Transcripts For CNBC Squawk 20240703

In the meantime, lets talk about the price of bitcoin. It has been volatile. Shot up yesterday in a big way and pulled back after blackrock denied the report, becky. Coin telegraph saying u. S. Regulators approved the application for the spot etf. Everybody cheered and went crazy. Coin telegraph later retracted the story and conducting an internal investigation into the inaccurate report. Blackrock reported the application is still under review. Crypto markets have been waiting news for spot coin etfs which are expected to drive investment in the sector if approved. If because we still dont know. Just because blackrock and fidelity are asking for it, doesnt mean the s. E. C. Has to give it. Do i think there is momentum . Sure. It doesnt lead to the situation. The company that put out the story is now conducting an internal investigation which makes you wonder if they suspect somebody was doing this and making trades based on the story. It wasnt how it happened. Was somebody feeding them the information and trying to do something illicit on the other end . Obviously, this is a market that is waiting for. This. You saw the move. You saw it come back down. And Congress Member jim jordans bid for House Speaker is gaining momentum. He won the support of skeptics who opposed him last week. That includes mike rogers of alabama and ann wagner of missouri. He is only afford to lose four republicans and still win the gavel. The survey by nbc news show there is are several supporting him. A vote is expected at noon today in the house. A lot of options over what would happen if that did not pass. There is talk of other republicans coming into it or giving more powers to Patrick Mchenry who is the existing speaker in residence. The pro tem speaker. He does not have a lot of powers at this point. They cannot get legislation passed at this point. Lets talk about what is going on every night in israel. This comes as President Biden announced he will travel to israel tomorrow. Nbcs jay gray is joining us from tel aviv this morning. Reporter good morning and good midday here in tel aviv. We are in the area with a lot of businesses and cafes and residential areas. Normally packed at lunchtime and which you can see there are not as many people here on a week day. It has been that way since the tension with the iron dome tested overnight and during the day for the ground assault in the next few days. That is something that has been talked about as you know regularly and has not happened to this point. When you talk to those who are out, most are pleased that President Biden is on the way here showing support of the United States not only to the people of israel, but to the world. It is a big deal to a lot of people that he would make this trip during a time of war and show that the u. S. Has the back of the israeli people. He will walk a fine line. He will talk and the white house said this is part of the stated mission about getting some supplies, muchneeded basics into those innocent civilians caught in the fight. Medicine and food is muchneeded. That is the humanitarian aid that he wants to speak to as he makes this trip. You have two ends to gaza. The equipment and preparing for the land assault and that is something that they have been training for and you have up at the other end with the rafah Border Crossing with thousands who have gathered. 600 foreign nationals looking for a way out. All of those humanitarian aid supplies looking for a way in. Right now, neither endof the strip is budging at this point. A lot of people are anxious to see what is going to give next. Jay gray, we appreciate it. Before you go, i was going to note behind you and you commented on this at the top. It seems so it looks like things are moving more normally than before. Is that even possible . Reporter yeah. I think people have the shock which has worn off. Things are moving a bit more like you expect. Nowhere near or close to the volume. A lot of the businesses are just closed. They are not open for business. As you move into different pockets and different parts of the city, you find that to be more apparent. Buses are running. Cabs are out. You dont see a lot of as the bus passes by with awe few peop inside. Jay gray, thank you for the report. Stay safe. We will talkin to you soon. We are watching shares of merck this morning. The fda approves expanded use of the keytruda for lung cancer in patients. Andrew, this has been happening over the years. Keytruda approved for more and more cancers. It is something that is seen as the top quality of going after it and approving it for more things along the way. Thats a good thing. More than a good thing. A great thing. Shares this morning are up 88 cents. And nelson peltz has built a stake in an insurance company. This time at allstate. The report shows allstate has hired Investment Bankers to see how to handle peltz. Allstate has not raised premiums fast enough to cover losses by paying out on natural disasters like wildfires and inflation has made it harder to replace costs. Carl icahn did not publicly push for board seats or other changes two years ago. What nelson will do next is a big question. He is keeping the Investment Banking business in business at the moment. When we come back, we have earnings alerts for you. We will hear from Johnson Johnson and bank of america and Goldman Sachs. These are all happening this morning. We have other names out there, too. After the Johnson Johnson report, we have a first on cnbc interview with the cfo joe wolk. You are wahisqwk b tcng uaox and this is cnbc. Announcer this cnbc program is sponsored by baird. Visit bairddifference. Com. 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. Drawing on deep expertise across the worlds public and private markets in pursuit of longterm returns. Pgim. Our investments shape tomorrow today. Earnings season rolls on. We have more big names set to report today. Including the big banks. Netflix and tesla are on the docket for tomorrow. I want to bring in kari firestone. The chairman and ceo of areaus management. Kari, talk through what is happening in the economy right now. I think you are more outspoken on this than most people i hear from. A lot of people are waiting for the recession. You dont think it will happen any time soon like the last year or so. Hi, becky. With unemployment as low as it is and under 4 at 3. 8 , it is very hard to go into recession. There are too many people working. They are earning money and spending the money. That has been true for a year now. We also see that while there are some places of soft necness, wi hou housing, it is not the demand has gotten lower, but the costs are increasing. It is not as we are on the brink of recession because things are cracking. That hasnt happened yet. Something could happen. It is more business as usual. If we keep moving inflation down, theres no reason for the fed to raise rates more than once. That seems unlikely. We are most of the way there on the Interest Rate front. People are working and still spending money sdp. Having said that, i want your take on the big banks we heard from so far. I think you have been thinking the muted response to the banks earnings is better than expected is probably the right response. Most people would say if we dont like the banks, it is because we worry we are headed into recession and that will mean a lot more bad loans for the banks to come as part of this. You dont think recession is here, but not impressed with the big banks. Lay out why that is. The banks trade for long multiples. Between six and ten times earnings. One would say these are attractively priced. That has been true for years. What is difficult is bigger is not necessarily better. It looked for a while last march when the Smaller Banks were failing that they would be the beneficiary of the Banking System and people would flock to which they did, but loans have not picked up as Interest Rates have gone higher. The demand for credit has gone down. Theres lots of private Credit Opportunities that all kinds of borrowers can go to. The banking business on the ipo side has been weak. Those are two big businesses. Lending is weak. When you talk about the i po market, it hasn nt been there. Where is the business coming from . They dont get more deposits. The depositors are asking for higher Interest Rates. Thats a problem across the landscape in banking. They cant give people very little money on the deposits. They are demanding more interest. That hurts earnings. You wouldnt be a buyer of any of the banks or you must be watching to hear what they have to say today . Yes, of course, were listening. They are a bellwether of how the economy is doing. You can learn a lot from the last ratios and how much of the Balance Sheets seems particularly stable. We think Charles Schwab is attractive. That is a stock that has really suffered the last year or so because people shifted their money out of low Interest Rates into higher Interest Rates. Of course, they do with that cash sorting which is a problem for Charles Schwab. We think we are at the end of that. That is growing its asset base. Kari, Brian Sullivan laid out an interesting stat. You know he does the rbi with the random but interesting fact is if you took out the magnificent seven out of the s p, you would be looking at s p flad flat for the year. Those seven have had impressive gains. I know your three big are in the magnificent seven. Microsoft, google and the other one . Amazon. Those are three of the biggest positions in stocks. Are you sticking with that as you think Technology Continues or do you think the other 493 stocks continue . I guess it is 491 with the two tra tracking stocks in the 500. Do you feel they play catch up or does Technology Continue to out perform . It is a very interesting statement. 85 of the s p return is contributing to the seven. Alphabet is the largest holding. It trades at market multiple. A. I. Is helping them. If you look at the 492 other names and average stock is up 1 to 2 this year, theres opportunity in the multiples if the names are lower. Yesterday was an interesting day. I think 92 or 93 of stocks in the p s p were up. Thats the first time it happened since june. We need more participation for the market to move higher. If we are not going into recession, and the fed pauses, then we continue to show growth for the Fourth Quarter and into next year and that means there could be more participation and stocks moving up. You cannot own an entire p portfolio with the fix or six names. They represent a number of our portfolio. We are underunderweight alpha. It crowds out everything else. It is not a reflection of you not liking those stocks. You cant have that much exposure to those few names. Correct. What with do you like outsid that . We are positive there is growth in other parts of the economy. Healthcare and financials this year. Healthcare has opportunities. Is protected. Some stocks trade at low multiples. All of the midcap names and smallcap names have been hammered. If you look the index, it trades at 13 times index or less. We think there are opportunities and investors should start to look further below those top names. What do you like specifically . Just for example on oreilly auto which is a name we have been positive on. This is a stock with samestore growth. You know theres difficulty buying new cars with Interest Rates and oreilly does a great business with the parts business and auto repair. Salesforce is a name we like because it is a largecap name, but had a tough 2021 and 2022. It is starting to perform better as they seem to recognize they need to cut cost and focus business. The Software Business is starting to come back for them. It was really weak for a year and a half. We like a name such as ftv. That is an industrial. It is a company that has a variety of applications for technology and engineering in healthcare and industrial. You see that as positive. There is a range across the spectrum. Perfect. Kari, thank you. Well talk to you soon. Thank you, becky. Coming up on the other side of the break, data from the Census Bureau showing work from home rates have fallen to the postpandemic low. We will have details about that coming up. Later, an an in interview w anchrtal swaz on m a and more as squawk box rolls on. With gold bond. 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We need to rethink. Next level moments, need the next level network. [speaker continues in the background] the network with 24 7 builtin security. Chip . At t business. Announcer executive edge is sponsored by at t business. Next level moments need the next level network. Welcome back. Johnson johnson just reporting earnings. The stock is now up 1. 5 after they came in with earnings on adjusted basis of 2 2. 66 a shar. That is 14 cents better than the street was expecting. Revenue was up 6. 81 to 21. 35 billion. That is ahead of expectation. If you look at the guidance that the company is offering, this may be the biggest reason for the jump you are seeing in the stock price. The guidance is higher than they had been given before. They are saying because of strong and growing demand for the Cancer Treatment and drugs like carvital and because of the stronger demand for the Cancer Treatments, they are looking at additional expectations for profit. The full year is adjusted profit of 10. 