think that trade tensions will work their way into this matter as they seem to be working their way into everything these days most definitely i mean, the boeing has been pretty clear about the trade tensions influencing a lot here, whether its the max or more importantly, you know, wide bodied aircraft orders which have been held up as a part of this. Real quickly, buy or not . I am. Yeah and, carter, one more do you think that if european regulators do not approve the plane, that all u. S. Manufacturer not manufacturer but airlines will actually put the plane back into service . Especially ones that do business in europe . Well, your biggest operator in the u. S. Is Southwest Airlines whos expressed that they have confidence in the plane. Its been clear that, you know, theyve flown i think more test flights. I think they will operate. Carter copeland, we will see where this all heads we appreciate you joining us. Absolutely. Squawk box will be right back coming up, we break down and then add up all the taxes proposed by president ial hopeful Elizabeth Warren and tell you what it means for your money and, later, is President Trump winning in his war with fed president jay powell those stories plus youlast headlines when squawk box returns. Obvious. Sometimes, they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. When i lost my sight, my biggest fear was losing my independence. Mmm. Good. So ive spent my life developing technology to help the visually impaired. We are so good. We built a guide that uses ibm watson. To help the blind. It is already working in cities like tokyo. My dream is to help millions more people like me. Zbru tires are now down about 160 points started the morning down 50 or so down 200 this is all the latest from china and the moves being made on both sides in the ongoing negotiations which we should get more clarity on, what is it, october 10th it will start again in earnest nasdaq down 41 s p indicated down 17. Its hard to keep track of all the taxes proposed by Elizabeth Warren, so robert frank is here to break them all up and break it all down and add them all up. Hes the man for the job on this. Good morning, becky shes got a plan for that and shes got a tax for that Elizabeth Warren has proposed five major new tax increases that add up to larger than the gdp of switzerland the wealth tax is her most famous, of course. Thats a tax of over 50 million. That would raise over 2 trillion over ten years or about 200 billion a year shes also got a Social Security tax, thats even bigger. That will be a tax on Investment Income for high earners and a payroll tax for high earners split between employers and employees. That would raise an estimated 4. 2 trillion over ten years or about 400 billion a year then you have corporate profits tax. Thats designed to make sure Companies Like amazon who make profits pay a minimum amount of tax every year that would be about 100 billion a year then there is the lobbying tax, its the smallest, only about 1 billion a year she would roll back the tax cuts and jobs act thats at least another 100 billion a year so add it all up the warren taxes would total about 800 billion a year that would increase the federal tax revenues by about 20 and its larger than the gdps of switzerland, saudi arabia and the netherlands. It does not include, by the way, her medicare for all plan which would have a separate tax and thats hundreds of billions of dollars a year extra probably over 1 trillion if you added in medicare for all. A lot. A lot and so but when you take the tax piece, but we dont know all of the spend pieces, right now the federal deficit is now estimated to be 984 billion. Thats right. The highest its been in seven years. Yeah. Since 2012. Yeah. Does this solve that . No. Because it would go to new programs right. We dont know whether these taxes would raise what she projects and whether they would be able to Fund Medicare for all, college for all, prek for all, all these programs and so if you build programs off estimated revenue that come up short, it could actually add to the deficit. Well, in fact, our next guest had a calculation for how much the taxes would actually the warren taxes would pay for the actual proposals from a certain segment. I think its lets ask him. Lets bring in our guest, David Gammage informally advised the warren campaign. I think that was your number, wasnt it, joel . The warren taxes pay for 1 25 but at least we only have 24 25 to go. She has a plan for that, too. If you add up all of the proposals. Taxes those who make more than 150,000 a year, payroll taxes does not come close to paying for this bill. The wealth tax, bottom line, its unconstitutional. Even if it were, its economically destructive people forget that capital is what makes us more productive. It makes every worker able to produce more it helps all of us live more prosperous lives when you talk about a wealth tax, its not as Elizabeth Warren likes to say, going after yachts, diamonds, rembrandts, its invested in profitable, productive business enterprises. Go after that wealth and guess what all of our standard of livings decline. David, thats a point that joel makes again and again, that its not buried in a mattress or sitting in a vault somewhere, that its being deployed in American Companies, in entrepreneurialship and everything else. Do you disagree with that . I agree that revenues and assets and wealth of the super rich and everyone else is properly invested. I totally disagree that a moderate tax on capital or on assets has bad economic effects. History suggests quite the opposite the u. S. Economy did far better decades ago when we had much higher tax rates on capital. And in factthe lack of tax at the high end is, in my view, damaging the economy i see all the time very complicated economically damaging tax gaming, tax avoidant strategans that waste things to conceal them patching our existing tax system to bring them back to levels to meaningfully tax some of the super rich and combat the tax avoidance games would bring the economy back to a better functioning level. Plus theres the issue of declining government investments in all sorts of activities that have historically shown to be economically beneficial. Again, i think, yes, the fact that assets and wealth are invested profitably is true, but that doesnt mean that a moderate tax in a way that patches holes in the existing tax system would hurt the economy. In my view it would help the economy. Dave, theres a recent paper outthat talks about how much wealth the wealthy have. More importantly where its invested