Transcripts For CNBC Squawk On The Street 20240713

Downgrading most advanced economies. You can see right there, these numbers 3 for the world, 2. 4 for the u. S. , 1. 2 for your area, 6. 1 for china. These are all down you see there from the prior forecast and also mostly except for japan down from last year. The imf saying in its report, Downside Risks elevated. Brexit related risk to hinder confidence and growth. Theyre down on this trade issue. Very quickly, they do see something of a moderation next here in 2020 we go back up to 3. 4 it isnt the advanced economies this get there theyre looking for a turn around in emerging markets and developing countries four things the imf notes needs to be done theyre saying International Response may be needed if things get worse from here. They say Monetary Policy cannot do it all. There is a financial risk created from low Interest Rates there. Fiscal measures to help with the slowdown along with structural reforms. Carl that is big news, steve were going to dissect a lot of that with the earnings that were getting today. Well come back to you later, Steve Liesman. That ties into the earnings day were getting on the banking front. Jpmorgan chase, better than expected results, helped by growth in home loans, auto loans and credit cards goldman a slight profit miss, revenues in line and then sciti beats the street wells fargo misses on the bottom line, concedes consensus on the top line everybody seems to talk about jpmorgans results that was the big factor, created surprise not the busiest quarter. Good quarter for debt underwriting and fixed income trading, which was a few hundred million to the better for jpmorgan the mix of their trading exposure and positioning not something you can extrapolate. I think jpmorgan in general, though, checked all the boxes, very steady performance. I think all of them are steady Third Quarter was a little slow in Investment Banking and that hit in some areas. Saw that in goldmans numbers as well. Still leading in terms of the franchise and m a, the numbers were down year over year the correspondenti underwriting down, i think 9 decline overall. Even though they, jpmorgan and Morgan Stanley when it comes to equities are numbers 1, 2 and 3 depending on the quarter that youre talking about but overall, more muted than i might have anticipated given how often how much time we spent talking about ipos, plenty of them underwritings with a little bit light for goldman. Again, just volumes mostly not there. It is interesting because they obviously the group trade oz on a macro basis trades with yields, with expectations with how much we have left in this expansion. That will determine what credit costs look like down the road. It is a quiet backdrop for them in terms of results. Question is does the market give them any credit for this goldman, mentioned earlier, trading at tangible book value return on tangible equity, 11 , and first nine months of the year and the market says, yeah, fine. What are you going to do when things arent so great citi gets to 12 too, keeping the promise there. People commenting on the markdowns on goldmans Equity Investments, uber and the like a little choppier. Yeah. One narrative being spun today is their pivot, right . If youre down year on year on revenue, profit, eps, roe, how much how long is this going to take . Of course, we have been talking righttally so about the efforts when it comes to consumer the Conference Call calendar this morning is a little strange, goldman is not until 11 00 a. M. In part because of the bookup of all of the different banks reporting at the same time and various Conference Calls. Were going to wait and see what management has to say there. Listen, to your point, markets, 55 in deposits, 5 billion in loans, the apple card, i am told by the way were not going to get any metrics. Dont look for anything on the call that will give you a sense in terms of specifics how it is done other than pretty elevated is what im hearing. They tried to keep the credit quality of the clients very high and they at least people close to goldman tell me theyre very happy at apple with the performance thus far of the apple card and then they also have this transactions platform, transaction banking, they have been using it internally, 250 billion in payments processed. Clients will access it next year so thats the efforts that were sort of referring to that are new, essentially, for Goldman Sachs. Thats why not comp expense will be higher than it otherwise would have been. The question is are you getting a return for what youre spending they would say we already is a bank that has 55 billion in deposits, 5 billion in loans, just to go out and find Something Like that, you pay more than we have spent. The other steadier business that goldman has been trying to refocus on is asset management, been there forever, 20 of revenue. It is like an apple issue. Like, when does the market pay a higher multiple for the steady part of the Services Business and for goldman it will be a while. Youre not going to get used to be a way to get a premium, now it is not. So it is good, smooths out the business, but 20 is not going to kind of color the entire view of what the company is able to do. David mentions cards, jpmorgan card sales up 10. They did say delinquencies are stable all the color we normally look to for jamie dimon on the economy, he says in the u. S. Economy, gdp growth slowed slightly growth in wages and spending, combined with strong Balance Sheets and low unemployment levels offset by weakening Business Sentiment and Capital Expenditures driven by increasingly complex geopolitical risks including tensions in global trade one thing people did note, chargeoffs, up 33 at jpm. Theyre moving higher, off very low levels, but not yet reaching a point where you have to worry too much about them it feeds into this idea that clock is ticking, you know, the expansion is not going getting younger. So, again, it is not something you cant handle the question of paying up right now, for future results, if you can say yields go higher, this was an unwarranted recession scare, theyll trade better. But until you get more kind of comfort that we have years to go on the expansion, it is hard to he was asked about a recession. He said, of course there is a recession ahead. Is it happening soon we dont know. Yeah. Mike, this stock has outperformed the s p. Yeah. Stock is only about a dollar below the all time high. Has the premium. Bespoke said traded lower on q3 results for nine straight years. Incredibly consistent pattern if it holds up here, up 2 it is the consensus winner and everyone gets that it mirrors what is going on in the overall market want reliability, steadiness, willing to pay up for it as a premium. I dont know it is necessarily changing the overall story based on these three return on equity, 15 , 18 at jpmorgan at wells fargo, it is the waiting game at this point they report the numbers, well see how the market reacts. Charlie sharp takes over on october 21st as the companys chief executive officer and president. Replacing long time interim ceo alan parker who bid his goodbye in the press release. The cordial thing to do, if youre a company with a new ceo is not go out of your way to beat earnings. Right. You can no real incentive to put up a great quarter for wells fargo. So as an opening note in q3, what do we say today i think the last two quarters, expectations got beaten down nicely the market is on balance slightly more rewarding than punishing the results. Very early you look at unh, it is a little bit of an uptick after those numbers. Unh beat and raised j j by a dime larry fink talked about the Overall Investment climate this morning on squawk. U. S. Growth is at least 2 . China growth is somewhere between 5. 8 and 6. 2 were paying so much attention to the political and geopolitical issues that were losing sight that the world still is moving forward and so i think thats one of the big issues that is going on now. It is not great, but it is not as bad as we feel every morning we wake up speaking of which, you wake up this morning and get more headlines regarding china trade, that they want the tariffs rescinded before they start buying 50 billion a year in american ag. Right or china is retaliatory tariffs on american ag products need to go down if theyre to make good on this purchase. Which they wont do. Which they wont do unless the u. S. Cuts its own. Seems like thats an aspirational number, 50 billion in ag purchases. There was also some talk that Chinese State media is more benign way characterizing the agreement and saying the u. S. And china are on the same page looking to push back against this idea it was a as an investor, i think it has to be extraordinarily difficult to really figure out what is going on given all the different data points, the different view of the truth to put it kind of also the fact that it hovers out there still. My explanation for fridays market action, so the s p was at 29. 90 something. At 3 00 p. M. Right. And it kind of gave up a percent fast because it was, like, this isnt going to get us out of waiting game. This isnt going to take the suspense away about whether we have more to come in terms of tariffs or escalation. And that alone was enough to say, fine, we dont get an all clear on that front, we got to deal with the issue for a while. Right which will continue to watch, along with the other earnings that we havent gotten too well dig deep near j j after the break. Take another look at the premarket, well watch that imf cut to Global Growth they take u. S. To 2. 