07 to 10. 13. That is compared to 10 to 10. 10 a share. If you look at the street expectations, they were 10. 03. This is a bit higher than they had been expecting for the year. The stock is up 2 . We will breakdown the quarter with Johnson Johnson cfo joe wolk. That is coming up later this hour. Andrew, Strong Demand for the drugs and new breakdown with the new Johnson Johnson. We will look at what is happening. We will go overall of it with joe wolk with all of it. Absolutely. We will have executive edge and come back. Take a look at this. I dont know if this is surprising or not. May be surprising if you are thinking about this two years ago. The push to get back to the office is working. The data is showing fewer than 26 of u. S. Households have someone working remotely one day a week. That is down 37 from early 2021. The census data showing that workers are seeking remote jobs at a higher rate than companies offering. Washington, d. C. And seattle the and boston and San Francisco all had rates near or above 40 t. 40 . It is a total shift. The idea of zoom cities during the pandemic and people thinking the population would live in park city, utah or live in different partsmoremotely. That appears not to be the case. Remote working is in certain cities like seattle or San Francisco. I guess that makes some sense especially companies brought people back may expect you to be there once or twice a week. If you go in more than once a quarter you have to live there. Which exacerbates the issue of an 2ffordable housing. The home builder said it was great to move to the locations with more homes built. If you are living nearby, it is not helping with the additional cases. This is what steve was trying to do to set up towntowns. They had success. No question. This was supposed to cat pucatat more. Now more workers want remote work than is available. Who wants a commute . If you are young and want to meet people, that is one thing. You need to number the city. If you have kids and you have a couple hours commute, that is difficult. If you are a parent, you are a chauffeur to get kids everywhere. Work life balance. I get it. We will talk about the escalation in the israel and hamas war. As we head to break, lets look at yesterdays s p 500 winners and losers. Announcer winners and losers is sponsored by state street global adivisorse bigges. Inspir. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . This is american infrastructure, a prime target for cyberattacks. But the same aipowered security that protects all of google also defends these services for everyone who lives here. Good morning. Welcome back to squawk box here on cnbc. We are live on the Nasdaq Market site in times square. We have red on the screen right now. Dow off 91. 5 points. Nasdaq looking to open down 41 points. S p 500 off 13 points. Lets talk about the middle east right now. Fears of escalation rise in the middle east and President Biden is set to visit israel today for the sign of unity. We will bring in admiral stavridis to weigh in on what this means. Admiral, lets start there. What does this mean . How important is this visit and speech . What are you expecting to see . It is a big vote of confidence in israel. It is a signal to both the United States and also to the israelis of absolute rock solid support. Number two, andrew, this is a warning signal to iran. The president has been vocal in the last week or so pushing against iranian escalation in the region to your original point. Thats why the president , in addition to going himself, has ordered not one, but two Aircraft Carrier strike groups and 2,000 marines headed toward israel. It is a powerful show of force. Admiral, lets talk about deterrence. What do you think the risk is right now that this war expands . I think its actually small. I think its 10 . Thats high in one sense. Uncomfortable. I think there is an 80 to 90 chance, lets put it that way, andrew, this will be contained in and around gaza city that hezbollah in the north will not lash out. The reason i think that is because the fundamentals. Iran doesnt want a war right now. They are not looking for a regional conflict that will completely degrade their own economy. Israel doesnt want a wider war, obviously. They will have their hands full in gaza. Above all, the United States really doesnt want a wider war. Hence all of the forces moving there. While not negligiable, this is in the 10 range. When you look at what is happening in gaza right now and what israel is doing to try to both hold hamas accountable and try to return those hostages back to israel, how do you assess the progress and what does it look like to you . I think they have made very strong progress as follows, they have mobilized 350,000 troops. Think about that for a minute. Just the logistics of that. Get ting everybody in a uniform and armed and everybody fed and getting everybody to a new destination. 350,000 on a total population in the country of 10 million and only 7 million jews in that population. This has been a big undertaking. They he have done it quite smoothly. Secondly, special forces infiltrating and moving through gaza. You see flickers of this and, thirdly, andrew, the precision guided strikes. There has been no big Collateral Damage event. Israel created the conditions, as we say in the military, to push forward if and when they choose to do so. I give them high marks for how they are reacting now. Low marks for the intelligence failure which led to the initial attack. Admiral, where do you put the odds of this expanding and becoming more of a regional conflict with another front opening up in lebanon and other areas . I realize that the president going there, President Biden going there today, is to show support, but it feels like someone calling it a bear hug to make sure they use extreme caution and are surgical in the strikes to protect civilians so as to not conflate things. Thats precisely right, becky. I think that very quietly subrosa off stage with antony blinken, secretary of state, lloyd austin, secretary of defense, and the president himself are privately counselling the israelis to go carefully here. You dont want to flip the narrative at the moment which is the brutality or horror of what hamas has done. You dont want to flip that narrative and end up with heavyhanded israel overreacts. Yes, the israelis are getting that kind of quiet counselling in the midst of the fullthroated public support. Admiral, isnt that the conundrum or trap that hamas has tried to set here . How do you see this playing out here over the next several weeks . By and large, you have to imagine it unless you believe the palestinians and others will end up going to egypt or other places that you could end up having at the same time as this terrible and disgraceful situation that hamas has credatd a separate humanitarian chrrisi . This is why the israelis have moved the Massive Force to gaza, but paused that ground assault. That is why they are using extreme caution in the precision guided strikes they are using. Thats why they are doing everything they can to encourage egypt, with whom they have good relations, to accept the gazan population. That is why the kingdom has accepted willingness to fund all this. I think that will already happen and 600,000 have left gaza city. More will follow. It will give the israelis a chance if they go in and do it in a measured way. Admiral, quickly. We have to go. The relationship with israel and saudi. How does this play out . I will give you another back drop to this. A number of major american ceos planning to be in saudi next were with the big conference every year. Financial ceos. Lots of behind the scenes talking about whether folks should go or shouldnt go. What do you say . I say go. I think there will would be a resurgence in the Israelsaudi Arabia partnership. There is an inn evident ability of that. You will gain confidence at the Carlisle Group where our teams are moving forward. Admiral, thank you. You bet. When we come back, Congress Member jim jordan speaker bid is gaining momentum ahead of the vote. We will take you live to washington next. Later, the Wharton Schools Jeremy Siegel says the markets are poised for a yearend rally. Squawk box will be right back. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Why choose a sleep number smart bed . Because only the sleep number climate360 smart bed its possible. Lets you each sleep up to 13 degrees cooler or warmer on either side, while you both sleep at your ideal level of firmness, comfort and support. Your sleep number setting. And now, our new next gen smart beds have temperature benefits, so you sleep better night after night. And now save up to 500 on our new sleep number smart beds. Sleep next level. Shop for a limited time only at sleep number. Congress member jim jordan getting closer to become the next speaker of the house, but some holdouts are still there with the vote expected at noon. We have Emily Wilkins joining us from washington. What are the hurdles . The biggest is can he get to 217 . Jordan has more momentum and lawmakers came out and said we were opposed to him on friday and now were supporting him. It is not clear at this point he has enough support. There are still a number of members who have concerns about jordan. We will find out at noon where lawmakers head to the floor to vote on the record. The first time we are seeing that in two weeks since Kevin Mccarthy was ousted. A number of republicans said they would never vote for jordan last friday are now supporting him and saying there needs to be unity within the republican party. Of course, theres also concerns among some of the moderate members. Jordans message last night as he told reporters was that they needed to elect a speaker as soon as possible. We need to get a speaker tomorrow and the American People deserve to have their congress or house of representatives working. I felt good. We have a few more people we will talk to and listen to and then well have a vote tomorrow. Reporter jordan can only afford to lose support up to four republicans and it is clear at this point there are more that oppose him or we dont know where they stand. Of course, without a speaker, the house is not able to pass any legislation which includes the white house request for humanitarian and other aid for israel and were now a month out from when government funding is set to expire and republicans have to figure that out as well. Becky. Emily, thank you. Emily wilkins. In the meantime, lets talk bank of america. They are reporting their earnings. Lets get to leslie picker with the numbers. Leslie. Reporter andrew, shares moving a little higher on the numbers this morning. Posting a beat on the top and bottom line for q3. You see shares up. 7 . Revenue at 25. 3 billion. A slight beat on the fully taxable basis. Eps beat by 8 cents per share. Coming in at 90 cents per share. Net Interest Income for loan making rose to 14. 5 billion. Deposits were higher at 1. 9 trillion. Still onethird above pandemic levels. Q4 2019. Expect to get attention on the updated marks of the held to maturity portfolio. Thr those are 131 billion in unreal eyesed losses. This is the deposits that they accumulated during the pan democra demic. The size and scope of the portfolio has caused the stock price to lag peers. Executives say the losses wont ever be realized. Credit costs with bank of america taking the provision expense of 1. 2 billion. Up from q2 and slightly higher net chargeoffs. Still lower than estimates. We saw this trend last week as well with the big banks reporting. As for the individual businesses, sales trading revenue up 8 with gains of fixed income and kmotds commodities and equities. Investment banking is higher in the quarter. Guys, shares up. 50 . We will dig into those numbers as the program continues. Leslie, thank you. When we come back, Johnson Johnson shares this morning are up by. 75 . It is a gain of 1. 17 after the companys Earnings Report that showed better than expected earnings and sales for the Current Quarter and also raising guidance for the full year. We will bring you the first on cnbc interview with the cfo joe wolk. That is next. Reminder, you can watch or listen to us live any time. Just watch the cnbc app. This is Spring Semester at fairfieldsuisun unified. They switched to google tools for education because theres never been a reported Ransomware Attack on a chromebook. Now theyre focused on learning knowing that their data is secure. meet gold bond daily healing. A powerhouse lotion that moisturizes, heals, and smooths dry skin. With 7 moisturizers 3 vitamins. And. New gold bond healing sensitive. Clinically shown to heal moisturize dry, sensitive skin. Gold bond. Ever since she was a little ki, all maria wanted to do was bak. Im maria alvarez, owner of marias cakes. And im axel, proud to be her state farm agent. Her baking superpowers have brought sweetness to our community. I make delicious cakes to make special occasions even better. Maria doesnt just bake; she also creates opportunities. Small businesses like marias, open doors for communities to thrive. Support your community. Support Small Business. Across the globe, industries are transforming and businesses need to navigate the changing landscape to stay ahead. When you partner with barclays, every change leads to a bold possibility. You have the vision. We have the insights, Financial Solutions and Global Perspectives to help you make it real. Barclays corporate and Investment Bank powering possible. Welcome back bg everybody. Johnson johnsons with its results, and joining us is j js cfo. Joe, first of all, this is the first breakout of earnings since the ken view spinoff, and the stock is up by. 75 of a percentage point. Hopefully you can break down the numbers. Its a pleasure to be with you this morning. Yeah, we had a Strong Quarter in 2023, and its shaping up to be a strong fullyear projection. Sales were up about 7 , and earnings up about 14 . The way we executed the ken view transaction, and eps is up 19 . We are seeing strengthening in what we are calling the Innovative Medicine group in oncology, and we introduced a new product, talvy, and stelara performed extremely well. In treatment for depression, we had a great performance. On the med tech side, it is growing 20 a quarter. We have new products coming out next year, with data readouts. And yes, that was a strong part of the med tech. Yeah, we have great data readouts happening as early as this week as the European Society for bladder cancer, and later in the coming weeks, we will have readouts on ra, rheuma rheumatoid arthritis. If you are so confident about the future, why not raise the guidance even more . I realized you raised guidance, and you are talking about 10. 