Transcripts For CNBC Squawk On The Street 20240713

Sense that there are Different Things that come out we had the futures down, the equivalent the s p down 1. 2 and came out with a statement with hauwei we didnt come out. New york times cited sources saying there might be nonessential equipment. You understand what i mean, meaning that there is a story floated, let me be more accurate that made it so that the bear market of last night ended no stocks trading. Its kind of amazing when people started the futures in 1984. Did they ever envision a world, this is our gamble if there is no stock trades, its a gamble. I feel the momentum behind these talks. I cant believe theyre having talks after whats gone through this week. I dont know. Well, you cant listen to lighthizer, you know, the contradictory nature of this sometimes that we see from the administration, whether its navarro contradicting kudlow, lighthizer, mnuchin and the president s tweets, it makes it very difficult one would think for an investor to try to figure anything out except that you can go in with some expectation for example maybe tariffs will not be increased to 40 and maybe the new ones on the 156 billion wont going to affect a 15 in december the october 15th tax, thats what took place. And i think that the market goes up if thats held off. That was the tariff done bump in peak remember that was in peak, where the president was very angry the problem is, can we go back to this market and accept the fact that it is just impossible. I mean, apple. Okay you so you sell apple on the news that the trade talks are going badly and then apple removes an app, which is in keeping with all of apples ethos, dont endanger people, endangering policemen, Police People then do you buy apple off that way . You upgrade apple because apple is doing better with the 11, you think if the trade talks go badly, i am describing an just an unfathomable market where if you have conviction, are you out of your mind. Well, were in a bit of a bottleneck, where fundaments are subject to one binary outcome. Right, as to whether these talks go well or not. I was working with bed bath this morning and the change there, a heavy weight by the way comes from target, ceo at target, hes going to be the ceo of bed bath. Im doing my work. I thought, wait a second, how much is from china am i kidding myself . I know that target has a lot of brands, maybe he knows how to source like target target has tremendous power to be able to jawbone prices. I forgot to ask t china. I realize then i dont know a missing piece of the puzzle. Its a missile piece of the puzzle at all times certainly for Companies Like that, for apple which had 52 billion reasons as in the dollars they bring in from china every year to make sure that things continue to be good for them over the years right but washington i want people to own facebook. Okay zuckerberg in front of congress. Do you sell facebook because zuckerberg is in front of congress washington, i asked. I had hormel on today, so you would think, is there anything more simple than hormel . This is the Pumpkin Spice, smam is sold out in seven hours, david. Spam, it should out in seven hours, david i mentioned, you know what matters to them . China and swine flu because the china has a hogg shortage. 176 to 180 to prior 175 still above the street. I know, just how can you not be beleaguered by the idea that there isnt anything ill give you a if you one, do you know tanker rates are up huge to sill, its spam, budgies and spam, monty python oh, so it has some ingredients beside spam. Its actually not bad the hormels new burger has the least of any of these. It does have a lot of saturated fat. Okay we should go to kala, doping dont you think . Kayla, a full morning. Reporter good morning, charm. We just saw the reception outside the u. S. Trade Representatives Office of the vice premier of china. He was received by the u. S. Trade representative and the treasury secretary they all put on a good face. It was a congenial treating, smiles, backpacks, posing for a photo op for the media that is assembled for the most disspenceful moment in this protracted trade dispute on u. S. Soil that i can remember you had in bounces airs and osaka, japan but this is really a critical moment here in this dispute. Because have you this spector of tariffs going up next tuesday, tariffs on a wide variety of goods, many principles on the u. S. Side believe would be incredibly damaging to the economy. Then you have both side essentially throwing a whole bunch of options against the wall via the press and show the other side maybe what theyre willing to do and not willing to do, to telegraph their position ahead of these talks what we do know, the president hasnt made up his mind. A Senior Administration official told me that last night despite all of what we have learned about chinas position but the u. S. Position in repeat days david, you mentioned that its become confusing for investors to follow this back and forth. Its become confusing to reporters as well. Last night when Chinese Media was reporting the delegation could cut its trip Early Administration officials were saying it would go through friday there would be a fancy dinner tonight, expecting talks to go well that changed tune in an hour, a principle saying the situation is fluid whether they extend to tomorrow is an open question. We know the chinese have played this game before they have used the idea that they could cut talks early if theyre not going well or extend them if they feel theyre productive as a way to entice the u. S. Side to put more on the table. Well see what happens today of course, we wish we could be a fly on the wall in the negotiating room, but well rely on our reporting and what information we can get in the meantime guys kayla, you know, you mentioned of course the difficulty in trying to understand what might transpire. You bring up the president as well hes clearly a wild card here. Because he can make a decision that perhaps at odds even with the negotiators in the room. Isnt that right reporter that is exactly right. And its unclear exactly where his mindset is right now three weeks ago, he said he would not do a partial deal. He would not seek agricultural purchases as part of an interim deal he didnt want a mini deal a few days later, he asked his treasury secretary, why didnt they buy agricultural . A lot of people say maybe the devil is in the marketing, how you build this to President Trump, maybe not a mini deal or interim deal if that is on the table. But as a mile marker, as a point of progress, as a way to temporary pause the dispute and make sure that there are dates in the future where china can be held accountable and ways that the u. S. Can retain leverage over china in that way so, yes, the marketing, i think to the president has been a challenge from officials up until this point and were not sure at this point exactly where the president is on this, except that he has not made up his mind as of last night. Kayla, jim. One of the things that im confounded by is that there is a hard core list from Peter Navarro, seven things that have to happen before their gentleman to be any progress with the talks. We know a lot las to deal with intellectual properties, phentanols, state subsidized institutions doesnt the president subscribe to the seven deadly sins as a reason if you dont check off on one of them there will not be a big deal reporter he certainly has in the past, jim. The question is whether the landscape for the president has changed, whether the impeachment inquiry, whether the looming election and caucuses in iowa a few months away. Whether hearing from his agriculture secretary out on the road in the midwest, where farmers are incredibly angry about their dire financial situation, whether those messages are overpowering navarros seven deadly sins. That is the question for the president at this point what he feels the calculus is that he needs to make at this exact moment in time given the election, given the state of the American Economy and the fact that some of his officials, including larry kudlow just last week said, were concerned about manufacturing. We dont see a recession if sight. Were concerned about some of the data. Kayla, even as we are speaking to you, we saw a rival south China Morning post, of course, one of the Media Outlets that we watched in relation to these trade talks has dim prospects for deals as china resumes talks. We have to take all of this into consideration as well as your reporting, kayla, which has been exemplary. Of course, the fallout between china and the nba continues, the nets are playing, they are fought airing that preseason game a part of the backlash from the Houston Rockets gm, showing support for protesters in hong kong nba has planned to hold a postgame briefing the players would not be made available to the media china daily had a graphic of the nba logo with a bomb in the players hand rather than a basketball so thats not going well either. No, i think there is a lot of people on this spot here i have been very sympathetic to the idea of say coach atkinson who is a terrific guy. The nets coach. Then the owner of the nets so i mean if you are in the nfl, we would say, hey, no problem. You cant say anything joe tsai. Remember, the nfl had no freedom of speech. Its regulated very tightly. Adam silver has rebelled against that i almost feel like the nba either has to go toward an nfl model or has to say, you know what, we have way too much too many people that feel that free speech is core value. I think thats what he said thats kind of what he said. We