Transcripts For CNBC Squawk Box 20131004

Shutdown which is in its fourth day. The president was to depart tomorrow for a week long four nation tour. And even more chaos in the nations capital. A strange car chase from the white house to capitol hill that left a woman dead and several injured. Well have more on the strange story with aeamon javers later morning. We have no problems. We have drew mattis, mark zandi, were spoiled. We will not take an embarrass the ment of ric. We wont take no for an answer. Hell no, we wont go. Exactly. Its jobs friday, damn. To i have to say this . Twitter tweeting and hash tagging theyre weird. O i ha . Twitter tweeting and hash tagging theyre weird. Do i h . Twitter tweeting and hash tagging theyre weird. Have you ever heard hash tagging before . Is that the number sound . I never know what im doing with that. I think whenever im going to Say Something sar takes tick or you just say hash tag punch line. But no one ever looks it up. Youre just doing it for your open right . Thats true. And it never trends. But twitter is trending . Is it . It is trending. Twitter ipo was trending as of last night. I want to thank the government to not having a jobs number so we can talk more about the twitter iipo this morning. Xr. Couldnt the president ignore the republicans better fr . If hes not going to talk or negotiate, he should just be out of the country. He can go and talk to people in brew nyamulagira, but he cant talk to house republicans. Any he way, lets talk twitter. A lot of people were an t anticipating this filing. The Company Looks every bit emerging growth as it defined itself under the jobs agect. It will try to raise 1 billion. It will be listed as twtr. And it didnt list an exchange. It doesnt have to for a couple week. But i mapped out some of the key differences between twitter and facebook and you can see the numbers here that were talking about are far different. Age roughly the same. Twitter has far few are und underwriters. Theyre raising 1 billion versus facebook 16 billion. And look at the profit. Facebook by the time that it filed to go public was already making a billion dollars. Twitter is still posting a net loss of 69 million and thats just for the first half of this year. The purpose of the proceeds remember with these companies, they have a lot of employees whose Stock Options are turning into real stock and so they will take a tax hit and usually these companies cover those taxes. Twitter will be paying roughly 330 million in the First Quarter that its a public company. Facebook paid roughly 965 million for that same charge. They both have pending deals. But the most interesting part i think, the percentage of insiders that will be selling in the ipo. This was a huge criticism of facebook. More than half of the stock that was coming to market was coming from existing investors or early High Net Worth individuals who had gotten into the stock and Mark Zuckerberg himself. At twitter, 0 so far. How do they do that . They said, hp listen, we wane optics to be different than facebook and we want you to know the best is ahead. You dont need to cash out right now. Were going to turn a profit. Well post better numbers. And so you you dont need to sell into this deal. And i think it is smart. And the language is interesting. It says we are executive officers, directors and other holders of our Capital Stock and securities have agreed or will agree that subject to certain exceptions for a period of 180 days, we and they will not dispose of or hedge any shares or any securities. That is so important. Psychologically in the market, if you are buying in to this ipo, you know the numbers are a little bit rocky in terms of profits, but you know there arent a lot of people who will get rich quick here. It opens up a bigger question, 180 days out when the lockup expires, do you have a huge number of shares that come on to the market. The hope if youre the company, you hope some numbers you post in the First Quarter are promising now where the stock goes up to that september. The final thing that i want to note, this is very interesting language that i havent seen in another ipo filing. But the Company Actually edited its by laws to thwart a potential take skroefr. Take over. They did receive some takeover attempts from apple. There were early stage discussions. The board is staggered and they also have a Blank Check Authority to issue stock to dilute anyone who does try and be an activist in the stock. So you can see this is a company that wants to be public, it wants to operate in the public sphere. And it doesnt want carl icahn as an investor either. Or apple or facebook or whomever. Or joe kernen. Dont worry. Im getting all my ducks in a row here. Im interested in twitter, but are you more interested in this than you were facebook . I think so. Ill tell you why. Because 65 of the advertising right now is already mole. So we dont have to worry about how they do mobile. Because everyone does twitter mobilely. Dont they . Yeah. And i see hchon once i sa could you run sports clip, im not very smart about monetizing this, new Digital World were in, but i can see a path to monetizing a lot of the stuff twitter does. What im fixated on is this shutdown here because its interesting. I got the journal here and the new york teams here. Gop elders are starting to worry. Saying the American People are starting to lose confidence in the president and here we are now were going to help his but the journal points out that the white house, their strategy also has risks associated because the person most associated with the u. S. Government is the president. So you cant im mad at you cant name 454 members of the house. You cant name each one of them. You can name the one president. And the other thing is he already won and i could see if you had an election coming up that you could win, youd be trying to gain some points. But you wont whip tyou wont w because the districting. So if you were thinking i want to do things in my last two years,ecause the districting. So if you were thinking i want to do things in my last two years, that wont happen anyway. So it shouldnt be about points. Tack to the budget deal, get out of this. Also the whom idea of the at the time credebt ceiling, everybodys said this is the point of no return. Thats doctor you k why you the deal. This is the point of n. Thats why you do the bunl the deal. Is the point of no ret. Thats why you do the bunl the deal. Boehner is saying i guarantee you well not default. Weve allege known that. Always known that. Jeb hence early will say today that they did send piece meal legislation that would prevent them, made he can sure they were continuing to pay fps today that they did send piece meal legislation that would prevent them, made he can sure they were continuing to pay fpc today that they did send piece meal legislation that would prevent them, made he can sure they were continuing to pay fpey that they did send piece meal legislation that would prevent them, made he can sure they were continuing to pay fp early will that they did send piece meal legislation that would prevent them, made he can sure they were continuing to pay fpearly will that they did send piece meal legislation that would prevent them, made he can sure they were continuing to rly will say toda that they did send piece meal legislation that would prevent nserly will say today that they did send piece meal legislation that would prevent them, made he. At least that exists and thats out there. All right. Kayla, thank you very much. Before twitter goes public, investors can order up shares of potbelly. It priced 7. 5 million shares at 14 a piece. That is above the expected range of 12 to 13. The chicago based Company Operating nearly 300 shops in 18 states. Most of them in the midwest. Also instragrams 150 million users will soon be seeing ads in their photo sharing feed. The widely popular photo sharing unit will start to roll out advertising in the United States. Facebook hope this is will be a sustainable business. Advertisers are expected to spend 10 billion on social network ads this year. Shares of facebook by the way are trading right now at about 49. 68. So its continued to climb. Investors havent convinced bill gate thats should step down from the board of directors. Gates and Steve Ballmer standing for reelection to the board. And earlier this week, three investors who hold about 5 of the Company Reportedly were lobbying anonymously, theyre scared of bill gate, lobbying the board to push for gates to step down. Ballmer is retiring by next august. Not clear whether hell stay on the board. I guess they figure gates still has something to do with the successor. Hes not really involved that much in the day to day operation. Obviously he has influence. He gets to help pick the ceo. That may be what theyre talking about. They dont just want a puppet of gates. I dont know. They might want some input from him. And Tropical Storm karen is forcing Energy Companies in the gulf to shut down production and evacuate some workers. Right now the price of crude is at 103. 60. And is karen going to turn into a hurricane . Lets track the storm with the weather channels reynolds wolf. If you were a hurricane weatherman, youve been like the maytag repairman, right . Just sitting in your office like this. It hasnt been good for hurricane followers. Well, it depends on how you happen to define good. For us its a season where no one is hurt, no major catastrop catastrophes. There are people disappointed that there werent a lot of hurricanes this year because it certainly doesnt play into the whole narrative. Youre right about that. It does take all kind a as. But right now this, is not one of them. You take a look at it, and whats interesting about it,as. But right now this, is not one of them. You take a look at it, and whats interesting about it,s. But right now this, is not one of them. You take a look at it, and whats interesting about it, winds are at 60, pressure at 1002 mill100 medic medically bars. It doesnt have the pinwheel form that we often see. At the center, it is not here. I. It doesnt have the pinwheel form that we often see. At the center, it is not here. L. It doesnt have the pinwheel form that we often see. At the center, it is not here. I. It doesnt have the pinwheel form that we often see. At the center, it is not here. D. It doesnt have the pinwheel form that we often see. At the center, it is not here. I. It doesnt have the pinwheel form that we often see. At the center, it is not here. C. It doesnt have the pinwheel form that we often see. At the center, it is not here. A. It doesnt have the pinwheel form that we often see. At the center, it is not here. L. It doesnt have the pinwheel center of circulation right there. So you have a lot of dry air on the western gulf and that is affecting this. So im thinking this actually looks very favorable to weaken. So thats actually some good news. But again if youre hoping for a big strong storm, looks like this may not be the one. But you still have to be cautious because this time of the year, the tropics can be fickle, still a lot offen certainty with it. But if take you a look at the computer models, each individual line indicates a different computer model. All in agreement venture to go the north northwest, and then booming off toward the east northeast. At a minimum, very heavy rainfall to new orleans, mobile, other parts of the gulf coast. So the way the forecast looks from the National Hurricane center has it going up to the north, winds gone to 65, 70, and then veering off to the northeast. Again, possibly a big rainmaker. Some places on the gulf coast flooding all but a certainty where you could see up to 8 inches of rain in some spots. 3 to 5 in pensacola over to portions of mobile bay. Back to you. Hopefully it will be nothing more than a big storm. Can i ask you, is that that group piece of spaghetti looked like it would go up the east coast. Would it die down . If it does make its waup up towards the east coast, it would more likely become extratropical and pushed out to sea. Waup up towards the east coast, it would more likely become extratropical and pushed out to sea. Awaup up towards the east coast, it would more likely become extratropical and pushed out to sea. Ywaup up towards the east coast, it would more likely become extratropical and pushed out to sea. Towards the east coast, it d more likely become extratropical and pushed out to sea. It could be like a giant plow pushing it out into the atlantic. How do forecasters three months before the hurricane season, what are they using to determine what kind of season its going to be, do you know . They base is on sea surface temperatures, upper level wind storms. You want minimal upper lfl wind, warm water. You cant have dry air. Try air has been a big factor in the storms being pretty weak. This was supposed to be a more active season than normal. They had no idea, right . Why should we even try to forecast a hurricane season. Tricky systems. A lot of people feel the same way you td to todo. Predicting thin things in 2 that we can do. Anyway, thanks. I wont put you on the spot. Youre ready to go. Hell walk out of the shot at some point if i keep saying this stuff. Testing the limits . Yeah. With him, i dont know. Big brother is watching. Anyway, see ya. The ongoing d. C. Deadlock knocking the wind out of the sails of the stock market. Dow falling below 15,000. Here with us now is head of research at clear brooke Global Advisers and deputy chief u. S. Economist at ubs. Drew, you like to worry. And we asked you how this could affect sentiment and i think you found every single possible way that the shutdown could cause people to not do things. Number one, you got people that actually dont have any income right now because theyre furloughed. So theyre not consumers that are spending. But then regular consumers might put off something because of this. The more the media makes of it its a human tragedy. The biggest impact tends to be when Financial Markets worry. Everyone who has a job, who has a retirement account, the account gets smaller and smaller. So its not responding necessarily to the shutdown. Have you noticed . You know what youre making the case for right now. Qe. Because that means the converse is that they the fed already made that case. But in general if you make the stock market go up, people spend more . If people have a perceived improvement in their wealth, they will spend more. So whether equity prices or legos, doesnt matter. Anything going up is good. I havent noticed, but i did see a piece the other night where just because im not you watch this every night. No, not every night. I got to know whats going on. Just because i havent noticed it didnt mean people who need government assistance are noticing it. There are people affected, right . There are people affected, but there are people in washington who determine who are essential and people who arent. Hopefully there arent people who are more hungry because of the Government Shutdown. You about the executive branch decides who will show up for work and get paid later and who wont. Ou about the executivh decides who will show up for work and get paid later and who wont. U about the executive bra decides who will show up for work and get paid later and who wont. About the executive bran decides who will show up for work and get paid later and who wont. About the executive branc decides who will show up for work and get paid later and who wont. What about wic, some of those programs. Those decisions are being made by politicians. Im not saying its not easy. Im just saying if youre already in the program, your check will still come. Its the people who are applying new to the program. So there is a marginal impact there and im not saying should you make fun of it, but just rather in terms of the broad scheme of the entire functioning of a 16 trillion economy, its actually reasonably small. You make the point between Government Shutdowns and debt ceiling debates, we may be able on combine these two, but which is worse for the market separately . I think overall if we look at history, go to the videotape as we say. You look at the shutdown during the clinton administration. Between december 16 of 1995 and january 6th of 1996. Looking at the s p 500, it was down 3 bpt 7 . Subsequent months, the market came right back at 10. 