07 to 10. 13 for the full year, and before that the guidance was 10 to 10. 10, and you raised the guidance by seven cents, and you are not raising it enough to reflect the beat this year, and do you think you will continue to beat in the quarter to come . Its a good question, becky. Some of the difference is the currency rates, and now its at 1. 05, and much provides a headwind for us. Quite frankly, its a 10cent raise. What we challenged the teams with is finding ways to invest in commercial capabilities so we can bring the great products to the market even quicker. Let me also ask you about international versus u. S. , and you had strong growth in the United States, i think it was Something Like 11 versus was it 1 up internationally . Is that the strong dollar or Something Else happening there, too . A piece of the stronger dollar, but a bigger part is some of the vaccine revenue, and those sales were minimal, and it was not for profit business. When you see the quarter results, thats the big change in terms of ous performance in the big quarter. We heard from pfizer that the covidvaccines are not getting nearly as much demand as anticipated and as we had seen in the past, but it was not a big part of your product line . Our success was never dependent on the covid vaccine. What is the car vick tea drug . It uses the patients own cells, and its very intensive. We have two new biospecifics that are easier for patients, and its recently been launched. We have got the complete regimen. We found out myeloma is a very specific disease to the individual, and we have a number of options. We are hopeful, when we talk to our scientists some of the combinations could lead to a cure some day. Let me talk about the spinoff of kenview, and you say that raised 13. 2 billion in proceeds, and 180 million shares of that stock that you kept, and that gives you flexibility to do what . You can sell it to raise funds, or what do you do with it . At the time of the tender offer, we felt good about the prospects and still do, about the success they will enjoy. It provides flexibility down the road of investing in our open pipeline, and maybe doing a deal or two or raising the dividend as we have for 61 consecutive years. Thank you for being with us. And we are looking at kenvue shares yeah, and Johnson Johnson, thank you. Thank you. We are going to talk about potential risks to the Energy Market with rick perry, former texas governor. And then an extendedntvi ierew with allen schwartz. All that and more, as we come back after this. I think im ready for this. Heck ya with e trade youre ready for anything. Marriage. Kids. College. Kids moving back in after college. Heres to getting financially ready for anything and heres to being single and ready to mingle. Whos ready to chacha . welcome back to squawk box here on cnbc. As earnings parade continues, we are live in sometimes square. I am Andrew Ross Sorkin along with becky quick. Joe kernen is off today. The dow is opening down about 62 points. The s p off about ten, 11 points we are will call it. The tenyear sitting at 4. 763. Oil, and we will talk about rick perry about energy in just a bit, but the energy patch, if you want to buy oil by the barrel it will cost you. Bitcoin has come down, 28,528. Israel destroyed more than 200 targets in gaza overnight, and President Biden announced he will travel to israel tomorrow. Thousands of people gathered at the border with egypt. Megan fitzgerald joins us with more on what is happening on the ground. What can you tell us . Reporter good morning. What we know is the secretary of state, he is looking about the safe passage for americans that want to cross into egypt and to get humanitarian aid across the border and into gaza. We know we had a more than sixhour conversation in israel with Prime Minister netanyahu along with the war cabinet, and among the things they discussed was opening up the border. The israelis have agreed to develop a plan that would allow for humanitarian aid to get americans to cross safely over. We know there are loads and loads of humanitarian supplies waiting not far from the border to try and get in, and we are talking over 150 truckloads of lifesaving supplies to get in there, and its a race against time. The situation on the ground in gaza gets dire and dire by the day with more than 2 Million People running out of food and electricity and needed supplies like water. We know that according to our producers on the ground people are being forced to consume dirty and contaminated drinking water. Doctors are warning of the Health Care System on the brink of collapse, that they are running out of electricity. The only oncology hospital in gaza is warning they only have 48 hours left before they will be forced to close down because they are running out of electricity. We know the death toll and the injured just continues to rise with nearly 3,000 people dead in gaza, and 10,000 people injured, a majority of them, women and children. Megan fitzgerald from cnbc joining us from cairo. Thank you. Lets talk about breaking news. Choice hotels coming out and launching a hostile bid to acquire Wyndham Hotels, and 7. 8 wyndham, and wyndham stock up 16 with the news. Choice said its making the talk public after wyndham decided to end the talks after six months. Choice hotels says they are surprised and disappointing that wyndham decided to disengage and they said they were in a negotiable range with price and consideration with wyndham a few weeks ago. Again, making this hostile bid public after negotiations between the two fell apart. Choice hotel stock down 2. 3 , and Wyndham Hotels up by close to 16 , and we will continue to monitor this. Its an interesting transaction, and just the cost savings created and the loyalty programs. I wonder if those kinds of programs matter as much for these kinds of hotels, which are considered more middle tier. Its an Interesting Development and we will keep our eyes on it throughout the rest of the broadcast. In the meantime, lets get over to Frank Holland with the premarket movers. Bank of america shares are up after they beat on revenue and profit, 10 above estimates. And better than expected on the other side of the ledger, bank of america reported 131 billion in unrealized losses. Shares are up 1 . The bank of america ceo will join us on squawk on the street at 10 00 a. M. This morning. And Johnson Johnson stock up 1 . Profit came in at 5 above estimates. J j reported a 21 billion gain from the spinoff of its consumer unit, and shares up over 1. 35 now, and microsoft is being initiated by loop capital as a buy with a price target of 425. Shares are down right now about. 25 . And then microsoft has been an out performer in q4, and shares are down right now. Andrew and becky, back over to you. Frank, thank you for that. In the meantime, lets talk markets and how investors might want to think about the conflict in the middle east as well as some of the Earnings Reports. Our senior investor strategist from edward jones, good morning to you. A lot of folks are trying to figure out which way this market is headed as a result. Yeah, it has been a harrowing week and a half in the headlines, and our hearts go out to the tragedy unfolding in the middle east. What we say from the market perspective, when we look historically, geopolitical crisis tend to be shortlived in the investment crisis. We do see markets actually out performing and back up above where we saw, you know, when the crisis began. What we would say more broadly, as we entered the last week and a half, we saw glimmers of optimism, and that came as the treasury bond space offered muchneeded relief to investors in the weeks prior to the crisis. That was jone good piece of new. We are at an inflexion point of earnings, and the last three quarters have been negative, and could be the first positive quarter. We have seen nice Earnings Reports, and i dont want to be negative nancy here, and the real question is what you think these Earnings Reports are going to look like 12 months from now, and thats the part harder to figure out, even putting aside in your head, if you can, what is happening in the middle east, and if you believe or dont believe a recession is coming in 2024. What we have seen is a tremendous three quarters of 2023, and we have seen that above trend growth, and not negative growth or 0 growth, but still growing and at a slower pace, and that comes as the consumer faces more pressures. We know they are facing higher Interest Rates and Mortgage Rates, and they are also looking at an environment where Bank Lending Standards remain tight. There are headwinds facing the consumer which are extremely resilient. We do think that may be welcomed from some perspective from the markets because it keeps the fed on the sidelines, and we see some of the inflationary pressures, especially core inflation starts to ease. We think it will not come as a surprise. Theres going to be a period of slowdown in the second half of 2024, and we think thats a credible scenario, and it also coincides when the fed will start to signal the rate cuts they have been talking about in the back half of 2024. What would you be buying right now . We continue to see a broadening of market participation. We think the valuations are pretty compelling outside of cap technology, and not only in the cyclical parts of the market, but areas like small caps over time. Then, of course, on your bond portfolio, we think a little longer duration cost averaging in over the next few months ahead of the potential pivot from the fed is a compelling opportunity. Broadening in equities, and the Artificial Intelligence technology space, and we are waiting for better valuations. Appreciate it. Thank you. Thank you, andrew. This choice wyndham back and forth, this Choice Hotels now with its hostile offer, really interesting reading through the tiktok on it. Choice first send the letter to reup wyndham and offered 80 per share, and they raised the proposal to 85 per share, and then the final offer was 90, and 55 cash and 45 choice stock. In september, the two were still talking about this but then they cut it off. I dont know what kind of regulatory problems they would have, but in august the stock was trading basically close to 80. Yeah. And you go back, and 77, 78 bucks in the end of the july, so if you are the board you think its your best if you are the board of wyndham and you are sitting around going okay, the first shot across the bough was 80 you said they came in april, right . Yeah, april of 2023. In april of 2023, stock is looking at 60, and 80 doesnt look bad. By the way, 68 bucks, in the middle or 66 bucks in the middle of april, was, i dont want to say an alltime low, but on a relative basis, you look at the stock in five years will, five years is a different story, but one year was low. I dont know. This is clearly the beginning of something, but i think this has to be a 95 or 100 deal if you are going to do it. Wyndham shares at 80 bucks, and up 15 on this news. Wall street betting the same thing. When we come back, the crude market on edge as the crisis in the middle east grows and could eventually endanger crude flow. We will speak to rick pey,rr next. Squawk box will be right back. I wouldnt have my business if it wasnt for my website. Once i decided to go with godaddy, the process was seamless. I was able to create my website on my own. To have it be exactly what i want it to be. Be able to integrate my appointment app. Godaddy was able to provide everything that i needed. The whole image of who i am and what empire is is presented through my godaddy website. Risks to the middle east oil reserves could present a potential problem the longer the israel hamas war goes on. And joining us now is rick perry, and he served as the Energy Secretary under the trump administration. Thank you for being here today. Obviously the situation in the middle east has a lot of people concerned about what it means on a humanitarian level, and we are watching