4, down. 2 were back in a minute whether your beauty routine is 3 steps. Or 57, 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. Futures are higher as earnings season kicks off today to a mostly upbeat start jpmorgan, the banks, j j, black rock beating estimates the street was expecting the worst Third Quarter earnings season in three years. Barry banister joins us this morning and jeff mortimer. Good morning, good to see you both good morning. Good morning, carl. I want to get right to one of your more interesting calls, youve been net cautious all year long, you got a nice tactical call on cyclical stocks going into the end of the year what is it yeah. We think the market is really ripe for blocking and tackling it is going to pivot on the whole question of a recession in 2020 but the setup reminds me of july of 2016, we had weak nominal growth in the economy and year over year basis then and now things pivoted up a little bit for the next three to six months after that so we had been as you said very positive for the last year on defensive, look utilities, reits and staples, but we think it is time for a little bit of cyclicals and energy, some financials, and some industrials to year end. Does that extend to things like transports or not transports are obviously leveraged to Global Growth in trade and trade volume in particular pricing is an issue, some special situations on shipping related to bunker fuel and so forth. But overall i think that the market is already starting to look into early 2020 and were trying to stay about 3 to 6 months ahead of the current situation. And i like what im seeing but well be very aware of the risks and well watch that position all right jeff, people trying to draw analogs to the environment is this december going to be like last december others argue the fed is in a different place, even though some of the trade dynamics are similar. What do you expect going into actually the prints were getting on q 3 and guidance for q4 i dont think this q4 will be like a last years i think you had a perfect storm of forced selling bill hedge funds and mutual funds markets turn from positive to negative and Algorithmic Trading exacerbating some of the issues. I get asked that a lot by clients. The fed has changed this posture, pivoting to neutrality late last year and then even to easing this year as we all know. I think were a different backdrop and we have more in the tank, almost a 20 gain on most assets so i dont think q4 is setting up to be a week like last years was. What does that mean, does it mean we can expect a normal seasonal lift or do you think that there is more to it than that yeah, i think you enter a decent seasonality backdrop, a lot of markets make their bottoms in september and october. If we get through this earnings season and analysts have for the most part as they typically do, theyre probably a bit pessimistic into the earnings print, down 4 or so so they tend to set the hurdle a bit too low. That companies then jump over, were seeing a little bit of that today from some very strong reports so far i know were only going to have 7 of companies, S P Companies this week. But i think so far, so good, and i think you might have a decent end to this year certainly there are backdrops of trading tariffs and other issues, impeachment, all the things that go on, that are very tough to map and model i think in general were in a pretty decent spot as far as markets and rates are concerned. Yeah. Speaking of being cautious, barry, this survey this morning, everybody is hiding in cash, reits, real estate, staples, third expected Global Economy to weaken in the next 12 months do you think were going to be caught off guard per your cyclical trade on the markets in general . I think that survey reflects why the defensives have done so well in the last year and year to date. We have to risk adjust for volatility, the returns of the sector level and so far this year utilities, reits and staples have clobbered the rest of the market risk adjusted. I like the tone going on in trade. I think both sides are talking, with mutual respect. Theyll probably throw some bones to each other and get some positive moves there it is going to be a long slog in terms of negotiations. But i think that the tone is better brexit tone is a lot better. And there has been a huge reversal in the last year in the feds posture. This injection of reserves is a big, big positive for the market in terms of liquidity and improvement. So, barry, does that mean that this idea that cyclicals and more aggressive stocks can work a little bit better is it just kind of a contrary positioning type move . And then were back into a similar kind of slow growth texture for the market or do you think we actually have a real new leg of growth coming the consumer held on very well in the United States. And we have depleted some inventory. I think what wear going to probably see is a better Growth Profile in the Fourth Quarter versus the third subsequentially on a nominal and real basis. It could continue into early 2020 if we can push back any possible future recession dates. Right now it looks like a green light to us for a as was mentioned earlier, a bit of a seasonal rally here off of october. Finally, jeff, you know, speaking of the new, whether we call it a trade truce or deal or what have you, there is a theory that a lot of companies were hanging on to employees longer than they ordinarily would, hoping for a grand deal. And were trying to save on operating expenses through wage growth and maybe hours worked. But now that we sort of know the deal for now, they are going to go ahead and make those tough decisions on head count going into year end. How likely do you think that is . Thats an interesting question i have not heard that yet, kyle. Carl it is interesting to note, i have not heard that in the conversations that ive had with management or Money Managers we have to see i dont know if a lot of people did expect a grand bargain, certainly in our Investment Strategy committee we were looking at many, many deals and that this trade and tariff war or issues will continue on for a longer period of time than many expect. So perhaps if companies are caught off sides, some of that might be coming. But i hope that is not as widespread as you may have deemed that in the question. Well have to see going forward. All right, guys, appreciate it a lot of information headed our way. Barry, jeff, thanks. Still to come, former wells fargo ceo richard kovacevich, what it means for the sector futures look good here, not far from session highs in the premarket. Were back in a moment each day our planet awakens 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. It also has the highest growth in manufacturing jobs in the us. Its a competition for the talent. Employees need more than just a paycheck. You definitely want to take advantage of all the benefits you can get. 2 3 of employees said that the workplace is an important source for personal savings and protection solutions. The workplace should be a source of financial security. Keeping your people happy is what keeps your people. Thats Financial Wellness. Put your employees on a path to Financial Wellness with prudential. A look at the futures, hoping to get back up to 2985 on the s p. Bank earnings to get to today and a lot more fed speak headed our way. Opening bell in about six minutes. Im off to college. Im worried about my parents retirement. Dont worry. Voya helps them to and through retirement. Dealing with todays expenses. While helping plan, invest and protect for the future. So theyll be okay . I think theyll be fine. Voya. Helping you to and through retirement. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. Opening bell in throw minutes. Busy Tuesday Morning a lot of bond markets open again after the columbus day holiday and the first wave of real torrential earnings rain is upon us with the banks. Well get transports started with united tonight. I think it is welcome the idea you can lock at companies and figure out what comes next in the next three months, interesting, but it seemed like the stock market didnt know what to do with itself yesterday, no real lead from yields. Very light volume. Yes two years maybe, close, right . Whats that in terms of volume . Yeah. Really slow day. The bond market is not doing much yields are holding, and i think that steadies the outlook here one interpretation is the trade deal didnt do anything to we cant pencil them both in, this was not at all clear, therefore if you thought before the fed would be more friendly the rest of this year, it didnt change that picture much. Ten year holding at 1. 7, up from 1. 5 a week ago. And bullard, bostic and george on the tape today, well watch try it keep an eye on congress, senate back in session, lots of reports about the kind of testimony well get behind closed doors this week. The situation in turkey, more comments about the withdrawal of u. S. Troops from portions of Northern Syria, the turkish lira coming off a fivemonth low after those sanctions announced by the president and the call for a ceasefire. Yeah. It is not one of those things that has a real direct lever to any of the things we normally look at. But adds to the noise level. The bank of america, Merrill Lynch fund manager survey which remains downbeat, matches the defensive posture and i think it is just because of headline fatigue largely. And this idea that were a little bit in the homestretch of the expansion. Not to say thats true, but thats the impression. And s p i was saying earlier, hit 29. 