will not compromise. But the owners dont feel that way a lot of the owners are willing to compromise. Well, this is a Different League than the nfl, jim you know that. The players have a lot more power here theyve had a lot more partnership if you can with ownership, that i think is the case in the nfl, is that fair to say . Disdifficult to switch. They have more powers thats very true. The players have historically had tremendous things to say and i just wonder whether it just means, did the chinese not think it would come . Or are the chinese panicking over hong kong panicking, how . Does it really matter if the general manager of the Houston Rockets thinks there should be free speech in hong kong are they they short sided and that temperamental i dont think anyone is talking about the notion is the regime threatened by adam silver . Are they threatened by a thoughtful nba is that what that society has become i mean, think about it even the russians, at their absolute worst would never be threatened by an nba commissioner i just find this to be a farce that this great country which has done so much for its people is scared, is scared of a player can you imagine if lebron talks . I dont see the repression and free of speech in china as bag new thing at all its a part of a pattern thats been elevated because of the tensions to endorse hong kong has always been an issue but i just think had you ever asked any nba player about the repression in china, maybe they would have said something. Were they all just whistling past this graveyard of repression thats what i want to know i mean, on the altar of sleeper deals . I think there was an expectation that we would sort of export our values along with our sports well, yes thats the wto theory, which by the way Peter Navarro thought. Wait a second, wasnt there supposed to be when china joined the council of nations that they were going to loosen their, any restriction . Theyve gotten tighter i mean, lets understand this regime is far given from the previous regime. This regime is hard line in a way that now was hard line, maybe nor hoard line than maybe you do have a leader for life now. Who has consolidated. Isnt that maoist perhaps i thinkthis is the biggest story out there. Im not kidding. I think the hong kong story is kind of the under played in our country. You cant every weekend have a p protest. Its very important i can think of any other geopolitical issues, something going on in syria that potential toly could become its not in our marketplace we dont do business with the kurds. They were our greatest alliess within 48 hours of a phone call. Its things that will take up a lot more of our attention. Hopefully not. Im saying that hong kong, the chinese communists have not been able to figure out how to do a nontiananmen square shutdown of the protesters and they must be losing face every minute over there. In the south, china, payment, they can do everything they want they cant seem to stop the protesters if i were the chinese government, id be saying, we got to shut the protesters down, before we just got new stricttures on muslims being pers indicaecute persecuted what happens if somebody shuts down the talks navarro suggested hohong kona legitimate framework the kurds is more i beg to mention the kurds. Its not more im saying its another issue that people have to start thinking about because there are ramifications far beyond syria that have to go to iran, israel, saudi arabia europe. We just think, no response towards the iranian attack on the Saudi Oil Facilities nothing. Guys, were going to try to stick to the markets now there is a ton of research to get on apple as jim said, netflix, unh, sis core kroger. Well get to that when squawk on the street comes back. The dow is down 34 in the premarket each day our planet awakens with signs of opportunity. But with opportunity comes risk. And to manage this risk, the world turns to cme group. We help farmers lock in future prices, banks manage Interest Rate changes and airlines hedge fuel costs. All so they can manage their risks and move forward. Its simply a matter of following the signs. They all lead here. Cme group how the world advances. The final horn doesnt have to mbecause with Nhl Center Ice on xfinity you get up to 40 outofmarket games per week. And with the allnew xfinity sports zone, you get everything nhl all in one place, even notifications about your favorite teams. Watch every barn burner, barreling check, and all the top shelf action. Plus get instant access to your teams with the power of your voice. Thats simple, easy, awesome. Say Nhl Center Ice into your voice remote to upgrade for a great low price, or go online today. [ music playing [ music playing all right, lets get to a mad dash this morning. We got a lot of stocks to talk about. Lets start it off with bed, bath and beyond. Lets start with this scene. We watched it decline, decline, all the time while they bought back stock programs sold would say a little late they do remake the board now they have a new chief. The activist is a brilliant guy. Ive known john for 30 years they have been in search of a ceo. Even when they just reported, saying where is the ceo . David, i think they got the number one ceo, mark trittton, i know him he is the chief merchandisosis for target everyone sees his work in all the brands, ios said earlier im missing a piece of the puzzle, how badly will bed bath be hurt by china theyre the least impacted of retailers. Trittton is a guy that can hammer the vendors the most expensive sourceer. There is so much money that can be taken out of the supply chain. Theyve offloaded a lot of the bad territory. What they never do is ruin the Balance Sheet. David this stock is not up enough. Really . So you think there is a future here there are certainly those that believe its another name that goes into the dust pan of history. They can get rid of the ancillary sales and most importantly, david, they wouldnt get trittton. I agree with you, i was very concerned. But they wouldnt get a guy thats that high quality tri tritton wants to be paid in oodles of stock. He wants stock he wants to be the man who turned around a dinosaur, by the way, target will always tell you this is the principal share owner. Watch this situation, david, this is where the activists i think have done something constructive and brought in people who can change it i hear what you say. I have Mickey Drexler on tonight. Yes, hes back with a new brand. Were going to talk about mall being dead this is a strip place, the mall is so dead its scary. It actually is scary. Go into a mall, it can be scary. You were in one theyre abandoned their integration spiders, snakes you have to go in, david, its like Indiana Jones now, money is in that pit just like that its like, wow, thats a wall for you. Bed bath is a strip mall david, i this i that this is a guy. And i think it can go back to at least where it was even just a year ago this was a brilliant move and i wish him well. All right evaluated info from jim there, particularly about the stock and yet to be failed iled ak. 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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. You are watching cnbc squawk on the street, the opening bell in two minutes on this very important thursday as trade talks begin. Two sides trying to end a fivemonth standoff, xinhua, one of the services say china is willing to preach agreements both side care about and to prevent friction from further escalation all of these things have been probably in the works of the rollout. But does this say if you play tough with the chinese and black list enough companies, do they really come to the table is it something the hardliners have been saying i have been watching shipping rates soar ever since we put costco not the right costco, the wrong costco on a restriction list out of nowhere we black list a shipping company these out of nowheres, but i think to some degree really are shocking china, which is so used to compliance and instead we just do freedom one day, shipping another day then we do hauwei another day. Its a list i this i the chinese are kind of baffled i dont blame them to be baffled. I think they need the trade people at the white house fight every day. They fight every day about whats right. Amongst themselves. Amongst themselves. The president is old arbiter i think the president thinks that the american people, his read of it they can be tough and the only people that squawked about it, are some of the partners but the walmart amazon target costco, the prices have not. Cti unchanged for the month they fell they might be later in the fall no sign of them. A tremendous battle they came from failed retailers and then you go back and think, well, what business should have a skyrocketed price, steel, steel falls through the floor. A lot of the economist model itself completely gone awry. Anybody that said these are inflationary, is proven to be wrong. I have a big board, Multinational Bank head quartered at the biotech focused on therapies to treat cancer a ton of calls on big names here, gold cutting cisco travel opens it its the last quarter was disappointing. Theyre talking exactly what i have been talking about why you need to cut rates, which is you have slower enterprise spending, telco spending what happens in that world is you think cisco will miss again or a guy down. Cluck robinson says watch the stock go from 58 to 45 now at 3 . A big buy back only 2 to china i dont know is this an early call with the stock at 13 times earnings do you want to play that ropeadope game i dont want to buy cisco at 