it from a financial perspective with what it means for the oil markets. What is your take on this . Exactly. When you think about what this administration started 2 1 2 years ago, sending the message to the fossil fuel industry, stopping the canadian to the texas the keystone pipeline, and even of late, shutting down major areas in alaska that the people in alaska had been counting on, and all of that, becky, sends a powerful message that we dont like the oil and gas industry, and we are going to transition with exspa dishen, if you will, to all of these renewables. We saw in texas where you start relying too much upon these renewables where your reliability gets put in jeopardy. You have bad messaging and bad regulatory messages out of washington, d. C. , when you have what is happening in ukraine, when you have that complicated with israel and that tragedy that is going on there, and the messaging to the iranians. This is key, i think. The messaging to the iranians, we will let you have the 6 billion and let you go forward on your programs over there dealing with the nuclear power, and we know what that turns into, it turns into nuclear weapons, and all of that collectively really puts the oil and gas industry not only in jeopardy, but very nervous, so instead of sending a good positive message to our friends, which from my pertive, our friends, the fossil fuel industry, the oil and gas industry, you are sending messages to our enemies that is shoring them up. This is not only a dangerous messaging, its dangerous policy that is putting peoples lives in jeopardy around the world. Its also driving up the cost of power, cost of energy and the cost of gasoline. All of that together, you are enriching your enemies and causing, what should be your friends, to suffer economically. I am, obviously, not a fan of that. We are looking at wti trading just below 87 a barrel. We have seen it pick up 6 on friday, but oil prices were down before that because of concerns about demand around the globe, and are you surprised to not see the Prices Higher at this point given all that is going on . To be honest with you, i cant put my finger on that. At the end of september, it was a 92, 93 a barrel, and thats not a snapshot in time. We have wars going on that affect the production of oil, obviously what is going on with ukraine and russia, and in the middle east, there have been no events that disrupt the middle eastern production. That has been a blessing, but, who knows how long that goes on. You have a very unstable region with hamas, with the iranians, and with other bad actors in that area that could disrupt the production very quickly. The other thing that we have seen is just this past week or so exxonmobil buying Pioneer Resources and making a big bet in the basin in texas, and we spoke with dan urgan yesterday, and he said the difference this time around. The United States is now the top producer of energy, so we are in a better position than we were 50 years ago when we were so reliant on middle eastern oil. There does seem to be just some real money that is going to be put to use in terms of making sure that that is continued to be shored up, you know, and exxon, again, betting on fossil fuels and continuing with the biggest purchase they have done in this century. Yeah, and dan is a brilliant futurist, from my pertispective the brightest in the oil patch of knowing what will probably happen in the future. American technology is why we are where we are now. It was our ability to stay focused, george mitchell, and what he did with hydraulic fracturing, that changed the world, literally. America is sitting in a good position, and with that said we have to have an administration that support the industry and understands that American Energy independence is very important to the future of this world, and not just to the United States, and thats not what we hear. We have an administration that is driven by the radical left environmental extremist that says lets do away with tpfossi fuels and go to the renewables. Until you see small module reactors, and we are years away from the educational process that this is walkaway safe technology, and until that happens we are going to be continuing in the conundrum, if you will, with those that drive the climate and that threat, which is not, but they won the public debate and its the education that matters here. Do you believe the u. S. Is Energy Independent . Yes, we are well, we were. Let me put it that way, until this administration came in and said, you know, we dont like tp fossil fuels and we are stopping the pipelines we export more than we import, correct, even now . Yep. We are importing a substantial amount of it, too. Thats a very fluid market out there. Before we let you go, i hope you would weigh in on the uaw strike, because this is related to future of automobiles and future of evs and future of combustion engines. You saw what is happening at ford now. What is your take . Yeah, i think those workers, number one, they understand that this out of balance focus on all electric are moving so dramatically towards electric will really impact their livelihoods, and so again, what historically had been partners to the democrat party, and partners to the Biden Administration, i think they may be looking they being the workers, are looking over their shoulders going, wait, is our future employment going to be negatively impacted by all of this push to go electric, and go electric way too fast and without thinking about the impact on infrastructure, charging stations, and all the different things. So an interesting balancing act by the Current Administration and a longtime partner politically. Okay. Secretary perry, thank you very much for joining us today. We are going to leslie picker right now. Goldman sachs numbers just out. Yeah, eps coming in at 547 per share, and thats a decline from the same quarter last year. That there an 828 million impact in the earnings from a few selected items as well as small hits from the sale of personal financial management. Goldman, if you recall, they announced the sale of the sepl sky to a consortium. Banking and markets, though, generated revenue of 8 billion for the quarter. Beating estimates by a billion for this division. It was also 6 higher than a year ago, and much of that was driven by leading roles on three major ipos in september, and they were offset with fewer deals completed in the Third Quarter. And the ceo said in the release, i also expect a continued recovery in both Capital Markets and strategic activity if conditions remain conducive, and hopefully we will hear more about that on the call today. The firm had a financing revenue quarter, and there was revenue from asset and revenue came in, and a lot of it was due to losses in largely real estate assessments and net losses in public equities, and the Management Fees were up 7 due to higher assets. We did see inflows during the quarter, guys. Thank you for helping break that down in real time. The stock has not moved much, marginally down right now, and we will be getting more reaction in a moment from this mornings big bank earnings. We will talk about that, becky, in just a little bit. Also, we will talk about human jobs. The vice chairman of corn ferry. Squawk box returns after this. Welcome back to squawk box. A beat for martin earnings of 6. 73 per share, and Free Cash Flow, 16 billion. And lockheeds back order. The u. S. Punishes its own stockpiles, and meeting demand has been the challenge across the industry post pandemic. And coo, frank st. John, says they are hoping for a Rapid Restoration of security in the region with minimal loss of life of the israel and hamas situation. They dont see any issues with the impact. Lockheed shares up 10 , and analyst argued its unlikely to affect sales materially at this stage for the defense contractors. With the capacity already growing, he wouldnt expect any change to lockheeds projections for the next few years. This is a quarter company. And executives telling me they are expecting between april and june complicating the entire defense picture, though, is the u. S. Government, operating on continuing resolution, and that expires september 17th. If its all resolved relatively soon, the longer it goes, spending doesnt increase for particular prapograms, and to t extend we are reliant upon that in the financial forecast, that can become problematic. You can see shares of lockheed with the top and bottom line beats up fractionally right now. Becky . Thank you. Still to come, we have reaction to this mornings big bank earnings, and ai is the threat to human jobs. The vice chairman of korn ferry will weigh in. Squawk box will be right back. upbeat music 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. Only the sleep number climate360 smart bed lets you both sleep up to 13 degrees cooler or warmer on either side, and at your ideal level of comfort. Constant contact. Your sleep number setting. And now save up to 500 on our new sleep number smart beds. Sleep next level. Shop for a limited time only at sleep number. Welcome back, everybody. A quick recap of Goldman Sachs that just reported earnings, and it was a beat on the top line for earnings. Revenue also beat expectations that came in at 11. 82 billion, and that stock off by 0. 9 of a percent. And joining us for reaction is gerard cassidy, the head of u. S. Bank equity strategy. What do you think of bank of america and Goldman Sachs with what we have heard so far today . Becky, one of the common themes we are seeing today is the credit quality picture for the banks on friday as well as today with bank of america, and the numbers are very convoluted because of the sale of green sky, and, yes, we are seeing normalization but the costs associated with credit are lower than expected. The other big piece of the news, of course, is the net Interest Income that is a big driver for bank of america is hanging in there, and it didnt go down as much as expected. Overall, the numbers are coming in slightly to better than expected for most of the banks. I guess the big takeaway from that is the economy is still hanging in there, especially when it comes to the consumer, and even what businesses are feeling at this point so that means a downturn or recession is further off than some are predicting . Becky, you are spot on. We thought we would have a slowdown by now, and we builtup the reserves for the banks models, and we are increasing our estimates for this year as the credit costs lower, and we are moving more of the costs into next year. I would emphasize, this is a normalization process and not a deterioration. Deterioration could happen in a hard landing but if we have a soft landing, it could be the banks under performed substantially from the broader markets. Is this a buying opportunity . I think it is, becky. You are right. The stocks have greatly under performed and we think its because of the unrealized bond losses, and bank of america, its the biggest albatross around their neck. When it comes to if the economy next year is not going into a hard landing or a real recession where unemployment exceeds, you know, 6 or 7 , and the unemployment number creeps up to 4. 5 next year, this is a Good Opportunity to oepwn the banks, and in the last four tightening cycles, that has been the catalyst for the bank stocks to work. Its a tight enough needle to say we are going to have a soft landing in a downturn but not a terrible downturn, and thats difficult enough, but if you have to do the Second Derivative and say on top of that, it has to be a soft landing and the fed has to lower rates so all the losses on the bond portfolios melt away, as you say, thats trickier. They are not going back to that place. Then you would have the continued losses on the back. How do you debate that and figure out where to go. Now, how to triangulate that, thats a good point. You have to go back to 94, 95. Its a threading of the needle, and the critical part for the banks is they can live with the unrealized bond losses because we know over time they will come back, and the critical factor is the credit and if we have a soft landing, the combination of those two factors wouldout outwh the unrealized bond losses, and they are under owned by the institutional community. I would say from a valuation standpoint they are very inexpensive. The other issue you have, if the portfolio, the bond losses are not a big deal if you can carry that out for longer and longer, and you have Smaller Banks dealing with the issues of commercial real estate losses. If rates dont come down, they cant refinance those loans either. Is it an issue where you look at different tears of banks, big banks versus small banks, or are there banks that are better operators than others, and which stocks do you like the most . Its a good question. Commercial real estate is obviously a big loan category for the Smaller Banks in the country, and the banks under 50 billion in assets, and the larger banks, the exposure to commercial banks is low, and what is interesting, though, becky, is the borrowers will work with the banks, and they are working with the banks and the customers, and if the properties are fully leased and its a issue of higher mortgage values and if the properties are 40 vacant, you have a serious problem. For the banks, most of that problem is in the shadow Banking System. In terms of banks to potentially own, bank of america is one of the bigger banks, and some of the bigger banks, bnc and some reporting this week, its a Way Investors could own banks go into the end of the year. Thank you. Coming up, we have a big deal in the hotel business. We will bring you the details. Its a hostile transition after the break. And then linkedin, we will talk about that. And Jeremy Siegel talking about markets. Do not go anywhere. The earnings parade continues. This is realtime insights. I am here with ey americas vice strapblg de. How are you seeing this play out. We are seeing an adoption of Artificial Intelligence and todays deals, you have more data than time so we are using ai to catalogue and query data to make sure no stone is left unturned. What does that look like in practice . If you think of target identification. We use ai to understand the full Competitive Landscape and who is buying who, but its not just about buying your competitors, and case in point, 2,000 tech deals and many were not tech companies. Talk to me about how its benefiting your clients . We are able to use advanced algorithms to analyze massive amounts of data, and theres market preferences and financial performance. These things were never possible in the past. Thank you so much for sharing your expertise. Thank you for having me. Okay, updating and recapping the news out a little earlier, the hotel news out this morning. Choice hotels is making an offer to buy Wyndham Hotels and resorts at a roughly 7. 