and it looks like a greater share than we expected is in private companies. Yes when you look at the difficulty of valuing private companies, you look at goodwill, you look at private business, how do you actually youre going to have to have tens of thousands of irs auditors auditing probably hundreds of thousands of wealthy taxpayers to get that revenue. Does that make sense so lets be clear a good portion of the reason why so much of the asset base at the high end is invested in private companies is based on current tax avoidant strategants many are done in a way thats economically damaging. Super rich pool their resources in a way thats well known to be inefficient, economically damaging in order to reduce valuations theres known ways to combat the strategans that would be built into a wealth tax and should have been built into the estate tax a while ago. There are formulaic measures to assess the value approximately of private Health Companies along with limited use of assessment and, yes, irs resources should be brought up considerably. Joel, last word yeah, the fact word is the professor says the economy has gone down relative to how it was 40 years ago thats not the fact. The fact is the Median Income is at alltime highs. The middle class is shrinking. Thats because people are moving from the middle class to the upper middle class and upper class. This is census data. For those that are the typical income earners is less, thats factually untrue all right growth and median wage growth is dramatically lower. Census bureau data, sir. The debate continues. Gentleman, we appreciate it. Another big hour of squawk ahead. Well be back in just a moment emerging markets obsolete . If at pgim, we see alpha in the trends driving specific sectors of outperformance. Where a rising middle class powers a booming Auto Industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Every day, our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Black listed the u. S. Hits china with ai Companies Days before new trade talks are set to begin. Technical foul chinas nixed access to nba games after a fallout over a pro hong kong tweet escalates. Whos up, whos down with the key segment of u. S. Consumers. We have spending habits of the american teenager as the final hour of squawk box begins right now. Live from the most powerful city in the world, new york. This is squawk box. Good morning and welcome back to squawk box on cnbc live from the Nasdaq Market site in times square. Im joe kernen along with becky quick and Andrew Ross Sorkin the futures now are indicated down 180 points. Yesterday when it was all said and done didnt give much back at all from what we saw on friday this is all china related. This morning more angst about what can really shall accomplished in the next round of talks given that some of the news overnight about black listing china concerns still weighing on sentiment. Treasury yields, which had now i think its good when the yields go up for sentiment now theyre back down at 1. 52 on the 10 year. Couple big stories that investors are going to be talking about today i want to tell you about the u. S. Expanding a group of blacklisted Chinese Companies to include the top ai startups that move is barring these firms from buying u. S. Components. Similar to the u. S. Governments actions against huawei earlier this year. Check out shares of chip maker ambrella excuse me, am how do i pronounce that i think its amberella. Down 10 which is down they are scheduled to get underway on thursday, trade talks. Chinas staterun tv network is removing preseason nba games this is in addition to what ten cent said it would do, which is temporarily suspend the slate of streaming. The deleted tweet from the Houston Rockets gm supporting hong kong protesters escalates tensions on two continents nba commissioner adam silver said the league is apologetic to the tweets but supports freedom of expression. Its a fine line hes trying to walk there hes planning to head to china in advance of a preseason lakers nets game the nets owned by joe tsai who was the executive chairman at alibaba. Separately, boeing now being sued by the Union Representing pilots at Southwest Airlines the pilots saying they rushed the grounding of the 737 max jet to market and misrepresented the aircraft as safe the suit is without merit says boeing the stock is down 1. 5 less on that news and more on a story from the wall street journal saying european regulators are unlikely to allow the the max the certification of the max 737, at least this year and that theres differences between the faa and the europeans, so well see. By the way, that dow component down 1. 5 , it has improved over the course of the morning. It was down more than that thats happened as weve seen additional weakness come out across the markets with the dow down 170 points. That has been weakening since 6 a. M. For the last two hours. One of President Trumps favorite punching bags has been the Federal Reserve. Just last month trump blasted his own hand picked central Bank Chairman jay powell saying he lax guts and vision. But according to the latest results from cnbcs all America Economic survey the president s agregressive tactics against the fed arent too popular Steve Liesman joins us on that hey, steve. Thanks, becky the all America Survey finding the president is not winning this battle. In fact, the public sides with the Federal Reserve on the issue of fed independence. We asked the question, should or should not the president try to influence how Interest Rates are set . 50 saying that the president should not and just 25 saying he should influence it now we have a large no opinion on this, 22 so i guess theres a big part of the population that could be swayed, but to the extent that people know about this issue, they tend to side with the Federal Reserve and on the side of independence. I want to tell you we worked very hard to ask a neutral question in this regard with our republican and democratic pollsters. It is not easy i will tell you this is the smallest percentage of the population that knows about this issue of any issue we polled about. I just gave you some examples from the wall street journal, nbc, cnbc survey 99 . Public knew about the orlando nightclub terrorist attack 91 knew about trevon marayvon n a couple of Financial Issues in there. This is surprising me. 40 of the public has heard or seen at all about trumps fed comments. You know what surprises me more is 77 said they knew about the debt ceiling debate. That was big. It almost shut down the government it shows you that the public