Transcripts For CNBC Squawk Box 20150915

Tell you about outside the world of business. At least 8 people are dead and five more believed missing after severe flooding yesterday near the utah arizona border. Heavy rain swept away a roadway and these are floods that came up very suddenly. Three people at least have survived the incident. There are at least approximate 13 fires burning right now. Hundreds of homes destroyed. Well have more on both of these developing stories a bit later this morning. First andrew has todays business headlines. Lets get you caught up on the stories this hour. The bank of japan is holding off on expanding its Stimulus Program but warning that a slow down was putting further strains on the economy. Some economists say the boj could ease again next month. Well watch that. Take a look at whats going on with the nikkei closing today marginally up about. 34 . Also we have stocks closing down more than 3. 5 and at a 2. 5 week low, the Global Markets all waiting to hear from the fed on thursday. Thats the big news. Theres no shortage of expectations. The chief Investment Officer now says he sees, quote, below 50 chance that the fed hikes rates this week. Inflation running below target but the cio still expects a move before the end of the year. Used to listen to bill gross and now we listen to this guy. We still listen to bill gross too. Tried to forecast stock pric prices. Citigroup. A global recession starting in 2016 is the base Case Scenario lead by china. Its now our Global Economics teams main scenario and uncertainty remains with the likelihood of a timely and effective policy response to that global recession that seems to be diminishing right now. Everybody is already at zero. Its the reason why a lot of people say it should have happened awhile ago. In corporate news, carl icahn raising his stake in Cheniere Energy to 9. 6 . Hes the biggest shareholder in the natural gas company. A new sec filing showed he paid between 53. 60 and 54. 75 a share for his most recent stake. Last month two directors were appointed to the board. You might remember that last week jim joined us on set to disclose for the first time that he is short cheniere. We have been pretty negative on this space. Its a looming disaster. Everybody figured this out much like iron ore five years ago at the same time so everybody is building these huge plants that are immensely expensive. They cost tens of billions of dollars each. Many of them in australia and pacific rim. The problem is demand isnt growing anymore. Okay. So this to me seems like hes averaging down, isnt he . Yes, if hes continuing to buy in on these things. By the way, he didnt realize that you had icahn going long on these issues. They were crossing trades at the same time. I think hes selling shares to icahn. So far it looks like maybe i dont know, well see. He was selling eight higher levels and icahn was buying. Big tech company in the news. A problem at an apple supplier that could restrict the supply of new iphone models. Issues are said to have effected the back light. Apple placed rush orders to try to resolve that issue. Also yesterday the tech giant announced it was on pace to break its iphone sales record set last year. Also in auto news this morning, the uaw union announcing it will keep talking with Fiat Chrysler to reach a new contract after midnight. It delays a strike. The biggest issues said to involve Health Care Costs. So you wont be seeing that this morning. In other news, bmws new ceo fainted on stage. He collapsed during a news conference. He was able to walk and with us escorted off the stage and hes fine and we hope hes well. Im sure someone is making a joke there about, you know, how the cars were so amazing it caused you to faint. But i wont make that joke. Even though i just tried and failed quite miserably. Your first instinct was better. Well stay there. Hes a new ceo. He is a new ceo. A little nervous. Well, we dont know. Could be some Health Related issue or Something Like that or. Could be food poisoning. Could be a lot of people here. I dont know, we dont know. But there are people that would choose horrific fate other than speaking to a large group of people. No. We talked to about a dozen people. Im used to most of these clowns in here anyway. Trusted coworkers. Im looking at you mack. Welcome back. Welcome back, mack. Mr. Extreme sports. The grandfather that engages in extreme sports and you paid the price, im sorry. Youre not percoceted out right now. The show is important. Are you all right . What extreme sport am i talking about . Frisby. Broken collarbone, frisby. Youre a grandfather. I should be but im not. I started late. Help him hes moving chairs around. Down 25. Dow down 3 and change on the s p and down about 8 points on the nasd nasdaq. Europe was lower based. I figured it had to do with the volatility and flux again in asia and especially in china. Talk about china about every day things are keying off of whats happening over there and you can see there today, 3. 5, if it was here, then you know what kind of point gain, point loss that would be. Its a big number. Yeah, that gets your attention and then oil has been under 45 recently down at 44. 32. Take a look at the ten year. It is fed week and were still below the highest ten year if you look at the ones we monitor, were still way above, our yield is way above crappier countries. Countries that their credit worthiness does not match up with our credit worthiness and they have much lower yields. We worry about the dollar, i guess versus the yen i against the euro, that seems like an okay time to go up a quarter. Euros rallied a little bit. Which again may speak to ideas that people are starting to really doubt whether the fed will raise Interest Rates because part of the reason for that shift was the expectation that the fed would be raising rates sooner. Lets take a quick look at gold which is threatening, again, to break under 1100 level 1105. A little mini rally there as you can see at the bottom. It was approaching 1150 again but now heading back down maybe under 11. Well see. That much anticipated september fed meeting will finally take place this week. A lot of uncertainty out there about whether or not the fed will raise rates this month. Economists argued both for and against a lift off. Should they and will they . They should but they wont. The chief economist at High Frequency economics and covering it is steven parker. Why do you think they should but they wont . They probably shouldnt have allowed the markets to price it out for this week. The fact that they priced it out means they wont want to at this point. They werent telegraphing a rate hike meet so the market asums it assumes its not going to happen. They probably wont want to surprise the markets but they will counter that by suggesting its very close and the key continues to be labor market improvement. The Unemployment Rate is dropping by a percentage point per year. If the key is unemployment, it seems like were at for every reason that they should go ahead and raise there has to be a lot of other factors theyre looking at. Will the Unemployment Rate continue to fall . Thats where global turmoil and the markets come in so, the latest data along are suggesting were well on track. This idea of the market turmoil and worries about global growth, will growth slow enough to stop the downturn. If you project ahead and say unemployment keeps falling here then its a matter of time before the case picks up and the case for tightening is strong. We have been watching very closely with the markets. Theres a lot of extra volatility around this and uncertainty. What do you think happen ifs the scenario jim lays out is what takes place this week . At this point the uncertainty about will they or wont they have is having a bigger impact than the actual hike. You heard them say raise rates. Get it over with. The uncertainty is worse than the act for a lot of these economies that theyre saying are going to be directly impa impacted when you look at the u. S. Economy and places like europe the story is improving. Even with the weakness in china theres a positive fundamental story out there. You think it was sparked by uncertainty from the fed . No, certainly what was going on in china was the spark. The correction is just a normalizatio normalization. Weve been in this period where you havent seen one this is a reflection of slowing growth. You need to find those where growth can be above average. You cant just have the type of low growth environment weve seen. Where is that . Were starting to look outside of the u. S. So while the fed is approaching a tightening part of the phase you look at the bank of japan, look at the ecb theyre much earlier in their policy cycle than where the u. S. Is and as a result youre seeing weaker currencies which are a tail wind for companies in those regions. Earnings growth thats stronger out of europe for the First Time Since 2008 and japan delivered the best Earnings Growth in the world and that trend can continue. So even though we have seen this correction that weve seen a big step down in stock prices you dont think that things are attractive here in the United States . No, i think that there are certainly opportunities in the u. S. But you have to be more selective at this point in the cycle. What youve seen lead over recent years has more the better defensive sectors. The bond proxys. Now you have to go back to this idea of where is the growth. For us that means places like consumer d Consumer Discretionary and the pull back we have seen has given us the opportunity to take advantage of the sectors that have done so well recently and now were getting a second swing at them. We talked a lot about what the fed does. Are we still looking at incredibly low rates for a long time to come . Just comparatively speaking. If you have other Central Banks easing around the globe. In relative terms for sure. Once you get the first one out of the way there will be more. Theyre not going to do just one tightening. You never do just one. Theres always uncertainty. A typical fed tightening cycle is 200 basis points a year. It will be more gradual than usual. Even if they do 150 basis points a year youre still talking pretty low rates in 12 months time but lit build up. After two years if unemployment stays low. What about this idea, the city bank report that joe was quoting predicting a recession . I think the most likely scenario is a global recession that takes place in 2016. That changes the entire Morgan Stanley i think. At this point theres nothing in the u. S. Numbers to suggest a recessi recession. A lot of the rest of the world did go into recession. Particularly emerging markets but we chugged along and its the same scenario here. Look at our exports and theyre falling but if anything the domestic demand numbers are sell rating and the likelihood of us going into recession with Interest Rates this low is pretty low. You know one person thank you, guys one person that does not shy away from large crowds to speak . I can think of a couple. This person has a pretty good head of hair. I try to mimic. Did you see any of that . Donald dump . Donald trump. The donald. You saw some of it, right . I did. I was watching on one network and they switched and put oreilly on and ms and cnn, they did not leave and cnn now they i think one of our producers must be over there because they have a clock showing how many hours, minutes and seconds to the debate. 