Transcripts For CNBC Squawk 20240704

Yesterday, but again we were talking about Massive Gains not just through the month of july but year to date as well well continue to keep an eye on this if youre watching treasury yields, this is where you would anticipate seeing moves if there were a downgrade if people were afraid of rushing into this. But it turns out u. S. Treasuries are still a safe haven and why the yields are still a bit lower. The 2year note trading at 4. 86 . Of course, all that related to what were seeing. Talk about the downgrade because it is our top story. Theyre citing what theyre calling an erosion of governance Emily Wilkins joining us now good morning to you. Good morning, andrew. Yes, shocking news yesterday at least for some of those in the Biden Administration seeing that downgrade in the u. S. Credit ratings from a aaa to a aplus this is only the second time the u. S. Credit rating has been downgraded like this treasury secretary janet yellen is quickly depending the Biden Administration she says the data they were using is outdated data and calls the numbers arbitrary. Its not only yelin pushing back against these numbers. Other democrats are pointing the finger at donald trump and the republicans saying theyre the ones to blame. Taking a look at the ways and means committee, theyre saying the gop is responsible for the downgrade and the American People will be forced to bear the consequences from the debt crisis and tax cuts for the wealthy, although, if you look in fitchs report, they say the recent debt crisis is really the only latest incident in a dysfunctional government they say theres been deterioration for to years in the u. S. s government and other things that contribute to the rating is the rising deficits, mediumterm fiscal challenges unaddressed, and recession fierce we expect them to discuss it this morning well be following her remarks very closely. The question i have for you, and i dont know if anybodys got on the the bottom of it, what was the timing . I mean what really led fitch to do this now . I think the reason why youre hearing janet yellen and others push back so hard, is if you really look at the model i dont know if you fully read it, emily. The economy looks better. It looks like its on a better trajectory than where they were three years ago. To say it happened on the Trump Administration or Biden Administration, if you look at the chart it was much worse at the end of the Trump Administration and progressively Getting Better now, fitch, if i remember correctly, put the u. S. On a negative ratings watch just a couple of months ago, and so the question is what would have put them on a negative ratings watch a couple of months ago and you would have thought would have gotten worse, not actually gotten better. This is a real big shock to the Biden Administration they said, hey, we solved the debt in a bipartisan way. We got it close but we got it done youve seen concerns about recession mostly go away at this point and youve seen some really strong numbers. So i think the Biden Administration is asking a lot of questions about timing, and, remember, too, this is happening as theyre going across the country to help biden onlyics, so this is not going to be a good look for biden and his team it has the potential to put in a strong message that the economy is doing much better than two years ago. There are more people with a soft landing but fitch is right in saying this wasnt really resolved you may have gotten past the debt ceiling crisis at this point, but we dont have a way to kind of get past the funding disagreements youre going to have that pick up over the next year you dont have anything to deal with with Social Security and other issues that have come up, so fitch is right from that perspective. Absolutely. I mean we know the debt limit, were going to have to deal with it in 2025 there is absolutely a chance were headed toward a Government Shutdown at this point and what we are able to get to these problems, figure out a solution and move on, they keep occurring. I think thats what fitch is trying to get at they even pointing out this isnt something that happened in the last year or two years or four years this is something thats been gone going on for the last 20 years. It crosses both parties. It crosses a number of years, and you really cant pin the blame on any particular administration. Emily, we want to thank you meantime i want to get some reaction from market participates in a treatment thats called, quote, strange. He says hes puzzled by the many aspects of the announcement and the timing and hes likely not the only one this goes to what the chart and model says and what fitch seems to be saying separately. Similar stand by Goldman Sachs saying it should have little or direct impact on the market, claiming there are those who would be forced to sell based on the ratings change. Again, if you look this morning, yeeds are down, which means prices have gone up. What does this actually mean about fitch though if fitch is a private company, its owned by hearst its people who make these decisions. Does it put prash on other agencies to downgrade . Do they say, these guys dont know what theyre talking about . Aaa is the top raying for u. S. Debt. I dont think theres a question about raising some of sthees things. We should be 100 honest. So much is sustainable. Dysfunctional process. The truth is if you look at the ray ratings have been done at least historically, it ooh whaes is a country on a relative basis. Meaning how does this country compare to this country compare to this country compare to this country and you look at the timing and say, you have to say to yourself its a little weird here its not a question of raising questions. Its an issue of if you really were going to downgrade the country, according to their model, you would have done it 3 1 2 years ago. You just would have. You wouldnt have done it now. Thiss what doesnt make any sense. I think the Market Reaction is telling you that too. This is not people being scared of buying out of treasuries. I want to get to another developing story a grand jury indicting former President Donald Trump on attempting to overturn the 2020 president ial election. The indictment unsealed late yesterday. Former President Trump is expected in Court Tomorrow eamon javers joins us with more on that. Eamon, good morning. Reporter jack smith explained why he moved forward with the indictment of former president of the United States donald trump heres what he said. The attack on our nations capitol on january 6th, 20 21 ws an unprecedented assault on the u. S. Democracy it was fueled by lies. Now the 45page indictment charges trump with conspiracy to defraud the United States, conspiracy to obstruct a proceeding, obstruction of a proceeding and conspiracy against rights, that is, peoples Voting Rights in general in this country. Jack smith says he wants a speedy trial in this kasem the former president has been summoned to appear in federal court on thursday here in washington, dc, at 4 00 p. M. That is tomorrow the Trump Campaign issued a statement denouncing smith in the wake of all this, saying this is nothing more than the latest corrupt chapter in the continued pathetic attempt by the Biden Crime Family and the department of justice to interfere with the 2024 president ial election. In a document filed late yesterday afternoon, were learning more about the closed Door Communications between the former president and his former president mike pence who, remember, testified before this grand jury and took contemporaneous notes of his conversations in real time with donald trump in one exchange detailed in the document, trump berated pence because the Vice President opposed an effort to establish pence had the authority to reject president ial votes. Heres what they say about that the Vice President respondnd he thought there was no constitutional basis for such authority and it was improper. In response the defendant told the Vice President , quote, youre too honest. Now, in his remarks yesterday, special counsel smith said the men and women of Law Enforcement who defended the capitol against violent attackers on january 6th are heroes and think did more than defend the building and the people in it they defended who we are as a country. Ameamon, also yesterday mike pence coming out with his strongest statement against former President Trump saying he doesnt think he should ever be president again. He is himself now running for president , but this is the strongest statement he made today. He said no man should be above the constitution, that anybody who puts themselves there sbhould ineligible for the presidency its fascinating moment where mike pence who rarely stood askance of donald trump at all nene way during his vice presidency on the last day, on january 6th, did stand against donald trump, did testify against him in this proceeding, and is now running against him so theres this as nating conflict of interest hes now running himself and is running against trump and provided keynotes to special counsel smith. All of this against constitutional stakes. Theres some real question if trump were to win in 2024 and overseeing the department of justice that has gone through with this case, what would that mean for american jurisprudence and Law Enforcement. Were in totally uncharted territory, becky. Eamon, thank you. Eamon javers. When we come back, were going to talk strategy after the downgrading by fitch the futures this morning in the red. Futures off by 163 nasdaq down by 155 later, well be joined about the latest push for crypto regulation youre watching squawk on the street d is ianths cnbc and we would experience turbulence. I would watch the Flight Attendants. If theyre not nervous, then im not going to be nervous. Financially, im the Flight Attendant in that situation. The relief that comes over people once they know theyve got a guide to help them through, i definitely feel privileged to be in that position. vo Verizon Small Business days are coming. I definitely feel privileged from august 7th to the 13th. Now is the time to partner with our experts. Get started today with verizon business. Its your business. Its your verizon. What do you see on the horizon . Uncertainty . Or opportunity. Whatever you see, at pgim we can help you rise to the challenges of today, when active investing and disciplined Risk Management are needed most. 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Right now its time for the squawk planner on todays earnings calendar, were going to be hearing from cvs health, also yum brands and kraft heinz. All of that coming after opening bell and qualcomm and doordash then well be getting adp private payroll report a lot happening. Joining us to talk about that and much more is carol before we get to earnings or the rest of this, i have to ask you about what you think about fitch you up grading the u. S. Credit rating is. That appropriate what would you mean . What would you advise investors. I think the interesting thing youve already alluded to is the timing of it, but its not necessarily unprecedented. Theyre stating everything we know and mounting debt and also the Interest Rates the u. S. Government is going to have the pay on that debt. Thats not unexpected as we take it off the table lets pull back on some of the risk stance weve taken. So you dont think the decline in the future this morning is related to the downgrade as much as its weve come a long way, weve seen big advances in the equities market and its time to take a little risk off the table youve got weakening data, and labor markets softening as well you are seeing some softening. Youre seeing that willingness you start taking those things all in order, and weve been in the camp of expecting a soft landing for well over a year and now that a lot of the rest of them are coming to that position, there are a lot of potential risks especially if the fed looks at things, at how optimistic they are staying and decides to keep the rates higher for longer and feels like it has wiggle room because they dont want optimism to keep driving things too aggressively and keep raising rates. So youve been long on the markets to this point, but now youre a little more neutral i think weve been a balanced risk exposure all the way along in terms of wanting to play some of the growth, but also wanting to participate as the rally broadens out into mid and small kap. The debt balanced exposure means weve never driven all the way in on lets g aggressive thwart the growth but cognizant of the fact there are a lot of potential tail risks and those are the ones that fight the hardest. Im sorry im trying to parse through it youve been surprised by the strength of the equity markets to this point . A bit surprised at how strong they came up off the bottom, but it was legit in terms of looking at the economic promise weve made so far. Some of that was legitimate if you will but our overall allocation hasnt changed much. We focused on the United States. Weve been in the mid and fall cap relative to large cap all along and so hoping at really bending. Also we dont want to get too optimistic when youre too far into that growth mode. It might be an opportune time. Some have gotten more trim as they cycled back into the broader markets. Okay. Carol, thank you for your time today. Carol schleif. Meantime coming up on the other side, Summer Travel season, it is in very full swing, but will the surge continue into the fall that is the question were going to talk to one of our favorite people, the points guy for those of you trying to use your miles to get around hopefully hes going to help us ja and latter Frontier Airlines ceo is going to join us in an exclusive interview a well that stock is up slighaftly ter earnings well talk about it after this sl in the true iconic notion of what america is all about. this is our task. This is our mission. We have a clear focus, and we have the ability to be agile and innovate. It takes years of dedication to get us to this milestone. It is all because of you. Never doubt that a small group of thoughtful, committed citizens