5 . Now when we fast forward to the summer and we all remember the summer of august of 2011, european debt crisis, our own debt ceiling concerns. The markets fell out of bed. Markets came down 11. 5 . But again, once we came to a resolution, markets came right back. So it creates opportunities if youre buying assets at good valuation. If youre not going into like a recession or something. So taken just in a vacuum, it wouldnt mean anything. You have to look at where we were before and where well be afterwards. Yeah, i think the bigger inch pli da every pli indication here is that its about the debt ceiling. What are the long term implications about rising debt. What are the long term implications about rising debt. We have to pay it off and how will the markets react. Drew, the other thing you said is that economists used to having their little data points come, and well miss one today, that they dont have that to figure out. So we dont know the state of the job market. We need that every month. Should make mark zandi very happy. It gives us a lot to to on the first friday of every month. But people trying to gauge the state of the economy dont have much data either. And it could get worse. We dont get the employment report now. As soon as the government reopen, well get it in two or three days. But the next payroll report is next week. So if it extends beyond next week, every piece of data that youll get in the Employment Situation will be suspect for months to come. Because its going to put something awkward into the data flow and that means adjusting properly for the seasonal adjustment becomes that much more problematic. What does that mean for the fed and tapering, less likely to taper . They want to keep buying as much as they can and they will find some do you have a date when they will settle this . And you have deadline at a time of october 17. You have to politically. A good friend of mine was former undersecretary of the treasury, he emailed me yesterday. He said if you look at the 14th amending to a certain extent you could interpret it where president obama could just forget about it. But they dont want to get there. But they will settle. When do you think it will be done. Our view was this weekend and as far as i know that still holds. I think it would be really easy to do it right now because were now talking about budgets. Except harry reid at this point, if they ask for a 1 cut, if republicans said please just give us a 1 cut, harry reid will say youll get nothing and leak it. Just because hes so vindictive. He would have been toast if the idiots hadnt run that terrible candidate in nevada, he wouldnt even be there. Everyone who will get blamed will still get blamed. There is like a nine point difference. Republicans at 44, president at high thi30s. Why would nip cave up they have to. Maybe for the country. Anyway, tim, drew, thank you. The squawk bug is buzzing. You are can check it out. Still to come, two titans sharing the same stage and their opinions on the debt ceiling. More on that when squawk box costs right back. Before you hit the road, here is your travelers check. According to a new survey, an air transport company, smartphone ownership among flyers is up nearly 50 since 2010. With so many smartphone carrying travelers out there, how many use their device to book flights . The surprising answer next. At farmers, we make you smarter about insurance. Because what you dont know, can hurt you. What if you didnt know that posting your travel plans online may attract burglars . [woman] off to hawaii what if you didnt know that as the price of gold rises, so should the coverage on your jewelry . [prospector] ahh what if you didnt know that kitty litter can help you out of a slippery situation . The more you know, the better you can plan for whats ahead. Talk to farmers and get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum carry smartphones use their device to book flights . Less than 5 . Flyers stop concern with smartphone bookings is use ability which includes the fear that their phone will not work. Team time for the executive edge. Last night two titans shared the same stage, hosted by brian zil sullivan. They were asked about the dead line for the debt creel. Ceiling. Our central bank is the Central Banks banker. We set the tone for currency and the like. Is there a possibility of a debt default like i mentioned yesterday on your program, really no. I think its basically theatrics. It will be resolved very rapidly. But i think the most important thing that we must understand, the United States is a standard bearer of the world. People look to the United States as a country that lives by principles. Just the conversation p a potential default is unacceptable. They join the covhorus of investors. Both Warren Buffett and hank paulson voiced similar opinions on the debt ceiling yesterday right here on squawk box. And you do hear it from a variety of places. People very concerned about that particular issue. Last time we saw it happen, we actual i got downgraded. But that it nothing to the actual price in the yield on our paper because its just known what the underlying strength its known by everyone around the world. So if its a technical default, were not a country that will have trouble paying our bills. You need to tstand by what youe saying, but everyone knows its just bickering. But it is starting to have an impact on five year cds spreads. They are up to 33 basis points. Up 45 , though, just over the last three week. That is still below i think it got up to about 62 or 63 back in august of 2011. People in the risk business need to, if it goes from a 1 chance to a 2 chance, it needs to be reflected somewhere. But people still know, i dont know if you want to call it technical, what you want to call it, but you still know you look at the situation, its bickering between the political two partieses and it has nothing to do with the underlying strength. I cant imagine they would push it. No. And if you have both par paties saying you cant do it, i believe that it wont happen. When we come back, will lawmakers rise above to avoid a debt ceiling nightmare . Ed rendell and judd gregg will talk to us about how capitol hill can strike the right deal. And as we head to a break, take a look at yesterdays winners and losers. vo you are a business pro. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Good morning. Welcome back to squawk box here on cnbc. Im joe kernen along with becky quick. Andrew ross sorkin is off today. The Government Shutdown is in its fourth day. President obama has canceled an overseas trip. A group of 50 moderate republicans led by a congressman from pennsylvania is reaching out to democrats in hopes of striking a solution. Jobs industry a casualty of the ongoing shut down, but well still do everything as if the number was coming. And just pray along with us. At 8 0 well still be outside the Labor Department. The report has been postponed, so well have our own squawk version. The report ha postponed, so well have our own squawk version. Steve liesman gets pretty close to the newspapers. Zandi has the adp thing. So well be close. They revise it anyway. I bet you well be as close as the actual number. So you wont really be missing out on anything. And twitter could start trading within a month. Their ipo filing was that public late yesterday. Currently plans to raise 1 billion through the offering. Its not yet been revealed about where twitter will play, but it will use twtr. Twitter will trade. You cant say it will saying like elmer. Its a billion that they will raise. How much will they keep. So whats it worth. Kayla, whats it worth total . Its a billion dollars. How much are they keeping . Whats the total valuation of the company . Sorry. Caught you Employee Shares were valued in august and it was fair value of 12. 62 a share. That would make its valuation implied at about 9. 7 billion. J so they would be selling 10 or so. In the meantime investigators are trying to find out why a woman led police on a chase that eventually led to her death yesterday on capitol hill. Eamon javers joins us with the details. Weve been scratching our heads over a lot of the details. Yeah, confusing and sad. But some terrifying moments here in washington, d. C. Yesterday. Her name was kiriam carey. She was 34, a dental hygienist and police are still trying to figure out why she went on this spree. She ran over a secret Service Officer and led down to the Capitol Building where you see this video of her in a chase away a circle. Police had her stopped, they had their guns drawn asking theory get ou her to get out. Eyewitnesses told us as soon as she backed up, smacked in to the Capitol Police vehicle, thats when the shots rang out. At some point later she drove up constitution avenue and thats where the standoff ended. Its unclear exactly what happened at that point. But mirium carey ended up did dead. Her 1yearold daughter was in the vehicle with her. Capitol Police Officers were able to rescue the daughter and they have her in protective custody. Very scary and sad incident on capitol hill yesterday. Police still trying to federal government out why this happened. Mentally unstable, but the thing is, the response is what was you need to do it, i guess. But looking back on it, its just amazing the lock down and an entire city paralyzed by that. And she just snapped in a car. And were living in a post september 11th world. And obviously we just had a shooting at the navy yard two weeks ago. So Security Forces are on high alert. Youre talking about two of the most iconic symbols of american democracy. Security around those areas is very, very tight. When somebody crashes into a security barrier and deliberately runs over a secret Service Officer, they will respond very quickly and very intensely to that. You hear shots and everybody gets they have to assume with that kind of hostile aggressive action, they have to bear in mind that youre looking at a suicide bomber or terrorist attack or Something Like that. So they will respond very quickly. The tragedy here is the daughter in the car, one year old daughter. Miriam kercar careys family sa had a fall involving a head injury and they will try to figure out what set the woman off it to the point where she would do Something Like this. All right. Thank you. Well see you later. With the debt ceiling dead line drawing closer, lets get perspective from ed rendell and judd gregg. This a pep ann and tiller or something. Youll be here every friday night. Do this maybe at fox woods or something. It would be a privilege. We see in the papers that everybody started some type of budget deal. Why cant we just for the republicans, cut a dollar out of the budget, both sides act like they got something, and just do it. But harry reid look so is vindictive that i dont know if he will let the republicans out of this without a pound of flesh. Well, ei think the republicans kdeserve it. For their own good, they should vote for a clean cr and get the Government Back work again. But i think a lot of people concerned about the debt realize that although weve done some decent debt reduction, we still have a long way to go. And we should pivot right now and get involved in real serious talks. I give the president credit. Hes put on the taebl things like change cpi. He took it off. Well, but hell put it back on. It will take some persuasion with his people. But we should pivot off of this. Actually get something gun. I think that will set off an economic explosion. I dont know what the chances are, judd. Do the democrats have any interest in letting the republicans off the hook . The opportunity is there and i think eds outlined the opportunity which is that they reach an agreement which is a mini grand bargain for lack of a better term. They do the debt ceiling, cr and sequester issues all this would be package. There is some fog lifting on this which implies that maybe the path theyre going down. Would the president be agreeing to negotiate to\ there this which implies that maybe the path theyre going down. Would the president be agreeing to negotiate to there this which implies that maybe the path theyre going down. Would the president be agreeing to negotiate tothere i this which implies that maybe the path theyre going down. Would the president be agreeing to negotiate to talk about that before the debt ceiling . Maybe he wont even talk about anything like this until this is done. I think the president s made it clear that he would talk about everything except repealing obama care. And republicans who are responsible have made it clear they will talk about everything but raising taxes. So a broad amount of activity. Both