8 billion takeover, and this is a hostile deal. Choice going public today because negotiations fell apart. You can see Wyndham Hotel shares up by 15 , 79. 15, and Choice Hotels stock off by 15 . If it were to happen, it would combine two of the largest offerings in the hotel space. Choice says it took the bid public after wyndhams decision to disengage in talks after a sixmonth dialogue. Right now the dow futures is down by 72 points, and the nasdaq off by 48 and that comes after a strong day of gains yesterday for the equity markets. You can get the best of squawk box in our daily podcast. You can listen anytime. Squawk box will be right back. But the same aipowered security that protects all of google also defends these services for everyone who lives here. The power goes out and we still have wifi for everyone to do our homework. And thats a good thing . Great in my book who are you . No power . No problem. Introducing stormready wifi. Now you can stay reliably connected through Power Outages with unlimited cellular data and up to 4 hours of battery backup to keep you online. Only from xfinity. Home of the xfinity 10g network. Welcome back to squawk box. Linkedin announced it cut almost 700 jobs. Joining us to discuss this and how to position yourself best against ai is korn ferry vice chairman. This is real and its especially happening in the engineering world. Coders may be the first i hate to say it on the firing line here, alan. When you think about ai, its a hot topic. When we think back to the Industrial Revolution we have seen a lot of disruption in terms of how work gets done, and then we have the internet rev challenge jobs where cognitive tasks are valued. Previously, often, innovation challenged jobs where manual tasks were performed. So, yes, definitely, engineers and various others will have to see this as a potential threat for displacement or ideally, a tool that will let them do higher order work better. Right. But how do you how do you decipher between higher order work and what that challenge is . And the reason i ask is, if you are in the coding business, for example, and chatgpt can do a pretty extraordinary job of drafting, especially early code, with then can get tinkered with, if you will, afterwards, youre a young coder, young engineer out of school. Theyre going to put you in the job. What you used to do was actually draft those you know, that sort of first level of code before some of the more senior folks got in the door and started playing with it. How is that supposed to work and if that leveled separately, if that level disappears, right, then you have the whole concept of how people work their way up the ladder, what apprenticeship looks like, and ultimately, actually, how smart and thoughtful the folks on the senior levels ultimately look like. Those are all real dynamics. And the net of it is, well have to figure out a different way to develop people whose jobs may be displaced at lower levels of the work flow. So, for example, upscaling those junior coders faster, through formalized training, replacing what used to be on the job training. So, you know, where theres a will, theres a way. And where theres a problem, theres always a way to address it. Statistically, about 19 of jobs are argue apply threatened by or enhanced by the onset of ai in the workplace. Thats pretty much the conventional research. So lets look at it another way. 81 of jobs are not threatened by this. Manual task jobs other than the robotics component of ai are really not under the gun here. So, over a period of time, yes, were going to have to find ways to upscale people so they can do higher order work faster, and quite frankly, that does all kinds of things, like promote economic growth, efficiency, you know, i think back to the internet in the mid90s. Remember when people actually printed out an email and then read it and put it in their outbox with their Administrative Assistant to put it back in and email it out. It took about nine years before people got to the point where they didnt actually over, you know, over a period of time, do that anymore. So these things enter the workplace, theyre threatening, but they dont get adopted instantaneously. Theres time to basically adjust. Allen, i want to have you back on the broadcast so we can continue this conversation, because i think that adjustment is the big question. How you adjust what thats supposed to look like. Unfortunately, i dont think we all have the answers just yet. I know you have some, and we look forward to talking to you again very, very soon. Happy to come back, andrew. Appreciate it. We do have some hotel news just out this morning. Choice hotels making a hostile offer to buy Wyndham Hotels and resorts in a roughly 7. 8 billion takeover that would combine two of the largest operators in the budget hotel space. Choice is offering 90 a share in cash and stock and says that it took its bid public after wyndhams decision to disengage from talks after six months of dialogue. Pace ceo patrick paces joins us right now. Lets talk through what happened here. Youve been speaking with wyndham and talking about a potential deal for six months, going back to april of this year. You started out at 80 a share in cash and stock, raised it up to 85 in cash and stock, and now come up with what you say is your final and best offer at 90 a share. What happened . Then they ghosted you . We engaged back in april. Weve had a good five to six months worth of dialogue. And in early september, we thought we had a really close agreement on the terms and the consideration and the price, so for about a threeweek period, we thought we were going to engage in a little bit of oneway mba, allowing them to diligence our company. And then at the end of september, about three weeks ago, they elected to disengage. So what we really wanted to do was to have their shareholders take a look at the offer and were asking the wyndham board and Management Team to reengage with us, because we feel like, this was a really compelling offer for their shareholders. We think it creates a leading Hotel Platform that really brings a lot of value to our franchisees and to our guests. And we think its a real opportunity for both sets of shareholders. In your release this morning, you say that they raised some questions about choice stock. I guess that is deal that is, what is it, 55 45 cash and stock. Secondly, how you would finance the cash portion of that. So how would you finance that . You would be issuing how much debt . Weve been in conversation with two bulge bracket banks and we feel confident in our ability to finance the deal at a 55 cash offer. We also wanted to provide the wyndham shareholders with an opportunity to participate in the combined company on a goforward basis. I think its important, becky, to realize, these are two really high Free Cash Flow businesses, with a really high margin, which gives us the opportunity to delever pretty quickly. Weve demonstrated that in the past. Our Balance Sheet today is only at a 2. 6 times net leverage ratio today. And so we have a very healthy sleet. So we believe that putting these two companies together will allow us to realize these synergies on a very quick path and dlelever the company back t our normal target range. Patrick, can we talk about the 90 share price. And the reason i raise it is, clearly you went in at 80 when they were at not an alltime low, clearly taking advantage of a particular moment in time back in april, when the stock had fallen quite i dont know, quite dramatically, but it had fallen. But then, by the way, was back up at 80 over the summer, practically. And so the question is, as you say, 90 is your final price. I think theres probably a lot of shareholders who have been in this stock, including this board, that are sitting there going, 90 doesnt make sense. I think, andrew, its important to note that there was a leak in the wall street journal back around may 22nd, which really impacted the price of both company shares. But if you look back in the longterm, over the past five years since theyve been a separate standalone company, weve had effectively a twotimes multiple advantage over their business. And so the shareholders have sort of, in their world and in our world, seen that difference in the gap of the earnings multiples that weve had. What were offering is actually to pay them something very close to our historic multiple, not theirs. So we feel like its a very compelling offer for their shareholders, and we would like them to reengage in a conversation with us, to reopen the books a little bit, Due Diligence each other, and see if we can get to a common understanding on price. Why do you think the talks fell apart . Thats a question for the wyndham team, really. Were well advised on what we think the opportunity here is for both us and for them, for both our shareholders and our franchisees. And we really feel like its a really compelling time to do it. Theres a lot of things that are happening in the hotel space right now, where costs for our franchisees are rising. And so by bringing the two companies together, we believe that through our awards program, we have an opportunity to franchise the value of their assets and the return on investment. Patrick, i want to thank you for being with us this morning, jumping on the zoom call to get us up to date. Patrick pacius with a hostile offer for wyndham. Thanks for your time. Thank you, becky. Coming up, the Wharton Schools Jeremy Siegel joins us next on why he says markets are poised for a yearend rally. Squawk returns with that after this. Wow. We can make this work. It can help you reach them with confidence. No wonder more than 9 out of 10 of our clients are likely to recommend us. Ameriprise financial. Advice worth talking about. Good morning. Another big day for the banks. Earnings rolling in from bank of america and Goldman Sachs this morning. Well take you through all the numbers. And can the house find itself a speaker . We look ahead to todays expected vote in washington and whether the gop can finally come together. And a big potential deal in the hotel sector. Choice hotels going hostile this morning, in a bid for wyndham. Well bring you the details on that as the final hour of squawk box begins right now. Good morning. Welcome back to squawk box right here on cnbc. Were live from the options action maNasdaq Market site in times square. Im becky quick along with Andrew Ross Sorkin. Joes off today. Weve been watching whats happening with the markets. Dow futures down by about 65 points this morning. S p futures off by 11. 5. The nasdaq down by 44. This does come after a pretty strong day of gains across the board yesterday. Treasury yields have been higher this morning, too. And that could explain some of the red arrows when it comes to the equity markets. The tenyear right now is yielding 4. 76 . The twoyear, well above 5 . Its at 5. 