can change the world. It is the only thing that ever has. to be a woman leader, its not so easy. But its easy if the passion and the love is coming from your heart. The New York Stock Exchange is the symbol of what america is all about. The potential of capitalism, the potential of the american dream. The only way you can move a Society Forward is a true expression of freedom. sfx Stock Exchange bell ringing welcome back to squawk box. I want to bring in one of my favorite guys, the points guy. How are you . Great great to see you. The real question is what do you think its going to look like in the fall and i want to get into the whole points game. Yeah, so i mean summer stravl really strong. Were seeing consistently, were beating 2019 psa numbers some days by a lot up to 100,000 more than to2019 people are in the skies. The biggest has been international. Were seeing all the Major Airlines making a huge portion of their profits ive never seen flights to europe, 5,000 minimum Business Class and up if you go to parising youre looking at 8,000 fares across the board. However, i do think things are slowing down you see softening from direct airlines i still think its going to be a busy fall, but i think were nation the end of the post pandemic boon with trarchlt there have been a lot of meltdowns, myself include. I didnt travel this july because of how bad things were earlier this summer. I have to say i use your website consist intelligently, dare i say, to game the system the airways is gaming us. At least in my mind its impossible the use the miles in a meaningful way. Im shocked you have to be a little savvy. Im going to mykonos in a few weeks. I just start checking a couple of days ago. Emirates is now releasing Business Class i booked two tickets and i checked the loads on that flight in two weeks normally in august flights were sold out last summer, and theres still a lot of business and first kras avaclass availaby what i would say to people with points is look at others virgin atlantic, i was checking yesterday, theyve got Business Class almost every day from their major u. S. Outlets to london once youre in england, you can pop around. Should you be trying to use the miles in advance or has it changed to where you want to use it much closer to when you want to leave or how do you plan for snit. Airlines want every single seat to be full. They open up the lastminute seats. Constantly check there are a bunch of tools point. May and another. Theres one other. Sea seat seats. Aero you can scan where you want to go leaving from new york and it will give you tons and tons of different flights. Youve got to be a little bit savvy. To end it up, you should be looking at 2024. Airlines open up about 11 months out with their award Availability Book for next summer even if you have to change it, most let you change for free or 50. Is the situation getting any better domestically . Domestically in terms of using frequent flyer miles or just in general . No, no. I agree with you there are opportunities out there internationally it seems like at least. But if you go to any of the big guys, united, american, delta, it seems more challenging to use the miles. It is i would say but the fares domestically are much more reasonable southwest Just Launched a 50 off promo. Its easier to sniff out buy the cheap domestic tingts and save the miles for those that are just insanely expensive these days. Is there, by the way, one airline you think is doing it better these days. You know, of the big u. S. Airlines, delta, you look at the whole numbers of how theyre performing on time every airline is susceptible to these meltdowns, but delta is consistently wellmanaged and the most on time. Brian, you and i are in agreement this morning thanks for coming in. Thanks for having me. Coming up, well brung you the market numbers and reaction. Right now itoo l lksike the stock is down by 41 cents. Well be right back. I remember being on aau trips, high school games. My mom would always say, you need to fuel the body and you need salt. I would always be the kid not cramping, ready to go. Fast forward 20 years and i go from eating salt out of my palm to drinking lmnt. Welcome back to squawk box, everybody. Cvs Health Reporting we want to get to bertha coombs. What are we seeing. Becky, were seeing cvs posting with an adjusted 2. 11 , thats tencents better beating handily on both the top and bottom line despite headwinds in the Health Care Benefits unit which saw higher medical costs and medicare advantages as a lot of people get those knee replacements, amounting to 82 in premiums while medicate membership fell double digits from 18 from march. That was partially offset by commercial and medicare enrollment more than 46 million was a big top line beat helped by signify and oak street acquisitions which offset lower coexistence at their existing clinics. At pharmacy and consumer w wel wellness, up 11 is that offset the drop in covid vaccines and covid tests which led to weakness in the front of the store. Cvs also taking a 496 million restructuring charge to coverup coming severance and layoff costs. They want to cut costs in the wake of acquisitions those job cuts should be completed by year en you can see the stock there rising on that news. Becky . Bertha, thank you as you mentioned, the stock up by 1. 1 . Stock is up by 87. Down by 40 before the dmum bers hit. Thanks, bertha. Coming up, were going to talk about shares of pinterest because theyre following after the companys Quarterly Results. Well talk about the companys social media stocks. A reminder you can guest the best of squawk podcasts. Listen any time. Listen, were coming right back. Welcome back to squawk box. Shares of pinterest under pressure ite expected to score better expenses are growing youre looking at 5 the expenses are growing faster than revenue social media stocks have been on a run is far this year pinterest is up 16 for context. Meta up 160 basically in a different business i dont think we should put them on the screen, frankly, together snap up 25 . Again, life is relative. Joining us more on more of the social media stoxx, our next guest. Good morning to you. Youre a shareholder is it unfair to say pinterest is in a different business . No, pinterest is in a different business than meta for sure not a social business or social messaging. Meta at this point, the scale, its like the death star, the gravitational pull, 3 billion users. Its a different ball game altogether. Whats the challenge that pinterest has at this point . Theyve been challenged in struggling and growing they clearly have an expense issue. Theres been operational questions. Its a Fabulous Business if youre going to renovate a house or something, theres fun things to do, but they havent really nailed, i think, these broader they need to come up with more and more broader and broader use cases. They havent nailed the shopping experience. Closed the loop from discovering something to buying something. Well see if the new Amazon Partnership helps with that. Its a big kind of a ads deal. Will it enable folks to shop the products on amazon thats still being hashed out. In the transcript yesterday bill didnt talk much about that it will be a big step from looking aet the pins and images and being able to look at it. Do you think theyre going to be able to ultimately truly trans ability . The conundrum we found with the brick and mortar business, you may go look at something, tool around, decide what you want to doing and you end up going to a different site maybe amazon is not actually the cheapest or maybe you have a walmart plus subscription or some other thing. Years ago we had a program there when i was there called bible pins there were some 3 hundred million pins that were shopable. Users didnt do it it was an educational thing, letting them know they could buy. But where does the transaction tack place on pinterest . Let me ask you the question youre a chair holder. Why are you still a shareholder if you have as many questions as you do its a longterm business you have a very hole some context that advertisers want to be next to it egot fortune 500 branding and other things its more of an impulse buy, shopping store as on instagram, its more of that type of product on pinterest theyre more of the Primetime Television interest like cards and things of that nature that are being presented there. How are you thinking of the other social media sites there was declining revenue Consumer Internet is highly unusual to see i was trying to look back at 20 years of googles history where they ever had a yearonyear decline, so thats a very rare thing. Snapchat is in a different spot because theyre trying on to retool the app business and tool things out. Do you think operationally the back end on snap can actually be meaningfully improved so it can be competitive with whats offered on instagram or provided by google its completely possible, but its going to tack a long time you cant turn a tanker con tanner around on a dime. I dont know if you think this fall is behind. But given where they are, if when you catch up, where is everybody else its a platform app they have little stories and stuff at the front now but you go there really to message friends and family, and so the ads are always going to be somewhat interrupted. Has facebook ever figured that out on whatsapp not really, no. They counseled those users. They do. We sit around and talk about all these users, but a huge number are on whatsapp. Yeah. Its monetized i think the fact there are 3 billion users, meta has 2 billion plus on face boochlkt 80 gross margin business. Its a fantastic business they have. If you could own one, which one do you own i think meta is the longterm stock you want to own. They roll out commerce. Are you a believer in x its a private company nobody knows what the valuation 20 billion today 15 b 15 billion . We dont know exactly whats happening there. By all accounts the valuation is probably down from where it was taken private. If elon called you tomorrow and it was 20 millioning do you want in in. Id probably go in. Look, they have 450 million users, highly active and engaged audience its always been trying to figure out whats the ads model that fits with the messaging they have on twitter. Cameron, thank you for coming in this morning. Thank you. When we come back, a close friend of Michael Milken is out with a new book and arguing that m mi milkens position was motivated. A reminder you can watch cnbc on the cnbc app im so glad we did this. Im so glad we did this. Im so. Glad we did this. [kid plays drums] life is for living. Lets partner for all of it. Im so glad we did this. Edward jones wake up, achievers. Youre making the most of every hour of your life. Im so glad we did this. Except the hours that youre sleeping. So why do we leave so much Untapped Potential on the table . This is a next level bed, for a next level you. My circadian rhythm is kicking your circadian rhythms butt its not a competition. I know, but im still winning so, it is a competition. Save up to 500 on the new sleep number® smart bed. Plus, free Home Delivery when you add an adjustable base. Shop now only at sleep number®. All right. Welcome back, everybody. A new book on Michael Milken argues ta the finance here was not the Bernie Madoff of the 1980s. Joining us now with his firsthand accounts for millikins conviction and the aftermath is sandler hes a child hood friend and director of the millikin Family Foundation and the director of the Milken Institute hes now the author of witness to the prosecution myth of Michael Milken. Its been 33 years since he pled guilty to charges laid out in this book. Why now with this book whether he raichs it or not, michael isnt a historical figure probably the most effective financier of our time and is still written about. Nothing has been written about him who was there, who knows the truth about exactly what happened, what did he do and what didnt he do, and i think its time for the truth to be told. And your version of the truth is what . You say my version of the truth. Its a oneperson account it doesnt its not a jo journalistic action that went after all of this. Go ahead you were there what is the truth as you see it . The truth is mike came under the radar of a very aggressive prosecutor back in the mid1980s. He was extremely successful. He was a person that certainly could help a prosecutors career especially political careering and he became part of an investigation, and prosecutors have tremendous power. One of the things i try to point out in the book is if that pow serioused aggressively, it can happen to anybody. The prosecutor decides who to investigate, how to investigate them, can use a grand jury to indict a person. At that point in a court of public opinion, as we all know, a person is not innocent until proven guilty, and what i try to explain is exactly what happened here, how it happened, and why it happened. Richard, lets just be clear. That prosecutor was Rudy Giuliani who used this situation and others to go on and become may yo of new york city. I completely understand what youre saying about aggressive prosecutors, and anybody who is ooh watched a lot of these prosecutors who have used this to go on can see what youre talking about in situations like this i just want to saying look, Michael Milken, no question, saw things differently and revolutionized what happened with the highyield debt market. He realized before anybody else the market wasnt acting efficiently and highyield debt, jumpons, as they would be called, you would be paid back for some of the highrated debt in some of thosequestion, he dit unleashed the entrepreneurial spirit when it comes to this country. Milken was responsible for people like ted turner going on to create the industry he looked into he was responsible for steve wynn being able to come on and take the casino magnate. Those are all fantastic things he unleashed, but it also unleashed some bad news for society too. If you look at some of the corporate raiders who were able to do things and go after companies they would have never been able to go after with the amount of equity that they had or the amount of capital they had at those points, that unleashed some really bad things too. Just in full disclosure, i should tell you that ivan boski, because of what Michael Milken unleashed, was able to go every notomas foil, where my father worked at the time everybody lost their job because of what he did, because he went in and took over the assets that was worth more than the company was at that point, we lost our house. So full disclosure, i have some questions about all this no question Michael Milken has done Amazing Things with charity, 1. 