of you ought to get on the phone after this. You two could get together on this right now, couldnt you . No question. Sure. Well, i was joking a little that the president canceled his trip to brunei. It would be easier to not talk to republicans from brunei than if he stays here. So if hes set on not negotiating, he should have gone. I dont think thats his position. I think his position, and why want to speak for hims but from reading what he said, hes not going to negotiate killing obama care. And thats reasonable. Its his signature proposal. People in the Republican Party who want to do something about the deficit and debt rather than just shout have said they wont negotiate on the issue of tax increases. So in between that, there is a have big pathway which ed has outlean lean lin linline outlineed which is entitlement reform. How can we do it in i dont even want to wait until the 17th. Could this framework come together in the next week . Sure. First of all, i think the president can say if john boehner makes it clear they wont play games with the debt limit, the president can say, fine, thats what we wanted. Now lets talk seriously about doing further debt reduction. Lets get together and as judd said, do a mini grand bargain, put mechanisms in place that will to entitlement reform and will also do tax reform. Everyone agrees we need tax reform. You have max baucus and the republican congressman worked very hard to do meaningful tax reform. Its a great effort. And there are people out there who want to get this done. Do we get the it doit done t weekend . You can certainly get an outline of an agreement this weekend. Do you get done this weekend, no. But the interesting thing is the speaker has said hes going to take there isnt going to be debt refault, period. So it wont happen. The continuing resolution therefore becomes the issue and the sequester becomes the issue. All right, gentlemen. Youre good together. Well have you on again tonight. We can solve all this, i think. Still to come this morning, could america be facing another down grade thanks to washingtons debt ceiling dispute . Well talk about that when squawk comes right back. At a ford dealer with a little q and a for fiona. Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. Dont have enough food to survive. We cant let this happen. There is something we can do about it. Please join Christina Aguilera and yum brands in the movement to fight world hunger by supporting the United Nations world food programme. To donate go to hungertohope. Com or make a text donation right now. Your contribution will feed children and save lives. Together, we can stop the dying and start the living. And together, we can move people from hunger to hope. Joining us is marie calf gnaw. We talk every day the fear of the debt ceiling is that it we dont pay our obligations, it will trigger a debt downgrade. You can tell us what you are watching. Standard and poors believes the impasse is likely to change the rating which is double aa plus with a stable outlook. We change the outlook to stable earlier this year for because of the improvement in our view in the deficit our expectation is that it will continue to fall. The fact there was compromise in lessening the impact of the socalled fiscal cliff and because the economy has been on stronger footing abo. So not likely to drtrigger a downgrade because you think the debt ceiling will not be breach . We being it will be passed on time. Stable means we think it is less than one in three chance of a ragt chan rating change over the next two years. Would that be your first move . To change the outlook . If the debt kreceiling is not raised, there can be no net new financing. Thats assuming no other remedies are pursued. And that means the government probably has to cut spending by the order of 15 to 20 . Which will have an impact on the economy. Would you change your outlook to positive at that point . I dont think so. There would be a big impact. Whether that would affect that service is unclear. Youre stable and you see no indications that youd go from stable much less downgrade . Well, the rating is aa plus. Theres no indication youre going to change the stable . We dont have a second derivative. I want a second derivative. Our stable outlook is positive. We dont do that. But its stable because we dont maybe you should. This process the debt ceilings been raised 70 odd times over the last few decades. We changed the rating because we think the process has become more divisive and more acrimonious. And that introduces certain governance difficulties. It has an impact on the economy. In terms of a furlough or government workers being not paid in terms of a contractor being not paid, that wouldnt have impact on what youre looking at. What would have an impact is if we dont pay pay Social Security if it comes up or medicare. Not the we estimate that the shutdown is probably costing about. 3 off the quarterly growth rate for every week that the shutdown continues. Obviously the biggest impact was the people and businesses of those most directly affected. From a macro sense, thats what we view. For that quarter . Off the quarterly growth rate, thats our estimate. Thats a lot. That has a. 3 for every week that the shutdown continues. Thats a lot. When youre 2 , its a lot. Its not bad when youre at 7 . Yes. If the debt ceilings not rai d raised, the impact on the economy could be much greater. Very quickly, october 17th is the date that the treasury secretary and others have said is absolutely the day of reckoning. Youre not convinced of that. You think it could be later. Well, we dont have a position on that. Treasurys in the best position to give an estimate of that. Certainly, i think, october 17th date they gave was before the shutdown occurred. Certainly the shutdown less spending. In an odd way, it may move the date back a little bit. Also, certain lumpiness in revenues and expenditures and difficult to project. Thank you very much for coming in. My pleasure. More details on the twitter ipo, and check out squawks guest hosting lineup for next week. Going to start on the left. Former council of economic advisers, chairman alan krueger, hasnt been out of the white house that long. Legendary oil man boone pickens. Worlds savviest investor some would say chanos and the one and only jack welch. Ppened ppened so we could be a better, safer energy company. I can tell you safety is at the heart of everything we do. Weve added cuttingedge technology, like a new deepwater well cap and a stateoftheart monitoring center, where experts watch over all drilling activity twentyfourseven. And were sharing what weve learned, so we can all produce energy more safely. Our commitment has never been stronger. Bny mellon combines Investment Management investment giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. When we continue this morning, well try and help investors rise above the debt threat and tell you what it could mean for your portfolio. Mark zandy of moodys and neil wolin will join us along with Steve Liesman. Nice car. Sure is. Make a deal with me, kid, and you can have the car and everything that goes along with it. [ thunder crashes, tires squeal ] so, what do you say . Thanks. But i think i got this. [ male announcer ] the allnew cla. Starting at 29,900. [ male announcer ] anbe a name and not a number . Tor scottrade. Ron im never alone with scottrade. I can always call or stop by my local office. Theyre nearby and ready to help. So when i have questions, i can talk to someone who knows exactly how i trade. Because i dont trade like everybody. I trade like me. Thats why im with scottrade. Announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. The debt ceiling clock is ticking. Is there a disconnect between investors and what treasury sees happening . Economists are joined by Steve Liesman and neil wolin to break it all down. And with no yob jjobs report, weighing in. Plus, what this all means for investors and your portfolio. Its a squawk jobs report friday and the second hour begins right now. Good morning, everybody. Welcome to squawk box on cnbc. Im becky quick along with joe kernan. Andrew is on vacation today. Weve been taking a look at the futures. And so far this morning, yeah, nothing too major, up by about 16 points above fair value for those dow futures. In our headlines this morning, it is day four of the Government Shutdown and still no solution in sight. President obama is calling on House Speaker john boehner to let a clean funding bill come to the floor for a vote. Among the casualties of the shutdown to this point, the president s planned overseas trip which has now been canceled and the september employment report which supposed to be released this morning but has been postponed. And twitter has revealed the ipo plans. Julia . Becky, twitter filed to raise 1 billion with the ticker twtr. The company says it has 215 million monthly active users, thats less than some were expecting. So the question now, whats twitters appeal . Well, the top line is growing very fast. 2012 revenue grew by nearly 200 in the first half of this year, revenue more than doubled to 254 million. But the company is still not profitable. It made progress in 2012 as the net loss decreased 38 but in the first half of this year, a number of acquisitions pushed up its net losses 41 . Now, driving all of twitters growth is mobile. 3 4 of the users access from a mobile device accounting for over 65 of twitters revenue. A percentage the company says it expects to continue to grow. One key stat investors were watching was revenue per user. But came in at less than half of facebooks in the Second Quarter of the year. So question now is whats next. Twitter needs to grow its international revenue. Now, as users outside the u. S. Were more than 3 4 of the user base, just a quarter of the revenue. The company says it wants to partner with more Traditional Media Companies to bring more content to twitter and in order to grow ad revenue, plans to improve targeting. Facing serious risks, could lose popularity and it faces significant competition for ad dollars. So who will cash in on this ipo . The biggest shareholder is cofounder and former ceo Evan Williams with 12 . Followed by peter fenton with 6. 7 . Then current chairman and cofounder jack dorsey has 4. 9 . The current Ceo Dick Costolo has 1. 6 of the company. Then theres institutional holders. Benchmark, union square, spark capital, plus dst global along with rizi traverse. The number of shares twitter will offer and what the pricing range will be is unknowns. We still dont know which exchange itll list on. Becky. Thank you. Up bright and early. Standing right there in front of the twitter sign. Thats julia boorstin. In the meantime, investors and treasury dont seem to be on the same page. Yesterday, several of our guests said the deadline for the debt ceiling would come and go while treasury warned of a financial shock. Were not that far over the edge that were actually going to default on treasury debt. Thats not going to happen. If it goes one second beyond the debt limit, you know, that will not do us in. These are the sort of economic numbers theyre trying to put on. Not just the default or the shutdown but the effect on sentiment of the potential for some of these bad things to happen has a real economic impact. Is wall street getting the wrong message from washington. U. S. Economics editor at the economist and a cnbc contributor, mark zandy and Steve Liesman. And steve, im going to come to you first because we spent time talking about this yesterday. Im amazed at the back and forth. Wall street seems to be shrugging this off. It had a mrgs, the treasury secretary seem to be saying october 17th, this is the answer. I think both are right depending on what day you pick. On october 17th, i dont think the world falls in on that day. I think markets have the ability to bring forward the bad stuff if they so choose. If theyre in the buffett camp of, hey, this is going to work itself out, they probably wont bring that forward. Is it the 17th the 1st . It doesnt matter. If you reach the debt ceiling, Government Spending will decline by 108 billion. And lets just assume that principal payment is paid, okay. It still means you have to make some choices out there. Under a series of choices offered by the bipartisan policy center, for example, you could pay principal. Youd have to close the department of justice and the fbi, not make tax refunds. There are real choices. You can have it one of two ways. An up front catastrophe or rolling catastrophe. I think it ends up a bad thing. Neal, we spoke with Marie Cavanaugh from s p and she said its not a downgrade, a downgrade wouldnt be triggered by missing the debt ceiling, it would be a missed debt obligation. That would be something that would trigger the downgrade. October 17th, is there wiggle room after that . Well, you know, i think, becky, the secretary of the treasury of that date, he wont have capacity any longer to borrow money. Hell be left with relatively small amount of cash on hand with which to pay a lot of bills and shortly thereafter, he will not be able to make good on the obligations of the u. S. Government. That can begin to trigger a negative consequence. All we have to do is remember 2011 where we didnt actually default but Consumer Sentiment and Business Sentiment and all kinds of negative economic consequences the markets, obviously there was a downgrade in the absence of default. For the first time in our countrys history, we arent money good on the obligations weve incurred. No question, none of this is good. None of this is an argument of the right way to do business. They warn of serious consequences if you default on these obligations. I guess steves right, part of this is the markets decision on when it matters. Ive been struck by how much earlier the market has reacted. Weve seen the markets sell off you see treasury bills maturing around the 17th are starting to have higher yields than those that mature later on. There are people pricing in the possibility they will not get paid on those days. Weve seat credit default swap spreads on sovereign debt widen out. Looks to me like the markets are more aware and more sensitized to the risks around us than they were in august of 2011. And youve got to believe those risks will only grow and that volatility will only grow. The more time we lose between now and the 17th without a sign of movement by either side. Going back to the 17th deadline. By my calculations, the treasury