92, Something Like that, 3 00 friday, youre down from there, you pick up part of that now at the open, so i think the earnings looks like a net positive contributor in terps of earnings reaction. You can add up the dow components and figure out if theyre offsetting one another unh and jpmorgan are doing their share to offset goldman. Unh 388 beats by 13 cents revenue ahead. The guidance raised maybe for now the policy risk that some of them building into the stock is outweighed by the results. A weak performer for coming off the low base. Also, by the way, brexit the debate tonight bumps the Democratic Candidates who hunter biden on gma, a lot to watch if youre keeping an eye on politics. To the opening bell here, and the s p 500, at the big board, it is Discount Store dollar general, celebrating its 80th anniversary at the nasdaq. Biopharma focused on improving treatment for cancer patients. I guess jpm will help light the way at the open. Looks like it jpm, it is a pretty heavily weighted stock, and, you know, looks like up 2 , the all time highs over 120 it is pushing that tough to get too negative on the overall market you have apple and jpmorgan pushing new highs, even if the rest is looking more tattered underneath. And, you know, Goldman Sachs is kind of giving back about a similar amount it does seem as if thats the toggle now i dont think anyone thinks financials will lead to market higher, but it helps the idea that the cyclical tone of the market can hold together for a little while right and carl, youll be happy to know they maintain their fortress principles in case you were wondering book value, 7524, up 8 . It is trading well above book, different than that stock, Goldman Sachs, which has really not traded far above. Tangible book at the end of the quarter, 205 and change. There you are right at if not a bit below off a quarter that is perhaps less than inspiring the Conference Call not going to get under way for another hour and a half you would expect a lot of analysts will be asking about the efforts goldman is making in terms of Consumer Banking and with markets, with the apple, credit card, with the Transaction Processing platform that it is going to start rolling out more broadly next year and the cost of all of that. And whether theyre getting a return on it comes to the basic business, fixed income currency, commodities, an underwhelming quarter. The market isnt paying up for that at all, even though these franchises are still pretty good. So i do think it is really about the belief in that transformation that seems to be driving the story. I want to mention schwab, by the way, also an earnings beat today. Up 4 because it did get hit with all the other guys back when the zero commission kind of wave hit, two weeks ago. We have not heard from wilfred frost. Takeaways from you we have been listening to the calls that jpmorgan just wrapped up the headline is that chairman and Ceo Jamie Dimon was a little less constructive in terms of his macro outlook than i heard him in a while he said in terms of china and trade, quote, it is hurting Business Confidence and expenditures also a similar tone from the citi cfo on the media call, where we heard there is cautious sentiment out there from corporate. Back to dimon on the u. S. Economy, he said, quote, still growing, but well see the key term though in terms of the consumer and credit quality is hes very relaxed overdoing the prurz essures n the Banking Industry we had growth in the United States for the better part of ten years. The credit is extraordinarily good. In terms of trading, both citi and jpmorgan seeming to suggest the surprise beat we saw in the fixed income trading came just in the final month of the quarter. That clearly didnt reallysachs. Bank of america tomorrow, Morgan Stanley on wednesday more so interesting comments on the calls about that spike in the repo rate during the quarter. Essentially the tone coming from both citi and jpmorgan, it was in part due to the liquidity requirements they face from regulators, they do think the fed is addressing it if there are bigger stressors in the market to come, the reaction could be bigger still. They hope the fed is addressing the issues want to snapshot one thing for the earnings overall this is the year over year revenue change for the Third Quarter, for all of the big banks. It is playing out in the share prices jpmorgan up 8 , citi and wells fargo, saks down 5 , 6 year over year. People curious about jpmorgans exposure it wework, which they were asked about today. Yeah. So analysts call didnt go into it too much. General comments about ipo backlog and m a backlog. On the media call, i counted four different reporters all trying to get a comment on it, no comment whatsoever. Theyre able to hide behind that line of saying we never comment specifically about any one client but no luck in terms of any specific comments, which, of course, is a contentious one, both for them and Goldman Sachs. Because theyre both the lead book runners on that attempted ipo with the s1 that was so controversial, the bankers must have rubber stamped. The question with jpmorgan goes a step deeper because of personal loans to newman and those reports at least that jamie dimon and newman met directly themselves. But no comments on the media calls, so we didnt get any answers on that. All right thanks well check back with you later on separately from banks, nvidia will make a stand here as bamle takes the price target from 225 to 250. Data center growth, the new landmark on ai is neutral, natural language processing. Which they say nvidias data center has a lead on. The story remains that whatever the big important hot thing is, nvidia is in the middle of it i think that makes it it is also a stock that remains a good deal below its old highs and so it feels as if there is some room to make up tactically so that seems to be whats going on there the semiconductors have not given much in this latest little push, the market had up in the range of old highs. You look back, nvidia, so many of the other names at that point, little more little less than a year ago, i guess, right before the december swoon where they were all trading at their highs. Yeah. It is fought to that zone, another threequarters of a percent today as an index. Yeah. Wanted to move on to a story we have been following here de shaw, the hedge fund that in recent years engaged in Shareholder Activism with many other disciplines will today make public something the market has already known for weeks. It has a more than 1 position in Emerson Electric and is embarking on a campaign to bring significant change to the industrial giant, splitting the business from its Climate Technology business, while embarking on a significant effort to cut costs. Emerson stock price has responded recently to stories of the potential activism, its release of the report outlining all the ways in which emerson has failed shareholders over the last decade is its first public utterance since the report of it potential activism first surfaced it offers an indictment of david farr and the board of directors who have presided over a significant short fall over the last three, five and ten years, when measured against emersons peers in the automation or hvac industries, not to mention the ten year lag of roughly 120 versus the s p shaw focuses on a history of Capital Allocation since farr took over as ceo since 2000, emerson spent 14 billion in capital when accounting for m a and capex but increased ebitda by 400 million. The resulting 3 pretax return on Incremental Capital severely lags almost every one of its peers who posted an average return of 11. 4 during that same time period. One culprit for those poor returns on capital, shaw maintains, a cost structure that includes the highest levels of sg a relative to sales among the peers. The lowest revenue per employee versus those same peers. And a broader universe of Industrial Companies the report cites the 18 different facilities in the city of houston another, the companys aviation department, that includes eight airplanes, one helicopter, and a staff of 40 people, they also have their own internship program. Farr has long been lauded as a industrialist and his retail Shareholder Base stood by him, given a dividend increased every year of his term shaw claims hes been overcompensated for that track record with pay of 150 million over the last ten years, 50 more than the s p 500 average despite shareholder returns that have lagged that index by 118 they also note that mr. Farrs been compensated over 300,000 annually in perks related to his personal use of the companys jets to put that in perspective, thats five times more than the average for emersons peers in terms of how much they use the plain. They do it on a first class ticket would cost and above that they want emerson to change the metrics for longterm incentive compensation, focused on eps and Free Cash Flow growth and include indicators such as return on Investment Capital and total shareholder return these are met ricks that are widely used by emersons peers theyre asking the company to unstagger the board of directors so all come up for a vote every year and they note the board aport from mr. Farr owns only. 04 of the companys stock. And there have been three open market purchases by Board Members over the last ten years. The window for filing a proxy closes november 6th. None of this in terms of argument means shaw will get what it wants. It is a relative new comer to activism, it remains unclear whether it will do so, the track record for creating value from company splits, well, that remains far from clear consider dupont, we talked about it a lot here. Years of activism from third point succeeded in getting a split. That has yet to create real value. On october 1st, after reports of the interests were reported, emerson said it began a review of the companys operational Capital Allocation and portfolio issues well keep an eye on this one. Could be an interesting fight. It sounds look an activist campaign of the old style, you identify this company that has a little bit of a complacent Shareholder Base, popular individual investor holder because of the dividends just not managed for kind of a lead i think their focus on costs and they say it can be reduced by a billion dollars, they took a look the it from top down and bottom up, the lack of productivity per employee, youre talking about when you get into that and it overlaps with politics in terms of would they want there to be layoffs and things of that nature. Why you need eight airplanesan one helicopters when none of their competitors have that anywhere near that that is something i think that certainly some shareholders may question. The company has a fascinating history back in the 90s, known for never letting net income go down year on year, old ceo chuck knight, that was his hallmark. Right legacy in the days of tyco, tyco was taking an alternate strategy. They still the compensation, as i said, the Incentive Plan based on eps