11. Meantime, another big morning for the big banks. I want to get over to leslie picker who joins us now with an earnings rwrapup. Weve heard from bank of america and Goldman Sachs as well. The markets still really digesting this mornings earnings. Both bank of america and Goldman Sachs showed beats. Bank of america has been the biggest laggard among its larger bank peers over the last year. You can see theyre down more than 19 , in part, though, due to some sizable unrealize id losses in its cash and securities portfolio. Todays presentation showed that figure is now 131 billion. B of a and executives there have said that they never intend to realize those losses. The valuation has matured 13 over the last year as Mortgage Rates ended the quarter at the highest level in almost 23 years. The firm said today so those rates also having an impact on goldman as well, amid reporting Quarterly Earnings of 2 billion, there was an 828 million impact to net earnings from a few selected items, mostly commercial real estate exposure and green sky, as well as and the sale of personal financial management. Gold sky extends loans to consumers for Home Renovations last week to a Consortium Led by sixth street. Operating expenses at goldman were higher due to compensation and a writedown of intangibles. But goldmans banking and markets division, as i was saying, generated revenue of 8 billion for the quarter, beating estimates by 1 billion just for that division alone, and coming in 6 higher than a year ago. For bank of america, sales and trading revenue was up 8 thanks to gains in fixed income earnings and commodities and Investment Banking was higher in the quarter despitean overall muted environment. So i think theres going to be a lot of conversations about green shoots. Well see if at least in goldmans case, if green sky takes over some of the conversations on the call later. Clever, leslie. Well see you a little later. Lets get back to the broader markets. Our next guest says that he likes stocks right now and thinks that equities are poised for a yearend rally. Joining us is Jeremy Siegel, hes Professor Emeritus of finance at Wharton School of business. And professor siegal, first of all, thank you for being here. Lets talk through your thoughts on this. Some people think, oh, boy, we were due for a much bigger pullback. Weve seen the pullback and you think its over. You think its uphill from here that equities prices are on the rise. Why is that . Let me tell you why, becky. A lot of people say, look at how much bond yields, arent they real competition now for stocks . First of all, stocks are just selling for 17 times next years earnings. If you take out the tac, its like 14 or 15. If you go to small caps, its 11. And i know theres reason why, but those are very low valuations. But more importantly, why have bond yields risen so much . Its not just the fed. It is faster growth than anyone thought. Thats good for stocks. You know, promise of ai, the Third Quarter is going to be a real strong figure and i dont see really any real weakness in it. But more importantly, and i think this is a major reason, bonds have been harmed by proving to be a very bad hedge against inflation. I mean, bonds are great hedges against geopolitical risk, financial crises, but very bad against inflation. We didnt have inflation for 40 years, so everyone sort of forgot about that, you know, bad inflation outcome. And then suddenly, you know, after the pandemic, it reared its head, and went we looked forward, the next 10, 15, 20 years, people are saying, you know what, there may be more inflationary episodes. Do i really want to be in bonds . And we know stocks are really assets, just like real estate are real assets, and i think thats one reason why people have shifted. So bond yields, yes, have come up to be sure, but thats because theyve been damaged as being seen as the ultimate hedge against stock risk. Professor, let me ask you a question. Maybe im just not understanding this. If you think that there could be more inflation to come, that means that rates would go up even further still. And thats been a big issue. Every time yields go up on the treasury market spectrum, you watch equities come under pressure, just as people get concerned. And again, they look to this as being maybe, if you think theres more inflation, that yields will go even higher, thats why bonds are a bad place to be, but ultimately, that could be bad news for stocks, too. I think, actually, inflation a is on its way down, right now. But becky, stocks in the long run, and ive done all that long run data, are excellent longterm ledges. Youre planning a 10year portfolio, a 15, 20year retirement portfolio, stocks do beautifully against inflation. Bonds do no. So, you know, yes, i think inflation is going down right now, but when we look ahead at the deficits and all the rest, could there be another inflationary episode . And then, what do i want to hold . Do i want to hold real assets or do i want to hold paper assets . And i think thats one of the reasons why those yields have gone up. Youre 100 right, at least historically, that over a 10, 20, or 30year period, that is the case. The question that i would ask is, lets say youre in a different situation and youre looking at your accounts and the balances matter for the next decade. Lets just make it a decade. What do you think then . I would still be in stocks. I mean, youre talking about ten years ten years. Ten years. You know, if i think that theres going to be some more, you know, i think rates are going to come down, but maybe three or four years hence, therell be another little episode of 6, 7, 8 . Do i want to be in paper assets . Do i want to be in real assets . Dont forget, we had 40 years i mean, from, you know, basically 1980 when we came down after volcker, all the way until the pandemic, where we didnt have an inflationary episode. And thats one reason why bonds kept on going down, down, down in yield, because people said, oh, yeah, theyre great hedges against pandemics, anything that you want, except inflation and people forgot about that. They thought the fed would never let inflation go this bad, and theyre now as confident about that going into the future. Ten years for me is enough time i want to be in real assets. I agree with you, so i have a hard time arguing and playing devils advocate in this journey, but let me tell you about a couple of other arguments that have been thrown out, just in terms of valuations for right now. There are those who say, look out. We are at very high valuations given some downturn thats expected to come. How much of what youre predicating your thesis on is that well have a soft landing and that theres not going to be a big downturn . Well, soft landing probabilities have definitely increased. You know, its interesting, if we have a recession, yeah, i think stock prices will go down. But one thing has always been true. They go down too much in recessions. And they prove to be unbelievable buying opportunities. People get really scared and then once and listen, weve gotten out of every recession the last 200 years, well get out of the next one, and then well see soaring youre planning a tenyear portfolio, i wouldnt worry about a recession. If youre a timer and you think theres going to a recession, yeah, i would wait. But you acted what youre going to play that game or not . You know how hard it is to play that game p. I would rather, you know, concentrate on long run. And as i said, 17 times earnings and thats including all the tech, extex, 15, 14, times earnings, even on a longterm historical basis is cheap. Hey, professor, before we let you go, i have a question unrelated to the markets. We had mark rowan on the broadcast last week. Youve had a long, multidecade association with the Warden School and the university of pennsylvania and im so curious what your take is on whats happening on that campus right now and mark rowans efforts to effectively oust the president of that university as well as the lead trustee of the university. That meaning she put out a note over the weekend, but i would love to get your comments and thoughts and context and perspective on it all. Yeah, very difficult. Its not just penn, we know its harvard. And the truthful is, its truly of a lot of universities on whats happening. You know, it used to be free speech and then, we get to a situation where certain types of speech are already and others you cant touch them with a 10foot pole. And do we need to bring more bounce and an actual statement about what can we allow at the universities. Yeah, its very upsetting. This could be a major impact on funding, not just on penn and not just on harvard, but on many many universities around the country. Yeah, its a source of concern. Are you happy, though, with the leadership at penn and do you have a message for them about what you think should happen . Im sure this is the conversation happening on your campus. It is a conversation happening on the campus and i think all universities have to rethink how they are going to approach speech, free speech, and put out a definitive declaration and i think you get into this trouble when you sort of ignore some things and not others. And theyre going to have to work really hard on this issue. Professor siegal, we appreciate talking you, as always. And i also appreciate you engaging on this topic, as well. Can i ask one more question. Sure. This is such an interesting conversation that people are taking. Is this a situation where you think universities need to stop going after microaggressions and saying that that cant be handled or this a situation where you think it needs to be equally applied for if you feel safe safe . Did you swing too far . I remember about 25 years ago, i was at 45 years at warton, and one person called another person a water buffalo, and it blew up into one of the biggest things, the person said it was an insult and the person was expelled, and then finally brought back in, and all of that. And then, on the other hand, you have people coming in with, you know, hateful speech and, you know, advocating violence. And that seems to pass. And you know, why is one blown up and the other sort of passed through and thats why you need a real consistent philosophy and i think that all universities, i dont think its just penn, i think all universities have to have a philosophy. And some people have even said, you know, the universities should not make a comment on every geopolitical event. And they make too many comments and then its, which ones do you want to do you make and which ones do you not make . And some people say, maybe the university should just absolutely clear away from that. And but it is a tough issue. Im glad its being confronted and i hope to bring these donors back to the university and i think if theres going to be a policy that is, you know, acceptable to all, they need to work on it. That that will happen. But thats my hope. Do you think they can do that and bring the donors back with this leadership, this current leadership in place . I think that that is possible. You know, i know the president has already sent another email. I received it that was more apologetic to not that we should not have had the palestinian Writers Group here, but we have to be monitoring this and spoke out against the hamas situation strongly. Can they do that without, you know, resigning first . I hope so. I hope so. Okay. Professor siegal, we appreciate you, as always, and thank you for addressing this issue, as well. Thanks. Thank you. When we come back on the other side of this, Guggenheim Partners executive chair Alan Schwartz will be joining us for a conversation about the markets, rates, and so much more. Dont go anywhere. You are watching squawk box and this is bc cn. Cmon, were right there. Cmon baby. Its the only we need. Go, go, go, go ah touchdown baby touchdown are your neighbors watching the same game . Yeah, my 5g Home Internet delays the game a bit. But you get used to it. Try these. Theyre noise cancelling earmuffs. I stole them from an airport. Its always something with you, man. Great solid greek salad . Exactly dont delay the game with verizon or tmobile 5g Home Internet. Catch it on the xfinity 10g network. Welcome back, everybody. A vote on congressman jim jordans bid to become speaker of the house is expected around noon today. The Ohio Republican has appeared to gain support, but it is unclear if he can clear the 217vote threshold thats necessary to win the speakers gavel. Joining us right now to talk about the race and everything d. C. Needs to get done, a pretty long list, weve got andy blocker. He is invescos global head of Public Policy and strategic partnerships. And andy, first of all, what are the odds that you think he gets through. And if he doesnt, what happens next . What are the other alternatives. So, becky, look, i think right now, if you talked to me last week, i would say its a very slim chance that he had 55 votes who voted no, but since then, hes dpgained a lot of momentum, and right now its a better than 50 50, maybe 65 chance that he gets it. If he doesnt get, youre back to square one. Youll have to look, can we find a consensus candidate . Im not sure theres one out there, and then youre back to Patrick Mchenry whos in the seat right now. And they have to be feeling the pressure at this point. Theres no legislation thats been able to go through. Theres some huge events that are taking place. The war in israel, funding for ukraine, whats happening at the border. Not to mention that we are up against the deadline for another Government Shutdown if we cant get some budgets passed. Thats exactly right. The last two weeks, even though its been embarrassing for the party to have not have a speaker, it hasnt made much of a difference, because the last two weeks, they would have been on recess anyway. But over the next few weeks, as we head towards november 17th, which is the potential Government Shutdown, as we have the events in israel and the horrific terrorist attacks there, therell be a need for aid. All of this is putting pressure for them to get their act together, get a speaker in place so they can do the work of the American People, which is actually jordans message. Hes saying, look, just elect me now. We need to get back to work. Thats his primary message. So what