5 billion. Why didnt you talk to people like giuliani in this piece too, who has become friends with milken because milken reached out to him when he had Prostate Cancer i think he would look at things differently too. You ask excellent questions here when you ask about what he unleashed, history has shown that the companies that michael financed helped create jobs and helped build tremendous value for a lot of people. A lot of people that were imitators went after other companies, maybe things got quote unleashed as you said. Michael milken, Drexel Burnham did not finance mr. Boski in that situation as youre talking about. They had nothing to do with that so, what he really unleashed was a democratization of capital you talked about steve wynn, ted turner, there are many others, thousands of companies that he financed that could not get financing before he came along and if thats why i said hes probably the most important financier and certainly the most inonovative financier of our time the book is about what really happened i was there. I wasnt in the arena watching, i was on the field playing and i know what happened and i know exactly what he did and what he didnt do. And so maybe journalistically i should have interviewed this person or that person, but i know the facts the book as you read it is based upon Court Documents it is based upon the words of the prosecutor, the line prosecutor who prosecuted the case 30 years later and i stand behind everything that is in the book did look, he pled guilty in 1990 to several charges, including helping a client evade taxes by coming up with fake losses, including charges that he cheated drexel clients out of things was he guilty of those things . Actually, becky, he did not plead to either one of those things i know that appeared in a newspaper article recently. Yeah, in the wall street journal. Right well, if you go through the book, i take you through his plea, word for word, exactly what he did. He did not cheat any clients he did not create false losses spent 22 months in prison. Because he did plead, he was sentenced, and he paid his price. He paid the price of being part of this process. He made a decision that the risks to him were so great that he needed to find a way to resolve his matter and we did reach an agreement in which he found things to plead to, things which when you read them in the book, they are there again, word for word, you will see are highly technical violations of regulations, none of which have ever been subject to criminal prosecution before or since richard, im just so curious, did michael want you to write this book or not he and i never discussed whether i should write the book or not so i wanted to write the book. And so i wrote the book. So you have not discussed this entire book with him once he knew he was writing the book and he didnt ask me not to write the book im sure he wants the truth told you would have to ask him have you spoken to him since the book did you send him a copy of the book did he call you up did you have lunch he has a copy of the book he knows i was writing the book. He knew i wrote the book and you have nothing more to say about the reason i ask is decades it is a surprising thing to write, look, everyone writes memoirs and things this is decades later and i think there is a view among some sort of skeptics on wall street, were getting Text Messages even as were doing this interview saying, why show up to the party, you know, decades later with a version of, you know, your version of this now as opposed to having done obviously you did some of this in court at the time, but if there really were things that were misunderstood or lies you think were told then, why there wasnt a bigger effort to change the perception or to try to correct the record in between. Well, thats an excellent question i probably should have done it earlier. It is something ive been thinking about for probably 20 years as i say in the book at the time we did try to tell the truth and indicate what was out there. We were coming up against a tidal wave and there were all kinds of things being written and michael did plea he did plea. And we were in that situation. Then as years went by, and i thought about writing the book, i taught a class at Stanford Law School on the subject. And probably should have written the book then. I got busy on other things but i taught the class again and it happened around covid, i had time and i said, you know, mike is still an historical figure. If you go to the Milken Institute conference every year, which i know you guys have been at i havent thousands are there some people from cnbc have been there. There are thousands of people there who are so interested in him, his ideas, what hes doing. There are still articles being written about him. Yeah. Richard, no question, look, what hes done with prostate canccan im in awe of. Im amazed of what hes been able to pull together and how he changed things so he got results. Im not trying to take away from the great things hes done, but i just think that, look, it is worth an exploration of the downside of a lot of these things too and ivan boski said there was Insider Trading. Was ivan boski lying about that . The charges never came up and thats not anything he ever pled to maybe that was ivan boski trying to get a little leniency himself on some of these things. But it is a pretty muddled picture. What happened with ivan boski . If anybody, mr. Boski or anyone else said michael was involved with Insider Trading, he was lying because he was not. He denied he was when it came time to plea, one of the things that the government said, well, hes going to have to plea to Insider Trading, we said well, well go to trial he never would have done that. Dont forget, the government gave the judge an opportunity to show her whatever the government thought he had done after this intensive investigation that had not been shown, that he did not admit to and she held a hearing in that hearing she held that they failed to show anything and the only thing they tried to show regarding Insider Trading was trading of a bond, not a stock, that the s. E. C. Already investigated and determined that it did not take place and she determined it did not take place. So that is one of the reasons i wrote the book maybe, begagain, i should have written it earlier the truth is the truth, whether i tell it now or ten years ago. It brought up complex feelings for me and im sure a lot of other people. I appreciate you coming on today. I will read through the book but thank you for your time. We appreciate it and thank you for giving me this opportunity id be happy to discuss it with you further after youve read it and, again, i really appreciate the time. Thank you okay. Coming up, were going to talk to the cftcs chair about the latest push on crypto regulations. Take a look at bitcoin throw that up on the screen. Later, well get investment ideas, all that and more as squawk box rolls on. Constant Contacts advanced automation lets you send the right message at the right time, every time. Constant Contact. Helping the small stand tall. fan 1 there ya go thats what im talkin about Constant Contact. josh allen is this your plan to watch the game today . hero fan uh, yea. I have to watch my neighbors nfl sunday ticket. josh allen its not your best plan. But you know what is . Myplan from verizon. Switch now and theyll give you nfl sunday ticket from youtubetv, on them. hero fan this plan is amazing josh allen another amazing plan, backing away from here very slowly. fan 1 that was josh allen. fan 2 mmhm. vo for a limited time get nfl sunday ticket from youtubetv on us. A 449 value. Plus, get a free Samsung Galaxy s23. Only on verizon. Good morning fitch downgrading the United States longterm Credit Rating, and investors are watching another batch of earnings as we head to our jobs friday. Searching for a crypto clarity. Ftc chair ross benham will be with us to talk about regulation of the industry and more. And blackrock under investigation for investing in Chinese Companies that bolster the military there and violate human rights well get reaction from former s. E. C. Chair jay clayton the second hour of squawk box begins right now good morning and welcome back to squawk box right here on cnbc were live at the Nasdaq Market site in times square im Andrew Ross Sorkin with becky quick. Joe is off today look at u. S. Equity futures at this hour. Some pressure on them right now. The dow looks like it would open down 70 points off nasdaq close to 100 points down. And the s p 500 opened off about 18 points. Meanwhile, lets show you treasuries treasury yields. This is important in large part because fitch just downgrading the United States treasury effectively. The tenyear note, 4. 015 the twoyear at 4. 860. So, fitch may have a view, but seems like the market has a very different view of this, which is to say, actually, this stuff is worth more take a look at oil thinking about the energy complex, you can look there at wti crude. Buy it by the barrel, it will cost you 82. 10. A bigger conference about crypto in a little bit. Look at bitcoin, sitting at just about 29,537, a little better than where it had been still sitting just under 30,000. Lets get over to dom chu, a look at this mornings premarket movers what are you watching today . Good morning, becky, good morning, andrew. All about earnings this morning. Well start up with a check on cvs health which came out in the last 15 or 20 minutes or so. Those shares up about 1 just around 15,000 shares of volume after the pharmacy benefits and Healthcare Products retailer reported a profit revenue beat cvs has been more deliberately cutting costs on the heels of big acquisitions you may remember that just yesterday cnbc reported they were going to cut 5,000 jobs, mostly on the corporate front. Cvs did affirm full year Profit Guidance, reduced last quarter given the acquisition costs. 1 gain now for cvs health a couple of bigger movers on earnings after last nights closing bell starbucks shares down roughly maybe 1. 5 at this point roughly 7,000 shares of volume the coffee giant reporting mixed results, profits came in better than expectations on weaker than expected revenues. Sales growth at established store locations came in slightly below some forecasts but that same socalled same store sales metric soared by 46 in china on easy comparisons given the emergence of that country from the stricter covid lockdowns last year. Now, we will get much more on that story when starbucks chief Financial Officer Rachel Ruggeri joins squawk box in the next hour well end with a move higher in shares after advanced microdevices, higher by 2 , on a million shares of volume the computer chipmaker topping estimates for profits and revenues but its Current Quarter revenue forecast did fall slightly shy of forecasts amd ceo lisa sue said she expects more growth in the Data Center Business in the second half of the year also out this morning, analysts at citi upgraded the stock to a buy in a mea culpa admission, saying they thought artificial margin well get more on that story when lisa sue and the ceo joins squawk on the street later on this morning for a first on cnbc interview. Must watch there andrew, back over to you. Thank you, dom. Lets talk about the Fitch Ratings downgrade. Because it downgraded the u. S. Governments Credit Rating to a double a plus with a stable outlook from aaa and it has gotten a lot of notice in washington and elsewhere. The agency citing what it sees as a we shouldnt say agency, we should say a company. It is a company. Citing what they see as a fiscal deterioration over the next three years and continued 11th hour deals to raise the debt limit. Fitch sees debt limits standoffs as a repeated event that threatens the governments ability to pay its bills and services, a move could having after fitch warned back in may of a possible downgrade before keeping its rating unchanged one month later. Janet yellen coined the move calling it arbitrary and based on outdated data investors digesting the news many believe the Immediate Impact will remain muted joining us right now is chief Investment Officer at manetta. Good morning to you. What did you make of the ratings change it is important it is relevant the question is, of course, is it the canary in the coal mine for other similar downgrades and i would say it is a lagging or leading indicator this stance around the debt ceiling goes on year after year, where were not quite familiar with it, it is not a surprise. It was less drama this time around than before so why is it now that the governance is being called out i think it is significant it is compared to other developed economies because the governance is demonstrably worse in the u. S. Than other developed economies or maybe perhaps it falls short of what it should be there is less certainty than what should be there i dont think it falls ss shortf other developed economies. Here is the question. Everyone is sitting around scratching their heads, looking at the model for those viewers who want to go online, you can look at the model, they show you what they think and almost bizarrely, at least to me and i think a lot of folks who have watched this, you can look at the model going down, down, down, this is actually pre2020 and you would think if you were going to downgrade, this was a decent time to do so and then you see it actually change and actually start to go up, up, up, in a good way. And yet here we are in a good way, and theyre downgrading while it is going up can you make sense of that it is