growth being they wanted to be 300 basis points above gdp. Thats what theyre looking for. If they hit that metric, thats 60 of the incentive pay goes to them many of the other companies that they compete against are looking at a lot of different metrics and you wonder, eps growth, it doesnt mean youre hitting a lot of other things. Good stuff, david about 90 points of the dows gain is unh alone. To bob pisani. Thats whats moving things, healthcare is the big sector mover, thanks to unh good start to the earnings season for unh and jpmorgan. Look at sectors right to the markets here. Healthcare is up unh helping. Tech, banks, largely positive. Industrials, energy weak the cyclicals are flat to slightly on the upside a lot of discussion about jpmorgan i hope you were listening to wilf about the strength of the consumer thats what you want to look at. We tend tolike at trading figures. I look at where the consumer numbers are. Loan growth up 3 . Deposit growth up 5 credit card loans up 8 . That is very good news for them. I think the bottom line here is long growth still solid. Credit still very good shape net charge off pretty low. These are good numbers here. Overall, but you shouldnt kid yourself, banks trade somewhat in line with where the Interest Rate scenario is if you look at the kb, the bank etf, the etf versus the ten year yield in the last few months, so here is your ten yore yield, the white line here is the bank index you see it moves pretty good this was the start of the big tariffs in the beginning of august when yields started moving down. You can see it is not exact, there is a pretty good approximation. Bank stocks tend to move in line with the Interest Rate scenario. Thats why we pay a lot of interest through Net Interest Income and net interest margins. Look at where we are here, jpmorgan, not quite a new high United Health, even more, 90 points for the Dow Jones Industrial average they beat raised guidance. The beat was effectively roughly the amount 13 cents of what the raised guidance was. A good start for them overall. Imf downgrading the World Economic outlook, fifth time they have done it, this is ongoing thing with them for the last year here i like to look at the bank of america fund manager survey, 175 Fund Managers around the world, good idea, good sense of the pulse of what Fund Managers are thinking every month it is still the same everybody is long u. S. Treasuries still, how many months on end has this been a long u. S. Tech and growth two big long plays out there there is other we have been talking about shorting the cyclical sector and going long defensive sectors. Still long defensive still long cash and rates and Consumer Staples if thats a definition of defensive, and there is still short for the most part. Short energy, short industrials, by the way, short the uk too is what else is going on i think take a look at next chart here, the important thing youll see is what would make this this is my favorite, what would make the market go up the most for them . Turn it around what are you worried about what would maybe the market go up 75 ending the trade war would be the biggest thing for the risz in the stock market thats a huge number been that way for a while now. German fiscal stimulus, a small group thinks that would help chinese infrastructure spending. A small group, 7 say the fed continuing to raise rates would help move the markets. Were talking about equity markets now. Thats interesting how many people think the recession will be out there . It is about 31 in the next 12 months 67 say no is this good or bad . Well, that number has been a little higher, but it is still not even close to a ma generajoy that number is higher than it was six, seven, eight months ago. Not anywhere near a majority bottom line here, still very, very long defensive for most of this group, pretty crowded trade right now. Carl, back to you. Bob, thats interesting bob pa sani. Back to Rick Santelli at the cme once again after the long holiday weekend. As treasuries come back, the short end, dipping just a little bit from recent highs. Long end holding in a bit better look at one week of two year note yields, you see we jumped a bit. We are coming off, you can see it reflected in tens, minus twos, which continues to trade close to the 1415 level. 24 hour chart of ten year yields, it is starting to get its legs back. Hovering around 171. Open the chart up to early september, these are basically were in the zip code of some of the highest yields at 2. 5 weeks. But once again, maybe the best gauge continues to be the watch the 30 year bond, 219 30year bond unchanged we continue to hold above that dollar index exact opposite picture. One week chart there shows deterioration. Remember, our 29 month high is right around 99. 40 were trading right around 98. 40. So we really need to pay very close attention excuse me, 98. 60. Pay close attention as you open the chart up even though were close to the highs, were starting to ease back and many of the funding issues of the dollar index has demonstrated are one of the impediments that many economists give to some of the issues around the globe especially on liquidity and funding. So it is a mixed bag with the dollar index as it backs away, many think some of the conditions may ease back as well carl, back to you. All right, rick, well see you later. Rick santelli. Still to come this morning, the imf cutting the Global Growth outlook again. The chief economist on the challenges facing the world will join us later on this morning. Dow up 144, unh, ten year 171. Dont go anywhere. Ive been a caregiver for 20 years. No two patients are the same. Predicting the next step for them can be challenging. Today were using the ibm cloud to run new analytics tools that help us better predict and plan a patients recovery. Ultimately, its helping thousands of patients return home. And who doesnt love going home. At cdw we get youre always yeah. Im just not sure Office Drones were the way to do it. [ laughing ] drone voice lol. Our market share looks good, but. Drone voice where are the bagels . Well, cdw can help you modernize your company the right way, with a scalable infrastructure from hpe, making you more efficient and secure. Great. Oh. [ drones buzz angrily ] lets find a different room. For transformation that works, you need Hewlett Packard enterprise and it orchestration by cdw. People who get it. Health care will help the market today despite some of the policy worries, unh up 6 followed by cigna and anthem in the top five. Dow up 141 largely due to that were back in a moment lock up expirations for pinterest and zoom leslie is in San Francisco as you alerted us to it last week, leslie hey, carl, thats right pinterest and zoom are two recent ipos still trading well above their ipo prices, but trading lower this morning the reason why, each has a flood of share supply hitting the market as their lockup agreements expire allowing insiders to sell this happened for nearly every ipo 180 days after their debut pinterest has 538 million shares available to be sold that does not include shares held by employees who are locked up until pinterest reports earnings october 31st. Zoom has about 230 million shares free to hit the market today. Combined, guys, were looking at upwarsdss of 30 billion worth of Stock Available to be sold on the market today now, of course, there will only be a fraction of that amount that is actually sold today. Theres no guarantee it will actually pressure the stocks in the long run, but the additional supply into the market may not be met with a comparable surge in demand, meaning the stocks could take some kind of hit as were seeing in early trading today. Now given the heightened level of ipo activity from the first half of the year, theres about 140 billion worth of stock being released from the ipo lockups in the remainder of 2019 investors now are gaming out whether that makes for a large or small risk to post ipo performances back over to you. Great radar on that thank you very much. Of course pin is down almost 4 . Taking you back to june, you really have to get into the psychology of these employees who have to decide if they think it can come back or not. Exactly i think theres always going to be a pent up for companies that have been private for so long and the volumes are pretty heavy in zoom and pinterest. People are, you know, hitting this window that opened up but often enough the market anticipates a supply and expects it to be soaked up pretty well. Yeah. Leslie picker, thanks. When we come back the chief economist of the imf which cut its Global Forecast this morning. Dow up 124 ichl through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Is that pgim, we see alpha emerging in the trendsete . 