44 hours, to the debate coming up on cnn. Im surprised we dont have a countdown clock for the fed decision yet. For the fed decision . We usually do that. We usually do. The final countdown. We will be playing that music but they. Oh, we do. We do. But cnn was not at all shy about having the countdown and they were frozen on him for every word. He is whipping up by the way, both of us were flipping around last night without talking to each other looking for this. Yeah. We were watching too. Did you you always read morning money, right . Did you see the lead story this morning. Did they merge with Huffington Post yet . Not yet. Wall street is growing increasingly terrified that donald trump once viewed as an amusing summertime distraction could actually win the republican nomination for president. He took another popular shot on sunday at wall street ripping its lavish executive pay. Continues to rise in the poll. Would be wall street savers in single digits. Its now evaporating in a wave of fear. Is what he said. Says politico. You disagree with it. I dont think i disagree with it. I think thats exactly right. How is hilarys comments on wall street been . Have they been soothing . No, but theyre looking to a republican candidate to protect them. Also yesterday if you watched it he talked about cutting taxes and really talked about corporate taxes how those have to be cut. A very progrowth tax policy is going to come. You always think these republicans are going to somehow vote for a democrat. Its not going to happen. Its politico. If you look at the folks on wall street and even if you look at the way they voted historically by the way, they like hillary. They do. Like i said yesterday, they should merge and get it over with. Because they spew the same brand of politics. Anyway guys, thanks for joining us. Coming up were going to continue the conversation about donald trump. Hes holding a Huge Campaign rally in dallas. Tax plans while taking shots at his rivals. The gop front runner is met by supporters. We have that story next. But first heres a look back at this date in history. Lease the 2015 rc 350 for 429 a month for 36 months. See your lexus dealer. I was going to the library to do my homework. It was a little bit of a walk to get to the bus stop. I had to wait in line to use the computer. Took a lot of juggling to keep it all together. Whats possible when you have highSpeed Internet at home . The Library Never closes. It makes it so much better to do homework when youre at home. Internet essentials from comcast. Helping to bridge the digital divide. Tracie potts reports live from washington. Among the candidates there seems to be one target standing right in the middle of the stage and i think flanked by, correct me if im wrong, jeb bush on one side and ben carson on the other side. Its going to be ben carson for sure because he has come up so much in the polls and when it comes to donald trump going into the last debate he was a front runner but had not really he had just started to pull ahead in the polls. Now he has solidified that lead and that may be one of the reasons were seeing candidates taking aim on both sides. Number one in every single poll. Donald trump drawing 15,000 supporters and protests last night in dallas. Hell be center stage in tomorrow nights debate. The debate, i hear theyre all going after me. Whatever, whatever. Its so hard to attack donald trump because hes not playing by the rules that everybody else plays with. Hillary clinton calls trump entertaining. I kind of wish i had that same sort of mentality. Listen i dont need to tell you anything when i get there peace will be breaking out everywhere. Carly fiorina turning around trumps comments about her face. This is the face of a 61yearold woman. I am proud of every year and every single wrinkle. Dr. Ben carson, now the number two republican. Trump called the world renowned neurosurgeon an okay doctor. Its narrow minded when somebody says well hes a neurosurgeon so he only knows how to do medicine. Thats pretty stupid. Meantime, Bernie Sanders continues to draw huge crowds. This one in virginia. If we werent talking about donald trump sanders would be the biggest story of this campaign so far. No doubt about it hes the really big story of this campaign when you look at the latest polls. The way he displayed Hillary Clinton in iowa and new hampshire. For now thats why she is fighting so hard and campaigning. Donl trump will donald trump will be the focus over the next 48 hours going into this debate. Thank you. We have our countdown clock to the fed meeting. Maybe we need a countdown clock to the debate like cnn has it. But it is on cnn. Its kind of selfserving. Do you have the exact hours, seconds, minutes for us . When does that start in to recall night . Yeah. I dont have the countdown clock but that would be cool if you put one up there although i think everybody will be tuning in regardless. We have a debate. Our debate is october 28th. Its going to be a big number for hours if we do ours. We go beyond seconds. I dont want to give the suits any ideas because we may see that. They may have a meeting and theyll do it like the fed ex guy. Theyll say it like that. Coming up, jeff bezos versus Richard Bransen in the race to space. When we come back a look at yesterdays winners and losers. An a network and the cloud. Its reliable uptime. And multilayered security. Its how you stay connected to each other and to your customers. With centurylink you get advanced Technology Solutions, including an industry leading Broadband Network, and cloud and hosting services all with dedicated, responsive support. With centurylink as your trusted technology partner, youre free to focus on growing your business. Centurylink. Your link to whats next. vo wit runs on optimism. Un on . Its what sparks ideas. Moves the world forward. Invest with those who see the world as unstoppable. Who have the curiosity to look beyond the expected and the conviction to be in it for the long term. Oppenheimerfunds believes thats the right way to invest. In this big, bold, beautiful world. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. Welcome back, everybody. Were in the chairs this morning taking a look at a few stories that caught our attention. If you think you had a bad flight recently check out this video. There was a passenger on board an American Airlines flight that caused quite a disturbance last night. This is her being escorted out. Take a look at that. That flight was in route from miami to chicago. It was forced to make an Emergency Landing in indianapolis after the woman struck another passenger and the member of the flight crew as she was being restrained. The pilot announced a cabin lock down and announced for large male volunteers to restrain the passenger. A chicago lawyer was on the flight and captured this video youre watching. This is cell phone video of the woman being escorted off the plane and taken into custody. She could be heard shouting call my mom. No one on board the flight was injured an an investigation is underway. Just glad that didnt happen in first class. That would have been worse than the screaming brat, right . Wouldnt have taken that. Would have asked for a refund. Ask you to volunteer for a large male to subdue her. Im reading. Jeff bezos is visiting Cape Canaveral today. He will confirm his space companys involvement in new rocket building and launching from the station. Theyre both trying to be the leader in commercial space flight. What about elon musk . No, both want to do that. So its bransen. If you get to a certain level you decide you want to be a Rocket Scientist basically. And youre ready. Its sort of how it goes. I would totally go after the first 10 or 15 have made it safely. Even bransen said hes not going. Who wants to go on the first one. Can we talk about this . Im curious what everybody thinks here. The new apprentice. We talk a lot about the donald. Here it is. From trumped to pumped we now have arnold schwarzenegger. Hes worth 300 million. Donald trump is worth 10 billion he says. Of course they both might be worth it for all we know. Youre fired. Your terminated. Do you think hes only worth 300 million. No, i dont think so. Just a shot. Just for fun this morning. Youre doing your job. His 20 inch biceps, his wallet. This is when it gets a little bit cruel here. It says recently said about ivanka and i werent happily married and you know her father and arnold saying recently his love child was maid was doing terrific so we have just taken the whole conversation down to the gutter. I need to see how i have no idea how arnold would be at this. Hes doing for it charity. Trump was pretty unique at being putting him in the board room and figuring out skills you need to get ahead. Do you think arnold say business man . No. He always said its not going to work. They cant put someone. Its good to get a big name. I dont know how to evaluate real estate. You think hes worth 10 billion. I dont know is not clear enough for you . Well no but you suggested that 300 million is not it. Im suggesting its somewhere between 300 and 10. Is that okay . No, its fine. Do you want to argue about that. Then you dontave to bring it here. Well take a quick pause. Coming up, were joined on set to talk about the companys genetic tests to help predict a patients risk for Prostate Cancer. But first, a quick check on whats happening in european markets right now. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Without the internet i would probably be like a c student. Internet essentials from comcast has brought lowcost high Speed Internet into the homes of hundreds of thousands of lowincome families. It lets students do homework and study at home. So far more than two Million People across america have benefitted. Internet essentials is going to transform the lives of families. I see myself as maybe an entrepreneur. Internet essentials from comcast. Helping to bridge the digital divide. Welcome back. Take a look at the u. S. Equity futures at this hour. The dow looking like it would open up higher. S p 500 up about 3 points and the nasdaq up about 6. 5 points. If consumer news if you already started your Holiday Shopping youre in good company. A new credit cards. Com survey finds 32 million American Adults have begun making purchases. Thats about one out of every seven consumers. Really . The parents are twice as likely as those without kids to have started shopping already and about 2 already finished their Holiday Shopping. Folks, it is september. If youre looking to buy a diamond, this year might be the right year. They have taken a lit by a Global Market slump and slow down in china. Prices of diamonds declined by as much as 29 over the last 12 months. So the ones that you already own are down. Exactly. Dont try selling them now. It is Prostate Cancer awareness month. One in seven mens are diagnosed with the disease each year. Theyre the Company Behind the genetic test that can help predict a patients risk for Prostate Cancer and joining us now is the president and ceo stopping by our set fresh from the companys investor day. Prostate cancer has and treatment detection and treatment, im not sure what to think at this point. Everyone heard the statistics. One out of three men at some point, if you live long enough youre predisposed to possibly having it but then i heard a lot of false positives. People treat it. It may have been okay to leave eight loan and not go in there and mess things up. Whats the current state of treatment now . Its always been known that most Prostate Cancer is not very aggressive unlike many other cancers. The difference is whether or not you can determine which of those are aggressive and which are not. Thats where it comes in because its designed to look at the tumor tissue in prostate and looks at the expression of certain genes in that tumor to determine whether or not theyre expressed at a level that would make it aggressive. What does that mean . It divides a lot or metastisizes. It can. So you find this at a psa test and you say sounds like there is a tumor there and then you use this to see if its an aggressive form of the tumor or not. So its actually further down the treatment paradigm. So psa will give you insight that you may have a Prostate Cancer and you take a biopsy at that point. How many