45 and buy back at 43 the thesis is enterprise spendings continue to weaken Morgan Stanley had it almost the same peace yesterday. Its true. You think its the cost of capital is too high . Thats what these no, i just think there the a general on way, people are withholding orders because of the trade situation. Also the spending for telcos world wide, david and i talk about it to date if you dont continue, you are not out there opening your czechbook buying a lot of equipment. Capex is where they planned they havent rolled it back. You are not expanding it there is always a belief when at t, when teemo where is the teemo springfields . Actually now you mention it, you might as well talk about it. Mississippi has gone to the other side in so to speak. Florida also switched side you do have a potential job planned for new york in december for the states opposed to tmobile and sprint. You do have a date for example at the end of this month that is expected to be the case even though there have been rumor out there. There are some states that join. Its clear that is enough to stop the procession of states that are opposed to the governments agreement to allow the deal to move ahead and it is taking a long time as you point out. It is a good possibility Companies Choose to close the deal prior to. In the meantime, tmobile has done so well. It depends on who you talk to how many have an opportunity to stop the deal on any trust grounds, its highly unique seeing the doj come to an agreement on the deal and get the various things that wants from the parties involved to possibly allow fostered and have states oppose it were at a time politically in this country. The old conservative role is pro states rights. That was done i think a lot of it because of bias of prejudice. Yeah. The states are playing a hole, where i think theyre so out of the loop. But how many state are investigating facebook a lot what do they know there is puerto rico, though. But the state attorney general, they should stick to regulating charities honest to god, damon, we have a Justice Department that like it or not is the ultimate arbor and we dont know states attorney that lead back to larger questions about people questioning the Justice Department overall and whether its doing the bidding of the president and attacking his enemies. Thats why we talk so often how when you go after the rule of law you really do go after so many things. You have a stake in it . I have season this is Pulitzer Prize winning jim stewart, i got the book last night. Its the concept of the federal government is is a swamp. On tuesday. And then if you are going to discredit the Justice Department in the vacuum, states doing it i remember when eliot spitzer, there you go. You end up with a unique situation. When he was an attorney, he did it he wanted to regulate federal. It makes it more difficult for investors to figure out the outcome. In this case, tmobile and sprint have been waiting a long time to get their deal together. How about federal courts and state court about that Johnson Johnson risperdol. Its worth revisiting the old pj pj saga i have been trying to explain to people whats going on there which ill try to do right now well do it in a report. The stock is down 28 . You will take a look at that you may say, well, why is that happening . Well, it has to do with a decision by the judge presiding over the bankruptcy right now to open the door to basically a competition in terms of plans to take the company out of bankruptcy, originally, the companys plan was the one that was being focused on solely. But the judges now allowed the u. S. Bankruptcy court in San Francisco to a rival plan, to allow a rival plan backed by elliot manage. Which is in, man, is there ever something theyre not involved with no. Essentially to put this as simply as possible one plan would have given the equity holders a lot more at the end of bankruptcy. The other proposed by elliot not so much. This all goes back to the judges desire to return as much money as possible to the claimants here in the case and those claimants were people who obviously suffered as a result of the various fires that pj pj is blamed for. Owe pg e is blamed for those claimants have until the 21st to put in their claims. Ludlow had been anticipated you might see 100,000 claims october 31st is the bar on that. Its running closer to 30. Thats the deadline essentially. Regardless, the judge wants as much money as possible to go to those claimants. Youd have as much as 13. 5 billion left for the claimants the current proposal by the company, which would leave more for the equity holders is about 8. 5 billion or so to the claimants. So this is going to go on for a while. There is a lot to come between now and then in terms of even assessing the damages from the fires and figuring that out. But to the extent the judge wants more money for the claimants, well, certainly, even if he does eventually decide that the companys plan is the better one, it would seem this decision to put more pressure on theme return more or take more out of the equity. So thats where we stand right now. Why would a judge not do this why wouldnt a judge say listen you completely run this utility to the ground. You have every right to make your next plan you do want to make sure the company is on good financial footing when it emerges from bankruptcy they had planned essentially would cause a change in control, which brings up a lot of other issues as well and so forces certain things that are not necessarily in the best you know, you are talking about the largest utility. Right now theyre cutting power to 800,000 different homes store, flower shops, cant keep their flowers fresh hospitals going to back up generators i mean the public backlash from the rolling brownout, blackouts. Yeah. This all goes back to this very issue where you have the states largest utility in bankruptcy again trying to figure out what the damages ultimately will be u. How many claimants will be there, how large the pool that is available to those claimants. We will watch it, again, resulting in a 38 drop in the market value we believe it to be fairly high given this judges decision to give equal footing almost to the elliot plan. That is resulting in a significantly lowered expectation of recovery time. So, venezuela, iraq, california, the three states that have power problem, big companies, argentina, too. However, california to argentina. Not from a Power Production well, there are other states its all political. This is not political theyre cutting the power because they dont want they dont have resources in venezuela . What was the number to trim all the trees, 100 some crazy number, to eliminate all the risk of fire around their transformers. Did you ever see what the trees look like after theyre finished i mean, its a travesty. California wanted nice looking trees. On our properties, they come in its like theyre salami slicers. Like machetes. Its hard to get at all those trees. Its an enormous risk. The last thing you want is a devastating fire paradise, talk to people in paradise, california. Onefifth of the country is california, california is on the firing line from the president and firing line of ewillic tristy people dont leave, they stay. They are running a surplus thanks, to incredible taxes. They have a surplus by the way when the book comes out, trail blazers, there are people that bought the homeless tax, i guess rich people that didnt want the homeless tax, they didnt want a tax on the homeless, imagine how much money, a homes will tax on the homeless, rich people. They wanted to tax the homeless rich people now, the rich people thought. The famous showdown i dont know whether dorsey regrets that i think that still they have been bottling up that money. It hasnt been able to do that much its freight to be having this, the book is hotter than you think, bomost of these packs tht come out. Its rare to see 100 increase as a result of the deal, its usually in biotech, exactly. Roth pharmaceuticals is getting bought for 48 bucks a share. All cash by ucb. Isnt that something . It is something how is your index fund doing mr. Index brain washers . This does happen sometimes. It is a 93 premium to the 30day weighted average of the stock. As you can see, its 100 premium or more to where it was trading yesterday. They are, they have a proprietary peptide chemistry that has novel therapeutics caused by recesssive or uncontrolled compliment system its a component of the innate immune system so its a synthetic macrocyclic peptides all said and done they have something in phase 3 for myosthenia gravis. Novartis, same thing, this is where all the of the r d is really done. I was thinking, carl, its like these companies, they are the older dice folks but when they pay off, it is unbelievable i keep believing i look at regeneron how stalled it is, bia marine biomarine amgen has been a terrible performer. The big biotechs have been celgene, remember bristolmyers keeps going up i think Bristol Meyers is a stock to be owned. They are doing good things by the way, the cheapest drug stock alg. Allergan there is a pill they have migraine sufferers as the folks for the American Migraine foundation they have a pill for you a kite migraine there has never been a pill. You get a mieg dpran, boom you take the migraine, boom, you take a pill, the pain goes away. Thats what they need to replace one of the biggest drugs ever. Its huge. One of the components of healthcare that did see some increases in inflation this month. Yes obviously the democrats have never really been against biotech making the big money it