difficult to make sense of it, but i do think lets remember many of these agencies lost credibility around the financial crisis, they were slow, they definitely probably were slow on the Regional Banking Crisis there is a preference now to perhaps get ahead of another crisis, wave the flag or raise the red flag earlier than others there is little downside to doing that there is probably more risk of not doing that. I would say that is unusual. And it is good to be reminded these are still problems that havent gone away. We have a very short news cycle today. We just have come out of cast pfizing around covid and its implications we need to put this into context. So i think it is not unusual im glad it has happened, it has given everyone an opportunity to actually analyze the situation now and look at the impact and perhaps remind ourself of how vicarious markets can be i dont disagree with you at all about the precarious nature. I prove downgrade would have do. Debt years ago the question is why now and does it matter why now . What does it do to the s p and moodys and everybody else . Do they say there is pressure on us to do this now . As we said at the top, these are private companies. These are private companies, effectively analysts who work with these companies, who make these decisions. And so you explain the economics of their business and the incentive structure of their business to make these decisions and calls. Like any institution, businesses are based on trust and credibility. We have seen several banks vying for their own credibility. Credibility can be lost very quickly, especially with a big miss such as missing a financial crisis theyre vying for credibility. I actually think it could damage some of the other agencies credibility were they to dump on this bandwagon we talk about fomo in markets and investors. This will look like fomo, me tooism getting on the bandwagon. There has to be a fundamental basis for this if other agencies can find that, great. I think less of a problem now, the can has been kicked down the road we have some other concerns which is around the economic growth, inflation and fgetting o the next election. Why is the market yawning this morning they have had a tremendous run. The ai hype cycle has been driving markets. Inflation is heading in the right direction, we know it is probably going to come in waves and some uplifts in energy and food Going Forward. Specifically treasuries if there was a real sort of freak out moment, i dont know maybe you think everybody is going to sit around for the next couple of weeks and reanalyze this fitch report and then decide actually maybe treasuries are a bigger problem but, again, going to your issue where you were sort of talking about the relative ty of developed countries and where the u. S. Stands versus others, do you think this changes the dynamic in terms of how investors buy treasuries i think treasuries will always be the last resort, the preferred safety trade certainly relative to other countries i think the u. S. Is in a more robust state. It is always a relative trade as you mentioned before were seeing treasuries at these really record short yields, shortterm yields and the yield curve is still inverted. So i do see this we saw this with the dedollarization debate as well. Was there going to be a widespread sale of u. S. Assets i dont think thats going to happen thats why there is a yawn, we recognize this is yesterdays news aoifinn, thank you for joining us this morning. Thank you. Earnings of an adjusted 79 cents a share, that was three cents better than estimates. It comes in on revenue of 6. 72 billion, a little short of estimates. Craft heinz is reaffirming the outlook for the full year. That stock now down by 1. 2 . Yum brands hitting the tape. Earnings at adjusted 1. 41 a share, that easily topped estimates with 1. 24 revenue was 1. 69 billion, which is more than 1. 69 same store sales grew 9 better than the estimates of 6. 9 whether we come back, searching for crypto regulation clarity. Well speak to cftc chair ross beambonh aut the Digital Currencies next. Squawk box will be right back. awww. Awww. Awww. Nope. Constant Contact delivers the Marketing Tools your Small Business needs to keep up, excel, and grow. Constant contact. Helping the small stand tall. So, youve got the power of xfinity at home. Now take it outside with Xfinity Mobile. Constant contact. Like speed . Its the Fastest Mobile Service around. With the best price for two lines of unlimited. Only 30 bucks a line per month. Thats hundreds in savings a year when you wave bye to the other guys. No wonder Xfinity Mobile is one of the Fastest Growing mobile services. You really shouldnt walk out the front door without it. Switch today at xfinitymobile. Com every business thats why comcast business de is launching theal. Mobile made free event. With our business internet, new and existing customers can get one year of unlimited mobile for free. Its our best internet. Powered by the next generation 10g network and with 99. 9 reliability. Plus one line of free mobile for an entire year. Its the mobile made free eventhappening now. Get started for just 49. 99 a month. Plus, ask how to get one free line of unlimited mobile. Comcast business, powering possibilities. We have spoken to leaders in both the house and the senate over the past several weeks about Digital Asset regulation our next guest says that he did not endorse the houseled efforts that we have been talking about, but he has called the senates efforts in his words carefully and thoughtfully considered all components of the market joining us right now, the cftc chair ross benham. Welcome. It is good to see you. Thank you good to see you too. There is a lot of confusion out there about where things stand. There is a recent current ruling that dug into xrp and said the contracts, the trading for retail is not a security gary gensler has been pretty evasive when it comes to getting nailed down on what he thinks about these things lay it out for us. Tell us where you think things stand based on what the court rule and based on what the law says. Thanks. Good to be with you guys the Court Decision and there have been a few in the past couple of weeks really just i think validate what ive been saying for a couple of years that there needs to be action by congress so that we can fill these gaps in the crypto space and ive said as the chair of the commodity futures trading commission, we have been bringing enforcement without Clear Authority over the space and a huge portion and i argued up to 70 of the market is largely unregulated because they constitute commodities. Thats got to be really frustrated as a regulator. It feels frustrating, certainly, but also were bringing these enforcement cases and bringing them because were having people come to us it gives us tips and complaints, were not using traditional tools, registration, surveillance, oversight, so that we can clean up the market, we can protect investors. My mission is to protect investors and to preserve the American Financial system. If i dont have the tools, i cant do that with this market. Where do you think the biggest problems are, the biggest frauds, the biggest places where investors are getting fleeced . Believe it or not, a lot of the cases we brought, notwithstanding some of the bigger cases against more traditional crypto firms are pump and dumps, ponzi schemes, the same types of schemes and fraud we have been seeing in Financial Markets for decades. Bucket shops. It is just a different asset, whether it was metals or traditional securities, now this is an easy asset class, which is speculative, people get a little bit of fervor, think they can make a quick buck, you get a pitch and maybe put more money into it. Thats what we have been seeing for a decade what frustrates me is with this limited tool we have, were probably dealing with a tip of the iceberg. There is probably so much fraud underlying what we have been able to expose and thats a problem because you have american investors, pensioners, retirees and folks just thinking this is going to be a quick buck, and, in fact, theyre going to end up losing their money. The bad guys and criminals go where there is a vacuum, where there is a void. Theyre looking at this because you cant catch us type of mentality. Were seeing the development as this has been a little bit of jurisprudence about what token or commodities and securities, obviously bitcoin clearly a mod ty but youre starting to see more sophisticated Financial Institutions draw the lines and list tokens which probably clearly fall on nonsecurity or commodity space and to your point that becomes a regulatory vacuum, they can play in that space knowing that no market regulator, Bank Regulator can touch them. Let me ask you, one of the reasons i think regulators and congress and others have been loathe to actually deal with crypto in a meaningful way is because fundamentally, underneath it all, it is supposed to be uncontrollable. And so what is the benefit of effectively blessing something that you actually really cant control . And is it a smoke screen to say im going to control this thing over here and yet what is happening over here outside of the United States and other places i cannot control at all, which, by the way, may have a huge impact ultimately on the valuation of what youre seeing right here so, ill answer that, the latter first this discussion about domestic versus international, we dealt with it after the financial crisis, you need harmonization across jurisdictions, otherwise you find races to the bottom in sort of low regulatory jurisdictions and environments ive been chair for 2 1 2 years, the conversation 2 1 2 years ago was focused on smaller island jurisdictions moving forward with a regulatory framework. Now we have the uk, the eu, and hong kong, singapore, actually having crypto regulation we need to move forward and, andrew, i think this goes to your first point, is im a market regulator, ive been seeing this market develop and evolve, ebb and flow over the past three, four, five years, up to 3 trillion, down to less than a trillion, now floating just above a trillion. The fact of the matter is you have institutional nvestors, Retail Investors participating in this market and i cant step back because of this fear of validation i cant step back because what is the Technology Going to be in the future and what impact would it have on our economy and our country . Those are not the questions i asked. I have to ask what is my mission what is my responsibility, and as long as i bring enforcement actions, even one investor, one investor, thats all that matters. I have to protect him or her in this country because there is schemes, there is frauds, and there is bad stuff going on. Can you tell us why it is taking congress so long to get to any sort of solution on this . Even in the wake of these huge frauds and schemes, like ftx coming down. People are losing a ton of money on some of these things. What the heck is going on . We tend to see legislation and policy come after crises, 2008 to say the least. I think there is i had a lot of conversations with members of congress in both the house and the senate side. And there is just a lot of there are a lo lot of differenc and points of view about what this technology will be, what its impact will be on our economy, and Financial Markets potentially. And ultimately given all of this fraud, there is a viewpoint of lets just make this go away and squeeze it out of the country versus lets endorse this, lets create innovation, lets support that i try to balance myself in the middle saying we have to focus on markets and customer protections. What happens afterwards isnt there a little bit of an uber effect to all of this, which is to say, i mean, not the current uber, but when uber first started, it started showing up in cities around the country. There was no real regulation at all. And dare i say they forced the issue . Could you get to escape velocity to the point where people would actually have to deal with you rather than actually try to kill you . Yeah. Isnt that what happened here and the question is, if that is what happened here, should we be incentivizing that or not . I think i dont view that necessarily as the m. O. Or the strategy for all of the businesses perhaps there is a few out there that seem to want to force themselves into the landscape and the ecosystem. Isnt that what has happened with crypto . Not necessarily there is some good actors. There are a number of you talk to the crypto participants im not saying theyre bad actors they developed something if you talk to some of the largest institutions, which have been on the show, and you tell them youre not subject to any regulation, theyre, like, what are you talking about, we have to comply with 50 states to participate and there are money transmitter requirements, but it is not the federal market scheme but theyre trying to get regulated. They see this as a validation of the technology but here heres the validation issue what happens if you validate, you bless this, okay and then something truly terrible happens. Yeah. With crypto outside of the United States, it is all over the place, and mom and pop and everybody else loses their home and does and horrific things happen thats the other side of this coin and i dont know what the right answer is, by the way. The inverse to that is lets just the inverse is that people make a fortune and you dont do anything. Right, well, people are still going to get hurt. I mean, my enforcement record, for the past decade, has proven that people are getting hurt and they continue 20 of my enforcement cases last year, 20 , more than 20 , were cryptorelated thats a huge number for a financial regulator to have 20 plus percent of its enforcement record in an unregulated market. I cant the retail fx market in my mind is a perfect analogy. Unregulated, 2008 Congress Takes action a little bit of this friction and question about to we validate retail effects, why do we have retail participants in the market we cleaned it up fraud went away. It exists and thats it. I dont think we have this