markers are there for the aggressive forms of Prostate Cancer . We look at 46 different gene. Theyre active jeans that measure how fast cells are dividi dividing. How accurate is the test though. We know about the levels being off. But can i trust that completely . How much accuracy can i put in . Its been validated in over 3,000 patients at this point and in fact, yesterday we announced that yesterday some of the final data that we have that shows the ability to test differentiate aggressive from nonaggressive and we tied it to mortality so were able to predict whether or not the risk of a patient dying from a disease based on this test. Whats the time frame that its been studied . That prostate, that data was from ten year data. Is it how do you identify how does something give you a it looks at r and a expression levels in the tumor. A lot of Science Behind that. A lot of science. We looked at all 20,000 jeans and we found out that we found 31 that were very accurate at predicting the thats a lot of stuff thats not expressed. Around 20,000. How about lung cancer . You have a lot of different ones. The same we validated in lung cancer as well. So is there a subset of these markers that are conserved through all cancers . Well, whats interesting is when we originally sought to discover this we were looking at something widely applicable and it turns out these 31 jeans we have been able to show that we see this same pattern so we think this is applicable to a number of different cancers which makes sense. The fast growing cells. If you look inside of the tumor and it has an indication that its growing quickly. Theres going to be a lot of things breaking down. So you make money on this so is medicare going to pay for this and doctors know about it so anyone its going to be adopted throughout the health care system. We just got medicare reimbursement and that will start in october. Thats about 65 of men diagnosed with Prostate Cancer or medicare. That gives us the Largest Group of patients. Were discussing this now and just yesterday we announced that theyre also going to cover the test. Were going to make this available to all men. When can we just do a will the technology ever allow us to test a entire body for specific rna sequences that indicate theres cancer somewhere and youll know early . We try to look if the tumor markers circulated through the blood or through urine. We announced yesterday that we, in fact, have some technology that we developed to look in urine that will be particularly effective at looking at your cancers so thats a way to get an early sign that you might have cancer and detect it normally much earlier there would be no liquid to test, really . Theres no body fluid where it would show up. The thought is in blood depending if the tumor is accessed by the bloodstream. So it could go in. And we have actually shown and done experiments where you can detect some levels of tumor dna actually in blood. The dna from the rna. Yeah frrks the tumor and then we have looked at it as well in the blood. Hurry up. Youre here. Get back there. Crack the whip on all your ph. D. S. Thank you, good luck. When we come back this morning, the ceo of the payroll giant adp is here. First as we head to a break, check out the price of oil this morning. Its up by about 43 cents. This is after you saw wti close at the lowest level since august 27th yesterday. Right now 44. 43. Youre watching squawk box on cnbc, first in Business Worldwide. More data means more freedom to do. Whatever. Thats why at t is giving you 50 more data. Thats 15 gigs of data for the price of 10. Because the more data you have, the better. And right now at at t get 300 credit for every line you switch when you trade in a smartphone and buy any smartphone on at t next. Moms knowafter brushing, mouths often need a helping hand. Listerine® total care helps prevent cavities, strengthens teeth and restores tooth enamel. Its an easy way to give listerine® total care to the total family. Listerine® total care. One bottle, six benefits. Power to your mouth™. And for kids starting at age six, listerine® smart rinse delivers extra cavity protection after brushing. The great beauty of owning a property is that you can create wealth through capital appreciation, and this has been denied to many South Africans for generations. This is an opportunity to right that wrong. The idea was to bring capital into the Affordable Housing space in south africa, with a fund that offers families of modest income safe and good accommodation. Citi got involved very early on and showed an enormous commitment. And that gave other investors confidence. Citis really unique, because they bring deep understanding of whats happening in africa. I really believe we only live once, and so you need to take an idea that you have and go for it. You have the opportunity to say, ive been part of the creation of over 27,000 units of housing, and to replicate this across the entire african continent. Welcome back, everybody. Take a look at the traffic this morning. If you work or live in a major city youre no this. Now the u. S. Transportation secretary says new york will be the testing ground for a Vehicle Safety devees. The smart Device Installed in cars and warn motorists of impending dangers and congest n congestion. Traffic lights at key intersections will be an information to the motorists. The pilot programs focus is midtown manhattan, and you can have all the technology in the world, i dont know if youre improving traffic situations around rush hour here. I thought the mayor wants to get rid of the pedestrian walkway potentially . I heard that. Anyway, lets see otherhead lines this morning. The google glass engineer who left the company for facebook has returned to the search. He left for facebooks Virtual Reality startup last year, viewed as a major poachment for facebook. Hes back, now, though, at google to work for the company, alphabet. His profile reads, g is for gadgets, glasses, and goggles. Thats actually a huge deal for google, and the other question, of course, what did he figure out at facebook . Right. Planning on making a trade or two this morning . Check out a story in the wall street journal suggests morning is the worst time to trade stocks. I think we had this is an intuitive conclusion, i think, because of volatility on the open. How many times have you seen it where the bottom of the stock is hit within the first half hour of trading, and if youre selling, you can bottom it out. Thats what happens for individual investors. The piece suggests when you buy right at the open, chances of you getting the best price for a stock are lower and swings tend to be bigger. The panic happens right at the beginning. By the end of the session, you look at it, and its even gotten worse if theres not a lot of liquidity with the weird vacuums where stocks go down where they were, obviously, bad trades. They dont reverse sometimes because theres no bids, and it could be 25 below a market close on a blue chip and it hits it. Right. Thats a problem with Investor Confidence right now that we talk about a lot. How do we address that with all this computer stuff . Lets turn to adp. Every month, the markets anxiously await the employment report for a read on the nations labor market. Now, the payroll giant offers a check on how Health Care Costs affect businesses entering into the private exchange game. Right now, the Vice President and cfo of adp and a member of the cnbc global cfo council. Coming to you for health care data, but before we get there, explain to us, youre getting into the Health Care Game itself . Yes. Adp had been in the Administration Business for a long time, and once youre in the benefit and administration system, the question becomes, how do i invest in the future, and what do i do with private exchange, and can they integrate in a good way, and can i make that offering . Youre playing against the big guys . We found an innovative way to partner with the big guys because our offering invites brokers to participate in our technology, so its really a partnership between adp offering our processing enrollment capabilities on our platforms if youre an employee, how do you see this . In practical terms. If youre an employer and decide to offer a private Health Exchange for your employers, you will get an amazonlike shopping experience. Your employer gives you a certain amount to distribute to the insurance you deem appropriate for you and your family, choose maybe a high deductible plan its your plan . Its the plan that brokers put together for our clients, and so the interesting part is we dont, adp doesnt have particular experience in like selecting risk and so forth so we partnered with the Health Broker insurance policy industry and they provide plans that tuck into our applications. And because of that, in terms of the data that youll get, youve been a great sort of indicator, barometer of whats going on. Yeah. What will you get that you didnt know before . Well, i think, number one, our client and customers benefit because that information gets integrated and we can apply and administer the data and see how employees are doing. Its mostly a benefit for our clients of leveraging it and getting compliance in partnership with that private health insurance. All right. Youre part of the cfo council, so youre here in the flesh. We always give the information about what the cfo council says about all sorts of things, including, for example, a fed hike or not. What do you think is going to happen, and what do you think should happen for your business as you see it . Well, i think the odds are that there will be no action in the next couple days. Right. But we have been on record, i think, for a long time that the labor markets are quite healthy and quite strong, and ever improving, really, and i think so the doves are wrong . Its not as weak as you think . Personally, i would take the bandaid off. 25 basis points will not make a difference at this point. You have to start. The economy and Economic Situation in the u. S. Is healthy right now. What do you think employment looks like a year from now . Well, we have seen really 200,000 jobs a month created in the private sector, very broad based, all industries, Small Business right now, carrying what about the wage argument, though . And the wages have been stubbornly low low growth rates, but we have seen a slight increase in turnover rates, and when you switch jobs, you get a higher rate, and as the economy improves, you get a late cycle wage growth also improving. Okay. Leaving the conversation there, thank you for coming in this morning. Thank you so much. Appreciate it. When we come back, a special hour of squawk box, conversations for the next 20 years. Todays focus is education, debt and education of the future, our guests are Georgetown University president and that of Arizona State, and much, much more. Stay tuned, well be right back. vo what does the world run on . It runs on optimism. Its what sparks ideas. Moves the world forward. Invest with those who see the world as unstoppable. Who have the curiosity to look beyond the expected and the conviction to be in it for the long term. Oppenheimerfunds believes thats the right way to invest. In this big, bold, beautiful world. I was going to the library to do my homework. It was a little bit of a walk to get to the bus stop. I had to wait in line to use the computer. Took a lot of juggling to keep it all together. Whats possible when you have highSpeed Internet at home . The Library Never closes. It makes it so much better to do homework when youre at home. Internet essentials from comcast. Helping to bridge the digital divide. 20 years of money, power, and mayhem. 