will have 30 billion in cash on that day. Less than Berkshire Hathaway has. And if you look at the subsequent days, they wont go negative until november 1st. What does that mean, mark . Who cares . If it happens that day technically is the point being they can bring this up to the limit and then they can delay it a few more days . Well, what it means is everyones going to get paid on time up until november hold on, i want to show you. Why are we beating this to death when boehner said ill let democrats and republicans he hasnt said it publicly. If the New York Times says it right here that he has joe believes everything thats written in the New York Times. The New York Times is gospel. Hes worried about losing im cool if boehners cool and hes going to say were going to go for this are you willing to make a bet on that . Youre going to go long the market right now because boehner leaked to some guy. No, i will not do credit default. I will not increase the spread on any of that debt with a worry of a actual shutdown. You meet the debt ceiling breach . Yeah. If these reports are right, actually theres a possibility makes a shutdown last longer because in other words it may be the strategy of boehner to say we take the more catastrophic one off the table by giving them a debt ceiling increase. But i dont can i ask you one question bothering me. I think he said they cant prioritize payments on the debt. The actual payments theyre going to want to show people the choices that the treasury has here. Theres two ways to deal with a debt ceiling breach. I want to show you basically what is believed here. You prioritize, you make choices to pay some bills and not others. The Payment System is not programmed to do that and theres no legal base. The other way to do it is daytoday. Which is you could wait until you got enough money in the bank and then you make the payments and the problem is you start to delay payments. Youve done all this work. I dont like Life Insurance either. I dont want to pay off on Life Insurance. I dont even want to admit the possibility. But you put all these things together thinking that it might happen. But its not going to happen. But im ready for it. By the way dont you hate Life Insurance because neil would know. So i hate Life Insurance. You cant prioritize payments on the treasury debt. Now, my working assumption was if we got to that day, they would make the treasury debt payments and Everything Else will they prioritize the payments on the treasury debt . Well, look, mark, first of all making payments is enormously important. Treasurys going to have to speak exactly how theyre going to operate in the circumstance where the cash they have on hand is insufficient to meet their various obligations. But the real point to be focused on, in any event, it doesnt matter that much. That could trigger these consequences. I understand it and i agree with that, youre right. This is catastrophic, you dont want to go down the path. And were not going down the path. Just from a technical matter, could the treasury that kind of thing prioritize payments on the treasury debt . Could they make those debt payments before Everything Else . Well, you know, mark, treasury can do a lot of things. Theres no basis in law. Its not Like Congress that has said Social Security payments are more important than medicaid payments or rather medicare payments or this kind of payment is more important than that. They dont have any basis, i think, to make those kinds of judgments. Congress hasnt provided any. And i think given the current circumstance its highly unlikely theyll be able to do that. Youre saying theres no legal basis for them to prioritize the payments on the debt and therefore they may not . I think thats right. Theres two different rulings that have been out. One ruling said the treasury officials have generally said because theres no legal base in congress, we cant do it. There was a 1985 opinion that said because theres no instructions from congress the treasury has the ability to do this. Weve seen them do things the modern treasury has decided. By the way, you can read about this in an article right now on dot com about the choices if you havent given us the rules thats a 1985 ruling. Theres no difference in the appropriation of a nuclear missile. Or the national parks, they both have the force of law and why would you choose one or the other . The idea that boehner has said that, okay, were not going to push past the debt ceiling. Well give you the debt ceiling and then the Government Shutdown continues past that . Is that something that the democrats would say okay to . The republicans dont want to give up on shutting down the government as their bargaining chip. Saying youve got to give us all, its all going to be rolled together at this point. If the republicans gave the president a clean debt ceiling bill, would the president not sign it . Because that is a difficult position to sustain publicly. If you listen to the rhetoric and the message to wall street is that by saying these guys are playing with fire by holding hostage the full faith and credit. If boehner can take that away from them, he still maintains the ability to dig in his heels on the shutdown. And the polls and the markets do not seem to be responding to the shutdown specifically. They feel theyve seen that movie before and dont need to freak out. What do you think it is per week . You could be a keynote you could have a recession and its nonlinear, right . No big deal. Second week, its. 5 . 5 in the second week . Second week. Cumulative. Cumulative. Thats still. Were talking about. 5 Percentage Points off gdp. Takes us down into the ones. Yeah. Itll stall out. You get some of it back when they reopen and repay if they do back pay. Im going back to work upstairs on my computer to get ready with that squawk jobs number. Thats what im going to do. Weve got a number, were calculating it now. Weve got our team of junior economics reporters for cnbc up there. Junior . Senior and junior, you know, junior and senior. Thats right. Did you have a lockup embargo . Hampton pearson standing by doing nothing. Steve, well see you in a little bit with your real number we have. Real number. Thank you very much. Great to be here, becky. When we come back, well talk about the delay in the jobs report. As steve mentioned squawk box will be filling the void coming up at 8 30 a. M. Eastern time. And up next, sound Investment Advice during sound times in the market. Well hear from the chief Investment Officer of fed rated investors right after this. [ man ] monica had big dreams for her wedding. I want peacocks. Peacocks . Walking the grounds. In tuscany. [ man ] her parents didnt expect her dreams to be so ambitious. Italy . Oh, thats not good. [ man ] by exploring their options, they learned that instead of going to italy, they could use a Home Equity Loan to renovate their yard and have a beautiful wedding right here while possibly increasing the value of their home. You and roger could get married in our backyard. Its robert, dad. [ female announcer ] come in to find the right credit options for your needs. Because when people talk, great things happen. Because when people talk, because what you dont know can hurt you. Urance, what if you didnt know that its smart to replace washingmachine hoses every five years . What if you didnt know that you might need extra coverage for more expensive items . And what if you didnt know that teen drivers are four times more likely to get into an accident . sup the more you know, the better you can plan for whats ahead. Talk to farmers and get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum squawk box is rising above the government. Remember weve kind of fixed the fiscal cliff. Were rising above the shutdown. That was we need to bring the buttons back. We need to, you know, these guys i still have my button. Im getting ready to wear one. By the 17th, you know, really, come on. Somethings got to lets do a dollar. Boehner says okay, were cutting the budget by a dollar, obama says okay, fine, a dollar. And just do it. Its stupid. Some levels have come down. Well, the sequester. Do you want to get this over with . I do. Were below 15,000 again, zandy. Politics out the door and no, no, no this is about taking care of the country. There are taking care of the country. There are some even i will acknowledge there are Government Services that help people and are necessary. How this isnt about the deficit any longer. A couple of democrats have made this point. The republicans, theyve already won. I mean, if they get a clean cr, it will maintain spending at the sequester level. The democrats are fantasizing for months they could get that number up, maybe by 70 billion. Theyre now saying that giving in to the number the republicans had all along is a victory for the democrats and their sort of point is cant you take yes for an answer . Its interesting the way the center of the argument has moved beyond the actual size of the deficit. All right. Joining us now onset, cio equities. And a lot of people the truly opportunistic ones, when this happens, if you think the markets going higher longterm, this is just a better place to buy, right . Thats what were telling our investors, joe. Were pretty bullish longterm. We think Economic Growth picks up substantially next year. Really surprisingly, and we think earnings finally start to come through next year, the markets going to go a lot higher. Were using this as a chance to add. Look, we could go lower in the next couple of weeks for sure. But i dont think you have a lot of downside here in this market. Youve got a pretty solid floor in there at the double peak, the 15,065 level. The fundamentals are pretty solid, the economy is okay, the earnings are okay. Q erie, baby. Yeah. As long as weve got that 85 billion, im feeling good. Im like that guy on the geico, on the motorcycle, thats bernanke with all the dollar bills flying off. Bad news is almost good news. I mean, as long as its not really bad. 85 billion . Well see what the jobs number is. Well, at 8 30, well go to Hampton Pearson at the Labor Department. We think its right in that whats he going to say . No ones here today. I dont think we shouldve even said anything to anyone. We should just, you know, right at 8 30 after everybodys already watched for 2 1 2 hours and say, oh, by the way, were not really never mind, theres not literally going to hampton. Yeah, were going to hampton at 8 30, just in case, just in case the shutdowns over the Labor Department has the number, right . The president just doesnt want them to release it. Trying to put pressure on the market here. The situation of not being able to analyze all the numbers they had collected earlier this week. Analyze the numbers . Is that the word you used . The decision would have to be made to declare the people who release the data and manage that whole process as essential. Which could look ridiculous if you look at the other things. The press release has been written. Its not been vetted but its been written. Some months ago, some years ago when this situation arose, they did put data out during the shutdown because they were afraid existence of the data raised the risk of it being leaking out in some other way. One thing we think is interesting, joe, about whats going on in the market, the cyclicals are starting to beat the defense. Since last june, right, when the taper talks started. Even yesterday in the selloff, the cyclicals were holding in there relative to the defensives. I think people want to get long this market. Thats a way to do it. And i think thats whats going to happen. All right. Thank you. And these guys are staying with us. Greg and mark. When we come back, whats ben to do . Will the jobs report blur the vision. Well talk about tapering and what they think about that at this point. And then the corporate impact of the debt ceiling. Squawk box will be right back. Time now for todays aflac trivia question. 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Tell me fiona, whos having a big tire event . Your ford dealer. Who has 11 major brands to choose from . Your ford dealer. Whos offering a rebate . Your ford dealer. Who has the low price tire guarantee, affording peace of mind to anyone who might be in the market for a new set of tires . Your ford dealer. Im beginning to sense a pattern. Get up to 140 in mailin rebates when you buy four select tires with the Ford Service Credit card. Whered you get that sweater vest . Your ford dealer. A confident retirement. Those dreams, theres just no way were going to let them die. Like they helped millions of others. By listening. Planning. Working one on one. Thats what Ameriprise Financial does. Thats what they can do with you. Thats how ameriprise puts more within reach. Welcome back to squawk box, everyone. In our headlines this morning, we are about an hour or so away from the jobs report. But not the one you were expecting. The governments september employment report is on hold because of the ongoing Government Shutdown. But we dont want you to be deprived so we worked up our own version of the jobs number you can look through at 8 30 eastern time. Also, twitters ipo filing could mean the stock could trade within a month. But for those hungry for something sooner, sandwich chain pot belly starts trading today. That was higher than the expected range of 12 to 13 a share. Its going to be trading under the ticker pbpb. Pot belly pot belly. Adobe says hackers have stolen source code. Theyve been investigating the breach and says it has no evidence that it resulted in any attacks, at least so far. The Government Shutdown leading to a void of economic numbers for investors to divest this week including the closely watched jobs number. Lets get perspective from a former fed insider. Joining us right now is al broaddus. Al, thank you for being here today. Were worried about the jobs number thinking about those things, but more importantly, what do you think about whats happening with the debt ceiling debate . Is this a situation that you think will resolve itself . Well, i think, you know, it has to, becky, at some point. You folks were saying earlier today, you know, you can live with the Government Shutdown for a while. Even that, you know, after a week and a half, two weeks or so gets to be a big problem. But a debt ceiling can really have catastrophic results. Thats got to be resolved. Exactly when, i suppose is the question. The treasury will have some cash, i think 30 billion is the estimate on