was yellen yellen, she didnt like playing the biotechs again, elizabeth warren, there was a good piece today about senator warren in the journal about what our life would be like with her. It would be different is the way i can describe it, but they, shes not dropping single payer. She loves single payer that would change a lot of our lives. A lot of consumer names, kroger, jefferies goes to hold, jim talked to hormel ceo before the show and talked about plantbased foods in their Global Outlook take a listen Everybody Knows whats happening with plantbased proteins it was a trend that we saw coming right. We had actually partnered with another company then when the ipo market hit, that partner said, you know what, we want to try to go it alone. So instead of buying, we had to build. We put our team in motion. We got it from ideation to market in 8 to 10 weeks. Absolutely incredible. You regenerist crowd, buried in your company of happy little plants, really the best of the organic protein base versus the companys ability has you would say a loaded with chemicals, burger i mean, how can the wall street, how can the people at home justify what hormels price is versus beyond. Yeah. Its hard, right its all about the consumer. So there is no arguing that the consumer is more curious about plants than they ever have so when it comes to valuation of the company, all we can worry about is ourselves its about how do with egrow our business organically, how do we innovate and make disciplined acquisitions now, it would seem to me you got more runway to beat global than almost all of the multibillion dollar Food Companies i follow is this your chance that to do it yeah. We have been doing it. It hasnt accelerated as quickly as we like we got a Good Business in china focused on the china market. Two years ago, we made a small investment in brazil to learn about that market. The business is doing well were getting the learnings to have a platform approach to the business but their going to be other opportunities for us to become even more noble over time. Have you had the new Pumpkin Spice . Its sold out. There you go it sold out in seven hours the whole thing. You cant get it 25 bucks on ebay. Ive got one you know what, its darn good. What what what are you looking at . Close to it, you eating it. It could be a woo id shot nice suit anyway. Is that how you eat spam, by the way. I usually have it with a fork. Is it called a tub . A cannister get some spam juice its always under rated. Its great in the coffee. Cheers boom aha. Mix it in with your starbucks Pumpkin Spice. Why not one is better than the other happy little plants is a new line they have i think they have fewer chemicals in their plantbased burger by the way, they dont want to be like a burger they want their own thing. They think a lot of us are more into it. Why do i want a faux burger . How about a delicious tasting thing in the shape of a burger or david, this by the way, you dont have to wait for a report. This is like the food channel over here. Eating spam with a pen put Martha Stewart art on i think i can make burgers can this, spaghetti, meatballs you can catch jim tonight on mad money 6 00 p. M. Eastern time lets go to rich santelli at the cme group. Tenyear yields, close to the high of the month. Reporter yes, they are they may be surprising, i know theyre surprising to me look at a 24 hour chart of 10s, carl was right here we are, above 160 what is the catalyst i know there are positives on chinas trade. One thing i can tell you, none of the experts, none of the previous ambassadors, none of the previous negotiators have no idea how this is going to turn out. The maurkt grapples with every the market grapples with every headline look at a 24hour chart of the tenyear boom over there okay you see how much more aggress theyve chart looks . All right, lets go back to r 10s, lets start in early july we had a lot of things in early july things turn around look at our 10s, were starting to distance ours from the cycle low close around 146 now look at boones their cycle closed in that chart, bunds now were on the north side, minus 50 theyre aboutthreeandahalf week high yield. Really it looks as they are leading. How can we prove they are leading . Lets look at tens minus bunds you see that spread narrows, roughly a 21month low i have been talking about this whats going on in europe . We all thought when le guard was going to come in, that it would be different but still easy policy there is a lot of things shes saying that dont necessarily represent being in love with draghis policy fiscal good for you, christine. And the market realizes it carl, david, jim, back to. Well see you in a bit. Meantime, still to come, the nfl, china, and a new media venture. Well discuss all of that with the Jacksonville Jaguars owner and former congress j. C. Watts getting headlines from the chinese delegation telling wires they come with true sincerity. Dow is up 100 points were going to watch all these head lie headlines all day long were back in a minute president tweets hell meet with the chinese vice premier tomorrow kayla is wapitching all the trae news in d. C. That news confirms the fact that the leaks about china leaving early were in fact a threat from the chinese negotiators trying to up the ante for the u. S. As the two sides meet behind closed doors today. President trump has met with the vice premier in the oval office on three of the four previous rounds here in washington. On each of those occasions there was a big agricultural purchase announced. Dont know what is on tap for that meeting tomorrow, but the president is confirming he will meet with the vice premier tomorrow at the white house. Kayla, thanks jim, he says he thinks the chinese want a deal, but do i in his tweet . He was a shakespeare fan, the president. To be or not to be that is the question yeah. No doubt. I dont know. We still believe delaying the october 15 tariffs is the key. Thats a big win for the president if he can get that and big win for the chinese. Big win for the president because what it says is look, we found a level. They know were going to go higher, but we dont have to take them down remember what he said, he said if i take them off at 25, thats when we can start negotiating. The threat to 30 may have made them have second thoughts. They dont want 30 they have to devalue their currency again if they do. Well, that may be the one explanation for why these tariffs are not showing up in final thats a very big one that and the rapid switch away from where stuff is sourced is really happening and working. A stickier process. As things go on, people can move i caution companies, be careful when you move to vietnam if its just a sham and its just the chinese again, its not going to work. It has to be independent a lot of raw source material that is still sourced in china. They want indonesia. So you got hormel tonight. You want this pen its got some of the Pumpkin Spice. I really dont. Youre missing out on all the action dairy queen pumpkin. Mickey drexler with a new clothes line quality clothes, not just the usual landfill stuff i cant wait to speak to maicke. Hes still the godfather of the industry. Hell work it off at soul cycle. Jim, well see you tonight mad money, 6 00 p. M. Earn time dow is up 152 on that president ial tweet about trade talks. Long day ahead dont go anywhere. 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. Whether your beauty routine in cis 3or 57,. Kyo. 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. Good thursday morning. Welcome back to squawk on the street. Im carl with Morgan Brennan and david faber. Stocks are up, yields are up hop hopes are up for china trade talks as were beginning to get news with the and a meeting at the white house tomorrow as we said earlier, a long day ahead. That is where our road map starts trade volatility the trade talks stalled, stocks rallying as he says that he will meet with chinas top negotiator at the white house tomorrow. Talks are under way right now in washington as we speak. The owner of the Jacksonville Jaguars will join us well talk about china, whether it remains a priority market for the nfl in the wake of the nba controversy as well as his new media venture. Bed bath and beyond surging under a new ceo, pg e tumbling. Investors around the world paying close attention to developments in washington where the u. S. And china are resuming high level trade talks for the first time in five months pep we have full Team Coverage in beijing with the reaction from china. Well begin with kayla who is in our Nations Capital kayla. Reporter carl, this story developing significantly in recent moments as President Trump tweeted this he says big day of negotiations with china they want to make a deal, but do i . I meet at the white house with the vice premier tomorrow. Thats what we call in television parlance a tease. Certainly the president who has a background in Reality Television programming has created a scenario this time around that is more filled with spence than at any other point in recent rounds of trade talks. Certainly both sides are throwing all of their options against the wall much of this playing out in the press over the course of this week the u. S. Has banned eight tech giants from doing business with u. S. Suppliers its restricted visas for certainly chinese officials on human rights ground and also considering limiting investments that u. S. Parties could make in certain chinese stocks china in response says it will restrict visas too it threatens other retaliation and with situations like the nba and the broadcast help there china