20 years of unprecedented access. And 20 years of bringing wall street to main street. Its not just an individual stock picking moment but a market times situation. It is. Now time for the next 20. We tackle the future of education, what does College Look Like in 20 years . How will we pay for it . How do we prevent another generation of getting locked into trillions of crippling student debt . Here to tackle these challenging questions, president of georgetown, and michael crowe, president of Arizona State university, and bob kerry, chairman of the education focus institute. This special hour of squawk box starts right now. Live from the heart of business, new york city, this is squawk box. Welcome back to squawk box here on cnbc, first in Business Worldwide. Were counting down, yes, we really are to our big debate on october 28th oh, no, no. Were counting down to the cnn debate tomorrow night. No, no. Okay. Were counting down to the big nondecision im still hoping they have the nerve to do actually do it. Look, i think its a tossup, although, i think people do it. People say they have not telegraphed anything. Has kyle gotten any shots yet . Yes, lots. When he knows to this day, when my kid knows theres one coming, its a week of angst, and they go, wow, it was nothing. Thats the way it is. Its a week i dont tell them a week in advance. We pull up at the doctors office, and why are we here . Oh, thats nice. You tell in advance . Look over there. Well, eventually, hes not going to buy that. Im already there. Anyway, among the latest calls, the chief Investment Officer says he sees a below 50 chance that the fed hikes this week. The main reasons, global weakness, uncertainty around consumer sentiment, and inflation below target levels, but well talk to squawk market master Jeremy Siegel in 15 minutes to ask him this question as well. Among the top stories, shanghai suffered a late session selloff, citing fears of the economy and doubts of the future stimulus. Bank of japan keeping Monetary Policy unchanged, boj maintaining the plan of more than 650 billion in annual asset purchases. They thought they might increase asset purchases. This is futures at this hour. Looking at green across the board, dow looking to open higher, and s p up four points, and nasdaq up 7. 5 points. Apple insider reporting a problem in an apple supplier could restrict supply of new iphone models, a january these company affected companies of the back light. Report says apple placed rush hours with another supplier to resolve the issue. Yesterday, the tech giant said they were on pace to break its iphone record sales set last year, and security researchers have now uncovered previously unknown attacks on cisco routers that direct traffic around the internet. Theres been 14 instances of hacked routers, and they replace the operating software on routers and access data from companies and government organizations that use them. What . They say the attacks have been happening for a year. Cisco alerted affected customers. You might remember there was a different worry at one point, was that somehow the nsa was spying on everybody else and was taking those routers before they were shipped and putting their own whatevers in them, and so now you have everybody spy versus spy. Thats too techie to me. Whatever. For us, today, were tackling the issues of Higher Education, and now for the next 20 years. Seriously late loans on the rise, becoming americas next big crisis. Our Senior Personal finance correspondent is joining us now with more. Shes taking a look at student debt by the numbers. Sharon, good morning. Good morning, becky. You know, taking on debt is a central part of the College Experience for many students, tuition is rising 6 above the rate of inflation, rapidly outpacing the cost of other goods and services, and with some 1. 2 trillion in outstanding Student Loans taken out by more than 40 million consumers, the consequences of Rising College costs and a generation taking on this debt is dire. Already, many young people put off buying homes and delay starting a family too, but the greatest issue comes from default. P per borrower was 15,000, and Student Loans make up 10 of the consumer debt, but the amount of seriously past due payments totalled nearly onethird of all seriously past due debt payments. Whats more of the total 1. 2 trillion in outstanding loans, only half the amount is actually in repayment at this time. Becky . Thank you very much. That brings us to todays squawk box conversation for the next 20 years, a discussion about the future of Higher Education as the student debt crisis heats up, and the cost of college soars. The president of the Georgetown University, a private university with more than 17,000,000 students enrolled, the longest serving president in the schools history, and michael crowe, the president of Arizona State, and thats a Public University with more than 45,000 students, and the university partnered with starbucks giving employees there the chance to complete their degree online there for free. Bob kerry, president of the new school for a decade, and now executive chairman of the minerva institute, a university that trades physical classrooms for online video seminars, but its more than that. Lets jump into this right now. Gentlemen, thank you, all, for being here. I think the biggest problem is tuitions just too high. Thats a struggle for people to meet it. I wonder if you can tell me what happened and how to fix it. Senator, start with you. First of all, we have a competitive advantage of the rest of the world in Higher Education. You have to start on the education side and research side. Theres a lot of problems, but were not suffering as we are in many other industries. We produced a balance of payment surplus in Higher Education. Tuition outstripped inflation. The actual cash tuition has not, and the big problem with debt are students who do not complete their work or students who find themselves simply not able to find a job. This face looks a lot different until i went through makeup back there. I was unpresentable 15 minutes ago, and the woman doing the work is paying 780 a month to pay off her daughters tuition at nyu. Thats the problem, its a substantial burden unless her daughter finds a job to pay the debt back. We have 200,000 Social Security recipients having their Social Security check reduced as a consequence of student debt. It is a problem. The biggest problem for students who dont complete the work . In terms of how to arrest that . My own view, across the board, Higher Education people are adjusting, trying to adapt to bring technology, figuring out how to use their facilities more often. My own view as well is that the regulators have limited competition. We have about the same numbers of of people in the space, and i think the regional creditors have regional supply and a consequence with rising demand, economic and noneconomic demand, you get price increases beyond the rate of inflation. Im very critical im on the board of the agency thats supposed to be regulators the regular laters, but they could do a lot more to bring more competition into the system. Jack, talk about Georgetown University, obviously, you all have a program to help kids who cant pay for that. We do. Its a unique program. We do. It is tuition of 63,000 a year with room and board. In our case, one of 25 private universities or colleges in the country who are need blind of admission and meet all needs of our students. A rare situation. 25 of us are able to do this, but i think the situation regarding student debt, its complicated for many different dimensions, but i think its important to understand that the underlying fundamentals are still very strok strong. The average debt a student takes in the country today is about 29,000. If you think about the average starting salaries with a b. A. Degree, its roughly 46,000. The payment for that debt can be managed within that kind of frame work, but theres other elements. The average young person will be employed right out of a b. A. Degree and change jobs five times in the first decade after they leave, and age for Financial Independence in our country today is 31. One reason we have delays in starting families and purchasing homes is we have a very different Economy Today in our country. The economy itself, i mean, if youre still changing jobs, youre employed through the entire time, you expect you have enough stability to pay off a loan like that. Well, theres flexibility embedded in the Student Loan Program including income cop tin gent payment that ought to be the standard for every student who takes out a loan. Right now, its not used nearly enough by the students who are impacted by it. What do you mean, if their salary goes down, they have the flexibili flexibility . Payments go down. They are not aware of it . Not aware or not taking advantage of it. Theres a number of decisions i think individuals are making that we can help improve as we go forward. Michael, that makes the problem sound much less bad than we think it is on a big level. Im not entirely conconvinced. What do you see with your students . We see huge value for students who complete. The rate of return for a completer on investment they make in Higher Education is 12 or higher per year over their life. Youre not going to make very many investments that get that rate of return anywhere. What happens is you got over half the students starting college are not finishing college. So the problem is really a problem of completion. Why are not finishing . A lot of reasons that have to do with, i think, the need for more innovation in the way we do things, more structural innovation, more technology innovation, speeding the process, and so forth so thats where we focused energy is on innovating and changing the design of everything. Weve seen our completion rates go up dramatically, and we also, this is important, and this is truly important is that in the lower half of family incomes, completion rates are unbelievably low, and the lower quarter of family incomes are under 10 for College Graduates, and so you add to that, then, this phenomena of the forprofit universities, that have even lower completion rates and higher debt default rates creating this storm of confusion. There is huge confusion. Should these people not go to begin with or just not afford to stay this once in . Not that they shouldnt be going. Not Everyone Needs to college or everyone should go to college. Theres a lot of opportunities to develop ones self, but if you go, you should complete. Do you think that you or the entire industry does a disservice to students who you think shouldnt be going to college who say that they should . Ive never met anyone who shouldnt go to college. Okay. Youre going to disagree with him on this . What i say is this, every year right now, there are 440,000 young people who finish in the top half of the sat or act, if they got in a top 400 college or university would graduate at a rate of above 82 and have lifetime earnings a Million Dollars greater than if they just finished high school, and theres 11 million jobs that are created in the next decade that require post secondary education that will go unfilled because we cant get these completion rates higher. So it is about completion rates. This is what people miss is that its about figuring out how to take a Broad Spectrum of individuals and getting why bend the cost curve . Isnt that half the battle here . If i went to your university today, whats the bill for the years . 62 times four. Does that make since for you . If you saw the admission over the course of the lifetime, yes. What percentage goes to the actual education versus research at your institution . W are spending far more than what you are providing for us in terms of even if even if you pay the maximum. We contribute even more. Whats the full cost all in then on my if i pay 62 a year, what how much are you subsidizing if i pay the full fare . Subsidizing is not quite the right word. Okay. We are adding more to the overall experience that youre having. But, andrew, my guess is that at asu and georgetown, default under 5 . 