is not immune. Envious of people that dont dont know . Yeah. I consider this do we kind of wish you know what, joe, i consider this poll as news from outside of our bubble. This is what the broader public wait, were in a bubble were in a bubble this is the bubble we live in. Lets go onto the next one, are you confident in the fed. You asked everyone this, including the 60 . Yes, we asked everyone. People answer honestly 24 say they are indeed confident in the fed the financial industry, we asked some checks on this by the way, 72 is confident in the army and the armed services, okay, so that doesnt fit on this graphic here, but that one has remained very high down a little bit. You can see, take a look at the changes here kind of interesting. We last asked this ten years ago in the grip of the financial crisis so its interesting the fed is unchanged. The financial industrys come up ten points thats pretty good news. Congress an alltime low in the series and the Supreme Court an alltime low down 11 points the next screen we have to call, news outside the bubble. Powell who okay and what you see there is 66 of the public dont have an opinion on jay powell. 18 support him approve of his job and 18 disapprove thats a little worse than bernanke perhaps but, remember, people who didnt know about bernanke was much smaller because bernanke was much more in the news back in the financial crisis hes right on par with yellen who was 18 18. Its about 1 3 or 40 of the public are in tune now i will tell you this, our pollsters are very surprised this issue on the fed is not resonating with the president s ba base ill give you numbers here on immigration republicans support the president 80 15. On the fed issue they support the president 42 34. So half as many republicans support the president on the fed as support him on immigration and border security. His base is not with him his base is net negative on the fed issue. So the pollsters are sort of like, im not quite sure what hes getting out of this i mean, maybe hes getting lower rates. Maybe were going to debate that right now, but its a curious issue where republicans are staunchly behind the president on almost every other issue, on overall approval, not on the issue of the fed. Okay. Lets continue this conversation steve, stay right here where you are. For more on President Trump but taking on the fed, david west is here also, George Sultan is here. Director of Cato Institute center of monetary and Financial Services david, im going to you first. You just heard what mr. Liesman had to say is there any argument to be made that there should be support for President Trumps approach yeah, im reminded that i think its alan blinder said when he first went on the fed, Alan Greenspan said most americans think the Federal Reserve is a forest. Im not surprised the public doesnt know as much about the fed as we do in the cnbc audience look, i think the president must have calculated that if we have a recession, he wants to blame it on the fed. He stepped on his own message by starting and continuing a trade war with china and i think thats more predominant in peoples mind. Theyre going to understand that more. David, before we get to george, what do you make of the argument that president s have done this forever, maybe just not so publicly . Well, look, i think its totally legitimate for the president to complain about the fed, to talk to the fed about the economy. As you know, they did it publicly until the Clinton Administration its an exception to the rule. I think where the president is its one thing to say i dont like their Interest Rates policy but to call the fed chair a bonehead and to review his press conference before he even does it, i think its disrespectful. It undermines confidence in our government and all our institutions i dont think it serves his interests and i think its just wrong. George, i know youre a supporter of the president do you agree with david wessel. Well, im not a supporter of the president first of all so i have to i cant represent his view here. I actually agree with david. Itsnot helpful for the president to be attacking the fed the way President Trump has been doing and i think its it interferes with the feds ability to make policy in a way that is simply based on its evaluation of the circumstances. The fed now has to worry about whether it looks like its caving in to president ial pressure that complicates its job in a way that can do harm. George, i mean, lets cut to the chase of what i think is the issue that matters most to our viewers, which is do you think the fed is caving in to pressure what impact does it have that the president of the United States, and i dont ive lost count in september, but i think we counted like 22 of 30 days in august or 31 days in august, however many days are in august the president tweeted about the Federal Reserve. What impact, george and then david, does it have on jay powell and the Federal Reserve i dont think its having any impact it might if it has any impact at all be causing the fed to dig in its heels and perhaps to resist cutting rates more than it might otherwise, but as far as i can tell, the actions the fed has been taking while all this tweeting has been going on are justifiable in terms of economic circumstances. So you cant tell from the actual decisions the feds been making that its caving in to pressure it does need to cut rates. It has cut rates but that doesnt mean its doing it because the president is telling it to. David, how much how much of this do you think this conversation were having actually do you think happens in the room with jay powell i think they try very hard not to have this conversation. Its impossible to avoid jay powell has to get up every morning and say, is this going to be the day that i read on twitter that President Trump is trying to fire me . But theres also this interesting phenomenon, there was an nver paper the other day which suggested the tweets moved the bond market and the bond market moves the fed. Right. So it might be having an indirect effect. I think it has more of an effect than people i think it makes every decision it makes the entire decisionmaking process existential for the Federal Reserve. If they get this wrong, i think theres an argument that theres political backlash against the Federal Reserve in a way there would not be if the president had not put it in the face of the public. David, come back on this because your view i think is that the public doesnt look at the fed the same way that we do. I think the most important people to watch are the members