market infrastructure, we have this regulatory infrastructure, lets use it whether or not the Technology Evolves or takes off, we have to protect people and if we just step back and say lets just let this happen, the same scenario you just drew up will continue to happen. So lets at least shed some light, bring some transparency, lets protect people and lets use these tools that have worked for decades for American Financial systems and have made our Financial System the best in the world. Chairman benham, thank you for coming in. Thanks. Coming up on the other side of this, a check on the Housing Market and why International Buyers are on the decline. Look at the markets right now. Pressure on them all dow off 100 points nasdaq opening down 105 points and s p 500 opening off 20 points were coming right back. Time now for todays aflac trivia question. According to the National Retail federation, how much will americans spend on back to School Shopping this year . Xonnuswer when cnbcs squa wk wk bo cties aflac seriously . Now theres a hole in your defense; look at the size of that gaaaaaaaaaaaap is that a goat . you talkin about me . Gaaaaaaaaaaaap i think this goat is saying gap. must be talking about the Expenses Health insurance doesnt cover. So whos talking about the money aflac pays to help close that gap . Gaaaaaaaaaaaap aflac aflac gaaaaaaaaaaaap its about to go down, baby aflac aflac stop that goat get help with Expenses Health insurance doesnt cover at aflac. Com the notsosecret to our success . Earn and keep trust. Build and maintain financial strength and stability. Deliver solutions that meet complex needs. Do right by customers, clients, and policyholders, always. Repeat daily for over one hundred and seventy years. Massmutual. Partnering with financial professionals, benefits brokers, and institutions. Now the answer to todays aflac trivia question. According to the National Retail federation, how much will americans spend on back to School Shopping this year . The answer, 135 billion thats an increase of more than 24 billion from the Previous Year new report saying that foreign buyers of Residential Homes has now declined over the past year. Diana olick joins us with the story on that. Good morning good morning, andrew. Yeah, high mortgage rates, high home prices, low supply of homes for sale and a strong dollar, thats whats behind a sharp drop in home sales to International Buyers they bought roughly 84,000 homes from april of last year to march of this year thats the lowest number since the National Association of realtors began tracking this and it is a 14 drop from the year before they bought fewer homes, but they paid more for those homes with median price of 396,400. Thats also the highest the realtor ever recorded. Who is buying . China, mexico, canada, india and colombia were the top five countries of origin for buyers of existing homes. This doesnt count new construction and thats number of homes, not the dollar value chinese buyers had the highest average price at 1. 23 million likely because a third of them bought in california where, of course, prices are highest in total, 15 of foreign buyers bought homes worth more than a million dollars. Now, foreign buyers have bought the most homes, where . In florida, california, and texas. As well as north carolina, arizona and illinois but not all foreign buyers use cash 42 of them did. And half of foreign buyers bought the properties for use as a vacation home, rental property or both and thats up from 44 the Previous Year. Andrew diana, it is fascinating and it really seems to indicate maybe why things have been flatter than some people like it diana, thank you appreciate it. When we come back, blackrock once again under fire on capitol hill the Worlds Largest asset manager facing congressional probes for facilitating investment in companies accused of bolstering chinas military former s. E. C. Chair jay clayton will be our special guest. Well be right back. School is back and Dicks Sporting Goods has everything you need to gear up so you can show up. With the widest selection from the hottest brands, like nike, jordan, on, carhartt, hoka and more. The looks you want, the backpacks you need, all under one roof. When you cant make it to the store, dicks. Com is always an option. And with our best price guarantee, if you find a lower price, well match it. With looks this good, its never been easier to sport your style. This is cynthia suarez, cfo of gogo foodco. , an Online Food Delivery service. Business was steady, until. Gogofoodco. Go check it out. Whaatt . overnight, users tripled. Which meant hiring 20 new employees and buying 20 new laptops. So she used her American Express business card, which gives her more membership rewards points on her business purchases. Somebody ordered some laptops . Cynthia suarez. Cfo. Mvp. Built for cynthias business. Built for your business. Amex business. Welcome back to squawk box. Fortune releasing its global 500 list for 2023 this morning, ranking the Worlds Largest companies by revenue, topping the list for the tenth Straight Year is walmart. I thought there would be a drum roll or something. Sales exceeding 611 billion in 2022 energy also a big winner steve prices at the pump propelling exxonmobil and shell back into the top ten. I wonder what would happen in the next year for that saudi aramco nearly derailed walmart for the top spot, 603 billion. For more, lets bring in the editor in chief of Fortune Magazine good morning. Good morning. Hi, everybody. On our global 500 list, you can have governmentrun entities and there are over 100 of them fedex is on the list u. P. S. Is also on the list amazon, walmart, lots of shopping happened this year. Theyre benefitting. We were talking during the commercial break before you came on about how this list is put together, which is different than just taking all the data. Yes for the fortune 500, you can take the public data, the global 500 a lot of reporting goes into it it is a long time work of effort im getting reputable information from China Companies, for example not as easy as getting it from the u. S. Companies there is a scrappy team behind, they have been doing it for 34 years, doing this list. And do the companies willingly participate in this . Are they all trying to maneuver to get better numbers, worse numbers . Has that happened or is are there others that say were not talking to you how does this work the list is in the 34th year. I think there is a clamoring to get in the hardest work is betting on our end to make sure that what do you do with Chinese Companies or companies in other countries where it is hard to decipher what is really happening . We roll up our sleeves and report how often do you is there any great story you can tell us about somebody who is lying to you and you have to call them up and say, hey, were not doing that number . There have been companies that have been excluded if we found discrepancies. Excluded completely yes, if the numbers arent the numbers, we boot them, theres no way. Companies that might actually normally be on the list but because they didnt play fairly, you take them off the list we have to know the numbers, yes. We dont put anything on it if were not confident. We were mentioning that a couple of these companies, the Oil Companies had huge numbers last year. By the way, we used to have conversations with many of these ceos about, you know, windfall tax profits and the like this year, that seems to be less likely how much do you think this list will change next year . So, i think were on the brink of a lot of change first off, the Oil Companies crushed, all of them were up 40 plus in revenue year over year. Saudi aramco is a total behemoth it can pump oil cheaper than anybody else in the world. I dont think were going to see that kind of growth year over year perpetually i think that was a bit of a one off. The thing that is weird, though, all of these Oil Companies in the top holdings for revenue, slightly different picture when you look at the profitability. And apple, while it is the eighth most biggest in terms of revenue, dropping all the way up to 2 for profitability. It just tells you the Profitable Industries and the ones that have a little more wiggle room. Absolutely, yeah. We rank based on revenue you can argue based on other things saudi aramco, 159 billion in profit and apple by comparison, just under 100 billion. You see the scale of these things yeah. When you think about the anticalories, the revenue version versus the profit version, is there any great outlier . Yeah. I mean, definitely, i mean, look, like, amazon historically has been a giant machine in that way. But, you know, if it is ranked by profit, you would have saudi aramco in the top spot solidly, so, yeah. Okay. Alyson, great to see you cool list. Thanks. Were going to check the pulse of the Restaurant Business well find out how inflation is touching everything in the restaurant from food prices to labor. Well be right back. Welcome back yum brands reporting Quarterly Results earlier this hour, beating on the bottom line, but sales missing estimates. Similar story at kraft heinz where the revenue missed the streets expectations as price increases were offset by a 7 drop in volume a theme we heard from several Food Companies this year as consumers push back on higher prices opting for cheaper alternatives joining us right now to talk about how food inflation is impacting the sector is greg portel, lead partner is that the story . Are consumers actually pushing back on higher prices . Well, we had a really good run of consumer power. The consumer sentiment, Consumer Spending has been strong out of the pandemic and through the mini recession and we are seeing a point where wallets are starting to be stretched and consumers are going to have to start making choices theyre not necessarily trading down, but they are spending those dollars differently. And youre seeing that as you start to see these Food Companies come out with earnings. I think back to last week, we heard from Procter Gamble and pepsi, both able to raise their prices and that was responsible for the organic volume growth. Is it different when it comes to actual restaurants well, restaurants have a lot of different dynamics than just the Food Companies not only do they have exposure to the food, they also have labor costs, they have labor availability and then they have all the operational complexity that comes with a with a Consumer Experience that is tied up into that last point of contact you think about those Bigger Companies that have the ability to expand their risk and their opportunity across multiple segments, it gives them a lot more flexibility when it comes to hitting these algorithms. With Companies Like yum, theyre really tied into one sector, so they hit that barrier of Consumer Spending quicker than more diversified companies. What does that mean for margins in these companies well, ultimately the question is it is a race. Do you have earnings or do you have revenue and right now were seeing the revenue slowing, but in these well managed companies, were seeing the cost programs theyre putting in place starting to have effect. When i look at companies and compare their bottom line, what youre seeing is a company with a Management Team that is able to manage the complexity of running a multinational business while still realizing they have some headwinds on the revenue side it is really a testament to the ability of management to pull through their programs at this point when you see the earnings go up, even though revenue is down what do the Companies Need to be doing at this point what do you advise there is a couple of different pieces the first one is making sure you have supply security we found coming out of the pandemic, the ability to get access to food and to product and ultimately the labor is really a priority for most of these companies. Now, while the supply chain risks have abated a little bit, it is still their biggest critical point had it comes to serving the restaurant sector. So right now it is all about optionality and being able to define the cost of that optionality for your investors. And, just looking more broadly at kraft heinz, maybe some of the other companies that kind of fall in that same place, do you think the consumer is really going to hang on and spend kind of the 64 million question. That is it is for everyone right now i think what youre seeing is Companies Start to really invest in that innovation pipeline because Consumer Spending is there. The question is what will they spend it on . Youre going to see a lot of creativity around formulations, pack size, and some different innovations around flavors because thats going to give consumers a fresh reason to spend. And break them out of what could be a steady decline in Consumer Spending variations around flavors, is that mostly hot stuff . I think thats been the trend for, i dont know, the last decade or so, or are there other new things when it comes to flavors you can do right now it is all about speed of conversion of flavors what we found is, yes, you have the overall theme of hot but the question is how fast can you work innovation through because it is not just a hot, cold, spicy, guacamole, whatever the flavor of the day happens to be it is how fast can you cycle that through your product mix so that youre able to catch the wave before it happens okay. Greg, thank you. Thank you very much when we come back, former s. E. C. Chair jay clayton on the China Select Committee investigating blackrock and others for doing business with Chinese Companies that the u. S. Has accused of bolstering chinas military stay tuned the first time you connected your godaddy website and your store was also the first time you realized. Well, we can do anything. Cheesecake cookies . The chookie manage all your sales from one place with a partner that always puts you first. we did it start today at godaddy. Com upbeat music woah. Constant Contact delivers the Marketing Tools your Small Business needs to keep up, excel, and grow. Constant contact. Helping the small stand tall. Welcome back to squawk box. We have