october 17th. But theyre going to have to move, you know, you just cant you cant let that happen. Somebody, maybe the president has to step in and stop that. There will be a resolution. I think the question is, you know, exactly when it will happen and what form it might take. I might add one other thing. Theres a lot of talk and things the possibility of folding the shutdown resolution in with the debt ceiling that i dont know exactly what the politics of that would be. But since the debt ceiling has to be fixed, may maybe that increases the likelihood it will get a clean cr or Something Like that with a shutdown. You know, al, when you look at this from the feds perspective, were they right to refuse to start tapering at this point . Kind of waiting to see what happens in washington . Well, looks like it worked out that way, becky. I think if the fed had im not sure it would have made a lot of difference if theyd begun with a small taper. But, you know, this was one of the reasons that they decided not to begin the taper. The possibility of a fiscal storm like this. And in that sense, i think, you know, it indicates their caution was justified. People that said that was the wrong move, you know, when people start saying im not going to blame the president. But when you start saying that, you know, the markets, they havent reacted yet, but i certainly think theyre going to. You know, when youve got the fed there, maybe that gave people cover to continue this longer than they should have. If the fed wasnt there, maybe this would force people to negotiate. Theres a case to be made that the fed sort of put a put in there allowing, you know, the government side of things to be irresponsible. Well, i guess you could make that case, joe, but youre almost implicitly bringing the fed in the political that would never happen. Yeah. With the and they try to avoid that. I think it was their principal criterion what economic damage could be done. That was not the only factor. Right. I think the main reason they delayed was the fact that the august jobs report did not give them to use the chairmans words the confirmation they were looking for. Remember that the august report was quite weak in a sense. The august number itself was weaker than expected. But i think the main thing is the big downward revisions for the earlier report. Really used todays numbers. Al, its really good to see you again. Good to see you. Although i cant see you. Right. Good to hear you again. It looks increasing like janet yellen will be the chairman some time early next year. You sat around that table with janet yellen back in the 90s. Do you think well get a more dovish Monetary Policy than we have right now under ben bernanke . I dont think so, greg. I actually sat next to her for a while when she was first on the fomc. I think she came in mid 1994 as i recall. I think she has worked very closely with the chairman in developing policy recently. I think its going to be a smooth transition. Its hard to get more dovish, isnt it . Especially after this last decision . Well, thats a good point. But if you take the view this position was partly because some of the doves like janet yellen pushed in this direction, then youd see more of that. Can you unequivocally say because shes going to be the next one and she probably wouldnt want to have to go back up, maybe they did it because they knew it was going to be her at that point. I kind of doubt that. Theres another point of view theres that yellen actually labors under the burden of being thought of as a dove and needs to behave hawkishly. Obviously he was not worried about being called helicopter ben. For years al broaddus was the hawks hawk. So for al to have a dovish policy would be like a nixon goes to china moment. Bernanke was being sensitive to being called that, he hasnt shown it. I dont know what your nickname would have been, al. Helicopter ben. I dont know. Chain saw al. Oh, thats used. Go ahead. I was just going to say, becky, as greg will remember, i was hawkish. But when we got into the 2002 period and circumstances changed and it looked like deflation or what i think the chairman greenspan used to euphemistically term excessive or unwanted disinflation might be the problem. I shed some of my feathers. What about today . What do you think of them not tapering at this point . And what do you think they should do by the end of the year . I guess, i think a case can be made for staying where they did. I guess the communication issue is a separate issue, becky. And its unfortunate it wasnt clearer to the public and the markets. But, yeah, you know, we still dont have confirmation of a strengthening labor market. But it really strengthening. I shouldnt say that, its strengthening but not at the rate they had said they hoped it would move at. But a point i would raise is keep in mind the inflation target. We now have an inflation target. Its 2 . The inflation rate has been consistently below that for a year now. And thats the other consideration. And frankly, i give that a lot of weight. So in that sense, that gives me some comfort that holding off was all things considered, probably the right thing to do. Al, thank you very much for joining us today. Nice to be here. Nice to talk to you. As we mentioned, the government may not be releasing jobs data today but squawk box is. Lets take a live look at the Labor Department in washington. Yeah. Not much happening there this morning. But we have taken the bulls by the horn and plan on giving you an assessment of the nations job picture after that august report, it was very important. So the september report, you know, is going to be it would have been very important. I dont know if it will be if they release it a week from now or two weeks from now. We should be there anyway. Who knows, we should be there anyway. I dont know. Hamptons going to be there. As soon as they open, theyll i dont think so. We dont know. Were going to be there anyway. Theyre going to miss other stuff. I dont see how the gdp report comes out at the end of the month. I guarantee you, the other business places, Like Networks are not at the Labor Department covering this. You wont miss a thing. No. We own this story today. Our competition is nowhere to be found at the labor union. If they decide to release those numbers, were all over were golden. Steve liesman is putting together numbers, though. He has his own, hell join us at 8 30 with that. Make something up. Look, 175,000, are we going to be off that much . No, because adp was there you go. So well give a preliminary feel. I dont think any change in september relative to august. Weve got him, you, liesman. As close as these anyway, coming up next, squawk makes a ceo call on the debt ceiling and the Government Shutdown. Company ceo thomas fanning of Southern Company will join us. El shareholders meeting. Therell be the usual presentations on research. And development. Some new members of the team will be introduced. The chairman emeritus will distribute his usual wisdom. And you . Well, youre the chief life officer. You just need the right professional to help you take charge. Thats a good thing, but it doesnt cover everything. Only about 80 of your part b medical expenses. The rest is up to you. So consider an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, they could save you in outofpocket medical costs. Call today to request a free decision guide. With these types of plans, youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and virtually no referrals needed. Join the millions who have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp. And provided by unitedhealthcare insurance company, which has over 30 years of experience behind it. With all the good years ahead, look for the experience and commitment to go the distance with you. Call now to request your free decision guide. vo you are a business pro. Maestro of project management. Baron of the buildout. You need a permit. To be this awesome. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. aaron purrrfect. vo meeeow, business pro. Meeeow. Go national. Go like a pro. Its friday, and you know what that means, the squawk blog is up and running. This week we have everything from breaking bad to buffett. It was the week to come. You can check it out squawk cnbc. Com. Each passing day of the Government Shutdown has a potential to hurt the economic rebound and have a huge impact on business here in the u. S. Joining us now the Labor Department behind us. Joe kernan reporting with the Labor Department shot behind me. Joining us now is tom fanning, Southern Companys chairman and ceo also a director at the Federal Reserve bank of atlanta. So many things i could talk to you about today. If you were president right now, theres a couple of things and youre not, youre president of Southern Company, ceo, but if there were a couple of things. Right. All three of them. Number one, i saw the other day that we can be number one in energy, no problem with just a little bit of just a little bit of help or just getting out of the way of the federal government. Would that be thatd be one of the first things we would do, no . Oh, joe, look, ive been talking about that a lot lately. I think by 2020, we could follow a path of north American Energy security where if we just harness the resources this nation has to offer, coal, oil, natural gas, we can become a net energy exporter, change the whole equation from policy set on shortages to one set on abundance. And i think that Energy Security Breeds National security breeds created by 2020, maybe by 2030, 2 million to 5 million jobs. Yeah. It would give us a sustainable advantage to grow manufacturing, increase the number of jobs, personal income, make american lives better. Its something we all should do. Thats number one. I look at the other two things you think would restore americas financial integrity. The Balance Sheet which were on our way a little bit, if we could get through october, get a budget and get the debt ceiling raised. And then your third thing is tax policy. Maybe if we could combine two and three and just get you know, just get the agreement to talk about tax policy as part of doing the budget and the debt ceiling increase. I dont know why that congress and the president cant at least talk about that. Well, look, i think putting the interests of america and politics beside, that is absolutely something we have to do. If we dont address this issue as everybody knows, we have inescapably higher taxes, higher interest rates, its not a good future for our kids. Look, we know that were going to have to reduce costs. We know were going to have to do something with tax as i would not increase them, i would reshape them, certainly. And, perhaps, you know, this is not a democrat issue, not a republican issue. This is meeting the interests of america. And i think, you know, in all this chaos, perhaps theres an opportunity to create some momentum for a grand bargain. You know, tom, those are all excellent points, easy to agree with everything you said, its when you get into the details it gets more complicated. You say you wouldnt raise taxes, you would reshape them. Does that mean revenue neutral . Is that nobodys paying more overall . What do you mean when you say reshaping taxes . Well, yeah, look, becky, i can certainly speak to my own company, our own industry. Im on the Tax Policy Group at the business round table. When i was on with you guys some time ago, i talked about this idea of and its really camp and baucus are trying to do this kind of white board approach, lets start with nothing and build back. But the idea would be essentially this, looking forward, were going to have to keep what we got. Were going to have to keep employed something called normalization. But thats a sensible way to flow back benefits to customers. But going forward, we would be willing to do away with future tax preference items. Things like bonus depreciation, production tax credit, alternate fuel credits, in exchange for certainty with respect of lower income tax rate for corporations say around 25 . Thats something we could live with. Now, within that construct. Does that mean you were paying higher we know as you point out. Im sorry, tom, would that mean we know there would be higher or lower for you your corporate rate right now . Depends on the year. See. The way tax policy works, sometimes just like the fed its accommodative and sometimes its not. So when you look at our effective tax rate, sometimes its in the 30s and sometimes its in the Single Digits depending on whether you have bonus depreciation or a variety of other tax benefits in play. The important thing is reduced complexity, get the irs out of making Good Business decisions. You pride yourself on clean energy. How much of Southern Company is cold, tom . From an energy standpoint, about 25 . You know, joe, six years ago, we were 70 . And with this huge change driving Natural Gas Prices becoming lower and more abundant, then weve made a big lift. My point is you say the epa is accountable to no one. Its not it this is not something that and no ones really said anything that much recently about, you know, some of these recent decisions. Its unbelievable, isnt it . That youre in a position where, you know, these guys are sort of appointed and this would normally be congress job, not that theyre doing a great job. I know youre only 35 . But it does the writing is on the way. Anything can happen in terms of regulation with this administration, right . Well, with the new proposal on Greenhouse Gases and the standards theyve set for coal, its very unlikely any new coal generation will be built. Heres the issue more broadly. Were building a plant that has the ability to take the co2 and its not a waste, we use it for recovery. Using a resource that otherwise goes unused. Listen, Southern Company is committing not dealing with this rhetoric. The entity that has the appropriate lens to set Energy Policy isnt regulators, its congress. Clean, safe, reliable affordable is what im responsible for as a portfolio for the families that were privileged to serve in the southeast. Thats what we need congress to act on. And i think with things like this north American Energy policy idea, theres some bipartisan momentum to get something done. Its a way to play offense in a challenged environment. I think americans are thirsting for that right now. Like it or not, you have to deal a lot with the federal government whether its a federal Energy Regulatory commission, the Nuclear Regulatory