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. Good Tuesday Morning welcome back to squawk on the street. Im Carl Quintanilla with mike santoli an david faber sara eisen has the day off welcome to the first real day of earnings season in second gear results out of banks and health care has the dow up 137. Our road map with stocks overall up as the big banks kick off earnings season. Global growth concerns. The imf downgrades its outlook again. Well talk to the chief economist straight ahead. Investors awaiting details about tariff increases and aspects of the china u. S. Trade truce. Jpmorgan, goldman, citi, wells with, will fred has been monitoring the calls and more for us once again. Yes, indeed as we were discussing last hour the banks moving in Different Directions depending on their individual results off the earnings score but different anal for you now jamie dimon asked about the Business Roundtable statement they should prioritize stakeholder over shareholder interes interests and some of the pressure he and the banks have faced. I think we try, im speaking for a lot, a tremendous amount to help the communities because there have been people left behind the inner city schools are not failing because of banks and infrastructure is not failing because of banks so i think we can help infrastructure, help train people, get work skills, get involved with education systems, like all that kind of stuff that a lot of us do in detroit, we could lift up society and its good for us to lift up society when society does better everyone does better if you dont believe me look at venezuela, argentina, cuba, north korea, et cetera that doing well is a good thing for society and you can share the wealth a little bit. Im not going to respond to specific political statements out there, but well do our part to be a Great Community citizen and serve our shareholders at the same time. Back to the earnings and the share price moves, bank of america which reports tomorrow is trading slightly higher in the hope that it can emulate jpmorgan today where Morgan Stanley is trading slightly lower in fear that it might emulate Goldman Sachs. We should point out that jpmorgan did state that their financial exposure to wework is minimal though they did dodge other questions on the topic i should note that Goldman Sachs i believe in their Earnings Call that starts at 11 00 a. M. Plan to address wework more specifically the citi analyst call began moments ago. Wilf, one of the i guess downsides of giving that color commentary every quarter out of dimon, people look back a year ago what he said when he thought ten year going to four was a possibility and that you might have the best Global Growth in 2019 in a while. Obviously that has softened through the course of the year as the trade war has gotten worse, but i wonder where you think he is on that spectrum i think as i noted earlier, i felt his macro outlook was more cautious than ive heard it in the past though u. S. Consumer side, u. S. Credit quality side very relaxed about that, particularly the corporate side because of the trade war hes increasingly concerned ability. As to getting the guidance and forecasts wrong, at the barclays conference he addressed that specifically about four or five weeks ago and said i did think rates would be higher. Got that wrong rates are much lower the thing you have to give him credit for, regardless of whether those specific predictions are right or wrong, hes managed the business very well indeed. His revenue up 8 . Citi and wells fargo flat. Goldman sachs is down 6 year year over year regardless of the environment and his predictions on it his performance is the standout. Yeah. Wilf, thanks for that. Wilfred frost, busy day. Bank analyst gerard cassidy, good to talk to you again. Gerard, can jpmorgan be sort of the un it in that sets the standard for whats possible in this environment i think so. What were seeing from the results that have been released today is that jpmorgan is clearly head and shoulders above its competitors and its interesting because we all know banking and Investment Banking is a commodity like business there arent any patents or proprietary products and it comes down to execution. Jpmorgan is executing better than many of its competitors as weve seen from todays numbers. And gerard, given the fact that market seems to get that about jpmorgan, and has rewarded it in terms of the valuation, is it kind of game over in that sense or is there a chance that others are being overlooked, i guess in the concentration on jpm . I dont think the others are being overlooked per se because its a challenge obviously to execute as well as jpmorgan is doing these days and the momentum that jpmorgan has will continue that being said, though, if you look at the citigroup results, they came generally in line with expectations what was better was obviously credit quality and they had a lower tax rate that one could be a little overlooked based on todays trading. Well certainly hasnt been overlooked so far this year. Thats true. Obviously the best performer. Yes very true. What do we make of goldman . Goldman sachs numbers were affected by their investing in Lending Division and thats, as you may remember, thats where they value their private Equity Investments as well as public Equity Investments and those numbers were hit hard due to some valuations in the public markets. When you look at some of their core businesses, we had lowered our guidance in equity trading and they came in a little better, but i know against consensus they were less than lower than expected. Their Investment Banking businesses were okay, but advisory was on the weaker side for everybody. The core business at goldman is still, you know, strong. Its just this one line investing in lending which is a volatile line, worked against them in this quarter gerard, obviously the yield backdrop has been a big headwind and probably continues to be do you think any of the banks out there should be doing anything to change their sensitivity to the kind of suppressed level of Interest Rates right now . Youre right. When you compare what rates were a year ago and expectations of what everybody thought they were going to be in 12 months, completely different and i think the Balance Sheets have been, you know, being repositioned as we speak theyre not as asset sensitive in most cases. Some banks going into the beginning of the year were more neutral on Interest Rates so there wasnt any benefits from rising or falling rates. I think youre going to find, assuming the expectations rates on the short end of the curve are reduced at least two more times, between now and the fall of next year, and the long end of the curve remains around 160 to 185, i think the banks are positioning themselves better for that environment we also need to remember as they cut rates again, the deposit rates will continue to fall faster in each subsequent fed funds rate cut. Finally, gerard, health of the consumer, dimon took pains to say that delinquencies are stable charge offs were up, both there and to a much lesser extent goldman. Do we need to worry about that are we near having to worry about that not yet, carl the credit quality remains very benign for the Banking Industry. Its very healthy. I think the lessons that were taught in 08 09 have not been forgotten. When you turn back the clock and look at the banking debacle that led to strong underwriting standards throughout the 90s and 01 02 was not that material for the banks its happening all over again. Where the banks have taken a more conservative propofapproac underwriting, and the Regulatory Environment much more constructive with the stress tests so i think credit will remain benign into next year all right gerard, you cover the universe for us so well appreciate that. Any time, thank you the imf is cutting its 2019 Global Growth forecast to 3 it had been 3. 2 in july that is the slowest pace since the financial crisis our Steve Liesman is live at the imf in washington, sitting down with the imf chief economist Gita Gopinath. Thanks very much. I am here at the imf annual meeting with Gita Gopinath chief economist for the imf. You brought it down to 3 world growth tell us why you did that so there were a few tack tors one factor are the rising trade barriers and the continued geopolitical trade tensions. There are are a couple other factors which is kind of country specific factors in emerging markets and developing economies and structural force, low productivity growth, aging demographics in advanced economies. These three factors are responsible. How much is trade responsible for whats going on . If you look at the downward revisions, trade starts playing a bigger role. Theres this general slowing were seeing in the Global Economy but it seems to be driven more by the trade side. Our estimate is that all of the u. S. china tariffs put in place in 2018 and one announced would reduce global the level of global gdp by 0. 8 in 2020 whats a recession when it comes to the world you dont get much lower than 3 around here, do you . So once you start going lower than 2. 5 , thats usually a scenario where several economies are in recession 2. 5 tends to be a number people would associate with a weak Global Economy. You are pretty worried, synchronized global slow down and talked about the possibility of needed coordinated international efforts. Where are we relative to that . Are we close to needing that right now . Were not there yet but think things have to be put in play if especially if things get worse. Remember we are projecting a recovery in 2020 to 3. 4 , though we say that is precarious. Its important that fiscal policy starts playing a bigger role, Monetary Policy cannot be the only game in town. What is a coordinated International Response look like its usually a case described as synchronized move which would be where most Major Economies in the world, the ones that have fiscal space especially, undertake the stimulus this happened way back in around 2008 or 2009 when you had the last great recession. Does everybody cut Interest Rates further . You want Monetary Policy and fiscal follows move in the same direction. Many countries have eased significantly so the space that exists is not that big you want them moving in the same direction. Could the u. S. Go to negative rates or zero . Well, we certainly have technically speaking, there is more space to cut rates. Im not saying thats what they should do. Space exists we have to wait and see whether we get towards negative territory. This rebound you talk about, it doesnt come, though, from the advanced economies, it comes from the emerging markets, right . You dont really expect much from japan, the u. S. , or europe next year . Thats right. I think if you look at japan, even china, and the u. S. , they are going to continue to slow in 2020 thats not where the recovery comes from it comes from emerging and developing economies half of it comes from recoveries or shallower recessions in stressed economies this would be argentina, iran, turkey the other half is from a bunch of countries like brazil and india where growth is weak in 2019. India got whacked in your forecast and youre from india is it a personal thing i try not to take it personally, but yes, we did have a significant downward revision for india to 6. 