is trying to exhibit the hauer it with wield over an american organization. Trying to hash out any potentialpotentia contours of what weve learned could be an interim deal of sorts. China has been willing to purchase u. S. Agricultural products and willing to make limited concessions on opening certain markets, but it hasnt so far been willing to make the big promises that were needed to sell President Trump on this president question as the president raises himself, carl, has that changed well learn in the next couple of days. All right, kayla. Thank you. Well be coming back to you many times i have a feeling during the course of the day. Now lets get the view from china. For that we go to eunice who joins us from beijing. Thanks much, david. The state news agency is quoting the vice premier as saying that china is willing to reach an agreement on matters that both sides care about that optimistic tone contrasts with the message out of the Chinese Press all day today which is to not expect a whole lot out of the trade talks in washington the communist party paper the global times penned an editorial that said there was little hope for, quote, pleasant surprises out of the trade talks. This comes as hong kongs south China Morning post had quoted sources as saying that the level officials had made no progress in their preparations. As kayla was saying, there were several reports that have come out around these talks and they seem to suggest in summary that the chinese are hoping to direct these conversations to a very narrowly defined deal. One in which you would see a relief to tariffs in exchange for greater purchases of agricultural products. This has seemed to be where the chinese have been hoping to move the conversation for quite some time so that they dont have to necessarily make any structural changes. The trade talks are starting at a very challenging time right now for the u. S. China Business relationship the standoff between the nba and its chinese critics continues. Today several products of Houston Rockets nike products have disappeared and been pulled from store shelves here in china. And today the nba chief adam silver whos in shanghai for the exhibition game between the l. A. Lakers and the Brooklyn Nets was supposed to or at least expected to make a statement at the pregame press briefing. That briefing was canceled now, the criticism, of course, of the nba has been that 1. 4 billion people here have been hurt by the prohong kong democracy tweet that the Houston Rockets general manager did a couple of days ago that now might be in question because based on the level of number of fans who are packing the stands today and how much people are talking about this game, which is a nail biter, i think that is an indication that the nba still retains quite a bit of its fan base in china guys thank you china stocks, excuse me, are at session highs the dow is up 161 points on news of President Trumps trade meeting tomorrow joining us with more is Fidelity Investment director urian timer and jeff moon. Good morning to you both ill start with you. The fact that we just jumped to session highs in markets right now on little more than the possibility this could be moving in an optimistic direction right now, what does that tell you about what the expectations are that are baked into this market . I mean, how many times have we seen this movie before, right . Exactly. Expectations go up and they get dashed my base assumption is that the two sides are so far apart on the really big issues relating to ip, basically chinas industrial policy, that yes, we may see a true co. We hold back on terrorists in exchange for some agriculture purchases that is certainly in everyones interest to do that beyond that i think this is essentially a very long gain with little up side potential and in the meantime, the markets been in this Holding Pattern for almost two years the s p is up 5 from where it was two years ago more or less but normally it goes up 10 per year and so i think the market will remain in this sort of late cycle purgatory while we wait for the resolution and Earnings Growth is decelerating margins are coming down. Valuation you would imagine would get some pressure based on this longstanding cold war, if you will so it doesnt paint a picture for me that tells me the markets about to break out in some huge new way, but on the other hand, with markets down 20 to 30 , whether its price valuation around the world over the last two years, the longer the markets do nothing, the more likely it is that eventually it will resume in the per veiling direction which is higher. Long term im still bullish, but i dont think were ready to break out of this Holding Pattern quite yet. Jeff, in terms of these talks between the u. S. And china, its always been about the bigger more fundamental longer term policies, right . If it had just been about simply the trade deficit and this idea of buying more commodities, we probably would have seen a deal 18 months ago when this started. I think it begs the question how realistic is it to think we get some sort of deal this week even an interim deal. And if you do think its possible, whats changed in the calculus well, i think thats right. Both sides have signaled we are not going to get a comprehensive deal, so if were talking about a small or a skinny deal, i think we need to look past the psychology and the posturing around the talks and look at the core interests of the two countries. As a matter of fact, there are a number of things that both of the countries want to do and would do were it not for the fact that they want to spite each other it is entirely in chinas self interest, without regard to the United States, to purchase food. It needs soybeans. They need pork pork is increasing at a rate of 60 a year in terms of inflation. They also have a number of companies, huawei and others that are sufficiently innovative, but they want to protect their ip so theyre willing to tinker with their ip system and protection of ip for reasons solely of their own. On the u. S. Side, trump really does not have an interest in increasing prices on consumers and the runup to christmas that particularly relates to the october and the december tariffs that hes threatened, so i think he might be looking for an excuse to delay or cancel those tariffs to a certain degree. So i think i was going to say he has said that he wanted to save christmas. That was in part the reason for the initial delay but more important for investors is what environment is necessary to restore some confidence to capex and keep hiring hanging in there . I think Companies Need to have some sense of what the rules of the game are. The rules is changed but theyre not going to change again . The rules of the game have changed but theyre not going to change further we are in Third Quarter earning season so far its okay, but were in that window during the Fourth Quarter of this year where the numbers for next year start to kind of resemble some reality and right now expectations are for 10 , 11 growth next year. That should probably be more like 5 to 7 . It is a matter of adjusting expect tae expectations i continue to use the brexit analog as an example brexit has been going on for three years. The stock market has done okay, earnings are up, but the pe went from 16 to 12 because nobody knows exactly whats going to happen i think the risk for our market is not that earnings are going to implode margins are 12 . They were 6 in 09. There is a large buffer there. The risk is that investors are going to be less willing to pay a 17 multiple and maybe more like a 15 multiple. Jeff, back for the talks themselves, to what extent is the inclusion of the protests in hong kong, the persecution of the uigers, even the public ask of the chinese to investigate joe biden and his son, to what extent does that, if any, complicate the current talks these plucomplications are a unhelpful. All of those issues are important, they should be addressed, but they should not be lumped together with the trade issues which are difficult enough to solve. Basically whats happened is the stumbling block here in the trade dispute is chinas refusal to address industrial policy and since china has been in transit since may, the hardliners in the administration have started adding new issues to the discussion, including fentanyl and other things so these are all coming from people who in reality both want to gain leverage but also want to try to decouple from china. This is extremely unhelpful. If we ever want to get to a resolution of the trade dispute, we need to focus on the trade issue solely and break out the other issues separately. Lastly, quickly, the other big geopolitical news of the day, Turkish Military coming into syria fighting against the kurds. How closely should investors be watching in . Its helped propel oil markets this week. Could this become a bigger issue, especially if youre focused on emerging market certainly for emerging markets f youre if youre in index of some sort it is going to matter. Overall for the average u. S. Investor, i dont think it really changes the dial from just a market perspective. All right thank you for joining us today thank you when we come back, the nfl commissioner calling china a priority market for them were going to talk with the jacksonville shack wa Jacksonville Jaguars owner and with j. C. Watts who played several seonass of pro dow close to session highs, up 133. Ins by being privately owned. With more than 85 years of experience over multiple market cycles. With Portfolio Managers who are encouraged to do whats right over whats