are you telling investors at this point, who are looking at this docket and trying to figure out if were going to be up against another Government Shutdown, what that would mean narcotics. Interestingly, its strange. Its basically, even though jordan has been in the past someone who hasnt supported a cr, part of his message has been, look, i want to keep the government open. We need to keep the government open. And so so if hes elected speaker, i actually feel very bullish that theyll keep the government open. The interesting thing is, if they dont have a speaker, that puts us in a precarious situation we havent been in. You know, whats the powers of a speaker pro tem . Are they able to come up with someone else . So that puts a lot more uncertainty in it. So actually, in an interesting way, a speaker jordan actually is bullish for avoiding a Government Shutdown. What do you think happens with the rules . Because the speaker, the last speaker, Kevin Mccarthy, was so weak, because they changed the rules to the idea where one person could call for a vote to kick you out. Its such a thin majority at this point that if you lose five votes, you lose. Will those rules be tightened up, or will this still be a pretty weak leadership . So there hasnt been much talk out of jordans speakership about changing the rules. And so it cuts a number of different ways. First, i think that jordan because hes one of the original freedom caucus, he helped create it, he will be given a little bit more room, at least in the beginning. But ultimately, hell be under that same gauntlet of, hey, any five members can vote to kick me out of this spot, and so its going to be in that same situation. Look, this rule actually, if you look historically, has been there for some time. Its only the democrats who changed it in 2018, and they mostly changed it because they realized that the Political Landscape is different. No one would ever bring a motion to vacate back when the speaker was powerful and people were dependent on the infrastructures of the party. Today, you dont need the infrastructures of the party to get reelected. You have social media, all of these other ways to raise money. You can have one person standing up saying, hey, i object. So i think going forward, it would be wise to have that, but right now, were not sure thats going to happen. Andy, thank youfor your time today. Thank you. Okay, coming up next, a preview of the cnbc documentary crypto 911, exposing a bitcoin billionaire, which provides a neverbeforeseen look into a 3 billion bitcoin heist. Well show you that and you really dont want to miss it. Youre watching squawk box and this is cnbc. Welcome back to squawk. For nearly a decade, it was one of the biggest mysteries in crypto. Who stole 50,000 bitcoins, which would ultimately be worth more than 3 billion from a dark website called the silk road. No one knew until the man behind the crime made a costly mistake. And now a new documentary crypto 911 exposes never before seen video and the story behind one of the biggest heists in history. Eamon javers has this story. Jimmy, how do you feel after today . Wid whyd you steal the money, jimmy . A spectacular crime. This is going to be a huge case and theres a lot more money that we dont know about. In a small town. Shocked. I was shocked. I was so surprised. Why . A 28yearold secret bitcoin billionaire, his private jets, wild parties, and dark secret. It was just a surreal feeling. And with jimmy, there were no limits. This is the story of one of the biggest crypto heists of all time. Hes living this Party Monster lifestyle and with no visible means of support. Right. With clues dating back to the earliest days of bitcoin itself, in a story that reveals a dark truth about the hackers and coders who created cryptocurrency in the first place. A huge amount of bitcoin is leaking out of the system and you have no idea where its going. Its a huge question. And the man who could have gotten away with it, except for one phone call that led to an abrupt end to a nearly decadelong manhunt. Clark county 911. What is your name, sir . Its jimmy zhong, zhong. And thats just a sneak peek in this documentary, irs criminal investigation, the agency that investigated the case takes us behind the scenes and shows us how they cracked this case. We also get a detailed look into their interactions with zhong and a look into his bizarre life. You can check it out now on cnbc. Com or scan the qc code for the link to the full documentary, which is about half an hour. Just, though, i dont want to give too much away, but give us a little bit about who this guy, jimmy is, at the center of the story. Yeah, so at the beginning of the story, gyjimmy zhong is a local party boy in athens, georgia. Hes a former university of georgia student. He majored in computer science. Hes hitting all the bars. Hes that guy thats hanging around the college town a little too long, getting into his late parties, still partying at the college bars, buying rounds for everybody, taking people on trips, buys a lake house, and someone steals from him and he calls 911. Thats the 911 call you hear at the beginning of the documentary. And then things unspool from there. And his life really unravels. And in the end, its really the alltoohuman story of a hacker who had access to multiple billions of dollars, thought maybe it might change his life, and found out there are some things that money just cant buy, andrew. Eamon, we are looking forward to that. It is quite a project. I know youve been working on it for quite some time and i hope the audience makes its way to find it and view it. Thank you so very, very much. We are seconds now away from september retail sales data. I should say, about 45 seconds away from that data. Before we get there, lets show you futures real quick. Right now, things are opening down about 67 points down on the dow. Nasdaq off about 56 points, the s p 500 off about 14 points. The tenyear note, lets show you the tenyear, and the twoyear, but 4. 765, the twoyear at 5. 126. And our good friend Rick Santelli is standing by at the cme in chicago. Youve got a little bit of time, because i know youve got some thoughts ahead of it, rick, and then the numbers, of course. Yeah, well, my thought is, were staircasing in Interest Rates. All treasury yields yesterday traded higher than fridays highest yields. Today, theyre trading higher than yesterdays highest yields. Thats called the staircasing, when youre a technician. And it means that the markets are what i call guns hot. You want to be very careful. Interest rates are on the move. And that move is higher. Retail sales hitting the wires for the month of september. Expecting up 0. 3 on headline, more than double, up 0. 7 . To find a higher number than that, you have to go back to, when we were up 2. 8, although we had another 0. 7 read in may. If we look at it in exautos, still very strong. Up 0. 6. Up 0. 6, well, in comparison, if you look at july, july was up 0 p. 7, so you could see thats where it comps. Youve had backtoback up 0. 6. If you strip out autos and gas, it still remains very strong, up 0. 6. And if you look at the control group, which goes into other numbers up the economic food chain, it is also up 0. 6. Now, revisions are coming in. If you look at headline, which was 0. 7, last month, 0. 6 moves up to 0. 8. Exautos, 0. 6 last month moves up to 0. 9, exautos and gas goes from up 0. 2 to up 0. 3. And that control number which was up 0. 6 in the current read moves from up. 01 last month to up 0. 2. We have much stronger number for september. August saw positive revisions across the board. Yields are moving higher. Were getting very close to challenging for 80 in a tenyear, currently at 478. Its up seven basis points on the session. Twoyear, which is moving, but not nearly as fast, which means were taking some of the inversion out of the yield curve, put more steepening back in, currently trading 5. 14, thats up four basis points. So we want to continue to dkeep in mind that all maturities are trading higher than yesterdays yields, and should we close above 4. 75 today, youll see more followthrough on a tenyear for the rest of the week. Andrew, back to you. Thank you, rick. Meantime, our friend Steve Liesman has also been monitoring these numbers, making trying to make some sense of trying to make sense of it. Help us, steve. Shaking my head here, andrew. This is a wow. I want to give you a little tech here. It was the strong sconsumer spending numbers from june, reported on july 18th. If you look at the tenyear going back to that, that was the beginning of this surge in bond yields. This reassessment of Third Quarter growth that all of a sudden, we were going to pop here in a big way, and we did. And it has been maintained. For context here, the consumer didnt have to do anything in the month of september to still have that 3 or 4 growth rate. Now that number is even higher, the way it worked, june came up and it was a good number. July just had to be steady, august steady. Instead, it keeps going up. They revised up the prior. This is the consumer that just wont quit for reasons people are just not capable of understanding, and it was not gasoline station sales, which we expected some strength there. Instead, it was just, what was it, just 0. 6, i think i saw. 0. 9 on gas station. People expected more than that, but across the board, im looking at relative strength, Motor Vehicles and parts up 1 . And that was expected, maybe even a little bit light, guys. Retail sales, the Internet Sales were strong, so we dont have a consumer thats going to quit here. And i just have to wonder how much of a problem that is for the federal reserve. While i do that, ill look at what happened to the probability of rate hikes. They are a bit stronger for december. And by the way, the new development here is that people are starting to take a small gamble that if the fed doesnt hike in december, it may hike in january. Again, those are these numbers remain below 50 . But what im noticing now is the probability of a hike is now higher in january than it is in december and almost nothing for november. I expect these gdp tracking forecasts are going to be higher as a result. And we were already near 3 on the average. The atlanta fed was near 5 . They may go up further forwards 5. 5 or 6 . One other question, there should be a falloff in the Fourth Quarter. The question is how much of a slowdown there is. Andrew . Steve, thank you for that smart analysis on the fly. Appreciate it. Coming up on the other side of this, guggenheims alan he loto will join us live. Weava t talk to him about when squawk box returns after this. Golo has really taught me how to eat better and feel better. As long as you eat the right food groups in the right amounts, thats all it is. Its so simple and it works. Golo was the smartest thing i ever did. upbeat music Constant Contacts advanced automation lets you send the right message at the right time, every time. Constant Contact. Helping the small stand tall. Meet gold bond daily healing. A powerhouse lotion that moisturizes, heals, and smooths dry skin. With 7 moisturizers 3 vitamins. And. New gold bond healing sensitive. Clinically shown to heal moisturize dry, sensitive skin. Gold bond. Is it possible to fall in love with your home. Before you even step inside . Discover the Magnolia Home james hardie collection. Available now in siding colors, styles and textures. Curated by joanna gaines. 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We believe through direct bookings, lower operating costs, and a much more robust rewards program, we have an opportunity to help our our owners of our franchises really improve the value of their assets and their return on investment. Again, these talks have been taking place since april of earlier this year. You do see Wyndham Hotels stocks up. It had been up earlier than this morning. 77. 55 is the last tick. Choice hotels down by 4. 