1 . Now we do expect a recovery back to 7 in 2020. Lets talk about some of the risks that are throughout. Youre concerned about Financial Stability when it comes to lower rates. Is and also when it comes to greater trade restrictions, is it possible that the trade itself could put the world into a recession, the trade restrictions and tariffs if this continues and if it escalates further, i mean its there are many ways it can become more severe were all in a situation where investment is incredibly weak, manufacturing is very weak, and trade is very weak that could start spilling over to the Services Sector which has so far held up thats when we would start worrying about going below 2. 5 growth. Four outlooks and youve downgraded each time. That is correct. Do you think you might have one where you might upgrade eventually. Every time we put this out we flag the Downside Risks and unfortunately the last four times, those Downside Risks have realized in some form or shape we will continue to say that if you dont if policy gets it right we should see a recovery. Gita, stay right there. Gita has agreed to stay and were going to continue through this great color on the numbers you gave us earlier. Steve liesman, thanks. Well talk to the wells ceo. Investors await the detail of a possible deal with china dont go away. This piece is talking to me. Yeah . So what do you see . I see an unbelievable opportunity. I see bestinclass platforms and education. I see awardwinning service, and a trade desk full of experts, available to answer your toughest questions. And i see it with zero commissions on online trades. I like what youre seeing. Its beautiful, isnt it . Yeah. Td ameritrade now offers zero commissions on online trades. Welcome back time for our etf spotlight looking at the health care sector, playing a role in todays rally, the xlv up about 3. 5 from week ago levels, up 1. 7 levels this morning. The catalyst today is United Health care surging on an earnings beat. J j reported earnings too. The Health Care Provider etf, that is up about 3 this morning and that is obviously has an outsized contribution from United Health care as well these stocks have been beaten down, a lot kind of a political overhang, but they are rallying on confirmation that unhs business doesnt seem affected just yet indeed. With that, dow is up 200 s p 2987 breaking news on General Motors and for that well turn to phil lebeau in chicago. Shares of General Motors moving a little bit higher we know from talking with sources in detroit that the negotiations between General Motors and the United Auto Workers are progressing. As one person told me a few minutes ago, they believe they may be in the home stretch of reaching a tentative agreement with the United Auto Workers mary barra, ceo of General Motors and mark royce the president of the company were at the main bargaining table this morning along with negotiators and the leadership of the United Auto Workers theyre not to the point yet where theyre going to say we think we have a deal locked in, things can always change, but we can tell you there is progress here and as one person said to me we think were in the home stretch to getting this deal done the uaw leadership will be meet with the leaders of the locations of the uaw around the country, the local leaders, in detroit on thursday. That may be if theres a tentative agreement where they brief the local leaders. Back to you. Phil, thats big news were already in what, day 23, 24 i mean 30. Day 30. Hours lost. One of the biggest Industrial Work actions in the last few decades. Yeah. John murphy, one of the lead analysts who covers General Motors, he was out with a note today saying look, by his calculation, they probably lost about 2 billion so the impact here is substantial. The concern is, if you are a General Motors investor, is the longer this drags out, the greater the risk not only to continued losses, but also the Credit Rating getting hit and maybe potentially dropping closer to junk status. Thats not in the cards right now, but they want this to be ramped up as quickly as possible again, there is progress were seeing out of detroit. Thats good news, would be good news for good morning and overall manufacturing output which is highly affected by that work stoppage. Thanks, phil talk to you in a bit when we come back tax plans will take center stage tonight at the democratic debate what it might mean for your money up 208 dont go anywhere Chinese State media cautious about celebrating a u. S. china trade deal President Trump boasting phase one after trade deal is complete while pen has yet to be put to paper. Joining us at post nine to give us his thoughts the Partners Group advisory partner charl delara. Pleasure to be with you, david. Too much being made of what occurred last week here between our trade negotiators and chinas . I suspect so. This was their relatively minor set of understandings. A mine or squirmish it would be good to get this put to bed and move on it will leave unresolved issues in front of us. What are you referring to im referring to the understandings which appear to have been reached regarding ceased agricultural imports by china, or the postponement or delay of tariffs on chinese exports due to in to effect today. The full array of issues on the table here, these are not unimportant but dont respect the bulkof the problems that need to be resolved. Right others have made similar points. Whats your expectation then in terms of what will potentially get done and what will remain undone well, i think if you step back and look at this, there are three large clusters of issues there are the trade access issues, Market Access issues, which relate to trade and investment, there are the issues relating to intellectual property, technology, and Cyber Security which are perhaps going to be exceptionally difficult and issues relating to the structure of the chinese economy, relating to subsidies, state ownership, et cetera i think the president , both president s, would be well advised to separate these discussions into clusters. I think theres some hint of that with President Trump talking about phase one. I think there need to be definitive understandings out in the marketplace so that investors can get past this tremendous cloud of not only uncertainty but unpredisabilitibility hindering Global Investment and putting us at risk of a global recession. Part of that i think, charles, does stem from simply the mixed messages we get on almost a daily basis i dont know if you would agree. Even amongst the advisorses to the president or in the talks, its not necessarily always cohesive. Having been involved in a lot of trade negotiations myself, there are times to go public but there are times to keep these discussions inside closed door and i feel perhaps that distinction is sometimes lost a little bit and i think thats unfortunate because i think it adds to not only uncertainties, but unpredictability frankly, were selling the World Economy close to the global recessionp we saw the markdown of Global Growth by the imf. A lot of weakness out there. I came back from europe where the German Economy is flat in the southwest meeting with leading investors in our country and found them surrounded by almost paralysis regarding their own Investment Decisions Companies Like ours are bringing money to this country. Weve invested over 15 billion of foreign capital in the last few years but Foreign Investment into the u. S. Has declined precipitously. Were not going to be able to keep this growth going if these trade issues continue with so many uncertainties and i would say that if this continues for the next six months, the odds of a recession unfortunately are going to grow significantly. The sets of issues you lay out have been the same for quite a while, right its not as if that has changed very much. What does act as a trigger point . Weve been waiting perhaps for the chinese economy to get to a point of stress that it changes their decisionmaking process, hasnt really steamed happen it hasnt the chinese economy is slowing what were finally beginning to see is not just their export machine beginning to slow, their import machine is beginning to slow i mean part of our objective here was to correct the bilateral trade deficit. We havent made a lot of progress imports by china from the u. S. Were down precipitously last month, some 25 . And i think we are seeing a spreading of the weakness in the chinese economy, not dramatically, but were going to see Slower Growth this year. I think the real issue here is not whether the Chinese Government panics because of slow growth, i dont see that happening, i think the issue is whether or not both leaders recognize the longer this persists, the greater of uncertainties, and unpredictabilities surrounding these issues is out there in the marketplace, the greater odds are investment will decline to a point where Consumer Confidence begins to weaken and at that point we are in a recession. So for the critics who say where we are right now is, if we took the tariffs off, we could get the chinese to buy as much ag as they were buying before the tariffs were implemented is that too simplistic it is, but its a fair point. I think that obviously chinese imports of our ag products are down its not just the ag sector that is suffering if the tariffs in december go into effect the broader adverse effects on the u. S. Consumer will be meaningful and significant for the first time in all of this trade war in my view i thinks the fact is, is that there are legitimate reasons to put pressure on china to focus on these three seftsz issu ss of issues. If were done in a more orderly and private fashion, the markets could regain some confidence and we could sustain this recovery for another couple years in the absence of that, as long as these uncertainties and unpredictabilities persist, i think its hard to see were going to be able to sustain this recovery on into 2020 and 2021. Judging from what weve seen and expect, you very well may expect a recession next year i think the odds are sitting right around 50 50 firms like ours at Partners Group