commission, the Environmental Protection agency. During the shutdown period where a lot of those people and those agencies have been furloughed, does that does that slow things down for you . Make it harder to get planning done and so forth . Is that a real burden on your business . You know, i wouldnt call it a real burden. Were considered critical infrastructure. Anything in the critical category we go okay, were fine. You know, things will be done. You know, and im very mindful that if you look at the weather reports here lately that we could have a hurricane developing in the gulf that will come through our territory. As we did in katrina and other times, our industry has a great track record, southern especially so. The lights will be on as much as they can and well restore hope to the communities we serve as fast as we can. When things like that happen, we will have our eye ton the ball, well get the Critical Services done. Things like some permitting and some other ancillary activities otherwise undertaken by the government may be delayed. Rest assured, the lights will be on in the southeast. To not say no, we like it better. But anyway, that would be stupid because theyd be all over you immediately and i would never say that either. I want to make that clear. Anyway, tom fanning, thank you. We appreciate talking with you this morning. Well see you. When we come back, former wells fargo ceo Dick Kovacevich is here. As we are entering the fourth day of the Government Shutdown, futures indicated up about ten points. Up next on squawk box, dont start your day without knowing the names that will make you money. Joe has your list of stocks to watch right after the break. [ man ] monica had big dreams for her wedding. I want peacocks. Peacocks . Walking the grounds. In tuscany. [ man ] her parents didnt expect her dreams to be so ambitious. Italy . Oh, thats not good. [ man ] by exploring their options, they learned that instead of going to italy, they could use a Home Equity Loan to renovate their yard and have a beautiful wedding right here while possibly increasing the value of their home. You and roger could get married in our backyard. Its robert, dad. [ female announcer ] come in to find the right credit options for your needs. Because when people talk, great things happen. So, you know, if we dont have a number, weve torn up the script. We brought the animal orchestra. We brought back the animal orchestra, plus, andreas not here. We havent done the animal orchestra in a while. Supposedly, you know, hes back. All i know is chicago, rush street, he was there yesterday, you know, they have a little dinner. Just stop at one place. Stop, yeah, little dinner, stop at one place and who knows where. Who knows where he is. He may be, you know, just waking up somewhere on rush street, dishevelled, disoriented, who knows, or he might be back here with his wife and children. Chicago is a great town. It is. Its a toddling town. That toddling town. My kind of town. Yeah. Here we go. My kind of party. You just played it. Union pacific is forecasting Third Quarter profit of 245 to 248, thats below 256, the estimate pointing to the uncertain economy and mild weather thats been hurting coal volumes and open table upgraded the online Reservation Services stock. Maybe andrew made reservations using open table. Have you ever been there . I have not. I dont know if its still open. It was like 30 years ago, great restaurant. Italian. When we come back, the final countdown is on. We are getting ready for the squawk jobs report. Plus, former wells fargo chief Dick Kovacevich, hes our next guest. Squawk box will be right back. At farmers, we make you smarter about insurance. Because what you dont know, can hurt you. What if you didnt know that posting your travel plans online may attract burglars . [woman] off to hawaii what if you didnt know that as the price of gold rises, so should the coverage on your jewelry . [prospector] ahh what if you didnt know that kitty litter can help you out of a slippery situation . The more you know, the better you can plan for whats ahead. Talk to farmers and get smarter about your insurance. We are farmers bum pa dum, bum bum bum bum you really love, what would you do . [ woman ] id be a writer. [ man ] id be a baker. [ woman ] i wanna be a pie maker. [ man ] i wanna be a pilot. 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Hows that for an encore . With xerox, youre ready for real business. The countdown is on to the squawk jobs report. The unofficial squawk numbers are coming up at 8 30 a. M. Eastern. And the team is ready for action. The Labor Department may be closed but Hampton Pearson will be standing by. Stay tuned for the predictions and what the shutdown means for future employment reports. Plus, former wells fargo chairman and ceo Dick Kovacevich gets to react to Warren Buffett and hank paulson, and can two congressmen on both sides of the aisle rise above to avoid crashing the debt ceiling . The third hour of squawk box begins right now. Welcome back to squawk box here on cnbc first in business worldwide, im joe kernan along with becky quick. And apparently andrew scheduled this vacation day i knew it. It was scheduled weeks ago. Hes not on rush street. He came home last night. You go to chicago our guest host this morning, mark zandy, well have more from these two distinguished gentlemen, near one of which has the number today. I have a number. You have a number. Not the number. You got the adp number. You already gave it to us. Why didnt you save that until 8 30 today . That was out of my control. I might have done that. Couldve helped us. You could have helped me. Becky has your headlines. Thats right. We are in the fourth day of the Government Shutdown. That means the Labor Department will not release the september employment report. But weve got you covered. The unofficial squawk jobs report comes out at 8 30 a. M. Eastern time. Its an estimate you can only get here on squawk box. Meantime, president obama is cancelling plans to attend summits in indonesia and brunei to deal with the Government Shutdown. The president had planned to depart tomorrow for a fournation tour. As were heading into the fourth day, markets seem to be shrugging it off. The dow down close to 140 points yesterday, you can see this morning, the futures, though, are indicated up by about 10 1 2 points for the dow, up by about 1 1 2 points for the s p. Also on our headlines, twitter, more details about the much anticipated ipo. Our next guest has been poring over the details. Joining us now the chief Investment Officer at firsthand capital management. The firsthand Technology Value fund. More than 1 million shares of twitter. All the appearances be different, all the substance be different. And the number one thing theyre trying to do is hurry up and get out the door before the anticipation gets to be too much. With facebook, that might have been another one of the problems. It took a while and by the time it finally happened just that week, there was some rumors that the body language of the company on revenues wasnt as positive as it had been. And then, you know, the worry about how they transition to mobile, that started rearing its ugly head. Twitters got both of those covered, right . Mobile is the story for twitter. Thats right. Theres no hand wringing over twitter needing a desk top strategy. And thats great. Youre absolutely right. Theyre smart guys, learning from history and theyre trying to do their best. Markets have a way of not learning and human nature has a way of not changing. So you could still see a little bit of froth here because its an exciting story. But i think theyre trying to hold it down as best as they can. The next thing is, you buy Something Like this, lets say the valuation is 10 billion. I figured itd be at least ten. Sure. Is it a 20 billion company in two years . Is it a 30 billion company . Is that possible . Yeah, you know, its interesting if you look at facebook, facebook 120 billion market cap, its trading at 12 times next years expected revenue. Then id price this higher, kevin. I dont know, but now were back to that, you know, whats the right way to do it . Youre only selling a little bit. So do you hold back on demand to make it pop . Or do you price it for what its worth . Whats it worth right now . What would you pay for it . Would you pay 15 billion for it . I think that 15 is believe it or not kind of in the middle of the range. If you figured next year theyd do either 1 billion to 1. 2 billion and assign a number of lets say, i dont know, 12 times that revenue number or maybe 14 or even 15, linkedin trades at 15, by the way, and twitter scoring faster than either one. You get a number between 12 billion and 18 billion. So 15, down the middle, that could happen. Im not a technological person, but i see twitter and there are times i click on the Little Things where i know its going to take me somewhere. Im not on facebook. Ive never done anything. I could see how you could get to me. I dont know if id buy anything. But i could see how you could get to me with a sports clip or something where id actually click on it and see it and it would work. I can almost see how this is actually worth something in terms of monetizing what used to be a fad. Right. You know, i think probably the best the best way to look at it and ive had a lot of people tell me they use twitter more as a business tool. Twitter seems to fall somewhere between linkedin and facebook. They use it to socialize, people use it to follow celebrities and whatever. Its also becoming a little more of this daily tool that, you know, before you go on air, you would check your daily twitter feed just to see youre not missing something. And right. And you would tune it to what you feel you need to know. I know. Wow. I was hoping to be gone in five years just because i dont want to be tweeting. But maybe its here to stay, i guess. And im kind of buying into it. Anyway, kevin, thank you. Taking a shot of you, they got sick of a shot of me. They were trying to catch me shooing a bug. Oh, they were . Maybe you should leave it on her. Squawk box is rising above you can react to what im saying. Rising above the Government Shutdown after a productive september, should investors brace for more impact . That was like a question . A compelling question. You should go wow. I did. Joining us now is the chief economist at the center for american progress. Peter is the Lindsay Group chief market analyst. Heather, hold on a second, i want to get started with peter. I tell you this all the time, positive developments for the week and negative developments for the week and you cover everything. What do you got this week, dude . You got nothing . The Government Shutdown. Well, im going to have my positives the Government Shutdown, my negatives will be the Government Shutdown. It is a problem for zandy or for all and we like these first fridays of every month to do the employment report. We dont have it, were feeling this personally now. And even if we got it, wed have to wait for next month because itll get revised and then the following month and the following month itll get revised again. Who knows what it would end up being after we saw it today. In terms of making investment decisions, how much of all of this is going to be material . Well, i think the markets are looking at this as an irritating timing nuisance because we know the governments going to reopen and we know the debt ceilings going to be raised. Its this in between period of limbo that the markets looking at but not worried about. I think at the end of the day, comes down to what the fed is going to do and what earnings are going to come through over the next couple of weeks. So theres its something that is front and center right now but you should look beyond it . Yes, because even if the Government Shutdown, its a timing issue. And again, the debt ceiling is going to be raised and its a timing issue also. Heat you cant believe that we dont have this jobs number today, can you . Well, no, i think its absolutely ridiculous we dont have this jobs number today. I think it underscores how important government is in general, right . We all rely on these numbers. Were all here on the first friday of the month to talk about one of the most important numbers that the government releases, how many people at work, what the wages are, what hours look like. And we know that markets rise and fall on these numbers and we know that these are key data that the Federal Reserve uses to make its decisions about how to how to work with the economy. So, i think it is it really does underscore how important on both this data is and not having it. But also, you know, the government does play this Important Role in playing the foundation for a strong economy. I can see that to some extent. We were having, actually, a better jobs picture, then would that offset not having the numbers today . Well, i mean, first off, we dont know what the numbers would look like today because we dont have them. That was rhetorical. I think, you know, i agree the government has a role and a place, but i think theres times that lately a lot of things have not been viewed in the prism, through the prism of job creation. I think thats one of our problems. So do you have an answer on how we come together and rise above at this point . To get this october 17th situation rectified . Well, you know, thats, of course, in the hands of congress. And they seem un incapable of coming together and making decisions that are in the best interests of the u. S. Economy. And then, of course, the American People. So no, i mean, i dont think i have a clear sense of exactly how theyre going to do it. But i just hope they get together and make this, you know, put this Government Back to work as soon as possible. Yeah. Peter there, we were talking the other day to people and we said, you know, why cant congress do that . And there are some people that say, look, when it comes down to it, the president s got to get in there and get his hands dirty even with a congress thats unreceptive to him doing that. If something bad were to happen, you cant most americans could not cite even one, maybe their own representative. Its hard to blame 450 or 550 guys if you include the senate. But theres one person thats president. Does the buck stop there . Whether you agree with him or not, just speaking with him yesterday in maryland, when you bash over the head with a baseball bat the other side, youre not going to have amicable negotiations. And with the government shut down and youre bashing the other side, whether you agree with that or not, youre not going to have a smooth sail with respect to negotiations. Youll have to take a step back. As much as i hate this, as much as i dont want to give in, let me give a tiny bit just to get this all back together again and lets move on to something else. Peter, doesnt the president have a point when he says, this isnt just like all of congress that wants to act against obama care, it is one part of one party in one branch of congress. Asker for them to basically take something thats the law of the land and hold up the entire government weve moved. Now we just want now that republicans want anything budget wise. Is that right . Changes to the law. This law of the land thing. Its the law of the land. He can decide. Its changes he made that opened the can of worms for other changes wanting to be made. All right. We have data coming. Heather, thank you. Peter is going to stay with us for the hour. Yeah, no payroll, i might as well. Nothing else to do. All right. When we come back, former wells fargo chairman and ceo Dick Kovacevich will be weighing in on the deadline and comments about t. A. R. P. From Warren Buffett and hank paulson yesterday. We know investors and businesses depend on employment numbers as an important economic indicator, so we will bring you the unofficial squawk jobs report. Steve liesmans in lockoup, but hell be here at 8 30. N happen. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Its as simple as this. At bny mellon, our business is investments. Managing them, moving them, making them work. We oversee 20 of the worlds financial assets. And that gives us scale and insight no one else has. Investment management combined with investment servicing. Bringing the power of investments to peoples lives. Invested in the world. Bny mellon. Welcome back, everyone. Yesterday marked the fiveyear anniversary of t. A. R. P. And special guest Warren Buffett and hank paulson joined us and responded to a comment on squawk box last month. Kovacevich said that t. A. R. P. Was one of the worst decisions in the history of the United States. The people think the Banking System is unsound, it is unsound. I mean, because no banks can pay out all their liabilities at one time. So its essential that people believe in the in the soundness of the Banking System for it to be sound. And that took Decisive Action in september and october. I think when capital was put in, what you will see when you look at it, confidence was increased. Credit spreads came in, the markets did better. It made a huge difference. It was a turning point. Our banks were capitalized. Joining us with his reaction is Dick Kovacevich. He is the former chairman and ceo of wells fargo. And dick, its great to have you here today. Thank you, becky. Good to be with you. You made those comments about a month ago. Yesterday Warren Buffett who is a good friend of yours said he disagreed slightly, actually pretty strongly and so did paulson. I guess you agree to disagree on this point . Or do you want to come back at it again . Well, i have Great Respect for warren and he is a friend. But i think the andrew didnt ask the right question. And i dont understand hanks answer when he said that the markets came back. As i said before, shortly after t. A. R. P. Was announced, the stock market fell by 40 , bank stocks fell by 80 and i still asked the question how can anyone claim that t. A. R. P. Increased the confidence level if an entire industry fell by 80 as a result of that decision. So i standby i think it had a negative impact on the confidence, i think the facts support that. I think everyone was well intentioned, dont get me wrong, i think this should have been anticipated. And i think as i discussed on your program, there was an alternative way to do this where you did not have to cause the market to fall as fast if you would have done it a different way. I think they were looking more at the Immediate Reaction versus some of the longer term numbers youre thinking about. It was a situation where it could have been on a run on several banks. And that was the immediate thing they were trying to stop. I think that you could have stopped it any immediate run by requiring those banks who needed the liquidity. And you wouldnt have had the subsequent fall. And thats where we differ. I think that just think of the longterm consequences of t. A. R. P. We have institutionalized too big to fail forever. We have banks reputations. Everyone believes that it was t. A. R. P. That allowed banks to recover and have like wells fargo five years of record earnings. We never used a penny of t. A. R. P. Had nothing to do with it. Dodd frank would never have occurred if t. A. R. P. Hadnt happened. You know, we paid it back within one year and out of 2. 5 billion profit to the government. None of that is known because people believe that main street was not saved and wall street was. And thats just incorrect and i think a big mistake that the longterm consequences were worse than the shortterm consequences. You do make fair points. Of course t. A. R. P. Was more than the banks, right . It was the auto loan, the auto bailout and also housing. If we didnt have t. A. R. P. , gm wouldnt be with us, ford probably wouldnt be with us. It goes beyond just what the banks. But, mark, youre still missing the point. I have no problems if somebody wants to help troubled companies. And if they want that help, what i object to is forcing people to take money that they do not want and do not need. And then the consequence of that is you are your reputation and your stock price falls and the confidence level falls of the entire country. Because if a company that they believe is safe is now got a scarlet letter, although the government doesnt think its safe, they need 25 billion, of course its going to reduce the confidence level. Yeah, we should go back help the companies that need help. And everyone knew who needed help and who didnt. When you force people to take it, the ones the people who thought the companies didnt need it now said, oh, the worlds coming to an end and it did. We should go back and clarify for anyone who missed dicks last interview, he was specifically talking about the idea this was forced on all the major banks. There was that meeting in the room and even banks that didnt want it including dick who didnt want it for wells fargo. It was forced on all of the banks to try to look at the entire financial sector. Dick, while we have you here, what do you think about whats happening in washington right now both with the Government Shutdown and with the debt ceiling debate. Well, its a disaster. It continues to make obvious that our government is dysfunctional, its partisan. They are not doing the peoples work. This is very, very serious. Its serious. Let me say it again, we are going to pay the interest of our debt. We are not going to default on any principle. There may be something to pay later if it doesnt happen on time. But people will get their money back. Again, the longterm consequences as the worlds reserve currency, the beacon of stability in the world for centuries, you know, we looked terrible in the eyes of our own people here in the United States and around the world as a dysfunctional government time and time again. This just reinforces that. A quick solution. Do you find any way to find one . Well, yes, i mean i cant imagine why we cant come together. But if one party is saying theyre not going to negotiate and the other partys saying if you dont negotiate then were not going to have a deal cant come together. I think its true that when president obama was a senator, he voted against increasing the debt limit. And now hes vilifying and demonizing people who are doing the same thing. He did. He voted against it in 2006. He has said this time is different because, i guess, that was a political vote that he didnt actually follow through. Im just repeating were not doing political things now. Oh, i see. I guess i missed that part of it. So so we can come together. And everyones going to have to give up something. I think what has to happen now is we cant separate the Government Shutdown from the debt. You know, we have to do this together. Right. Theres no good to do it half way. There has to be ways to do it. This is the right thing to do. And there has to be negotiations and whether the president likes it or not, i think he has to enter those negotiations. Dick, thank you very much. Oh, sorry. I think whats happening is that theres a belief as always it seems to be in washington today that there is a political value in taking both parties are taking the stance they are. And were playing politics once again on something very serious. All right, we appreciate it. Thanks for your time today. You know the president s going to, if theres one he could take back. Well be back with the squawk jobs report in a second. [ indistinct shouting ] [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. [ male announcer ] when you wear dentures you may not know that your mouth is under attack, from food particles and bacteria. Try fixodent. It helps create a food seal defense for a clean mouth and kills bacteria for fresh breath. Fixodent, d forget it. It is the first friday of the month. We know you want the jobs data, but the government is going to leave you hanging today. Dont worry, squawk box has you covered. Steve liesman is on the case. Hes going to bring us the official squawk jobs report after this. announcer scottrade knows our clients trade and invest their own way. With scottrades smart text, i can quickly understand my charts, and spend more time trading. Their quick trade bar lets my account follow me online so i can react in realtime. Plus, my local scottrade office is there to help. Because they know i dont trade like everybody. I trade like me. Im with scottrade. announcer ranked highest in Investor Satisfaction with selfdirected services by j. D. Power and associates. Welcome back. We are its that time. We would normally be all excited. Lets get to Hampton Pearson who joins us now from the Labor Department with nothing. Hampton . Reporter joe, september nonfarm payrolls not released. The unemployment rate, we dont know. Average hourly earnings, not released. You got to kind of forgive me, guys, but after doing this for the better part of 15 years, im going through jobs report data withdrawal right now and obviously the government is not going to give me any kind of a Rehab Program to get over it. But in all seriousness, you know, weve seen the evolution of how important the jobs report has become, arguably along with the Federal Reserve the most important pieces of data we get from the government and government related agencies every month, the drive markets. If and when we ever get back to normal, we might want to make the case for changing that definition of essential. I cant believe that omb and the Labor Department opm cant get together sort of a data s. W. A. T. Team, if you will, to handle these kind of emergencies if were ever stupid enough to go down this road again. Back to you guys. A lot of reaction in the futures to your report. Were going to keep an eye on those. Wheres santelli . Yeah, weve got to get rick, get his take on the data. Is he do we have him . Oh, there is no rick. In all seriousness. This is something that we wish we had. But its not to minimize what i finally you really do look at some there are some negative consequences to this. There are people that say i havent seen any effect whatsoever. Just because it hasnt affected you doesnt mean there arent people thats right. That actually depend on some of this stuff. But in this case, its friday and its the first friday of the month and, you know, 22 years and i this is, you know, anyway. Squawk box isnt going to leave you hanging. Liesman, always does more. He says well my work shows me this. And hes prepared his own squawk employment report. And well check the futures after your report and see you want to know how i calculated first or get the number first . I want the number first. This is not a real number. What do you mean its not a real number . Its a real number for you. Not a government number. What do you mean not a real number . Its not a government number. Its a number. So it hasnt been cooked or massaged. No seasonal adjustment. No Participation Rate gaming. 158,000 september payrolls according to the squawk box team of economic reporters its fake. This is not real. 158,000. The squawk jobs report official. Heres how i did it. Zandy, you tell me what you think of this. Well, i notice you got 100 dots on the chart but only three on the line. Whats that all about . Well, it means. Check it out, reveal the next bit and you can see the red dot there, thats the actual from august. Come on, guys. There it is. Theres the red dot and thats where the green dot would be. Not bad. But i didnt use that green dot on the line because claims were lower in the month because of the reporting of california, so i added. By the way, a lot of the dots below the line. Now i did one other scattered chart. Put it up there, its the ism composite and jobs. And you can see thats where the green dot would be. A lot more clustering. Thats the composite. Now go to my math. Ill show you my math, take notes, tell me where this is wrong. I took basically an average of four different indicators. Claims average 313, it would be a 225, i gave it a 200. Adp, i added a bunch because you guys have been a little light that i took off some for government. Ism right on the line, it would be 150. Nfib jobs, we got that loost night, he has 9 . The average of those, 158,000 september jobs report up 158,000. And i know i know how much your secret fantasy is that youre really close. You would love this to be close, wouldnt you . Look, this is how the guys do it, more or less. Exactly how they do it. And they do, joe, the four numbers, theyll give different weights to them. It wouldnt be a straight average. Thats the best you can do. Thats why you cant do an unemployment rate. So even that bias is probably reflected in your number as the real government. By the way, its really close to the threemonth average. And i didnt do it that way. Can we check futures i didnt do a Household Survey. You do . How do you do it . I tried to do it. You got a model Participation Rate. A Participation Rate model . Yeah. The one that really matters is looking at the flows unemployment can we see if hampton was still there . He didnt even want to know my number. Im worried about hampton who is having withdrawal. Is he on the floor in the fetal position now with no jobs number . Whats your number . 