so much to talk to jay clayton about, who is here were going to talk about blackrock, crypto, fitch, downgrades, everything but heres were going to start the conversation because blackrock is under some fire on capitol hill the House Select Committee on china now reportedly launching a probe into the Worlds Largest asset manager. Lawmakers alleging blackrock is facilitating investment in China Companies for more, well talk to jay clayton who is here at the table. Good morning. Good morning. What do you make of this . Youve been somewhat somewhat, youve been a china hawk is that fair to say . That is yes. Lets go with yes. Go with yes okay what do you think is really happening here this committee is a Bipartisan Committee, which is rare right now well come back to what partisanship has meant for our debt rating, but it is a Bipartisan Committee it is not a legislative committee. It is a committee designed to bring out information. And this is one step in bringing out information. Let me take this to just a little bit higher level. Yes. Were into the president ial cycle, okay . What are the big issues for Kitchen Table americans in this cycle . We got abortion, okay. Put that to the side we got the border. Put that to the side maybe. Three big ones that all relate to china climate, youre not going to solve climate without dealing with china we can now all accept that the economy, the strength of the dollar, and national security. Those three, those three big ones, all depend on our relationship with china. We talked before about conjoined twins in our economy with china. Chinas economy doesnt look so good right now i climate being a political issue in isolation the candidates need to be able to deal with those issues in an open forum lets go back to your question about black rock when i invest in a global index, how much of my money is going into the chinese public Capital Markets and what is that money going to finance thats a very good question when those three big issues for americans all depend on our relationship with china, which is not a good one. Whats the answer we just had the regulator on about commodities and talking about crypto the question is do you regulate, not regulate how do you regulate something in another place . First thing towards regulation, im not getting transparency on shore and offshore in the gray areas you cant solve these problems until you understand them. Whats my view we are too dependent i think everybody agrees with that we cant have a sharp decoupling but in our economic strength we cant have a sharp decoupling thats the point i come back to all the time how do you do it gradually, how do you do it softly . And whats the definition of a sharp decoupling i do worry about Global Security in there is no connection between the two countries. I think the chinese have done a lot of shady and awful things along the way. You watch oppenheimer and think, wow, a problem with us having no connection another superpower on the globe. Look, we have ill give Henry Kissinger credit for this. We have something that has never ended well in the past we have a superpower, the United States, and a rising power when you have a super power and rising power, usually that ends in conflict. But then we had nikki haley sit at this desk a week ago and you would have thought she was prepared to declare war on china. A lot of people are watching today who they are all for the decoupling what are our assets start with what our assets are economic strength. We should befocusing on economic strength. We have better relative economic strength right now one of the issues is how are were Going Forward . Im just curious about et rhetoric piece of this it almost feels like the u. S. Even more than china right now its too simple its too simple. The this or that, thats too simple we need to continue our military strength, we need to continue our economic strength and we need to diversify. Talking about rhetoric and also whats happening in the world, fitch downgrading the United States states what do you think in. I think if you read the text, youve done a good job playing out whats their explanation you know, the downgrade in itself gets headlines. Whats the explanation ill put it in my kind of simple terms. Coming out of the pandemic we have growth but debt and deficit are still growing. And the financing of the debt is going to cost more than we thought. Those are the takeaways from this which is is, hey, we have to get our act together in the next five, six, service i dont know years thats unsustainable look back 12 months, getting our act together doesnt look so good looking back 12 months doesnt look so good lets look back 20 years. But looking back, the no appetite for looking beyond the immediate problem, you know, the debt ceiling no appetite for looking out and saying what do you projections look like . Thats a bad thing and the mrp people, we just talked about those three things, we dont give them enough credit the American People can understand that Social Security is unsustainable the context which is so interesting is were in the middle of what will turn into a president ial campaign. Youre seeing folks already putting ads out about this and whats so uniquely strange about this is i would have thought if you looked at their model, you would have put out this report and done this downgrade three years ago. Theres this uniquely weird thing happening. The perception is it worse today than it was three years ago. They could tell you its not, they would tell you its better today. The 2019 numbers are 100 on deficit to gdp now were at 120, theyre projecting going down to 118 doesnt look luke ike were get down to 100 any timie any time soon the deficit side, were 6 thats a big number. Relative to where we were year to year thats not a big number lets give bipartisanship credit here. Go back to the Clinton Administration they got those things under control. 2019 people thought we were starting to get those things under control. Lets finally talk about crypto i think and becky was talking about ripple, which is something you you go on twitter, people have views about you in particular and ripple. So i want to ask you about that but i also want to ask you what you think the ruling in the ripple case really means okay, lets do all of them, including the ruling in the ripple case. It shows something you and i have been talking about for a long time. Crypto is a technology, not a product in itself. Some of those products are going to be commodities, not securities we talked about the broadway ticket example a play thats not going on right now but that you finance with future ticket sales. When you do that, you say this ticket, youre buying this because i am promising you im going to put on an amazing play, it goi its going to be worth a lot, trust me when the play is up and running and going on and selling tickets for tonights show, its just a ticket we can see that evolution. Im going to build a network youre going to use this token to work the network. When youre building out the network, that token you think its really about the switch, when the switch happens. In these educations but Crypto Technology or some Similar Technology is going to come to all securities and commodities. And russ is right. We should have regulation for spot trading of commodities. We all know bitcoin is a commodity. Why cant i trade bitcoin through a registered broker dealer on Investment Adviser its a longer conversation and debate hopefully you can come back and continue it. We have starbucks cfo and Mario Gabelli. Were coming route back. With the lowest transaction fees and keep more of what you make. Start saving today at godaddy. Com good morning futures under pressure fitch downgrading americas debt rating new results on cvs, yum brands well also be getting a new read on jobs. Thats just 15 minutes away. Well get julys adp report and fridays big Labor Department number the final hour of squawk box begins right now. Good morning, everybody. Welcome back to squawk box here on cnbc were live from the Nasdaq Market site in times square. Im becky quick, along with Andrew Ross Sorkin joe is off today so far weve been seeing red arrows this morning. If you check out u. S. Equity futures, the dow is down but only about half the losses we saw a couple hours ago dow off 115, s p by 23 and nasdaq off by 116. Thats weird almost exactly the down weve seen for the dow if youve been watching the treasury market, despite the downgrade coming to the u. S. That well talk more about, youll see yields are a little bit lower this morning youd expect the opposite if people were running away from trea treasuries meantime, lets get you up to speed on the fitch credit downgrade of the United States it was cut to a double aplus from triple a. It cited a noting of double a plus is still well into investment territory treasury secretary janet yellen saying its based on outdated data and saying it defies reality to downgrade the United States amid americas strong recovery and then the bank commentary, wells Fargo Chris Harvey saying any pullback in stocks should be relatively short and shallow and then Goldman Sachs saying they think it should have little effects on the u. S. Market the s p back in 2011 was the first cut following that big fight over the National Debt limit. In the meantime, lets get over to a big slate of earnings dom chu has been monitoring the action if you take a look at the moves that we have, first of all, well start off with shares of cvs up just north of 2 , around 85,000 shares ofvolume. They report a profit in revenue that beat estimate, they have been more deliberately cutting costs. Cvs did reaffirm or affirm its fullyear Profit Guidance that was reduced last quarter next up shares of yum brands very thin Trading Volume the parent of taco bell and pizza hut reported mixed results. Yums results were helped by outperformance by kfc. Those shares up 1. 25 gains. Craft heinz up and oscar mayer and deli and koolaid drinks higher many consumers opted to drift toward cheaper brands given pressure on household Balance Sheets and shares higher in terms of Health Insurance humana. Just around 20,000 shares of volume now the 5 . Beat on profits, beat on revenues affirmed its forecast the humana shares a bright spot in a down tape, andrew, becky, up 5 . Back over to you thanks. For more we are joined right now by hightower adviser stephanie link i want to talk through some of these earnings with you. Very quickly, what do you think about the credit downgrade for the United States . Would it stop or change your Investment Strategy in any way no, not really, becky and im not really surprised given all of the circus thats happening in washington. I think this is just you know, its not positive at all but its not certainly going to change anything in the way i inv invest fundamentals and earnings have been coming in better than expected they have on a lot of levels but lets talk about starbucks that came out last night this is a stock you own, right i do. So the beat on earnings but missed on sales. Yeah. You know, i kind of like digging in deep, theres not a lot that really surprised me and certainly nothing on the negative side. If you have earnings growing 19 and total revenues 100 and operating income up 10 i know people are focused on global samestore sales. They came in 10, people were thinking 11. North america was up samestore sales, but they had better segment margins. They actually beat the segment margins by 120 basis points. If you look at international, international samestore sales grew 24 but china grew 46 versus 3 last quarter the reopening is happening on the consumer side in china i was very pleased to see that by the way, you have what led to the higher margins . It definitely is higher prices and better volumes, too, right . Its the operating leverage story that we were all waiting to see and were now starting to see it everyone was complaining last quarter that china samestore sales only grew 3 and now nobody is giving it credit to me its kind of silly when i look at members, members grew 15 year over year and theyre up 86 from 2019 levels. I think all things are going well for starbucks and maybe people wanted this huge beat but i just think the fundamentals are really very sound and the stock has lagged and by the way, yum brands just reported that stock trades at 27 times and youre only getting 13 total Revenue Growth for starbucks, its trading about the same in terms of valuation and we also have comparable in terms of total Revenue Growth as well at 12. 5 . Are you buying additional starbucks shares today as a result sfli would i think this new ceo totally gets it. You still have Howard Schultz on the board. You have a great cfo and i cant wait to listen to that call at 8 30 this morning with you guys. I just think theyre doing everything very well and i just dont think it should be lagging here at these prices what about cvs . That stock was out this morning or that company was out this morning with earnings. Looking at the stock it looked like it was hard to see where it was going to open. A little bit of a mixed bid ask. Its up 2. 2 now they bought up everything. They do have a lot of moving points what do you think of the company in. I think this is a really interesting story. It not really an earnings story at this point in tim because theres a lot of moving parts. A good quarter, total revenue up 10 . They have done 19 billion worth of m a over the last few years and i think investors want to see the return on investment from all of this aggressive change to the primary care strategy so i think thats going to take time for people to appreciate it but i think there is synergies to be had. I also think theyve got a really high cost structure, 40 billion cost structure that they can actually really chip away at and as they do that, they can then talk about how theyre going to return cash return cash to shareholders over time i think that is going to be a really big theme as well lets do a quick take on qualcomm that stock is up more than 7 over the last five trading days dplp the we have to get through the handset inventory issues handsets are 86 of total revenue. I think we have to get through that we will in the second half of the year as a result of setup into the second half of the year is actually pretty attractive thank you we will talk to you again soon coming up, just minutes away now, actually less than four minutes away, the big breaking Economic Data of the this morning, july adp employment is out after the break ahead of fridays big jobs report from the Labor Department going to give us hopefully a good preview and legendary investors Mario Gabelli. 