of congress. It is extraordinary. Republicans in congress, most of whom at least until this recent issue on the Syrian Border with turkey, have stood behind the president , are absolutely not with him when you look at what the members of congress on both sides of the aisle say when jay powell testifies, youd think he was the pope or something. So there is very little support for the president s attacks on the fed from congress and ultimately that is the feds biggest insurance policy against playing with its independence. David and george, i want to say thank you. Appreciate your time for being with us. Youre welcome. Steve, thank you, sir. Pleasure. When teens go shopping, where are they spending their money . Got some data just out this morning that tries to answer the questions, whos on the up swing and whos falling out of favor details with big implications for some of the top brands, thats next. Youre watching squawk box on cnbc make fitness routine with pure protein. High protein. Low sugar. Tastes great high protein. Low sugar. So good high protein. Low sugar. Mmmm, birthday cake pure protein. The best combination for every fitness routine. Welcome back to squawk box, everyone weve been watching the futures this morning we are still looking at some pretty extreme pressure on the futures. Dow futures down by 200 points this has worsened over the course of the last two plus hours. S p down by 22 the nasdaq off by 56 most of the pressure coming as we continue to get headlines that indicate the trade talks with china and the United States could be more complicated and as we hear things about brexit and what might happen next there okay toys r us brand is on the road to return with a major partner this time. Target has announced it is now partnering with the company that owns the toys r us brand, true kids, to help it relaunch toys r us. Com shoppers at the website will be redirected to target. Com t complete that purchase the news gives toys r us restored presence as it seeks to open new brick and Mortar Stores they wouldnt say how revenues from sales would be divvied up. New data on the pulse of the u. S. Consumer. It looks at a segment of the population that doesnt grab as many headlines as other groups it has big implications for nationwide spending. Courtney ragan joins us. This is the teen survey can you imagine trying to buy inventory for a store . It would be really hard, which is probably why the teen retailers struggle the consumer we know though in general has been a standout for the u. S. Economy we know the economy is showing signs of slowing teens also are spending less nearly 1 3 of the 9500 teens in the 38th by annual piper jaff f fris survey says its worse. Theyre spending 10 less than they were in the spring. Thats hitting the lowest level since the fall of 2011 in this survey when they are spending, males still spend the most on food females are spending the most on clothing, though apparel spending overall is down 3 from last year. Nike remains the top brand for nine years running coming in slightly stronger than last year as the preference for athletic brands continues with teens. American eagle outfitters is the second favorite apparel brand for at least the fourth straight survey adidas holds the teen market share for the third. Lululemon moves up to the seventh spot from 11th in last falls survey. That actually is the highest spot that lululemon has seen in the survey teens are shopping increasingly online but for beauty, 91 of them prefer to shop in store however, cosmetic spending is hitting a 19survey low with spending down 20 from last year ulta does further its lead when theyre buying beauty gaining 5 Percentage Points from the spring as second place sephora falls by 9 Percentage Points for more youll want to check out cnbc. Com because it has 67 pages of data of all sorts of things that teens like, footwear, video consumption and more. Court, we were talking off camera but the first thing that caught my attention is, okay, teens say forever 21 is their sixth favorite brand. It did file for bankruptcy. It was the fourth favorite brand. Still number 6. Still number 6. Its still number 6 and they still make billions of dollars but it still doesnt mean that youre going to stick around forever. Forever 21, i mean, i think some of the styles, too, teens are growing out of that. Theyre aging out of it. Theyre moving on. I guess it speaks to the nature of how fleeting and how fickle these shoppers in particular are. Absolutely. Absolutely i think, you know, many of my cohorts look like oh, we used to shop there many years ago. Not 21 anymore. Not 21 and not capturing the new consumer. Thank you. Thanks. For more on the restaurants angle lets bring in Nicole Miller regan shes with piper jaff fray looking at the importance of restaurant spending, i guess the statistic was 2014 was when you saw an Inflection Point. Teens started spending more on food than they were on clothes and theres been no looking back, right . Right what theyre really spending more on is experiences over things to your point, 23 of the share goes to restaurants. This is 200 basis points higher than what is spent on clothing in teen mine share. Who does the best when it comes to restaurants who comes out on top theres a couple standouts. We really like chipotle as a stock and this is a decent proxy of their, you know, Recovery Efforts and the improvement theyre making there so theyre solidly in the top three in their cuisine category they are number one. Starbucks on the other hand, they are the only Public Company with double digit mine share if you step back and look broadly overall, chickfila is absolutely eclipsing the number one, two, three prior seeds essentially in keeping that number one spot. And in terms of what you learned in this survey, did it change your mind about any of your thesis on these stocks or was this something that kind of backed up what you thought it absolutely shows a couple of things, that teens like limited service, that dominates. We have other surveys, however, as they turn you know, as they become young adults and look at the millennials and young adults that does flip to full service or casual dining. Thats one important piece to keep in mind the other, experience over things you look at where the comp is gravitating towards, towards chickfila or starbucks or chipotle theyre eating in, which is an interesting trend. Sitting down and socializing and beverage theres a lot of beverage consumption that comes with the mine share numbers and the associated comps at those companies. Like sodas . Actually, it