7. 2. 7. 2. It would have declined. Why . Well, partly because of the claims, but this continuing flow of unemployment to employment, if you look at it, its a good leading indicator. Youre missing something when something didnt happen positively. Youre just a little melancholy about the state of affairs. You listen to this and it really says what im feeling. Hes tearing up, folks. If we could get a closeup of joe right now. By the way, we didnt have the Market Reaction i didnt worry about a war of the worlds moment where the world freaks out on steves numbers. Can we see the futures . I was saying its not real and we also had squawk box number. Reading the screen. Can i make one substantive point, though . No, no, no not today. Please i thought thats why you brought me here. Im looking right now. Im looking go ahead, if you must. Its okay. No, go ahead. No, go. All i was going to say is weve been between 150,000 to 200,000 range for the past two years. Were close to 150, not 200. Youre acting like its a real number. You said its the low end of our range. Hes dragging me into his world. The same way the Labor Department come up with it no, economists would forecast, inputs or claims. Follow the ism, might also do a gdp jobs relationship which is a little bit tougher to do. Thats how you the guys have different models. We should write this down, 158, 7. 2. How light was your adp number. Its about 20,000 light, radio i right . Yeah. So you figure 160, 150, somewhere around there. Im confident, you know. The internals, you look at adp, if you get down into the weeds of it, feels like its weakened a little bit. And this isnt helping right now. Some of the High Frequency stuff. The claims are showing kind of the signs of an upside breakout. The problem with that, weve had this declining claims number, its not been picked up by payrolls. You were doing 200,000 at 400,000 and claims. The claims all layoffs and missing degree is hiring. And it goes back to joes uncertainty about the political environment. The indexes and survey for the Small Businesses show an uptick. Ism services fell. Ism services but it was still fairly high and the ism manufacturing was well, you saw his chart, applied 300,000, right with the ism model . Right. If i could just take a step back and make another serious point which is when you think about what the jobs the reality is in the jobs number, you incorporate all this stuff. Because of the noise in a given months payroll report, you would say, you know what, this one comes in light at 100, but i got high isms, low claims, the other thing. And you would say i have a good bet this thing would be revised up. Its not just one report even though they call it, what, the granddaddy of all reports . We really did need rick today to say that number was b. S. Its politically welch just tweeted this number is not i did not. Did you . No. The dow jones news wire has not picked it up. I think theyre missing a big story here. The classic was showing the futures as hampton was talking and flat lining. Just for the record, there are three bls employees at work right now. Thats it. Out of 2,600. I think theres a pr guy and i think theres a guy to feed the pr guy a guy to get the donuts they say and maybe a security guy. Theres just three guys there and thats why theres no report. And worth talking about, if the shutdown lasts through the survey data the 12th, are we talking about endangering the data . They could have put this data out next month or this month were in right now is an entirely different issue. Before the 12th, its going to of course affect the payroll number. And the collection of the data. Now i think you still give the survey even if the governments not working. I think you still would respond to the survey. But i dont know what happens. Maybe not on the Household Survey side where theyre telephone face to face interviews. Like 50,000 interviews that are done. Steve, thank you for doing the hard work. Youve got to revise that too. A revision. When we come back, were going to find out how Companies Plan for the Government Shutdown. We will bring you results from our exclusive global cfo survey. And then well try to get congressmen from both sides of the aisle to find some Common Ground on the debt ceiling. Plus, if you want to know whats going on behind the scenes at squawk box, you can check out the talking squawk blog. Go to squawk cnbc. Com. Obligations, but obligations. I need to rethink the core of my portfolio. What i really need is sleep. Introducing the ishares core, Building Blocks for the heart of your portfolio. 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Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. Welcome back, everybody. The latest survey results from cnbcs exclusive global cfo council that includes chief Financial Officers from public and private companies show washington and the fed have not affected business decisions. At least not yet. We asked the council before the shutdown whether or not a scenario like that would pose a risk to the feds Strategic Planning and nearly 95 said no way. The debt ceiling, though, that is a slightly different concern. But weakening consumer demand in the Global Economy are clearly the largest external risk factors for this group. When it comes to fed tapering, 72 of respondents said does not change the response. The majority believe it will happen before the Third Quarter of 2014. Of course, thats a pretty wide window. Some time between now and the next year. The council is less concerned about policy issues for the moment, but it is interesting to note that one of the factors they do see affecting companies is the activist investor. When asked whether activist investors affect, nearly 78 responded their actions have some level of impact. For more on our council and the survey results, you can check out cnbc. Com. While Congress Continues to lock horns over obama care, the government remains in shutdown mode. What will it take to get both sides of the aisle to come to some kind of compromise and rise above partisan politics . Joining us this morning is congressman brad sherman, a democrat from california. Congressm congressman desantos, lets start with you. What would it take for you to agree to some sort of compromise with the other side . Well, you know, its interesting. Weve been moving a lot of different bills in the house. We moved off our initial position. The most recent cr we sent to the senate wouldve funded all operations of government on two conditions. One, the members of Congress Actually live under the law that they passed and not get an illegal bailout. And two, that individuals receive the same oneyear delay of obama cares individual mandate that the president unlawfully gave to big businesses. So we think that was very reasonable. Harry reid says he will not deal with anything other than if its what he wants. I would say the president and harry reid say theyre not going to have to deal with issues of obama care. Is there anything other than just looking at the budget itself . Weve moved individual spending bills to address the specific things that the president has enumerated are problems baa uz of the shutdown. National guard, we passed a bill for that, kids with cancer, passed a bill for that. I think the senate should take those up and enact those. We should take the issues we agree with and just get those off the table and not allow that to get hung up in this. Congressman sherman . This is a budget bill. Youre supposed to argue about how much money to spend. There is no argument on that because weve made overwhelming concessions that the press hasnt covered. This continuing resolution spends 250 billion less than the president requested. And its it spends almost the exact amount that the republican ryan budget called for. So its a budget bill, somewhere between compromised and conceded everything. And so now, they want ransom for the right to agree with them on all the budgetary issues. And what ransom do they want . They just want to go after obama care. Yeah, but congressman, the sequester is law just like obama care is law. Thats not a compromise, just agreeing to what is already law in terms of the sequester and the budget is not giving anything on your side of things. Just agreeing to go with the law, thats the same whats good for the goose is good for the gander. Thats the same as obama cares law. No, in this case were coming in below the sequestered numbers, below the budget control act numbers by 72 billion. So thats an enormous compromise already made. And as to letting the republicans just tweak obama care a little bit, i dont think anybody believes that republicans want to improve obama care, straighten out obama care. If you have somebody that says they want to strangle your baby and then they come back and say, no, they just want to comb the hair. Dont let them near the baby. Let me take you gentlemen to the default issue. The budget is one thing, a lot of people have shrugged that off although it does have a serious impact on plenty of peoples lives. What the politicians and business leaders, the markets are all worried about is the idea of a debt default. Now, there is the front page of the New York Times today that says john boehner has privately said he will not allow the nation to default. Do you agree with that position . Right. And actually, we passed a bill a couple months ago called the full faith and credit act which would have made it an impossibility for the government to ever default on the sovereign debt. The wall street journal mentioned it in an editorial yesterday. I think the senate should pass that. That was attached to our initial cr. Default on sovereign debt. I think would not be good for the country. I dont think we want that. Im talking about the broader issue of a debt default. Would you separate the cr from the entire issue of the budget lifting lifting the default limit, the debt limit . Well, our initial, my initial idea was to take each individually, do the cr, get that done, then move on to the debt limit. But default is youre defaulting on the debt that you owe. You know, if youre not if you make a payment late, i dont think that would be good, but i think thats different. I think our bill provides insurance for that. And i think the president was trying to essentially scare the markets the clean lift of the debt limit. Lets forget about the cr for a moment. Would you go along with a clean vote of cleanly lifting the debt limit . I would not do a clean debt limit increase nor do i think that could pass the house or the senate. So the American People believe that you need to have spending reform included when then, yes, that would be correct. Congressman sherman, where do you think we eventually wind up . How long do you believe the government will shut down . Dont know. But we ought to pass a clean increase in the debt limit. It would pass the house immediately if john boehner would simply bring it up. There are 20, 30, 50 republicans who would vote for it, almost every democrat would vote for it. We know you dont play games with the full faith and credit of the United States. As to the idea that we can solve this problem with a paid china first bill, were not defaulting if we pay the interest on the bonds and debts owned by china and others. Were not in default in we dont pay Social Security checks. Were not in default if we dont pay veterans benefits. I think the market would take it the same way. Here on the investors channel, there may be focus on will the investors get paid . Over on the military channel, they want to make sure the soldiers and sailors get paid, on wheel of fortune, they want to make sure the Social Security checks get out. Its not a solution to say well pay the bondholders and wont pay Social Security benefits. We prioritize military and medicare. Once you do that you run out of money for the fbi and veterans pay. Thank you for joining us today. We do home theres some sort of agreement reached soon. Coming up, we may touch on all of this next week, too, and that will be with these guys. Our guest hosts include its not zandy but look at these guys. Pretty big crew. Not bad, right . Alan kreuger, only been gone for a couple of months. Real estate mogul sam zell, Legendary Oil man boone pickens, him, too. Famed short seller, jim chanos, figured out enron and capping it off with iconic leader jack welch straight from the gut and winning you know throughout history, folks have suffered from frequent heartburn. But getting heartburn and then treating day after day is a thing of the past. Block the acid with prilosec otc, and dont get heartburn in the first place. [ male announcer ] one pill each morning. 24 hours. Zero heartburn. Welcome back to squawk box, everyone. In ipo news, pot belly is scheduled to start trading today under the symbol pbpb, pricing 7. 5 million shares at 14 apiece. Thats above the expected range of 12 to 13. It operates 300 shops in 18 states. And the ceo aylwin lewis will be on the show today. That looked like a subway sandwich. I think theyre fatter. But theyre in with the midwest. Good name. Grabs your attention. Ive seen them but never actually should i want one . Should i be lust be for one of the sandwiches . You have to ask phil. Phil lebeau is a big fan. That didnt show me a lot there. That looked like ham and cheese. Maybe they get melty. When we get back, well have more from our guest host. You can talk out the talking squawk blog. Bny mellon combines Investment Management investment servicing, giving us unique insights which help us attract the industrys brightest minds who create powerful strategies for a countrys investments which are used to build new schools to build more bright minds. Invested in the world. Bny mellon. Box. As you can see, futures up about 13 points after the official squawk jobs report, totally unofficial in terms of the government. Thank you to our guest hosts. All three of them are very serious and they did well to remind us that we dont need an orson wells. It wasnt a real number but it was the most fun ive ever had on squawk. It was fun. Peter, greg, thank you. Mark, thank you, too. I already thanked mark. Have a great weekend. Right now its time for squawk on the street. Normally on the first friday of the month we get the big employment report but that is not the case today. That has been postponed as the Government Shutdown reaches day