popular. Focused on helping me achieve my investors unique goals. Can i find an Investment Firm that gets long term the way i do . With capital group, i can. Talk to your advisor or consultant for investment risks and information. Talk to your advisor or consultant some things are too important to do yourself. Get customized security with 24 7 monitoring from xfinity home. Awarded the best professionally installed system by cnet. Simple. Easy. Awesome. Call, click or visit a store today. Welcome back to squawk on the street. Jacksonville jaguars owner announcing his investment in the countrys first 24hour news network aimed at africanamerican viewers it comes ahead of the launch next month to an estimated 33 million households and top africanamerican tv markets. Joining us this morning to talk about that, the nfl and more is mr. Khan along with the chairman of the black news channel and j. C. Watts good to have you this is a big toe in the water here what do you see as the Market Opportunity . Well, what i see i think its Market Opportunity but more importantly really a great cause. Its been an unmapped market with about 33, you know with a bunch of the whole africanamerican market, so unmet need and this is a vehicle to be able to address that where do you think youre going to take shares from . Where are they getting their news now as a demographic . I think theyre getting them from a number of places, but its not specifically oriented towards them so maybe, j. C. , you want to i think when you look at where the community is today, theyre all over the board theres no one place that they go to get their news we will be culturally specific to the Africanamerican Community. You dont hear networks talking about sickle cell, thats in terms of wellness for us its a huge marketplace for us in terms of talent, news, analyticals, so culturally specific means that were talking about issues that are of concern to the Africanamerican Community. Theres actually a lot of discussion that twitter is a big source of information for africanamericans. Maybe thats a comment on how theyre looking for places on television to get their news. When you look at the millennial crowd, 98 of africanamerican millennials have cell phones 68 get their video from that phone. And so we have to be where they are. Well be on cell phones, well be linear, you know, streaming services but there is a need for that community as he alluded to, theres a need for that community to be served and right now the Community Says we dont have a location, a venue that we can go toto get things culturally specific to us. I think you just touched on this a little bit, but the idea of launching a 24 7 cable news channel, the timing is its an interesting time in the industry right now obviously a lot of cord cutting, a lot of streaming Services Getting ready to launch right now. How does all of that factor in to your decision to launch this now . I think in spite of the fact that the Community Says we are underserved, our strategy is we have to be wherever the Africanamerican Community is getting their news and in cord cutting, hey, we have to be on those platforms, on the digital platforms, so i think when youve got content that says wellness, current affairs, education, inspiration, when youve got content that will cover those spectrums, that will give a broad view of who the community is, not Just Entertainment or athletics, which i came from an athletic background, shad can relate to that, but regardless, theres a Broad Spectrum of perspectives in the Africanamerican Community and right now we will fill that need. Speaking of athletics, can we talk sports in china whats your take on what the nba has faced this week . Well, you know, ive been ive had businesses in Nine Countries outside the u. S. For 20 years obviously, sports in london, but auto parts and, you know, whether youre a sports or auto parts factory, you want to make money, but you want to do good. I mean, i want to talk about my experience, which has been, you know, you engage theres so many opportunities that are nondivisive or none controversial that one can engage in. For us in most of the countries, were doing things like if youre in sports club, youth health, exercise, underprivileged helping that, or factories, placing them in areas where theres high unemployment. You can do a lot of good without really broaching any sensitive issues. Was maury wrong to voice any support of any kind . Well, i think let me just say this let me give you some examples. Okay for example, in spain weve got factories in catalan, barcelona. Weve got factories outside. I get you know, ive had a number of times people say you need to have a public position on that. And my approach is well, you know, im an american owner investor i dont think its appropriate for me to really be talking about issues that are, you know, that really relate to that country. Similarly, you know, fulham football club, west london before brexit i had many people say fulham, were supporter, tickets, bankers, you guys need to have a position i said thats not the purpose of a football club. And it turned out 41 of our fan base voted against brexit. I felt it was the right thing for us to do. I know youre a chairman of the nfl Business Venture committee as well and certainly a lot of focus is on the nfl given the fact that Roger Goodell has said china would be a top priority given everything were seeing play out and the troubles at the nba, whether that makes the league rethink and owners like yourself rethink that expansion into that market well, i think right now, you know, our focus is london, west europe, and mexico and you know, nfl jaguars, we have fulltime presence in london issues of sovereignty, whether its brexit or whatever, i think we have opportunities to really participate and do good in many other areas. And affect peoples life in a good way. Congressman, athletes, it goes back to ali and before, theyre going to voice opinions about social issues even if the managers and owners may not want to join them, radio it its happened ill be 62 years old next month and in my mothers room i heard athletes taking positions on, you know, social issues, controversial issues, africanamericans who came along in the 60s and 70s and athletics, bill russell, muhammad ali, they were very, very outspoken im not so sure that, you know, you can quash that or hush that, but at the same time, i think we all have different perspectives. I have to make sure that im not making my burden your obligation and so, you know, its going to happen regardless of where we are, what continent were on yeah. And social position, im a u. S. Citizen. I have a Civic Responsibility to address those in this country. Do i have a responsibility to be talking about it for another country . Thats the critical issue and whether its athletes ore entite should have opinions and participate, but we have to respect the sovereign rights of other countries. Sure. Earlier back to the network, you said good cause, your first answer does that mean the viewership, are losses, operating losses, you wont pay as much attention to no. I think the good cause, good product that the investment, the commitment has to be open ended, but for anything to be sustainable, its got to be able to make money long term or you cant sustain it j. C. And some of the founders have been at it when they approached me and when i got involved my emphasis was i want to look at not only get the funding, but have the business structure. I have a huge amount of confidence in the leadership but launch right, meet the needs really of the viewers, and then they do become sustainable. Were talking about all kinds of things above and beyond this network here today one more question for you. Because whether it is china, whether it is brexit, whether it is some of the bigger, broader trade talks, policies, tariff situations that are playing out around the globe right now, the fact that you do own one of the biggest privately Held Companies in the company, auto parts manufacturer, what is your take on the Global Economy and how are you thinking about supply chains well, ive been in auto parts factory for 50 years times in the u. S. Have never been better. Okay its what weve gone through here over the last few years, i think the Current Administration on investment and Interest Rates, im super pumped and excited. Obviously weve got the gm strike and some issues that are part of our collective bargaining culture and how things go, but hundreds of contracts have settled without those issues, so this thing is going to get resolved. But this is i think were entering the prime manufacturing golden era for American Manufacturing right now. Really . Absolutely. I think and the world is changing in a lot of good ways you should be doing this show from a factory floor, maybe one of ours. Please come. Come to inner city detroit see what new factories look like who are the employees . 60 of the people are women. Theyre the eligible workers weve got to have work spaces that connect, more brains, less brawn and a huge amount of flexibility on the product line and quality. So i think its just starting in a great way. Im pumped well be seeing you in detroit i think. Absolutely. You should come to the come to the south side of chicago were talking about doing good i have a factory in the worst part of town where you can change peoples lives. Okay thank you so much, guys good to see you both. Thank you. Keep our eye on the tape obviously, keep our eyes peeled for any tape bombs, but dow up 161. Back to 932,7. 