would be its not necessarily soda its much broader than that. So starbucks is a great proxy of being not just hot coffee but cold, being not just coffee and caffeine but noncaffeine and not dairy but nondairy drinks so when you look at chickfila, thats something that they pressed hard on in the last 12 to 18 months where they gain a lot of mine share in their main chicken category, a lot of preference going on in chicken now as a category, but they also solidly built up their beverage platform. Does the decline of the mall change or has it changed over the last 5 or 10 years as youve been doing this survey i think of chickfila as being a mallbased retailer but i guess they have a lot of Free Standing stores, too have you seen those changes with teens not going to the mall as much have an impact on what you see in terms of the survey absolutely. I think thats when that preference had that inflection back that Inflection Point back in 2014 as you mentioned. That was the trough of mall traffic and that became the peak and the growing trend for restaurants. This is where teens socialize. So its really important that Restaurant Brands are getting them not just on the food profile but the convenience and gathering places and interse intersecting where they live so, you know, mall being on the mall pad and in the mall in terms of food is still a positive and then being an anchor once we start to drill down into the full service category, those anchor places like an olive garden for darden, they always show up as a number one as well. Nicole, thank you coming up on squawk, how to end the billion dollar strike against gm were going to examine whether auto workers tactics are working and what a good deal to end the walkout could look like. Plus, after the collapse of weworks ipo, were going under the hood of one of the worlds most valble ivuaprate venture companies. It is all right here on squawk box when we return. Still to come, breaking inflation data well inyou brg the number and analysis of what it means for the economy. Squawk box will be right back. That for over 85 years has focused on keeping confidence up when markets are down. An approach where Portfolio Managers work well independently. And even better together. Who dont just invest, but are personally invested. Can i find a proven approach designed to deliver results . With capital group, i can. Talk to your advisor or consultant for investment risks and information. Ta k to your advisor or consultant welcome back to squawk box. Were seconds away from the second read of Producer Prices dow is down 171 points big part of that, or one of the big parts is boeing. Rick santelli standing by with some of these numbers. Rick, the numbers. Reporter yes september read on Producer Price index, down. 3 definitely not the up. 1 we were looking for. Strip out food and energy, down. 3. These are both much wider out than expectations. Lets look at x food and energy on trade, thats unchanged final year over year up 1. 4. Ppix food and energy year over year, weve had 25 straight months 2 or higher. This is number 26, barely 2 on the nose 2. 0 on the nose. Year over year core trade, 1. 7 so these numbers are definitely from a headline perspective, much colder than we were anticipating even though we do have the year over year numbers falling in line, this is taking a couple of basis points off the treasury yields and we will continue, of course, to monitor when we have cpi, the cousin that might be more appropriate at this point in time to really see if the inflation pressures are cooling to the extent of this part of the pipeline. Squawk box gang, back to you rick, thank you for that. For more reaction, were joined by cnbc senior economics reporter Steve Liesman also senior markets commentator mike santoli is with us. Steve, what do you see in there . You know, im just looking at a sea of negative numbers. Its not like i can point to one area that caused it to decline so much. And its not like we had a huge number in august and this is a bounce back from that. Im just looking at, you know, energy down 2 1 2. The trade component which is sort of a middleman type of component down 1 . Transportation down 0. 4. What else . The x food and Energy Number is 1. 9 year over year and that is actually up. So, look, i think there is no pipeline pressure out there right now and thats the story and i dont know the extent to which the trade and the new tariffs might have influenced this, but i think the bigger e economic story today is going to be jay powell talking and i think that he has an opportunity now to reset or to confirm the expectations of the market when it comes to the fed. Do you think were going to get something out of this. The speech . Yeah, when you look at the title. It looks like hes going to be talking about data dependence and does he have enough hes been asked to give this a speech and he may decide to make it a speech that makes it worth listening to. 40 of the people know who he is. He may want to up that. Mike santoli, explain this. We have the futures, the dow was flirting being off almost 200 points its cracked marginally. What do you think is driving this i think its the overseas news reduced optimism about anything on china, brexit stuff its an overseas news story getting pressure on treasury yields again this Producer Price index number is moving in that same direction of actually having treasuries rally just a little bit and that in general has been Holding Stocks in check. You know, were still kind of knocking around this same range. I noted at the close yesterday that the day in early may when the president , you know chiechb na walkchin walked away, the s p closed at 29 poi 2949, we closed at 2938. We have been walking the path on the fact that we have some slowdown globally and we dont know if its a lull or worse. Mike, i want to ask you about the irn sanity. Which part of the insanity . Mike, tell me if im wrong. Theres somebody out there whos watching the headlines and this person when theres positive trade developments they go, buy, buy, buy, buy, buy when its negative its sell, sell, sell, sell, sell its like dora, right . The fisch im talking about. Dori. Has no idea what they did they both explore. No idea what happened yesterday. I wasnt burned yesterday, im fine, im going to go and do the same thing over and over and over again like a hamster on a wheel, a fish. Sure. If that machine programmed to do those things has a time horizon of seconds or minutes a nanosecond it kind of works. The trades do send the pulse through the market we got two separate rallies