7 . This is a cash and stock deal, 55 cash, 45 stock. The valuation changes based on the price of Choice Hotels at any given point. But again, you see Wyndham Hotels up by about 12 . Coming up, cant afford to miss conversation, right now, Alan Schwartz, right after the break. Executive chairman of Guggenheim Partners. Well be back with him in just a moment. But as we do head to that break, take a look at shares of johnson and johnson following the better than expected Third Quarter results and raised guidance. The companys ceo joe woke joined us in the last hour on the program. While the quarter was strong, were even more encouraged about the future. Weve got some great data readouts happening as early as this week at the European Society of medical oncology, for bladder cancer, for small cell lung cancer. Later on in the coming weeks, well have readouts on ra, rheumatoid arthritis. So were very well positioned, not just for the balance of this year but into 2024 and beyond. Only the new sleep number smart beds let you both sleep at your ideal level of comfort. Your sleep number setting. And now, all of our new next gen smart beds have temperature benefits. And now save up to 500 on our new sleep number smart beds. Sleep next level. Shop for a limited time only at sleep number. Welcome back to squawk box. We are joined now on set by a special guest here to share his macro outlook and talk about debt and m a expectations and so many other things. Guggenheim executive chair Alan Schwartz is here. Great to have you back at table. Nice to be back. A lot to talk about. And i always think of you as somebody who has their pulse on the corner office, if you will. The ceo set and something thats going on in the board room. Were watching the markets play out, a whole bunch of Earnings Reports coming, but im curious how you think that translates or not into confidence, if you will. Its a good question. I think in boardrooms and in the csuite, i think that corporations, the large corporates, public corporates kept their Balance Sheets very strong, unlike lots of other parts of the market. And so now that theyre seeing some of the they were kind of out of the m a market in a lot of cases, because of private capital. So now theyre seeing a chance to come back in. Because they kept their Balance Sheet strong. At the same time, the macro environment, especially geopolitical and all these other things creates concerns in the boardroom as to whether nows the time or wait on some of these things. We saw a big drop in m a activity, when the Capital Markets tied up for a lot of the private sales, but now youre seeing a lot of, lets say discussions and activity beginning, clearly picking up from the corporate side, thats seeing their opportunity to come in. But, you know, how many of those will get across the line, were going to have to wait and see. Does that signal then that theres a confidence that were not headed into a 2024 recession or soft landing . What does that mean . No, no. I find its very interesting, you know, theyre not sure about the economy and personally, you know, i was in the camp that 23, we would not see a recession spBalance Sheets to start out. So we didnt expect higher rates to hit consumption right away for a whole bunch of those reasons. On the other hand, and talking to ann walsh, our cio, we keep an eye on whats happening in the banking and the financial markets. And whats happened is the Duration Risk that lenders and a number of borrowers took takes longer to be impacted by rising rates, but its happening. Theres a tightening and condition. So we personally, we believe theres a recession coming. Now, we dont know how deep. Its hard to know. Going back to your question, just to set that up for that. Going back to that question, i think that a lot of companies are looking now strategically for the longterm, and theyre really not just looking to consolidate, although certain areas are, theyre really looking to get the capabilities and the technologies that they need for the very changing environment theyre looking at. So a lot of the deal activity will not be dependent on the economy, unless theres some big, you know, disruptive wave. How much of the hesitation is just look, if youre a corporate, youve got to answer for the price you pay. You dont want to pay too much and look like a dummy. And if youre being acquired, you dont want to accept a bid thats too low. Trying to get to that feeling of, i think this is a great deal, but ill have to justify it. You put your finger right on it. I will say, it always happens. Sellers say, wait a minute, look at my 52week high. Buyers are going, that doesnt count anymore. Look, a number of sectors are pretty far down, too. So, i think that, you know, corporations that feel like they have a strong Strategic Plan and lets say this, that have strong backing from their investors on the plan theyre on, theyre looking to step in now. Theyve been telling people, theyve been waiting, now theyre starting to see the sellers come and say, lets be a little more reasonable. And then, look, the one other issue that we all know is antitrust. Thats having a bit of a chilling effect, but the fact that companies that decided to fight this latest antitrust wave and have won is giving a little more confidence that if the facts really support this, they should be able to do it, that theyll go forward. Does that mean the conversation in the board room is saying, so were in, what are we end of october. Midoctober. Do they say, lets wait a year and see what the world looks like in terms of a political world a year from now . Or lets strike now and see what happens . I think theres more strike now. As i say, if youve been sitting there saying, look, we really need these capabilities for our longterm, we really need this technology or this so a lot of its not consolidation, because then the consolidation wave, youll see a lot of stock for stock, but on that side, i think since theyve been waiting, they dont know. They dont want to miss the window. How concerned should we be if you consider the smart money, that private equity has effectively stepped away from the table, if you will, when it comes to deal making. When youre looking at they represented Something Like 40 of the marketplace in terms of m a just about a year ago, and now what is it, 25 , Something Like that. If you think they know something, maybe a great opportunity for strategics to get in, so far as they dont have competition. But there might be a reason for that, which may not be very good. Well, no, i dont think thats whats driving it. I think a lot of the larger private equity have new funds, and theyre kind of waiting on the financial side of the equation, you know, Interest Rates are way more important to their deals. And thats where Duration Risk is. In the private equity wave we saw, which was a lot of different deals, a lot of them were financed by floating rate debt, right . And so theres a lot of those deals from the past, where youre starting to see delinquencies, youre starting to see bankruptcies, and thats part of why i say ann walsh and i say, we think theres already a tightening of financial conditions. And so that group of buyers is more affected by the tightening of financial conditions than the corporates who have been sitting on cash, who can come in. When you look at the Banking Sector right now, i mean, you know the Banking Sector inside out. You know the financial sector, as the former ceo of bear stearns, how big are the banking problems that we dealt with in the bring relative to what we saw back in 2008 . Do we know everything thats out there right now or do you worry about that . I think we know a lot. As i think you know, my partner, jim mill stein was advising the fdic. And there was some staggering Duration Risk taken by a few banks. But he went through the rest of the Banking System, and the bottom line of it is that the regional banks, especially, had to take Duration Risk, because there was nothing else to do. But they were more cautious about it. So the bottom line, of whats happened with rates clearly is affecting their capital ratios, and so, its tightening their lending standards. But, you know, it doesnt yet seem like its going to be a real, real problem in the system. Again, the thing we dont know, though, is, whats the Duration Risk in the borrowing community . Obviously, a lot of us are talking about commercial real estate, as one aspect of that, because of whats going on with backtowork. But if a lot of borrowers were borrowing on a floating rate basis, and they cant afford to take on a new one, then, whats that going to do to the banks . Thats the next wave to watch. But it doesnt feel like its going to be, you know, a systemic type of its going to be a systemic type of crisis. What you said in the beginning struck me. I didnt want to interrupt your line of thinking. Theres no line of thinking. One of the things you said is you said you think demographics is something people dont pay enough attention to. Right. What is it about it that youre focused on . Very much two things. One, the baby boom generation as its hitting retirement age, the number of workers of working age is declining. It used to be five 1864s, now 3. 5 going to 2. 75. For the last ten, the over 65s that stayed in the workforce. Then when covid hit, they said its time to retire. There was just a title labor supply than people realize coming into this downturn, number one. Number two, a larger percentage of the population thats living on their savings instead of on wages and borrowing, a rise in Interest Rates is like a wage game for those people. It supports their consumption. Demographics are going to have a big impact, the biggest impact i worry about is on the federal budget. Fair enough. Allan schwartz, thank you so very much for joining us. I was going to mention youre participating in robinhoods Investor Conference which is taking place next week. Folks should check it out on the website. If you have another plug, go for it. Im very excited. Ill be interviewing michael shea and hear blackstones views. We have hall of fame investors, paul tudor jones, stan druckenmiller, ken jones, all of the greatest ever. Condoleezza rice will talk about the geopolitical. For anybody that cares about the investment markets, this concert is a taylor swift ticket. And then the other thing, the thing that makes it really exciting is anybody that buys a ticket and attends, its a great thing. But at the same time every single dollar is going to go out on the street to those organizations that are helping the people most in need. So its a great thing and its a great event, and people should check it out because theyll love it. Youve been a longtime supporter of robinhood. Check it out on robinhood. Org. When we come back, weve got top stocks on the move in the premarket this morning. Weve also got some takeaways for another big warning from the big banks. lte you all about it when we come right back right here on squawk box. 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. The Biden Administration planning to halt shipments from china as part of a package of measures designed to stop beijing from obtaining cuttingedge u. S. Technology to strengthen its military. The rules will expand existing innings port restrictions to include more advanced chips, chip making tools and more countries including russia and iran. Want to stick with the markets right now and talk about the banks, about some of the Earnings Reports weve seen this morning. J j among them. Lets talk about whats working, what didnt in the last quarter and where this should go. Lets just go banks first. Im curious, jp mfrments, we said bank of america this morning and goldman. Bank of america, really great quarter. Strong interesting, really gaining market share. Outperforming in trading. They spent a lot of time in the presentation talking about that. Strong credit, strong equity, strong financing business. Deposit stability. Thats number one retail deposit franchise is delivering for bank of america. How do you like b ofa versus the rest . Wells fargo did pretty well, build capital as well. Citi has its restructuring efforts which well see. We think of credit positive, whatever jen frazier is doing. Bank of america i would say probably always right after j pfrments morgan and wells fargo biggest opportunity, is it citi or not . Its either a great opportunity jane is a fantastic leader. She has a good plan. Theres a lot of execution risk. Trying to cut committees, management layers. Shes simplifying the bank. Lets see, but so far so good. Where do you put goldman in this . Can you even say if what happens at Goldman Sachs has any impact on morgan stanlly anymore . The two banks merged. Bought the golden child of citigroup and thats delivering for them. Having that 50 wealth management, Asset Management business is very nice to have. Goldman does not have that. They went in a very different consumer strategy as we can see from the sale of green sky. Theyre an amazing leader in Investment Banking. Ultimately when that market picks up we had Alan Schwartz sitting in the same seat. When do you think Investment Banking does pick up . They say backlog is pretty weak still. The delivered finance market is speaking up. A good opening in september, but not great. Sponsors sitting on the sidelines. So its really 2024. 2024. But do you believe a recession is in the offing . We had a view of recession coming in 2024, were basically more into the soft landing camp. The banks, to be honest, are very important to that. Banks are tightening. That can be banking if they tighten quarter. Ana, thank you for coming in this morning. Lets take a final check on whats been happening with the markets this morning, after all the earnings news, deal news, too. Youll see the futures are lower than where we started three hours ago. Dow futures down just 101 points. S p futures down by about 25, and then youve got the nasdaq off by 123. Thats been happening as yields have picked up across the treasury spectrum. If you take a look right now, youll see the tenyear is yielding, now at 4. 82 . The twoyear at 5. 16 . Youre talking about another five basis points on the twoyear in the last half hour or so in part because of the data we got about half hour ago. A quick check on the oil. Make sure you join us right back here tomorrow. Right now its time for squawk on the street. Good tuesday morning. Welcome to squawk on the street. Im sara eisen with mike santoli. David faber joining us from the 13d monitors active passive investors summit. Carl quintanilla is on assignment. Taking a look at futures this morning. We are setting up for a lower open. Dow futures down 100 points after we gained 1 yesterday on the major averages. The s p futures digesting earnings from ba