10 year above 16. Dont go away. Welcome back it is time now for our etf spotlight. Today we are keeping an eye on the semiconductors the stocks in the etfs are on the rise this morning. You can see right there each up about 1. 5 yesterday the smh broke a twoday losing streak with a gain of 1. 8 its now up more than 37 ps f the year among the top holdings, intel, nvidia and qualcomm. Like it or not, its become a lightning rod for trade. Still to come, the Financial Sector has been underperforming the s p 500 so far this year will Upcoming Bank earnings turn the tide were going to talk to the ceo of kbw when extracurricular sqe street returns. Hope you like this music as much as i am today welcome back to squawk on the street. Lets get a check on where the major averages stand trading around session highs dow is up 145 points the s p is up 16 or about half a percent. Lets get over to sue herera for a cnbc news update. Turkish backed forces from the Free Syrian Army joined the turkish incursion against forces in Northern Syria as a series of explosions rocked a border town today. At least seven civilians were killed according to kurdish activists and a syrian war monitor. Ukrainian war president zelenskiy says there was no blackmail in the phone call with President Trump which helped spark an impeachment inquiry zelenskiy said he only learned after their july 25th phone call the u. S. Had blocked millions of dollars in military aid to ukraine. Here at home an october storm bringing snow and Power Outages to washington state. Up to 4 inches of snow fell in spokane. At one point more than 32,000 customers were without power. The 28 nobel prize in literature has been awarded to a polish author while the 2019 prize went to austrianauthor peter handke she received the award after the event in 2018 was canceled following sex abuse allegations at the academy you are up to date carl, ill send it back down to you where the Nobel Peace Prize awards are done, i wont be stumbling overall of those names. Were almost at the end of the long nightmare back to you. Better you than me. Sue herera if anyone can handle it, its. Dow is up 145. The president will meet with chinas vice premier at the white house tomorrow pretty interesting day so far. Im going home at 6 00 and i see futures down 35 points what trade talks not going well and then we see the ushape back i havent changed my opinion in the last 24 hours. The risk is very much to the down side. A truce, the market seems happy with a truce for a while, but long term, and im talking about getting through christmas, a truce is not going to make it. A truce can be broken at any time the market knows that. So what im concerned is the rhetoric, we keep getting more and more extreme territory in terms of the rhetoric and the action, so remember how this all started out. We were talking about intellectual property reform it somehow morphed into now were talking about capital flow limitations. Then it went into black listing chinese companies, then it went into visa restrictions for chinese officials. We go down this road a lot more Creative Things can happen we can talk about blacklists u. S. Companies working over there. This could get a lot worse im concerned how this keeps escalating, the tone of whats going on if you look at the market narrative, the markets come to believe that even if youre not in the 2020 recession camp that growth is going to be lower. Theres a lot of people, 1 to 2 for 2020 rates are flat defense are going to be the leader still and Earnings Guidance for the Fourth Quarter is going lower. Whats going to reverse this market narrative i dont think a truce will do that and thats my concern. Is the fed going to do it well, i thought powell did a fine job the other day i thought he held up well. I think theres going to be another rate cut everybody believes that. Im with the consensus on that theyre trying to figure out over in europe how far they have limits, theyve reached the limits of how much they can cut. I am pleased to see there is a pushback against zero Interest Rate policy. I think its fantastic i think it makes no sense. You explain to a 4yearold that makes no sense to lend somebody money for 10 years and lose money on that proposition. A 4yearold can understand that thats a losing idea and i think the world should push back against zero Interest Rate policies. What happens if tariffs are delayed with this new increase and we pivot to european tariffs . Weve got Big Decisions coming up on autos. We know what the wto has said. The World Trade Organization was created for the specific acknowledgement that tariffs create enormous friction in the Global Economy and create problems in history. We know this it was created as a mechanism to settle disputes. The United States won a significant dispute as the president pointed out with whats going on in the Aerospace Industry they sided with the United States we went and made a case and won in the i think thats very significant. I think that they can make a case, too, with china, with enough allies on our side, you make a case with china about various things i think thats the big issue a lot of people agree with the attitude toward chinese, but not the approach towards the chinese. Finally, some people have pointed out we dont have a lot of earnings to go on, but if you take delta and pepsi and lvmh, not bad. Thats only three. Theyre good. Lvmh was very good, surprisingly very good. In general, though, if you look at it, weve probably got 25 countries excuse me, companies in the Third Quarter that have reported generally theyre beating expectations, but if you look at the guidance immediately after the Fourth Quarter, the analysts are dropping the numbers more, because theyre concerned about what theyre seeing. So even though there have been beats for mosts, 90 of the 25 or so have beaten, their numbers are coming down for the Fourth Quarter because exactly what i talked about, the market narrative. Its interesting, the names for the most part have reported have been consumer facing and i wonder if theres any sort of bifurcation in terms of analyst estimates for where the industrial, business to business is. October 17th, were going to get general electric, the 17th i think. 30th i think. Okay. Tech strong is the 17th maybe right after that c caterpillar, youre right, thats the 17th and tech tron is the 17th those are the first two big global industrials to watch. I think theres going to be an issue there. Bob, thanks stay close. Still to come this morning, financials underperforming the s p. Jp morgan with some underwhelming price targets. Dow is up 161. What do you look for when you trade . I want free access to research. Yep, td ameritrades got that. Free access to every platform. Mhm, yeah, that too. I dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. Now offering zero commissions on online trades. We charge you less so you have more to invest. But shouldnt somebody this is be listening . Pression. So. Lets talk. Were built for hearing whats important to you, one to one. Edward jones. Its time for investing to feel individual. One top Economist Says we should be weary of counting on the almighty consumer to save the markets. Find out why on trading nation more squawk on the street is coming up. Hmmm . Because schwab makes planning for things like this easier. Yeah, with schwab we get automated investing and integrated planning help. For a low Monthly Subscription price. Why would schwab do that . They help you plan for the things that matter. Subscription pricing. Schwab introducing subscription pricing with oneonone guidance. Schwab intelligent portfolios premium, a modern approach to wealth management. [spokesman] if youve tried colleg group cheering shed, snhu lets you transfer up to 90 credits toward you bachelors degree. [woman] it doesnt matter how old you are, you can do it, you can finish. [spokesman] finish your degree at snhu. Edu time for the Santelli Exchange lets get to rick in chicago thanks, carl. Remember, if its earnings season, its rebecca corbin. Rebecca, you know, i find it so fascinating that all these global issues going on, everybody trying to decide whats going to happen with global trade, whats going to happen with tariffs. About 40 of your respondents are outside the u. S. Theyre equity investors. We surveyed 76 institutional investors. Theyre looking for continued deceleration earning season is priced in for sequential deceleration in line to worse than consensus estimates. Theyre bracing for deterioration in cash flow and margins. Expectations are for a pretty bad quarter. If i had to summarize what i saw was that for u. S. Theyre still thinking 2. 