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Wee we are awaiting adps futures report there is a new call out from bank of america this morning, bank of america now revising their outlook on the u. S. Economy saying theyre no longer looking for a mild recession, which was their base case for 2024 they say the recent incoming data made them reassess that view theyre calling now for a soft landing with no recession. Add them to the list of economists to have done that adp report shows private employers added 324,000 jobs last month, well above what the street had been anticipating job creation remained robust in july with leisure and hospitality. Adp says manufacturing, though, was a weak spot. Its an Interest Rate sensitive industry that lost jobs for the fifth straight month junes monster gain up 497,000 was revised down to 455,000 jobs and its the slowest pace of gain since november of 2021. This is a few days before we get the big jobs report. We look at adp potentially being a signal of that that number coming in much stronger than had been anticipated. Youre talking about a gain of 324,000 jobs versus the 175 estimate lets continue to talk about this for more on the adp report and nations job picture ahead, good morning to you everybody looks at these numbers and says how correlated are these numbers going to be to be what we see on friday . Good morning. Look, this is an independent look at the private sector adp provides Pay Roll Services for over 25 million workers, thats one in six in the United States we feel we have the data and we have to really share with the world, the public, whats going on in the labor market from the private sector now, we think that over time youll see the numbers today and the numbers on friday trend in the same direction but theres no reason to expect that they are in lock step because theyre based on very different underlying data. What i will say as well is that better than expected should be the phrase of the summer because it certainly true in the labor market this is a market where twothirds of the hiring was done by Small Businesses with less than 50 employees so really strong in that segment. So, look, the other big question is going to be is how does the Federal Reserve see these numbers. Is the economy too strong . Well, im of the firm belief that the economy can never be too strong, as long as prices are stable and thats the job of the fed right now. What were seeing is an incredibly strong market but is also an incredibly fragmented jobs market. The picture is not lock step you see softness in the good sector that reflects the underlying survey data in manufacturing you see softness in Interest Rates ratesensitive sectors like finance. You so softness in large companies. They pulled back hiring in july. This is a strong but highly fragmented labor market. The wages have come down we look at new hires we continue to see pay growth for those employees first in the door going down and sometimes theres outright declines. In some ways thats good for the feds inflation battle but at 6. 2 were still double the percentage growth that we used to see before the pandemic so there is a suggestion here that wages will come down but maybe not as much as the fed would feel comfortable with. Thank you for joining us this morning. Thanks for having me. When we come back, have we seen a postpandemic peak in airfares well hear from the oceo of Frontier Airlines. And dont miss an exclusive interview this afternoon on power lunch with jpmorgan ceo jamie dimon. That com yesour way at 2 p. M. Eastern time stay tuned b squawk box will be right back. G to what you want . Its truffle season ah thats okay. Never enough truffles. How much are they . Its a lot. Oh okay im good, that its like a priceless piece of art. Enjoy. Or when they sell you what they want . Yeah. The more we understand you, the better we can help you. Thats what u. S. Bank is for. Huge relief. Yeah. fan 1 there ya go thats what im talkin about josh allen is this your plan to watch the game today . hero fan uh, yea. I have to watch my neighbors nfl sunday ticket. josh allen its not your best plan. But you know what is . Myplan from verizon. Switch now and theyll give you nfl sunday ticket from youtubetv, on them. hero fan this plan is amazing josh allen another amazing plan, backing away from here very slowly. fan 1 that was josh allen. fan 2 mmhm. vo for a limited time get nfl sunday ticket from youtubetv on us. A 449 value. Plus, get a free Samsung Galaxy s23. Only on verizon. Welcome back to box. Frontier airlines rising in the market after the company narrowly beat on the top line. I want to get straight over to phil lebeau. Hes got a very special guest this morning thank you, lets bring in barry biffle andrew set this up you beat in the Second Quarter your guidance in the second half for this year coming in below what analysts were expecting paint a picture as far as the landscapeover the last six months things have changed a little bit i think versus just a few months ago we have surveyed our customers and weve got a fivepoint Movement Just in the Frontier Customer base. It is traveling to europe on a yearoveryear basis thats causing pressure. Youre seeing last year was maybe the year for domestic and youre going to see people going more to florida and the caribbean. So thats causing near term pressure in our case we put out a guide at 4 to 7 were disappointed that number should be double digits another 3 points contributed to the air Traffic Control challenges were seeing related to the weather events. Until we can get through those and get past that with these temporary challenges, its going to pressure the near term. Let me be clear here. Theres been a lot of hand wringing by investors who are wondering has domestic demand for travel peaked . We were curious ourselves we just went out and surveyed our customers and we found the european information we also found Something Else thats very interesting. Over 90 of our customers plan to travel same or more than before on a goforward basis and actually half of them are planning to travel even more with on 7 planning to travel less so the demand is there and growing versus 2019, 2022 even but the challenges in the near term, they went to europe this summer for you guys, ancillary revenue is a big deal. It averaged about 80 per customer you targeted getting it up to 85. How do you raise that or do you notice as the economy has had some bumps along the way over the last six months, people are maybe a little more cost conscious when this comes to some of the addons that are part of ancillary revenue for you guys whats great about our model is if people want to save money, they can actually choose to have less options in some cases if youre fully bundled, you dont have that option there could be pressure in theres some financial concerns but the reality is we have a very robust pipeline we have years in the making to continue to increase that. In fact, our longterm target remains 100 we have a lot of things coming out. We continue to innovate on our go wild pass, we launched our monthly product for that as well theres plenty of things in the tank to continue to grow it. It could be challenged and could continue to see drag in the momentum of domestic pricing barry, about a year ago i went back and looked at the tape, it was about a year ago that you guys ended your bid to buy spirit airlines. Now you see whats happened in the last year between spirit and jet blue, you see that the d. O. J. Is fighting them. You say that it may not come through. I know you wanted the deal to go through but is there a part of you that says we avoided a lot of headaches there and maybe in be hindsight all things worked out best for us . I get a headache just thinking about that experience thank you for reminding me it been a year i think the process is Going Forward and i think their trial is in october. Im actually encouraged that they actually can get this thing through. I know in the past i didnt actually believe that but it looks like it very well could. And i think when you look at the power of the big four and you look at the marketplace, theres a really Good Opportunity to have another carrier that could compete with them. It is very challenging right now. Theres a lot of talk about it and the government is putting up a tough fight. Barry, we have to wrap up the interview but i know becky is always interested in the go wild pass how many people are you having taking advantage of that we havent disclosed yet but it has exceeded our expectation multiple times whatever youre looking for, you can even try it out now with the monthly before you commit to an annual pass. Hopefully beckys got hers you can fly 299 all you can fly, 299 for the winter thats correct. Its the best value in travel. Especially in you dont have a job and you can be on the road or a student maybe, going around if you work from home or students, anybody with a little bit of flexibility or great product. It is the all you can eat buffet barry, thanks very much for joining us this morning. We appreciate you coming on. Barr barry biffle, the ceo of Frontier Airlines. Im going to do that i saw a guy bought an all you can fly for life and hes flown 23 million miles coming up, a deep dive into the markets. Dont go anywhere. Were coming right back. From big cities, to small towns, and on main streets across the us, youll find pnc bank. Helping businesses both large and small, communities and the people who live and work there grow and thrive. Were proud to call these places home too. Theyre where we put down roots, and where together, we work to help move everyones financial goals forward. Pnc bank. Taco bell, kfc, mixed results helped by outperformance at kfc sticking with food this morning, take a look at kraft heinz we have big names to report after the bell today those include qualcomm, door dash and pay pal when we come back, starbucks cfo will join us to break down Third Quarter earnings from the joint. The shar uerreurth rning. Psse is well talk about everything happening there. Stay tuned youre watching squawk box and this is cnbc welcome back to squawk box. Starbucks shares lower in the premarket up about 1 right now. The coffee chain posted higherthanexpected profit. Demand improved to china the mid point of that guidance is below street expectations, possibly whats weighing on the stock this morning starbucks cfo joins us this morning. Hi, good morning. Lets talk about the quarter. In many ways there was a huge growth in china that seems to be coming back quite nicely and frankly a lot of growth in the u. S. , though maybe light of what analysts had anticipated we were pleased with our performance in the quarter, actually around the globe. Our revenue grew at 14 when you exclude Foreign Exchange and importantly our earnings grew by 19 and our margin expanded by about 50 basis points. All around we had Strong Performance and that was really fueled by the success were seeing in our reinvention plan weep sa we said early recovery around the globe. We were really pleased with the performance and it speaks to the longterm opportunity this we have ahead how should we think about the the samestore sales, which have been growing but were slightly less than anticipated. On the high end people are buying sandwiches and other things with their coffee, which youd think would be helpful i dont know what that says about the strength of the consumer right now at the lower end. We see broadly our demand continues to be strong we arent seeing our customers are trading down thats evidenced within the 7 comp, were seeing transactions grow of day. Whats important about our ticket this quarter is it has a balance contribution of strategic prices as well as increasing customization and record food attach thats got a volume component to it when you take that together, it speaks to the fact that the fundamentals of our revenue are broad and strong it gave us the confidence to reaffirm our guidance. What do you think you need to do and where are you in the reinvention insofar as being able to get more people, traffic, foot traffic in the stores and the reason i ask this is fascinatingly, three quarters of the business now is cold drinks, not hot drinks, cold drinks more complicated to make. I will say as a customer, occasionally ill walk past a customer but then i see a long line and i think ill take a pass thats a great conundrum right and i think whats important is that our reinvention is directly pointed at creating a better experience for our partners and our customers by reducing complexity so the investments weve made in wages and training as well as equipment helps to stabilize the environment but also make for a better production environment. And weve had great progress but we have more opportunity ahead of us. So what does that look like in. I think whats important is part of the unit growth is being able to be able to support customization and attach and while its not just transactions, people walking in the doors, its the ability to be able to support more customization and great aer attach when you walk in the door, you might order a drink but you might be encouraged to customize. Were seeing Good Progress whats happening to costs given the Big Questions weve had about supply chain and other things has that resolved for the most part were seeing our Inflationary Pressures are starting to moderate its reflected in the guys and its one of the drivers of the reason we were able to move our guidance to the 16 to 17 Earnings Growth on a full range as its reflected in there is that moderation were starting to see from an Inflationary