we have to find a way to continue to put money to work and we will. Were determined and careful and prudent investors. The reality is that Investment Decision making has been significantly disrupted and not only at supply chains, many of these supply chain disruptions are leading to economic inefficiencies which will cost jobs in the u. S. And around the world. I think we have to step back, not worry so much about winning a skirmish, which is what friday was about, or a battle, but win the war. The war would be to open up the chinese economy over paerds of years on these difficult issues while sustaining the Global Recovery we probably need to work more closely with our allies as well. There was tpp is that something that could have accomplished what youre talking about. I wouldnt be surprised if we come back to that. Its one platform. I wouldnt rule ute out the importance and value of bilateral talks as well. To supplement the bilateral with some broader efforts focusing on a limited number of key issues, with our allies will go a long way. Session highs here as the tape is now reporting that eu negotiators are closing in on draft brexit deal. Is it possible we put that to bed first . Talk about some good news yeah. Imagine if we could get two thanksgiving presents here coming up before thanksgiving. One is a brexit deal, the other is a trade deal. Obviously a trade deal will take a long time, but i think that but a brexit deal is important because its also been a huge supplemental source of uncertainty here and i think the odds are growing of a constructive outcome there i think we have to realize these trade issues will persist for a long time. Theyre important investment issues embedded in this as well. If we clarify the clustering of the issues and set a schedule, set a schedule, remove the tariffs, use the tariffs as leverage threats in the future but not in the same way being done now i think we could actually make progress or sustain confidence and the recovery. Charles, appreciate it. Thank you. Pleasure being here with you. Joining us. Lets get a news update this morning and turn it over to sue herera good morning, everyone. Heres whats happening at this hour a former top adviser on russia telling house impeachment investigators there were concerns at high levels about Rudy Giulianis activities in ukraine. Fiona hill says former National Security adviser john bolton described giuliani as a hand grenade. Turkey showing few signs of relenting in its military offensive in Northern Syria as the operation enters its seventh day. Russia said its troops were patrolling in Northern Syria, a sign it was moving to fill a vacuum left by the u. S. Withdraw. The death toll from japans typhoon stands at 62 rescue crews searching flood and landslide hit areas for 14 people still missing the powerful storm brought recordbreaking rainfall 77,000 households are without water. And the duke and duchess of cambridge meeting with pakistans Prime Minister imran khan as they kicked off their fiveday royal tour of that country. Earlier they visited local schools where they spoke with students and their teachers. You are up to date thats the news update at this hour ill send it downtown to you, guys mike thank you very much. When we come back, the big banks take the day marking the up official start of earnings season former chairman and ceo of wells fargo will join us next. Introducing even more value from fidelity. Fidelity now has zero commissions for online u. S. Equity trades and etfs. And fidelity also offers zero account fees for brokerage accounts, plus zero minimums to open an account. And only fidelity offers four zero Expense Ratio index funds directly to investors. With all of those zeros, there are zero reasons to invest anywhere else. Fidelity. So maybe ill win saved by zero so maybe ill win i am totally blind. And non24 can throw my days and nights out of sync, keeping me from the things i love to do. Talk to your doctor, and call 8442142424. Investors focusing on banks. Most of them in the green this morning. You see with the exception of Goldman Sachs but the group still underpassenger this year a slowing Growth Outlook joining us is former wells fargo chairman and ceo Dick Kovacevich great to have you here good morning. You know, pretty i would say steady results obviously theres little gives and takes in terms of each firm but what would be your broad assessment of how the industry is performing. Jpmorgan putting industry leading returns up there and the rest is kind of slow and steady given the Interest Rate outlook. I would agree with that i think jpmorgan is the outlier on a Positive Side and the rest is pretty much as expected given the economic situation, the Interest Rate situation and the uncertainties out there relative to trade that i think has reduced the confidence in the Business Community and therefore weve had less investment and might be the case if we had better news on the trade front it would seem in that kind of characterization then that a lot is outside the control of people who run the banks. Its kind of the yield environments and the macro what would you do as a ceo and say im going to threaten my franchise. Not a lot of m a happening whats the next move dont make any big mistakes take what the market is giving you, look for new customers, but thats the situation today and i think if you try to somehow change that, you youre going against some winds and you may make bigger mistakes stay there and wait for the opportunities. Hopefully if we get trade, we wont get many or any reduction in Interest Rates and things will settle down and then gradual increases occurring in the economy over time. Its still a good economy and we just got to stay take what we can get from the uncertainties that exist today. Your old employer reporting earnings today as well you have a new ceo charlie sharp taking over on the 21st of october. Dont think weve spoken to you since mr. Sharp was appointed. Whats your sense given how long they went with an interim ceo. Do you think mr. Sharp is the right pick i think hes a good choice. Charlie has been involved in almost all segments of the Financial Services industry, the banking side, ceo of two Financial Services companies hes got a lot of experience and i think he will do a good job. I mean just to i guess get more specific on kind of the first move in this instance, i mean what do you think is right now his list of priorities at the top . Well, i think the top priority is to make peace with the regulators this should have been and hopefully still is the number one priority of the company. But they dont seem to have made a lot of progress. You have to fix that above all i think you will be helpful in doing that and then youve got to get back to business. I think again, the bank has been on the back foot because theyve been dealing with the regulatory issues and not made much progress on that it would appear reuters did get a hold of an internal memo a week or two ago saying they were looking to beef up the lending teams, anticipating a big surge in mortgage activity. Do you think theres still more to work with if, in fact, rates stay where they are . Yes you know, i think again, if the consumer doesnt lose confidence and i think its on an edge at the moment because of all this bad news relative to trade, if the consumer doesnt lose confidence i think the Mortgage Business is going to do well because Interest Rates are low and fortunately, because of whats going on, the increase in home prices have been reduced somewhat i think theyre ready to buy and they should be concerned that at some time in the future Interest Rates are going to go up so this is a good time to be buying and the Mortgage Business will do better. Goldman sachs will start its Conference Call for its earnings about 20 minutes from now. Sure to get a lot of questions, i would assume, in their efforts when it comes to Consumer Banking, whether its marcus or the new credit card with apple or their Transaction Processing business getting up and running. What do you think of the efforts goldman is making . Do you think theyre going to succeed . I think its going to be very difficult for them to succeed. Theres so much competition out there. If success is do they put business on the books, yes, that will happen, but i think youre going to have to pay a big price for that theyre going to have to have lower rates on loans and higher Prices Higher prices on deposits and the margins will be thin and its going to be a very difficult task in my opinion by the way, dick, i one dwonr what you make of the spread between credit card rates and overall rates . I mean its getting fairly wide to the degree that journal has done stories about people taking out loans to consolidate credit card debt. Is it getting abusive . Well, i dont know about abusive, but it certainly is very hot and one of the reasons for that is theres a lot of people who just dont borrow and so theyre not making theyre not making that much money on those people who do not borrow and, therefore, the ones that do have to pay a price for that its a very high margin which im surprised continues. Now theres a lot of specials out there too. You have to determine exactly whats going on and theres a lot of competition where rates, there are special rates for six months and so on yes, look into that, but overall, i would think it would be very difficult to increase the margins from where it is today on credit cards and may have to fault . Great to get your take on a wide variety of things this morning. Thank you when we come back, the wealth tax debate, two economists shaping the tax plans for some Democratic Candidates. Well tell you who they are and what it means for your money ahead of tonights debate. Tomorrow here on squawk, dont miss Salesforce Marc Benioff at 10 00 a. M. As were atsession highs given reports that gm talks are going well, maybe a draft document on brexit, so were going to watch that. Fourois ayros 3 pntaw fm p k. How are we doing . Fabulous. I wonder how the firms doing without its fearless leader. You sure you want to leave that all behind . Yeah. Stay restless, with the icon that does the same. The new rx crafted by lexus. Lease the 2020 rx 350 all wheel drive for 439 month for 36 months. Experience amazing at your lexus dealer. But were also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. For farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice wedge. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. Welcome back two economists have emerged as some of the most important influencers and helped Elizabeth Warren and Bernie Sanders create their wealth taxes robert frank joins us right here at post nine talking about all things taxes particularly tonight with the debate coming up. Yeah. That wealth tax has really helped propel her to differentiate herself from the crowd and now her wealth tax and Bernie Sanders could include a plan from the government to sell them to the highest bidder the adviser advising both warren and sanders is proposing a plan to address the plan of valuing private companies if you had a wealth tax if a Family Owned Company thinks the government is overvaluing their business to collect a higher tax the family could pay the tax with shares of the company. The government would then sell those shares on a new market to venture capitalists and private equity funds or other wealthy families for the government to own shares its to resell immediately, but to create the market value thats missing thats, you know, a service that irs could provide. And the reason this is important is an estimated 20 to 35 of the wealth of the very wealthiest or top 1 is in private companies. No comment yet on the warner or Sanders Campaign on whether this element will be part of their plans but the idea that one of the problems for the wealth tax is private companies are anything thats an illiquid asset tough to value theyre addressing it here with what they say is a Market Solution government takes the shares and then sells it in a private bidding war to the highest bidder. Thats just what government gets into private equity what could go wrong, david all right private so they dont its not going to be sold on an exchange theyre not going to take their shares public. Correct but what he wants to do is create some kind of exchange where you could actually offer shares that the government owns and private companies, to investors and so they would be creating a new market. Things like and or getting a real mark. Thats right. Which they want the Koch Brothers will love that. Cargill you could pay in cash the tax we as the government say you owe. Thats right. Or give us shares at a value of your company that you in a way the government calling your bluff you think its valued below that give us shares at that value and were take it. Robert, so much of this in terms of determining the actual wealth as you point out, whether its art or wine or private jets or yachts or homes or private companies, is the government getting involved at a level that weve never seen and seems hard to imagine yeah. I mean the good things according to the economists, 80 of the wealth of the top 1 is in marketable publicly traded securities most of it is easily handled now the other 20 some say could be 30 , thats the issue we see the games people play with valuing their homes for tax purposes and property tax purposes imagine that times ten with a private company and that is one of the biggest criticisms of the wealth tax thanks a lot. Google is holding its made by google event in new york jon fortt is there and joins us with a look at whats coming up. Hey jon . Weve got a lot of announcements so far let me start off these things tend to focus on phones. We got the pixel 4 799 price expected to be released october 24th lot of features including the camera which they always tout and then motion sense which is kind of a radar gesturebase thing to control the phone waving your hand over it big picture, though, this hardware operation is part of googles other revenues. Less than 15 of revenue overall, a lot smaller percentage of profit because theyre not making a lot of money off these things its about ecosystem protection. Similar to what we saw out of microsoft and see out of amazon with things like the echo line theyve never broken out revenue or units for those things specifically, but they have a strong story in a. I. Where theyre trying to take the whole ecosystem with it. Aside from the pixel 4 phones we expect to hear about a pixel go laptop we heard about pixel buds. Microsoft also came out with their ear pod competitors. You can kind of control from your ear some a. I. Built into that they have the nest mini and nest wifi, kind of rebranded their home audio system toward nest which they acquired. Used to be part of the alphabet unit but last year they wrapped it into the Google Hardware unit overall. Thats the story here. Really about ecosystem a. I well see if they make a marketing push to make real money and big units out of this stuff. Guys all right jon, thank you very much well see you in a few moments on squawk alley. In the meantime dow up 274 you got back to 175. Pound rallying on some brexit headlines. Theres a lot happening this morning. Were back after a break at Southern New Hampshire university, we believe in education built for all people. [woman] snhu was the best experience of my life. [man] without snhu, i wouldnt be the leader i am today. [woman] i graduated high school 19 years ago. I still finished. [man] in the military, you feel that sense of accomplishment. Thats what snhu is. You will march from this arena and say to the world. I did it. [woman] you did it. I love you. [graduate] i love you too. They give us excellent customer otservice, every time. E. Our 18 year old was in an accident. Usaa took care of her car rental, and getting her car towed. All i had to take care of was making sure that my daughter was ok. If i met another veteran, and they were with another insurance company, i would tell them, you need to join usaa because they have better rates, and better service. Were the gomez family. Were the rivera family. Were the kirby family, and we are usaa members for life. Get your Auto Insurance quote today. Welcome back to squawk on the street. I am dominic chu stocks are rallying after a slate of Consumer Bank results and Everything Else kicked off earnings season today. You can see here about a point and a half from s p 3,000. Health care is the s p 500 top performer, Earnings Results that beat expectations. United health hiked full year guidance, saw growth in pharmacy benefits saw that boost profits johnson johnson, Third Quarter sales jumped, following strong sales of cancer and prescription drugs. I will send it back down to you, mike, at the New York Stock Exchange thanks very much. Lets get out to the cme group in chicago Rick Santelli has the Santelli Exchange good morning. Thanks, mike id like to welcome my guest, bob hormez the market was happy with the arrangement thus far you look at imf, moved to 3 for 2019 the u. S. From 2. 6 to 2. 4 and for the eu, 1. 3 to 1. 2 your thoughts on stage one and how it may impact the trend of the forecasts we see coming from many places slowing down, including the imf. First of all, stage one was positive to a degree, but we dont know how positive because we dont know what the details are. And in trade, having been a trade negotiator, the devil is in the details we dont really know how much china will buy in terms of agricultural goods and also even though october 15, todays tariff increases have been put on hold, we dont know whats going to happen in december when a new round of tariff increases threatens. While this agreement to the extent we understand it has given markets a boost, it has not eliminated uncertainty that the business and trade community have been troubled by, which put a lot of investment and trade decisions on hold. We dont know whats going to happen on tariffs or a wide range of other issues. This is phase one. But relatively minor face one. Positive but relatively minor. A lot to go. Having said that, bob, and it makes complete sense to me and i am sure it makes sense to viewers, but if you take an s p 500 chart and draw a red line horizontally at 2900, youll find whether it was a year ago, six months ago, three months ago, four days ago, were never far from that level, that level isnt far from alltime highs. Not a bad place to rest during high uncertainty, is it . No, it is quite remarkable, given the uncertainties. It may well be that the uncertainties are abated for a period of time maybe theres a brexit deal that looks better, a mini deal with china. All these things it seems to me are at least in the real short term reducing uncertainties. It is medium term that i think people need to be considering. Youre quite right given the uncertainty, and theyre all over the world, now we have the middle east, another set of uncertainty the market has been resilient in the face of uncertainty. Bob, you have been around the block a few times, so have i when was the last time you remember everything was completely certain doesnt it seem like were getting lost in semantics . Tell you something that changed the last couple weeks, global Interest Rates, started in europe which in and of itself is shocking, rates are much higher than a couple weeks ago, still a low rate rate of change has quickened dramatically your final thought. Youre quite right. First one point on uncertainty, were used to uncertainties. When you have possibility of escalating trade war between the United States and china, thats a level and extent of uncertainty we havent had in the recent past at least on the Interest Rate we have to leave it here on Interest Rates pick it up another time. Youre right on interest, tough times moving different direction. Yes. Thank you, bob. Carl, back to you. Rick, thank you very much. Busy day dow uplm aost 300. Squawk alley is up next. But in my mind im still 25. 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At the made by google event in new york city, 11 00 a. M. On wall street. And squawk alley is live