interday on a purportedly positive china trade headline. Wait, to have two separate rallies you have to have a selloff in the middle. Two fleeting little pops. I do think that. All around it nets out weve been in this range. Talking more as youre speaking here. Is this crazy does it make sense, people are making money on this macro interday trade headline trade . I think there have always been people who take a shot at the latest headline and see if they guess right on what that whether its going to get traction. I would push back a little bit. Its not a few people. Its enough people to move the market in a meaningful way its enough tactical Trading Systems built in that way that set the marginal price on a momenttomoment basis this is boxes, trading the logic of the china u. S. No, its also you have to think about how it goes. You see that headline. If theres an interpretation that its a net positive for trade, you say, i had sellers in here let me pull them back and see what happens thats not necessarily people thinking it was a huge deal, its just the supply demand generally shifts at that minute. Let me just tell sorry i want to give really quickly, as we go into this speech today by jay powell, 75 probability over october rate cut and a 42 probability of it happening in of another one happening in december. And ill tell you, that number was above 50 before the jobs number and that came back down. Rick, did you have something you wanted to say quickly . Yeah, you know on this electronic trade, first of all we cant put the genie back in the bottle, but im a little shocked. Steve, mike, who decides whats meaningful in terms of strategic way to interact with the markets . You know, this takes us right through the technological revolution around every aspect of our lives theres nothing wrong with computers in trade its different its fast, but in the end if it was inappropriate or not priced correctly, it would afford opportunities. If theres opportunities amidst pricing, machine or no machine, it will get corrected. All right, rick thank you. Steve, mike, thanks, gentlemen one and all. With the ongoing standoff between china and the Houston Rockets, the nba finds itself in hot water for what seems like the first time in quite a while. Thats what jason gay says in the wall street journal. He joins us on the squawk news line to talk more about the developing situation you usually dont pull punches, jason. You saw the trey parker and matt you saw the official apology from south park to china. Like the nba we welcome the chinese censors into our hearts. We too love money more than freedom. Xi doesnt look anything like win a winnie the pooh. May this autumn sorgums harvest be 3w0u7bountiful. Theres times when they knock it out of the park. All the Crisis Management firms in the world together could not come up with a statement as elegant as that right unfortunately, its not far off from the nbas statement. Well, the statement that the nba did, theyre now kind of revising adam silver came out with a new Statement Today sort of acknowledging that their first statement was a punt as you eluded to at the top, this is unfamiliar territory with the nba theyre an organization that has pretty much an unvarnished completely fantastic run of press of the last half decade or so, especially since adam silvers been commissioner for them to be on the other side of this is new ground for them but this is, of course, habitually circumstance in china and for the nba they are theyre there now. Theyre there in china playing games. I mean, you knew that people were bound to bring up steve kerr, Greg Popovich or i mean, they just hammered the government in this country and now that seemed like a relatively innocuous tweet from the houston i mean, that had to be glaringly obvious that this is not apples and apples for how we treat, you know talking about i dont know why youd coddle a communist regime versus, you know, the government here but whatever sure. I mean, look, a lot of people have asked whats different about what the nba is doing versus another corporation that has a similar kind of investment in china i think the difference here is that the nba, obviously the nature of it, the kind of selling going on with the nba. The idea of having free speech, free expression, this is an expression expressionistic sport. People want to hear from the nba and they have had an open door policy the very nature of they havent quite come down and condemned morey but certainly acknowledging the discomfort that this has caused is unusual for them usually they kind of let the fur fly there. We pointed out, its not like the rest of Corporate America has been very outspoken on hong kong either, jason i cant no. I cant think of a single place that has said were with the freedomseeking demonstrators either so, i mean, its almost everybody Everybody Knows theres a billion consumers over there, i guess. Interesting question though its been raised by a number of people is the nba perhaps in a situation where it may have a little bit of leverage here . We do always point to the size of that market there and the investment that Companies Want to have in chiecin china, but c loves the nba. Its a huge entertainment product there. Were the nba to remove itself, does that create a potential leverage point for the nba i dont know. The irony, jason, in all of this is you have its become a political issue. You have folks, frankly, on the right who have typically been in the shut up and dribble category. Yeah. On this in so many ways that was also true of the argument around kaepernick taking the knee in terms of what was happening in the nfl and now all of a sudden theyre on this other side of this freedom of speech debate. Yeah. I mean, its been a tremendous, you know, holiday for opportunists here to jump in, pile on and condemn the nba for what they are interpreting as progressivism for business the idea that all of this free speech stuff is just some way of making a sale for the nba. I mean, i can understand why thats a juicy point to take, but if youre down there and youre talking to these athletes and youre familiar with the things that they care about and the causes that theyre taking on, i would caution against that i think theres a real truth to a lot of the sort of social progressivism youve seen in the league in the last decade and so with people like lebron james, stef curry. Hard to have empathy for millionaire athletes that are kneeling versus people in hong kong pushing back against a communist regime. Unquestionably. Thats hard for me to thats a tough one for me