99 point plus. The default rate is really an important topic because in my view, the feds ought to require the universities to have skin in the game. I say 25 of the loan default goes back to the university. They are enrolling the student. If they know that loan default comes back to them, they are likely to Pay Attention to the curriculum and Pay Attention, what is the student taking . The fed spit out data on saturday that are going to give all of us a pretty good information about what do i earn ten years after graduating . Theres a website that came up in georgetowns case its 83,000 starting salary. We cut it with a high quality curriculum because we dont have buildings. We lease residential and common area space, but those buildings are expensive. Now, it may be that buildings are great. I dont know, but it was exceptionally difficult to get regulatory approval, and i want to see regionals go to amazon, say mcgraw hill education and others and google and say, if you hire faculty members who all have nobel teaching, well give you regional accreditation and give your students a regional accreditation curriculum. Thats the problem. I mean, if you gave me a billion dollars today and said either do a Heart Transplant Center or a university, and the most important variable is the length of time for regulatory approval, we transplant hearts. Thats easier than to get Political Science 101. Bob, we had the conversation before. We have. You have to have a graduating class before you a ri credited, and no one wants to join a university that is accredited. That is the red queens rule in alice in wonderland. Thats right. It takes seven to ten years under normal circumstances. What weve seen in the past is the sector brought regional accreditation and adopted the same model, and pricedunderpar the most expensive private, and right above out of the state tuition and made 20 knowing that the defaults go back to the students, not to them. With terrible outcomes. Outcomes that are unjustifiable. You have to Pay Attention to how we regulate. Im serious. If any regional acreditor went to mcgraw hill or amazon or google saying the faults have to be nobel laureates, whatever, say georgetown and asu, demonstrate that you got really high quality up front, and well allow you, before you graduate your first class, do regional accreditati accreditation, thats phenomenal innovation, higher quality, and lower costs. You dont have that today. The key, in fact, is innovation. Thats kept prices rising significantly. Its something all of us worked on significantly, which is to find ways to drive innovation and move towards individualized learning, move towards helping people to move through college and be successful. You have to have environments that allow innovation and stimulate innovation. Ive been in a number of debate saying its not proven Online Education works. Excuse me, when its time for you to learn, you sit in a classroom and wait for someone to show up . No, you go online and learn. Thats going on in the libraries right now. Yeah. Faculty increasingly asking for software. Were past that hurdle. Were on the innovation curve like no tomorrow. Its our main raise. Thats why were moving forward. What cant be lost in this, we need more Higher Education, more students need more opportunities, and we need to see them through. The single most important decision a family could make is to find a way to get their child through a bachelors degree. That is the key right now in our country. Its got to be the right bachelors degrees, jack. Theres degrees and theres degrees, some produce no job, no economic opportunities, and others, georgetown, asu that will. I think we have to be honest about there. How is a student know the difference . They know it looking at the data from the the fed. Its going to tell you what you earn. Well, theres a lot more thing other than a job. Not if i got student debt, theres not a lot more things. The average starting salary for a young person with a bachelors degree now is 46,000. That can service jack, i dont do a deposit slip with an average. I do a slip with whatever im earning. All im saying, sure thats true at georgetown and asu, but im not worried about georgetown. You talked about the top 400, we have 7,000 out there trying to enroll students. I understand. We are going to its got to be a real nobel prize too. Economics of not how about peace . No. No. In fact, that should disqualify you. We will continue the conversation on the future of Higher Education with the closer look at the classrooms of the future, both brick and motor and online and a look at the Athletic University systems. Lets look ahead to the markets ahead of todays big meeting. Jeremy seigel will join us next. Without the internet i would probably be like a c student. Internet essentials from comcast has brought lowcost high Speed Internet into the homes of hundreds of thousands of lowincome families. It lets students do homework and study at home. So far more than two Million People across america have benefitted. Internet essentials is going to transform the lives of families. I see myself as maybe an entrepreneur. Internet essentials from comcast. Helping to bridge the digital divide. The countdown clock is ticking. On thursday, the Federal Reserve decides whether to raise Interest Rates. If it were to do that, its the first time in nine years. Thats another six years. Anyway, former treasury secretary Larry Summers is one market watcher calling for a delay. Imf managing director warning a rate rise could trigger panic, turmoil in emerging markets. Joining us now, a long time market bull warton finance professor, jeremy siegle. We like prices to go un. I understand that. Really, a panic, the end of the world, the apocalypse . The 12 horsemen . 25 basis points, seriously . Yeah. I mean, lets get it out of the way. I think uncertainty is hurting stocks more than an actual rate increase. Okay. Im in favor of a rate increase, and i believe dont forget, were not just going to get an onoff rate increase or not. At 2 00 thursday well get a statement about the intentions of perhaps further increases or not. Remember janet yellen used the term we can be patient, and then later described that as at least two meetings. She can say were raising rates and can be patient in raising them again as we assess the economic and Market Impact of those rates. Even more importantly, at that 2 00, we get a new dot clock, the projections of the fomc of what future rates are going to be, and i think thats going to be very important because i think they are going to come down dramatically for 2016, and so even if we get a 25 basis point increase with dovish language and a lower dot plot i think we could have a stock market rally, even though everyone or so many people are really fearing come and loom with the rate increase. So now, supposedly, if you look at the probability the fed has not prepared us for the 25 basis points because its a shock. So were not ready, were not prepared. Sounds absurd that we need to be absolutely prepared for it or that drk and, you know, i say thats ridiculous other than the spoiled brat traders that if they are surprised, they could cause something this time, so the fed might be looking at these guys that are able to act quickly, and maybe they do do you think they are going to delay . They probably wont do it because its not indicated that its going to happen. I think this is very important. All those probabilities that weve been listening to about what the futures market says the fed is going to increase, and, you know, saying 2830 , those are predicated on the assumption that the fed will immediate ly move to the midpoint of the range of the fed funds, expected to be 2550 basis points. They may not. Theres some indication they stay at the low end of the fed funds, and if they go to the 12 basis point, about the midpoint now and go to the low end of the funds rate 25 basis points, actually, the fed funds market predicts theres greater than a 50 50 chance that the fed will raise rates, so i think that this assumption that they are immediately going to move it to 37, the midpoint of the next range, is not necessarily warranted, and i dont think the assumption that, oh, the traders have not built anything like a rate increase in is also an unwarranted assumption. I think the market is more prepared for this increase than many, many traders believe it is. I would be, you know, it might bring a tear to my eye if they were to actually not have feet of clay and actually do, you know, what they actually but, like so many things nowadays, the divide between those that think it should happen and those who think it shouldnt happen, you can almost do a litmus test on where someone comes down on the political spectrum. Yeah. And you just put them in the groups theyll be in. Larry summers, all the euros, you know, and on the other side, people just as strident they should do it. Strange, isnt it . The weirdest thing is, it probably adds to income inequality, and yet all the liberals dont want them to raise. Well, it certainly adds to uncertainty which is not good for any of the markets. I dont get it anymore. Nor the economy. I agree with you, joe. They should move on thursday and i think they are going to. You do . Its going to be very close. It will be exciting at 2 00. All right, good, yeah, i think they go. I think were going to say yellen is a hero. All right. Thank you. Well see about that. Coming up when we return, well continue this conversation on the future of college education. Were going to ask our experts what classrooms are going to be looking like in 20 years from now, and how online courses will continue to change the game for universities. Were back in a moment. Excellent looking below the surface, researching a hunch. And making a decision you are type e. Time for a change of menu. Research and invest from any website. With e trades browser trading. E trade. Opportunity is everywhere. I built my business with passion. But i keep it growing by making every dollar count. Thats why i have the spark cash card from capital one. I earn unlimited 2 cash back on everything i buy for my studio. And that unlimited 2 cash back from spark means thousands of dollars each year going back into my business. Thats huge for my bottom line. Whats in your wallet . Welcome back, everybody, cnbc, first in Business World way. Carl icahn raising his stake to 9. 6 . A new sec filing shows that he paid between 53. 60 and 54. 75 a share for the recent purchases. Last month, two icahn directors were appointed to the board, and, of course, last week here on squawk box, janet joined us on set to publicly disclose for the first time he called a looming disaster. Check out shares of the energy this morning, youll see 55. 5 as the last trade. In auto news this morning, the uaw Union Announced they will keep talking with Fiat Chrysler to reach a new contract. This delays a possible strike. Analysts say it shows the two sides are making progress. The biggest issues said to involve Health Care Costs and changing a two tier pay system. Ford and General Motors agree to extend their current contracts. In other news from the frankfurt auto show today, bmws now ceo fainted on stage, collapsing talking about latest models in a news conference. He was able to walk and escorted off stage. Coming up, when we return, more of the special conversation on Higher Education in the next hour, American Airline Ceo Doug Parker joining us as we head to a break, look at equity futures in the green right about now. Back in a moment. Opportunities arent always obvious. Sometimes they just drop in. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. You totalled your brand new car. Nobodys hurt,but there will still be pain. It comes when your Insurance Company says theyll only pay threequarters of what it takes to replace it. What are you supposed to do, drive threequarters of a car . Now if you had Liberty Mutual new car replacement, youd get your whole car back. I guess they dont want you driving around on three wheels. Smart. New car replacement is just one of the features that come standard with a base Liberty Mutual policy. And for drivers with accident forgiveness,rates wont go up due to your first accident. Learn more by calling switch to Liberty Mutual and you can save up to 509. For a free quote today,call Liberty Mutual insurance at see Car Insurance in a whole new light. Liberty mutual insurance. Welcome back, Higher Education changing course, a larger number of students leaving the class for online curriculum to how they get in school to what and where they are taught, what will the future of education look like in 20 years . The Education Panel is with us, the president of Georgetown University and president of Arizona State university, and senator bob kerry, former new School President , and, of course, executive director of Minerva Research and scholarship. Moving to the classroom online. If youre a motivated student, i can i understand why a student might use a computer, an ipad and learn themselves. What i worry about in this online world is if youre not if youre not motivated to do it, that you wont, and that, actually, theres a lot of students, by the way, i include myself on the list, that needed a Little Hand Holding along the way. How do you do that in an online world . You do it. Its not one or the other. What it is is augmentation. Were finding new ways to augment learning, now ways to make faculty members be able to have more impact, and so its not an either or. You can operate in one mode or another, but its not about that. At the end of the day, in your case say you were slow in math or a particular problem with a con concept, the Technology Goes back to work with you individually, allowing you to find your own path, allowing you to find a way to advance and keep up with everybody else, and so its an empowerment platform. What were exploring, the single most valuable thing we provide in our context is time for our students to be with our faculty. Any way in which we can move some things into an online context to enhance the quality of the experience our students are having with our faculty is something we want to pursue. The central problem is if you look at whats going on with the technology, the cost simply to drive knowledge is driven to 0, and its threatening. If i learned for 20 years how to teach accounting, im threatened by this, but its fact and reality. Back to what i said before, to find out, and i absolutely agree with michael. Its a false choice. You dont have to choose. I dont have to choose whether i interact with human beings if i use facebook, if i use twitter, if i use google. I use all these things at the same time i get support from human beings that are friends of mine. How much of the digital component is about lowering the cost curve and providing the best if you decide that carl was in an internet age, and thats how you would learn, you learn from him, or if you decided you wanted to learn law or, if you wanted Larry Summers to teach economics, theres a class at harvard, and thats how you learn. With the western regional creditor went to facebook, google, twitter, said heres three things to do, what you see is the same deployment of Technology Changing everything. Its not changing Higher Education because regulators protect the marketplace. Does not mean they are not bringing technology or that innovation is not occurring, but its occurring slower in my view than it would be otherwise. I agree its occurring slower, but heres what we learned in the last few years. We learned you can create these learning environments to get tremendous learning outcomes, tremendous changes in graduation rates, tremendous changes in math, science, and Technology Absorption rates, we never did any of these things before. We can do them now. What were finding is that Technology Empowers success and lower costs and allows the faculty to be more engaged in what they do best. What do you think about the College Experience, though . In an in a purely digital realm . There are people are now offering some degrees completely and utterly online, right . What do you think of the dating experience with technology increasing the ease of which i can make contact with another human being . It is its a false choice. Tmi, bob, tmi. Tmi, okay. Too much information. Im just saying im thinking of the asu College Experience, thumbs up, georgetown is okay, but they are higher ranked than we are. Before i was rudely interrupted, the point youre talking about tinder. Keep it to yourself, god almighty, youre a senator. I didnt say it, you did. The problem is theres debate typically thats set up is as a choice that youre presenting here, it does not have to be that choice. The central challenge is a regulatory issue. The boards of the regulators are institutions that protect, and what they are afraid of, i understand the fear because when you look at what happened to knowledge december semination, the cost is driven to 0, but we are organizer as if i should be paying 600 fully discounted per credit hour to transfer that knowledge. Andrew, one thing to keep in mind, and this is why i respect what michaels been doing at Arizona State so much, the earlier conversation, what we have to be focused on now is creating more opportunity for education. If some of that can be done online, that is going to be a plus for everybody in our country. I dont think anybody would argue that what happens on our campuses is different and has advantages that are hard to replicate online. Let me ask another question. Is does the market work in terms of driving the majors and the choices that students are choosing in terms of what they are doing . We constantly hear, we have ceos here constantly saying theres not enough engineers in the country. We have to go elsewhere. We go to india, here, here, and here because we cant find them here. Andrew, keep in mind, since 1983, our economy outperformed Higher Education in terms of jobs required with post secondary education and estimate 11 million more are unfilled. Were under producing, what people dont understand. Theres a limited supply of College Graduates and stem majors. How do we work on that . We doubled the number of stem majors with technology, broadened who has access and success, more than doubled the graduation rate, making those things happen. What people are after are after a certain salary they want to pay. The answer to markets is not working well. No. Because, again, i only got one dead horse im beating here, but the regulators limit the supply, and demand goes up, economic demand as well as noneconomic demand. That is demand thats driven by Student Loans and money coming out of uncle sugar. That demand is going up, and the supply is being limited. Mike, are you saying, though, if employers pay more, theyd find them . No. Im saying its partly that. Theres concerns and complaints from industry, thousands of people coming to our institution searching for people. Its about price and what youre willing to pay, and partly about building a lifelong education rather than assuming that the College Graduate is ready to go. If you graduate from college and join the marine, theres 12 weeks in officer school, 12 months in training to do the job. People need to understand education and training is a lifelong process. Speak to the pay issue, if a company decides to employee engineer in india opposed to the u. S. Because the disparity in pay, part of the problem, then, becomes the cost of college. Well, partly, i mean, thats oversimplifying. Very. The local economy, but, i mean, in the american economy. We operate at a certain level. What we need to do is outproduce the better graduate. We need to produce the best College Graduate possible that outperforming anyone else back to technology. Technology, then, allows us to do that. Our theory of practice right now moving forward is getting an Electrical Engineering major, double in history, and speak german and english perfectly . If people know theres high paying jobs in engineering, is that enough to induce people to go through four years of engineering . No. Its not, is it . No. Theyll do something easy like journalism. We see changes in the area using technology to innovate people to individualize their learning, broaden their learning, and lower their costs. There are ways. Stem is tough. Four years where your nose is to the grindstone. Tough if taught in the old style. We changed our faculty, changed our facultys behavior, enabling them and enhancing their technology. Even the curriculum, you are signing up for something vastly different than a community major. A quick break, but any other countries or schools that have squared the circle . Solved the issue the making stem actually attractive to students . Countries . Yeah. Countries or institutions where you think they cracked the code . There are smaller countries, you know, everybody talks about finland and singapore, they are smaller with a different set of problems, but i dont think the United States of america, again, like i said at the top, were not dealing with failure here. We have the competitive advantage in science and in regime education. Now, we got significant problems at the lower end with big equity problems because theres a lot of kids coming out of households that cant afford to go to college. Its what jack talked about in the beginning, the quality is there. They just dont have the money to be able to do it. Okay. Were going to continue the conversation. Thank you, guys, a great conversation. When we return, a discussion on Higher Education, this time, though, tarkling the future of higher athletics, including pay for play. Look at u. S. Equity futures in the green. Back in a moment. This just in 50 million customers data was not compromised this morning in a Security Breach that didnt happen. Wall street. Not rattled. At all. No. Not at all. Not at all. I mean, look at the day. Sir. Sir. What went right . What went right . Everything. Thank you. With threat intelligence, behavioral analytics, and 6000 experts, ibm security will help keep you out of the news. My dads company wasnt hacked today. Cool. So wi got a job ews . Ill be programming at ge. Oh i got a job too, at zazzies. friends gasp the app where you put fruit hats on animals . I love that guys, ill be writing code that helps machines communicate. interrupting i just zazzied you. phone vibrates look at it friends giggle i can do dogs, hamsters, guinea pigs. You name it. Im going to transform the way the world works. proudly i programmed that hat. And i can do casaba melons. Ill be helping turbines power cities. I put a turbine on a cat. friends ooh and ahh i can make hospitals run more efficiently. This isnt a competition awe believe active management can protect capital long term. Active management can tap global insights. Active management can take calculated risks. Active management can seek to outperform. Because active Investment Management isnt reactive. Its active. Thats the power of active management. Happy birthday, squawk box. 20 candles are easy to blow out, its hard to blow out 87. Joe, becky, andrew, a happy 20th birthday. Happy birthday squawk box. You guys are doing a great job. Every year you get better and better. vo what does the world run on . It runs on optimism. Its what sparks ideas. Moves the world forward. Invest with those who see the world as unstoppable. Who have the curiosity to look beyond the expected and the conviction to be in it for the long term. Oppenheimerfunds believes thats the right way to invest. In this big, bold, beautiful world. I was going to the library to do my homework. It was a little bit of a walk to get to the bus stop. I had to wait in line to use the