Pressure and in terms of china Going Forward, what does that look like to new. We were encouraged by the recovery we saw this quarter and we continue to recover at a sustained pace that will come from a continued innovation, increases in terms of our digital capability. Well continue to support festivals and rituals and well continue to expand our store count. All of that will lead to recovery well have a Record Number of Net New Stores open but also speaks to the longterm opportunity we see ahead we have a lot of excitement about whats to come in china. Big curiosity how has starbucks mixed with the olive oil been selling its been actually doing really well. Were finding the gold foam is a highly customized item for our customers. So customization is about 60 of our beverage units cus cu cu customization. Collectively innovation is helping to fuel our growth and were excited about the opportunity to come. Okay, rachel. Thank you for joining us this morning. Thank you appreciate it when we come back, Mario Gabelli will be here livecy sitting at this very table. We have so much to talk to him about from the fitch credit downgrade that just happened to media stocks and just about everything as we head to this break, you can get the best of squawk box on your favorite app youre watching squawk and this is cnbc power e trades easytouse tools, like dynamic charting and riskreward analysis help make trading feel effortless. And its customizable scans with social sentiment help you find and unlock opportunities in the market. E trade from Morgan Stanley. With powerful, easytouse tools, power e trade makes complex trading easier. React to fastmoving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders so you wont miss an opportunity. E trade from Morgan Stanley welcome back to squawk box. Take a look at futures nasdaq about 140 points, s p 500 off about 29 points. Marginally worse, i dont know if its on the back of the adp numbers, which are hotter. Some are fitch downgrade could be. Were down by more at the start of the session but we got the losses down to 100 before the adp numbers. Well see what happens with fridays jobs numbers. What does the fed do . Lets show you treasury yields real quick, talking about that fitch downgrade. Taking most in sprietride. Were watching amd best estimates by a penny. Revenue slightly ahead of estimates. Amd giving an update saying it increased by more than seven times in the quarter the ceo expects the market to reach over 150 billion by 2027 and a programming note, shell be joining the gang on squawk on the street in the next hour. Joining us right now to talk about the markets, earnings, the new u. S. Credit downgrade and a whole lot of companies is Mario Gabelli, the chairman and ceo of gamco investors. Its been a few years its great to be back. Im happy to be wilson. Well talk briefly about the debt downgrade today just because its out there but i want to spend most of our time talking bottoms up stuff with you. What do you think the answer is . The answer is what is the amount of money that we owe as a country, 33 trillion, how much of it is held by the public, how do you pay interest if it goes to Interest Rates soaring, right. Then you have to look at how do we get out of this mess . The way out it have is it have a strong economy, grow revenues, cut costs or keep them constant and thats it. And a functioning government that can come up with a plan do it look, powell was doing part a to reduce aggregate demand by keeping Prices Higher longer and he got the rhetoric, the four 4s i talk about then we have policies very helpful long term like the infrastructure act, the ira act, chips act but the answer is you got to reexamine what are the priorities and expenses . So well live with it. You are a little concerned, i think, about the Banking Industry talk about that. Well, part of it is what is called an accounting rule that came in after the collapse of 1990 when a thousand of the 3,000 snls collapsed, they put in a rule 155 and its now 157 which means you could put assets to held to a 10year maturity. As long as they are more or less okay, you dont have to write them off so they continue to be held to maturity for assets like buildings, commercial buildings, real estate and you just heard about all the things so owners are turning them in and that causes you to have a market to market which companies are doing well and which arent and youre going to have someone in at 2 00 to talk about private credit theyre unregulated, which means you could have some explosions explosions more than hiccups, things that could change the equity market overall . Look, ive been through so many crises, 1893, 1929, come on since youve p you guys have been on cnbc from the predecessors, weve had 89 had so many of them. We will have a challenge but j j bank will do well. Jamie dimon and jamie korman i guess the bigger question is would there be something thats big to turn around the markets. At this point there is a serious momentum move. Dows been up 16 out of please dont go to the sky. Ive got it. The nasdaq, 30plus in the market we want to buy Good Companies with Good Management with good valuations, and the market comes down the magnificent seven are in the trillions. There are opportunities for small companies, and in addition to that, we believe corporate lovemaking, m a, even with the federal trade commission doing what theyve been doing youve been a long believer in m a activity but its gotten to be a freeze because of this administration yesterday, for example, chinook just closed. General, despite all the mayhem, closed l. Harris is a grow manage company and the stock is a bargain, and that closed well see. Notwithstanding that common sense also has to prevail, and you know, the ftc and the department of justice are coming out with new rules, but theres a world out there. Companies in japan is buying the minority interest. Thats part of the m a they own 61 then theres a lot of dry powder with the private equity, with corporate and strategics, and then you have financial engineering, the reverse of that, with j j, for example, spinning off kenvue and doing that kind of dynamic theres a lot going on what about the media stocks youve long been an owner of media stocks if you look at paramount, Warner Brothers theres a lot of as in the world that i like. Ill go over some like ag, advertising, aerospace and the aerospace industry, defense, commercial saviation i extraordinarily exciting everyone should contribute to their favorite politician because advertising is going to be up. The tv stations are getting their share. As a result of that, i like those kind of companies, even though theyre linear television, kind of dated. Cbs, abc . Ill give you an example. There is a Company Called tgna the stock closed yesterday or today around 16. 50. They will earn 3. 50 a share they had a deal to be bought the federal Communications Commission kind of derailed it in a very interesting way. Not important at the moment. Theyre going to be 24. Youre going to make 50 in 18 months in addition to that, at some point, the fcc is going to allow tv station operators to have more than 39 coverage what does that mean . It means that Companies Like paramount, like disney, may examine keeping the network, like keeping abc Network Comcast keeping its networks contrary to what bob iger just talked about. And then selling and spinning off the tv stations, assuming either the Public Company or someone can consolidate that so, you know, those are the dynamics do you think thats going to happen under this administration no. Do you bet on a new Administration Even if it doesnt happen, its okay. But why would you care about when somebody can get on tiktok and have 385 million viewers, and they worry about somebody having a cap of 39 . I dont disagree with you you and i are in the same place. I think the Regulatory Environment doesnt make a lot of sense, given how much competition there is i agree but im not talking about today. Its only 15 months until were looking at 2026. 15 months from now, were already in 2025 and then well look out a year and have a new, hopefully, somebody else doing things of a regulatory nature that are more practical. So you can betting theres going to be a new administration no, im not the stocks dont need that to do well meanwhile, if you take paramount, different issues, but sticking with aerospace, i am still buying, why . Because we need 40,000 new planes built in the next 20 years. The population of aircraft is going to go from 20 to 40,000, but you have retirements what does that mean . That entire ecosystem we have boeing and airbus on, number 37 coming up in about a month, and stocks like crane, textron, l. Harris, which is extraordinarily well managed and did a good deal with aerojet, those will have a tailwind and then the defense portion, you know, i dont know whats going on, then how do we solve this problem then, in terms of a Warner Brothers, if youre going to ask me about that. We have the screen actors guild, the writers strike, obviously, in the auto industry, theyre part of the consumer sector. You got the possibility of a the uaw strike. Uaw but basically, when yellow went out of business, that may temper some of the enthusiasm for an extended strike. It may not on the other side, you got to assume that happens. More interesting for me is that companies three years ago that would call me up and say, i got to call this company, introduce me, ill buy whatever they sell. Now theyre destocking so, the working capital of whether its a retailer, whether its an industrial company, more or less its coming down and there are signs like today somebody indicated on a press release that the stock game is over which means, in addition, if you have flat demand at the retail or industrial level, youre going to have significant pickup in supply, which means manufacturing is going up. Theres a lot of pluses, a lot of this is fabulous what do you do if the uaw goes on strike that means what . How do you look at that as an investor, not just for the big five i think, basically, it is part of the american process of having labor get their share and they have some issues that they have to deal with. Do you pay somebody joining you as an employee the same as somebody thats been there theres a lot behind the scenes. But the point is that the push to catch up with wages to pay for the products that your customer, your union member is paying i have no problem with that free market give and take do you invest in the company as a result . Well, you could be in advance of that. If the stocks, unfortunately, have not gone down in anticipation on the other side of the coin, if i dont have a supply of new cars, what does it do for used cars secondly, even if i have a supply of new cars, the prices are too high secondly, leases and fleets are not buying cars as much as they have to. They will then provide used cars, so youve got a surge in demand for used cars,which go into the Consumer Price index. And then just the question from the ev transition, Companies Like General Motors saying theyre going to transition to an entire ev fleet by 2030. Yeah. Maybe. Independent of that right now, in the world, were producing 81 million cars. Of that amount, 27 million are in china china, it will be the closest to getting evs earlier than most at the higher percentage. But the used car market is 238 million in the United States and 1. 4 billion in the world, and by the time you got a long runway for that fleet to turn over Companies Like genuine parts, which are doing a great job in Industrial Products where they sell parts for a. I. As well as in the auto aftermarket, stocks 155 ive been following it for 40 years. Its great management. Great company. And theyre going to earn 10, 15 times, so its okay, and they have pricing is inelastic, which means theyll do well, no matter what the elements of inflation are. Can we talk Atlanta Braves . They were here ringing the opening bell never a doubt i thought youd bring it up. Andrew no, im not. Come on its a liability. Thank you, andrew. Youre not keeping it. If you sign it and give it tom with becky, i will keep it thats a deal done. You own 17 of the voting my clients. I do not at gabelli fund we have clients that own the team, a thousand that own a piece of the team. The Atlanta Braves are doing extremely well last night, they played to a crowd of 41,000. Capacity the pitch clock is helping you ready okay nice catch. Just want to make sure. But basically, the pitch clock is making baseball more interesting. The growth in the hispanic population is also helping and so, the Atlanta Braves at 45, john malone and greg mcfey control it they converted it to a cstock and we think youre going to get 52. You have to own one share of a Baseball Team before its sold out to some rich person. Would it ever be sold to the saudis as you watch what happened with the golf situation . The logical buyer of all american football and all American Sports teams, whether its the commanders or others, are locals so, individuals can do that. And there are some benefits. You know, the major so, thats something to do i like it. Then, finally, theres gambling. Las vegas is hot you got 20 seconds, because i always have more to talk about you than we have time. Well, you want to bet on something. Theres going to be a super bowl in las vegas its going to be formula one the individuals that they attract are not going to go to the buffet for a dollar. So, theres going to be a lot of spend during a seasonal downturn you want to buy golden entertainment, caesars. You got to come back, mario right now, its time for squawk on the street. I got to have you sign it good wednesday morning, welcome to squawk on the street, im Carl Quintanilla with jim cramer at post nine of the New York Stock Exchange. David faber has the morning off. Premarket is taking a spill on that downgrade of the United States big menu of corporate earnings, and the macro data runs a littl hot today. Our road map begins with that downgrade, though. Fitch is the first major ratings firm to downgrade the governments Credit Rating in more than a decade earnings in