to get around i guess you can make that point in some weird universe thanks, jason gay of the wall street journal we are into the fourth week of a strike against General Motors by u. S. Auto workers, and earlier this week we heard talks had taken a turn for the worse joining us to tell us whats at stake for each side in the negotiations and how we might get a resolution is bob lutz former vice chairman of General Motors and a cnbc contributor. And harley shaken. Bob, why dont we start with you. Whats at stake for gm here . Well, the stake stakes really are american competitiveness and as youll recall after the chapter 11 bankruptcy of General Motors, the government made sure that the wages were supposed to be equal in the United States today theyre on average first of all, General Motors has the highest hourly pay of any any manufacturer in the United States secondly, the average wage is 13 above that of the transplants, and thats with the contentious temporary employees factored in. If you take the temporary employees out of the equation, the wage differential is even greater. General motors pays well, cares for its people, has Great Health Care put an offer on the table which the union said at the time, if you had presented this a day earlier, we would have we would have taken it to ratification that offer has since then been improved and they still wont take it to ratification so, you know, excuse excuse me and others for believing that for some reason the union is dragging its feet on a perfectly good deal because of the distraction caused by all of the indictments for corruption and selfdealing within the union. Harley, can you hear that heard a thing just one little bit of what bob lutz said and then im hearing myself harley, youre getting whats called the feedback loop played back into your ear we need to fix the mix minus what i will tell you, i dont know if you can hear me. Bob laid out what gm has on the line said gm workers get paid more than any other automaker in the United States and that they had what was a good deal that they said they would have signed a year earlier, he thinks theyre dragging their feet on this. What do you think the union has at stake the union has a lot at stake and im actually getting feedback. Take it out of your ear for just a second. You can put it back in when youre talking im sorry to ask you to fix this on the fly its difficult to do thats just fine. Sorry about that. Its the spirit of the negotiations fixing it on the fly. Working together. I would have to say that i am also hearing myself when i talk. About the cost structure. That is, gms total compensation cost, 63, versus, say, 50 for toyota thats true far as it goes in the United States, but if you include mexico and the United States, meaning if you combine those wage rates, so far this year, 92 of the vehicles gm made in mexico almost entirely suvs and highly profitable pickups were exported to the u. S. , if you include their mexican wage rates, which average 270 an hour, gms total wage cost for mexico and the United States, theyre all all of these vehicles are being sold in the u. S. Market, is 48 an hour. Okay. Toyota, which employs 1 5 of the workers in mexico, gm, their total wage cost is 47 an hour when you combine it like that. So the notion of gm being way out of line, if you look only at the u. S. , but now production is highly integrated between both countries and thats one of the issues that right now has derailed the talks in detroit. Hey, bob, lets talk a little bit about what this means with nafta. The workers are fighting to make sure they dont lose more of the production to either canada or mexico that is an issue that sticks out. Maybe also talk a little bit about your experience with u. C. Berkley and why you and harley may have difference of opinions here well, first of all, i think gm will survive this because in the old days they said an 11week strike would bring gm to its knees because of the drying up of the cash flow. That is no longer the case because china produces so much of the current cash flow for and as long as china keeps operating, gm will stay alive. And to the good professors remarks, of course mexico produces a portion of the vehicles, but all uncompetitive and increasingly uncompetitive u. S. Wage cost simply drives more production to memexico. Thats all im saying. As far as my u. C. Berkley experience when i was in the Business School there, i got out with an mba with a 3. 83 grade point average which at that time was sort of a record, but the one course i had a great deal of trouble in was taught by one of professor shakens predecessors called labor relations, history of, philosophy of, so forth. I had to write a term paper, and i touched on it a number of aspects, but because i wanted some balance i wrote in it that large unions had plenty to answer for when it came to the loss of competitiveness of american industry. I got a d on that paper and it was heavily red circled and in the margin it said you obviously havent been paying attention in class and so forth it was not popular but then ive never tried to be popular. Bob, if you could send me the paper, i would try to raise the grade for you. Professor, a last quick word just in terms of whether you think the union has the power and the support of its people to continue this for the inevitable future oh, i think the union does have the power and i think were seeing this right now. Bob of course is right about the role of china, but theres Something Else here. Moodys last week said it might lower the bond rating for gm to junk status. That would be a high cost to pay should the strike continue much longer so gm is hurting in a critical market in the u. S. It remains very important and what we are seeing right now is a test of economic wills it goes beyond the Auto Industry gm and the United Auto Workers in the 1950s road to the middle class for the u. S. Economy. It gave us a strong middle class, strong economic growth, i think we shouldnt forget that lesson it is the competitiveness of the entire economy because of the union and the corporation, working together, versus being jammed as they are right now i want to thank you both for your time today and for working with our technical difficulties. Good game of telephone join us again. Well see you soon. Okay. Okay. Finally, in the week of the wework ipo collapse, were looking inside the most valuable venturebacked private company over to diedra bosa on the west coast with an up and coming player in the fin tech space good morning good morning. That would be stripe it jumped into the top