5 gdp was the highest percentage pick in terms of number, but yet recession in the next 20 months also was a high probability and then through all of that the biggest concern, of course, is trade so they are optimistic about some issues regarding the u. S. , but not necessarily multinationals. Yeah. Theyre coming in to understanding that we are in a new normal this is the new normal and theyve wrapped their heads around that. Its all about expectations management so theyve come to terms with the fact that Global Growth is slowing and for multinationals, what i think there is a disconnect with regard to investors and what corporations are announcing with the cost cutting. Last quarter we identified over 3,600 Companies Globally that announced cost cutting actions, 18 higher quarter over quarter and 20 of those announced head count reduction playoffs that will cycle through and thats going to trickle through other sectors and to the consumer eventually. If all the concerns start to moderate, nothing is going to be binary when it comes to trade. If things improve, it will be a slow improvement how will that affect some of the ultimate decisions of strategic money in the equity markets based on your survey if you think about what corporations have done, they have basic realigned their financial positioning to this new norm so cost cutting, weve seen a lot of capex reductions happening, demand, et cetera thats all related they do have the alt to contibi continue to reinvest were talking about lower growth, decelerated pace. It certainly seems as though one thing isfor sure, the last couple surveys, this one especially, they put so much strength in current management under the strained conditions. The time we have left, explain why that keeps showing up. Sure. I think management teams have gotten a lot smarter, at least the ones we follow and work with they are ahead of the curve in terms of understanding what the ramifications are with tariffs and they of addressed that through initiatives, cost cutting, et cetera i think theyre going to be looking for investors, strong Balance Sheets dead level sensitivity is at an all hi ti alltime most investors are comfortable with less than two times daeebt. Management teams have reconciled their Balance Sheets theyre stronger theyre getting ahead of us. If we do see any type of catalyst that will change, theyll shift gears accordingly. Rebecca, thank you so much for the insights of your respondents. Back to you. Rick santelli, thank you. Now lets send it over to mr. Ft. Knox himself, john ford. As we continue to projectile some of the most valuable startups in the world, well take a closer look at a rival of uber and lyft based in china but with a network around the world. That is coming up on squawk alley sometimes, the pressures of todays world can make it tough to take care of yourself. But natures bounty has innovative ways to help you maintain balance and help keep you active and wellrested. Because hey, tomorrows coming up fast. Natures bounty. Because youre better off healthy. Owning and running the biggesta Small Business is finding the right people. In hiring our first recruiter, we decided to post a job on linkedin. They had to have worked. At a recruiter firm and be bilingual. When we saw ana marias profile. She had a ton of experience in hr. The interview went really well. And she seemed like someone who could really sell mckenzie to perspective employees. We found the best person to find the best person for us. Post a job today at linkedin. Com grow the fed is expected to be a big buyer of treasuries for a long time to come, but is its latest Balance Sheet move the same as qe Steve Leishman hopefully can finally answer that question for us. Yeah, i dont know about that the fed is going to reserve growing its Balance Sheet, but its really concerned the markets not see this as a round of easing during the financial crisis you remember the fed bought large quantities or q of mostly long term bonds to ease, that is e Monetary Policy in an attempt to drive down longterm rates. The fed says this is not that. Theyll be buying shortterm bills in limited amounts to ease the crunch in the overnight funding markets. Part one of the plan is to replace recent temporary operations and the feds Balance Sheet has. And fed Balance Sheet is growing from temporary operations, orange line. The fed needs to make it permanent with outright purchases, not temporary repurchases. 200 billion of work the fed has to do with no particular time line on it part two of the plan, fed will resume growth of the Balance Sheet in line with nominal economic growth, plus or minus 15 billion a month part one is getting the market the supply it needs to end the liquidity crunch and get the funds rate into the range it wants it at. Second part, monthly growth, is returning to precrisis era when the Balance Sheet grew not everyone is buying the spin. Pantheon says any permanent increase in reserves beyond the rate of nominal growth is easing of policy. That might be true much less q compared to other qe efforts, so less e as in easing. Talk about what you think the effects might be of new purchases or marginal purchases . I hate to contradict everything i just said, could have potential easing effects if you think about one thing it mielt do is steepen the yield curve, if they do purchases on the short end and otherwise ease their Balance Sheet to make it either neutral or towards the shorter end. You can have steepness in the yield curve. That could spark banks to lend more that could be an easing effect to it. All right, steve. Thats exactly where were going to jump off from, talking about yield curve. Major banks set to report Third Quarter earnings next week joining us in a cnbc exclusive, ceo of kbw thomas, good to have you good morning. You mentioned possibility of a steepening yield curve, but we havent seen it, banks earnings seem to be suffering or focus of investors as to why stocks arent going to go up. Really, the whole bank stock market has been driven around this rate change whats interesting is go back, look at where we were, june 8th last year, regional banks hit an alltime high, bigger banks in february at that time we looked for 11 earnings per share growth going into 2020. Today, we sit here, were looking for negative 2 earnings per share change going into 2020 so what changed . The entire rate outlook changed. Back then, thinking higher rates, good for banks, strong economy. Today we have a flat yield curve thats low rates it has changed the operating environment which has become more challenging for banks and i think really for the Third Quarter earnings which start in earnest tuesday, where we are in that story is really the big issue because we think that earnings estimates are probably still too high. You do have a lot of profitability at banks but it is lack of growth you think thats going to weigh on Investor Perception thats whats been weighing on the stocks. September 5th, we cut estimates for 221 Bank Companies that we follow at the time we were 10 below the rest of the street today i think were 5 less based on 2020 earnings what i hope would happen is there would be a more clearer view as to what the earnings outlook is, and i think that would help the stocks possibly find a floor. Reuters says a memo out of wells that theyre building larger loan full fullment teams to be get ready for next year. Is steve right can we get more . Mortgage lending, absolutely. Capacity is there to make the loans. Were looking for 27 year over year growth Third Quarter in the mortgage business. That will be one of the bright spots of the quarter that well start hearing. The refi boom will gin up. Fidelity cut trading commissions, has been a big story for awhile now the fact were seeing the digitization in finance, what is it doing to the cost for investment and what does that mean for banks and also the financials more broadly . I think there are a lot of interesting things two stories here the first one is that it is actually, when i was younger, banks would give away things to bring deposits in, you would get a toaster. It is cheaper to give a free trade than to make a toaster what it is all about is gathering customers. These companies are going to make money doing something else. I thought it was interesting today, in my morning paper there are three fullpage ads from td, fidelity, schwab going at it thats number one. Thats about customer acquisition, how technology lowered the cost of that second thing is youre absolutely right, if youre not investing in Digital Technologies to serve customers, youre falling behind. The whole scale argument is building in the Banking Industry, the reason sun trust is coming together with bbt and why i think there will be more consolidation. I know valuations are at lowes lows we havent seen in some time youre right. Weve gone back 15 years we are at historically low pe ratio, relative multiple to the market and dividend yield is at historical high. This spring is koild and ready to go for bank stocks to outperform until the operating environment becomes more clear in my opinion, it is probably unlikely to happen. We could be looking at a flat yield curve or we could be talking negative rates that they have in europe as a possibility. That is bad for the Banking Industry you go to europe, i mean, it is not an experiment. It is happening in europe. Those companies cant earn double digit returns on yiequity and traded a big discount to book what i would call on for policy makers, before you go to negative rates, think about what it does to the Banking Industry. Our Banking Industry is the leading Banking Industry in the world. I would be careful i think it would be negative. Is underriding behavior going to change after what weve seen in the past month for ipos i have a different take on this i think it is not a function about the ipo market, i think it is a function of the private market before the ipo market because some of the valuations that were struck in private market deals were really high and one of the benefits of doing a Public Market is youve got full price discovery, the world watching you do a private capital raise, be careful it is a thinner market i dont think it is a problem with the ipo market, but with the private market it is hard for the ipo market to speak for a price that was set in another market so my view is, it is all about what the investors paid you have to Pay Attention to what youre paying in the private market before you get to the Public Market. Thomas, thank you appreciate it. David, thank you. Squawk alley starts in a few moments. 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