computer. Took a lot of juggling to keep it all together. Whats possible when you have highSpeed Internet at home . The Library Never closes. It makes it so much better to do homework when youre at home. Internet essentials from comcast. Helping to bridge the digital divide. Got, like, online i got georgetown with hoops and asu here. Youre asking me, do i know how to keep my mouth shut . College at leases may have more cash, allowing s ining sti after a heated debate of the role of payments in college. President of the georgetown and michael crow, university of Arizona State president , and former new School President , bob kerrey as well. I dont know what basketball for georgetown is i cant hard for me to find something negative, but sure there is something. Its great for the fans and money brought into the school, but can it somehow make this Student Experience for those athletes not all that it should be . Does it cause people to leave after their freshman year . We worked hard to strike just the right balance. Its hard, isnt, to find the balance . We had Exceptional Leadership over the course of more than two generations now, and i think the values of our head coaches throughout this period have enabled us to get the right balance within our community. And we talked about online versus attending like an asu, the football experience at asu, i went to colorado, unbelievable you guys are in the conference now, the pac 12, and now youre glad about that. Just check that, well win that one. Youre in the southern division. Well win that one. Yeah. What it really is about the fact that we have to keep athletics on track, scholar athlete driven, and the kids mentioned in the leapup to this, were offering a comprehensive scholarship because what we asked in the past, come, dont work because you devote all time to studies or athletics. You have no chance if you come from a working class family, theres no other money. Room and board and tuition is paid. You have no other money. If youre on an rotc scholarship, thats the same deal, but you get spending money a month. This is full cost atense dance scholarships for athletes. I was a division 1 athlete at iowa state, and so i knew what it was like to not have resources, and so did my friends, and its the kind of thing thats an issue that should have been resolved a long time ago. Great hoops at iowa state. Yeah, these days. Final four last year. Yeah. Anyway, do we pay them, andrew . Whats your deal . We dont know what to do, right . You think they should be paid . Kind of. I dont know where to land on this. Our reaction to that. If we not that i set that up. No. If we went to Something Like that set up for the kill here. We say were out. Were done. These are students. These are not employees. These are students. This is the most important thing we can get at is to couch this in terms of amateurism and professional is a mistake. The former chairman of our board, paul, used to say, and he did this in testimony before the Night Commission last march in miami, he said the ncaa should add a third a, and that third a should be academic. What we need to do is bring the student back into the center of our experience and ensure that as we go forward, as we wrestle with all the dynamics at stake, the Student Experience and central experience as to what we provide in the intercollegiate programs, theres a challenge we wrestle with in football, and we developed new legislation that accuracied the autonomy for our 65 Football Programs at the highest level. What about the students who make i just want to know how you feel there are certain students, star athletes on your roster that are that you, the universities are making millions and millions and millions of dollars on in terms actually, only 24 of 65 Football Programs have positive revenue over expense, and our basketball is a break even program. Ask yourself, how is the u. S. Olympic team trained in the United States . Who pays for it . Fans going to College Football and watching College Basketball pay for u. S. Olympic athlete training in the United States. Ask yourself how many basketball players graduated from college . There was a time when it was, like, one and done. But thats changed. That changed now because the rules of graduation are strict. In the last five, eight years this changed dramatically. Policing is occurring . Unbelievably now, yes. Driven by College President s who put their hands back into the process now, and i think they have better control of it. You wouldnt object if they make money on a Football Program . Not paying, nobody should be paying. You should have a full cost of attendance scholarship. Youre a student. You should have a scholarship. Even if i make a lot of money in the Football Program . Youre saying your programs are break even, but if im one of 24 i wish they were break even. If im one of the programs where i make a lot of money, you dont object if i pay my players . No, i would. Why. Because they are not employees, but student athletes on scholarship. No different that the kid 20 seconds. Well, we got to n. We have to do this again. Can we do this again . Lets do this again. Thanks, guys. Thank you very much. When we come back, robert schiler sounds a warning saying the risk of a significant bear market is rising, and hes joining us next. Later, a first on cnbc interview with the American Airline ceo, doug parker. Stick around. Well be right back. Its more than a network. Its how you stay connected. With centurylink as your trusted technology partner, you get an industry leading Broadband Network and cloud and hosting services. Centurylink. Your link to whats next. Warning, growing fears of a bubble, and why robert is worried about stocks right now. New this morning, could chinas gdp bigger than beijing reports . A researcher says yes, why its good news and bad news straight ahead. Deep in the heart of the texas, selfmade multimillionaire rooster mcconaughey and butch are back, carving out forchips from unforgiving land, and now they are ready to pass on the secrets to success. The stars of cnbcs west Texas Investors Club live with us on set as the final hour of squawk box continues rights now. Live from the most powerful city in the world, new york, this is squawk box. Welcome back to squawk box here on cnbc, first in Business Worldwide. Check this out this morning. A street race between two highway performance exotic cars in beverly rhills getting hundreds of thousands of views, and the man claiming to own the car says hes protected by diplomatic immunity. What . That story in a bit, but before we get to the markets, we are 90 minutes away from the opening bell on wall street, and futures right now, as we flip the screen there, dow opening 17 points higher, and s p up up a point and a half, and nasdaq up 2. 5 points. Becky . Andrew, thank you. Heres the stories investors are likely to talk about today. August retail sales due at 8 30 eastern time. Economists see the number rising by. 2 . We got the Empire State Survey as well, and big story overseas, bank of japan standing on the policy, holding off expanding its Stimulus Program, but the boj cut assessment on exports and output, and some say the boj could ease against next month. In china, stocks fell overnight. The shanghai down by 3. 5 at the close. A two and a half week low for the new number, theres a call from a top china watcher to get to in a few minutes. Joe, over to you. Okay. Becky, in corporate news, carl icahn raising the stake in Cheniere Energy to 9. 6 . He was already the largest shareholder in the natural gas company, and last week, jim is short that same issue. Fiatchrysler, fords, and gm all agreeing with the uaw to extend current contracts, and the current agreement expired at midnight. Our colleges in europe catching up with mary bara earlier today, and heres what she had to say about the labor talk. The most important thing we are still continuing to focus on constructive problem solving, making sure we do the right thing for the company, the right thing for our employees, and the right thing for the uaw. What we do in partnership with the uaw every day is creating quality, creating safe jobs and producing world class vehicles for the u. S. , so thats our focus. And in other news, out of the frankfurt auto show today, bmws new ceo fainted on stage, collapsing while talking about latest models during a news conference. Bmw says he was taken to the hospital and is recovering well, the company says the collapse was due to a moment of dizziness. That does not really tell us whether there was an underlying physiological region. Im not lets hope i dont want there to be an underlying issue, but might be bad if there was not because then hes just going to get ribbed for the rest of his career that he fainted on stage. Remember president bush. Exactly what i was thinking. That was bad food that involved another said sleeping pills. Low sugar in the morning. I think there was chucking involved. Thats bad too. Yeah, 20 years later, here we are, remember president bush . Yeah. Okay. Change changing topics. New this morning, details about the real china gdp. So the center for strategic and International Study commissions top 20 researchers in the United States figure out what is the real gdp, and the report comes out this morning, Early Release on exclusive details. The report concludes back to 2013 with the most data to extrapolate from the previous years, they think the official size of the gdp is understated. Csis estimate that Social Security 10. 5 trillion. Why is that . The Service Sector undercounted and real estate undercounted with policy implications as well. Okay. Why is this happening . Part of it is outdated methodolo methodology, which well explore in a second. That could be a political decision, and theres things we know about the chinese economy, for example, if you work at the National Bureau of statistics there, you are lower ranked than a lot of regular laters with whom you get data from, plus, remember in china, you have an issue of regular lators. Talking china ease numbers, we say they overstate them. Exactly. This is a good point. Well get to that. Okay. The political decision on that in a second. All right, so, what the report reveals is the following. Back in 2008, there was a new International Standard for measuring gdp. The sna. The United States followed it in, like, 2012. Remember when italy decided that prostitution was going to raise their gdp because they decided to include it in the new sna. China promised they were going to adopt it by 2014. December 2014 comes, nothing happened. They are supposed to announce a big revision in previous gdp levels, does not happen, no explanation. What they conclude in the report is its a lot easier to meet your growth targets if the number youre starting with is smaller. So using they are still using the 1993 sna, which does not include things Like Research and development, et cetera, et cetera, which should be included because then its easier to hit your growth targets. It was gnp. Exactly. They added a full point themselves. Yeah, when they added not everybody includes prostitution in the new sna. United states doesnt for example. I would point out would have been a recession without it. Its a very long report, 212 pages if youre interested in chinese data. Its interesting. I focused on accuracy and inaccuracy, but theres a lot more there being a journalist, we go through it. Why inflate the number . So theres a reason you think that, and a lot of people think about the soviet union. They purposely inflated their gdp, or their gnp back then to look stronger, and we assume that thats what they are trying to do. What we think right now is that they are inflating the growth, right, so instead of just imagine that, trying to shrink the size so that its easier to show the stronger growth. Eventually, i think that catches up with you too. Oh, for sure. They have to