five of the list a few weeks ago after raising money at a 35 billion valuation. That makes it more valuable. Significantly more valuable than public fin tech player square. With just seven lines of code, patrick and john carlson up ended the payments landscape and created the back end infrastructure that is square. It was code that Companies Like rising startups, lyft, insta cart, door dash, they could plug in their apps or websites and bypass a complicated network of banks, processors and gateways the company processes hundreds of billions of dollars in Online Transactions annually, charging a small fee on each one. But the company may not be looking to go public anytime soon first, it just raised 250 million. Secondly, they may have some work to do on the Corporate Governance side. Board of directors has six members, two of which are its sibling founders, giving them outside influence. It only added the first woman to the board, google clouds former ceo diane green earlier this year the company now has more than 2,000 employees. But they couldnt tell me who its head of Human Resources is we also dont yet know anything about its financials unlike other names, talking about airbnb yesterday, which has given us clues over the years. Back to you, andrew. Okay, thank you tomorrow we continue our look at the most valuable venture backed private companies. Next up, this one, ready for this, juul labs, company with big potential in some ways, but also facing some very big problems and not just business ones, but ethical ones too futures have been under pressure this morning on fears about the u. S. china trade fight. Among the latest developments, bloomberg is reporting the white house is talking about possible restrictions on capital flows into china specifically focusing on investments made by u. S. Government Pension Funds joining us now, kumar. As youve been bullish on bonds over the years, and you didnt know any of this stuffs with wg to happen. You thought there were structural issues globally in the economy and maybe some of the things we did here were keynesian and wouldnt last. You didnt know we were going to have a trade war you didnt know that inflation was going to stay low necessarily, did you, or and you still feel the same way. 1. 5, where we should be on the tenyear to begin with, joe, you are absolutely right when i started calling for lower yields, say 2 2 1 2 years ago, i didnt know there would be a trade war it was more a case of growth expectations not being met and the ten year old very low inflation rates continuing and the fed not being successful on raising the inflation rate the trade war commenced in summer of 2018, and then it became a very important factor to me in terms of why the ease continues to go down and this week in terms of what we are seeing with the trade talks to resume on thursday in washington, d. C. , i dont have much of a much confidence that thats going to yield anything in terms of where the tenyear yield should be, which you referred to, we are right now over 1. 5 . I stick with what i said on my being with you last time, last month, that we are headed to 1 for the tenyear and then 175 on the 30 year, 30 year is just over 2 this morning. And we are headed down there as well so there is still money to be made in socalled risk free securities. You are not we wont go negative, i think you told us last time. Thats correct. I still stick with it, 1 and if the things really get to be terrible, i even go over to 75 basis points positive for the tenyear yield, but not going anywhere close to zero. Yields that low, support the stock market or does the growth slow down that youre talking about undercut the stock market . Thats a great question, joe. I think 75 basis points, 1 on the tenyear will be very negative for u. S. Equities because it builds into a very negative outlook for the economy and therefore that cant be good for stocks youre looking at a safe haven play, looking at Oil Prices Going down, equities going down, but gold, u. S. Treasuries and the german bund all performing well okay. All right, thats clear and pretty simple. We dont need to worry about all these external things. Just need to take that into account. Which is what youve done. Thank you. Thank you, joe, very much. Lets get down to the new york stock exchange. Jim cramer is getting ready to go this morning. You have not had a huge amount of faith in the idea well get something worked out with the chinese with these trade talks thats been an issue weighing on stocks today what is your thought now look, i have felt that the talk that larry kudlow gave on friday that said that there could be good things coming or what the president said after the close of the market completely antithetical of what theyre doing. This black list they put on is something that is directly related to freedom of speech and religious freedom. It almost seems like the next leap would be hong kong. And thats such a hot button, you cant even if youre the general manager, best general manager in the nba say anything that is negative i thought this was just in the midst of the day before the talks, come out with this, theyre basing this torpedoing the talks i think it shows thecompletely theyre trying to get a concession on what Peter Navarro calls the seven deadly sins. It is not happening. Anybody that is hopeful, their hopes are dashed. Thank you you got a lot more and well see you in a few minutes thank you, jim. Dont miss two ceo interviews tonight on mad money. The heads of Dominos Pizza and emerson, at 6 00. M p. Eastern time stay tuned squawk box will be right back. E 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 . Whether your beauty routine so,is 3or 57,. Hange make natures bounty hair skin and nails step one. Its the number one brand uniquely formulated for silky hair, glowing skin and healthy nails. Natures bounty, because youre better off healthy. Final check on the markets we were flirting with the dow being down 200 points. Now about 185 points nasdaq off 50 points the s p 500 off about 20 points. Well see what jay powell has to say later today. Join us tomorrow squawk on the street begins right now. What you trying to do good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber. Doubts creep in ahead of the u. S. China trade talks boeing down more than a percent on a couple of negative headline, will not help the index at the open eerither. Wholesale inflation runs much cooler than expected road map begins with fading optimism for a china trade breakthrough more companies black listed ahead of those talks this week stocks a