do reforms. The report says we have to do reforms to make the economy grow if they get out of the this middle income trap and become, you know, a high income country. Even when they achieved greater gdp in the United States per capita, its still much smaller. Great, thank you. Back to the u. S. Markets ahead of thursdays big fed meeting, this morning, Jeremy Sieger siegel shared his call. Coming down dramatically for 2016, even if we get a 25 point basis increase with dovish language and a lower dot plot, i think we could have a stock market rally. A different call from the yale professor, Robert Schiller saying a number of stocks are overvalued creating the risk of a bear market, looking at this chart again in a second. So you can take it down, but we have to put it back up. The professor joining us from new haven this morning. Professor, my entire life has been at least watching the markets based on livermore and the notions of the markets dgo n board with the opposite of what people are thinking. That has the best technical indicators or consensus too bullish, markets go down, too bearish, the markets going up, and your data here indicates when investors lose confidence, its a bad time in the market. Hated bull markets go up for a long time, arent they . Yeah. Well, i think its a complicated story. There are times when its kind of a bubble. I dont know how that fits in, but in 2000, that was the peak in the market then, had very low valuation confidence, and yet the people were confident about the short term, one year confidence was good, i think thats a sign of a bubble, that they they theyre worried but thinking they will get out, and so this can suddenly turn. Yeah, you use some are not like that now. Youre using 2000 with this chart. Well bring the chart back up, so 2000 was, you know, you owned tech stocks, it was not a great time. The confidence indicator in 2000 was very low. The forecast that maybe the bubble in tech stocks was about to burst. I see no warning on that index right there of 2008, the great recession. Right, there was not any. Thats the one i want to be warned about. I dont want to be warn about the next dotcom going down. Tell me when the markets going to do down, you know, 50 to 666 on the s p, and this does nothing for that. Well, let me say, first of all, its a complicated world. Give me another 200 years, and ill have a good answer for you. I plan to. Collecting the data since the late 80s, so we dont have that many good experiences to test this out, and 2007 was a very Different Event than 2000. It was. Maybe that was a valuation event with dotcom whereas that was really a systemic financial crisis, but, still, the fact remains that people were, you know, still bullish in 2008 on the stock market or still comfortable with valuations when we were coming tsunami was, like, right in front of our eyes. Yeah. But you you actually saw for some other reasons other than, obviously, this data. Right. Well, theres several things on my mine. One is the high ratio, and another one is the volatility weve seen in the last few weeks. Which is a sign that people, in my mind, are draws their attention in, and they are rethinking. A lot of people didnt react on late august because they, you know, busy with other things. Take time to figure it out, but now its on your mind. Now i have a heightened attention to this, and so that creates a risk of much there could be another big market move downward im not predicting it, just seems to me wouldnt surprise me at all, and then there would be a reaction that people have been thinking about this, and now the they react more quick ly. Yeah. I might send you because i dont assume you watch every morning because, you know, you have other stuff to do, you know, at yale, obviously, but david tepper in valuations who was on last week, talking about just the changing Global Situation in terms of reserves and flows, and that maybe growth wont be all it was forecasting. Globally, means lower valuations in terms of multiples meaning were at the high end for fundamentals for where we are right now. That was his basic take, and it may be some of the rallies should be sold instead of all the dips being bought. That plays into what youre saying here. 2015, no one made money, really. Its a tough year after six or eight years, but 2016 is the question. This brings up other issues like profit margins. Earnings have grown so rapidly, and history suggests that earnings dont usually keep growing like that. They maybe there was some effort to boost earnings after this crisis, and people are forgetting long term thinking. They are just trying to get back, and yep. And so that suggests another source of instability, but i dont want to be too negative either. Right. Okay. I think the market might do what it did in 2000, the ratio, 25 now, could go up to 45, i just really am not getting a strong forecast. Okay. I think im more worried about a decline than most people. Right. But i dont know whats going to happen. Youre the antisiegel. You should have lunch. Thats an old friend of mine who inspires me. Great. All right, professor, a lot of college stuff happening today. Jeremy, anyway, thank you. Well see you again soon, hopefully. All right, great. When we come back this morning, rate hikes are coming, maybe, maybe not today, maybe not tomorrow, maybe the day after that, though. As a consumer, should you lock in auto loans and Mortgage Rates now, or will it matter . Well ask the lending tree ceo, doug lebda. So youre a Small Business expert from at t . Yeah, give me a problem and ive got the solution. Well, we have 30 years of customer records. Our cloud can keep them safe and accessible anywhere. My drivers dont have time to fill out forms. Tablets. Keep it all digital. Were looking to double our deliveries. Our fleet apps will find the fastest route. Oh, and your boysenberry apple scones smell about done. Ahh, youre good. I like to bake. Add new Business Services with at t and get up to 500 in total savings. Its more than its multilayered security and flexibility. With centurylink you get advanced Technology Solutions. Including cloud and hosting services all from a trusted it partner. Centurylink. Your link to whats next. Im a senior Field Technician for pg e here in san jose. Pg e is using new technology to improve our system, replacing pipelines throughout the city of san jose, to provide safe and reliable services. Raising a family here in the city of san jose has been a wonderful experience. My oldest son now works for pg e. When i do get a chance, an opportunity to work with him, its always a pleasure. I love my job and i care about the work i do. I know how hard our crews work for our customers. I want them to know that they do have a safe and reliable system. Together, were building a better california. People are fussing about the fed, this with the fed, that with the fed, that with the fed. Who cares, 25 basis points, reflected 15 points in the market. That was david tepper talking to us exclusively last week, two days away from the allimportant fed decision. Will a rate hike be a nonevent or liftoff have bigger implications for the consumer . Joining us now, the founder and chairman and ceo of lenner tree. Good morning to you. Good morning. He stuck his toupg out at us when he asked the question. Are you . What do you think . Well, i wont stick my tongue out, but i agree with that. A quarter point move in Interest Rates has an effect for consumers, 30 on a mortgage payment, and move up in rates snaps that jobs are better, and the economy is stronger, and the most important thing for the consumer is access to credit is improving every day. And what about short term borrowing, things like auto loans, for example . Obviously, they are going they would go up as well. I dont think the long end for mortgages go up as much, but short term rates will go up, and again, i dont think its going to have that big effect. More important effect consumers have is shopping around. We see that 60 of borrows take the first offer they get. You can save a half point by shopping around and getting more quotes from different lenders. What your business is about. You got it. Tell us, though, not what you think should happen, but what will happen . I have absolutely noed w eid. I predicted rates would go up for several years. They have not. They have, obviously, been bumpy, and vehicle volatility is good for the consumer because you can refinance on dips like you buy stocks when they dip. I am i think theres going to be a rate hike sometime this year, whether its in the next few days, i dont know. All right. Real quick. Moving into any of the old type of loans we say pre2008 in terms of no interest . Were not moving in pre2008 terms. I would say the pendulum swung very far into absurdity on access to credit, the pendulum swung all the way back to absurdity for access to no credit, and now were getting back in the middle, and i think lenders are making appropriate risks, and you have a lot of new platforms coming online, a lot of new technology thats coming into the industry, and i think Consumer Credit online is going to be like travel after 2001, and were just seeing the early days of a very, very big boom. Okay. Doug, leaving it that, and in two days now, well put the clock up and see what the fed decision is. Thanks. Thank you very much. When we return this morning, don Trump Holding a Huge Campaign rally in dallas taking shots at his rivals. A new ad is firing back, and squawk box gets political right after this. [ girl ] my mom, she makes underwater fans that are powered by the moon. [ birds squawking ] my mom makes airplane engines that can talk. [ birds squawking ] my mom makes hospitals you can hold in your hand. My mom can print Amazing Things right from her computer. [ whirring ] [ train whistle blows ] my mom makes trains that are friends with trees. [ train whistle blows ] my mom works at ge. My mom works at ge. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. The debate, i hear they are all going after me. Whatever. Whatever. That was the donald out of a rally in dallas last night. He was, of course, referring to the big gop debate tomorrow night in california on cnn. Cnn never did break away i think they blew out all the breaks too. That means they did not take commercials while he was on, and they had their own countdown clock to the second. Were counting down another one. S cnbc debate in october which is now, i asked for a thousandth of a second. They dont even have minutes here. We have room, dont we . Maybe not. Its 43 days and 12 hours away, and i think its in boulder, perfect. There were protests last night, maybe its changed since i went there. Might be protests against cnbc when we got in boulder. Anyway. A new Carly Fiorina ad ive been talking about getting attention as well. Ladies, look at this face. [ cheers and applause ] and look at all of your faces. The face of leadership. The face of leadership in our party, the party of womens suffer gener sufferage, the face of leadership in your communities, in your businesses, in your places of work and worship. Ladies, note to democrat party, we are not a special Interest Group. We are the majority of the nation. I saw a lot of analysis on this. It is a great commercial. My daughter walked away, 15, but they pointed out, okay, so the donald is the one that used the term, but that was not really level and when you level something directly back at trump like ben carson or jeb or he comes at you. This was at Hillary Clinton. It was about the democratic party. Women are not just a special Interest Group that you play to and make faux war on women arguments about. This is the 51 of the country are women. Thats a voting block that doesnt have to go democratic, andrew. It was not a slap back at donald, but it was. It was. It was a slap at donald. Premise of the entire piece yeah, rather than a negative, it was a totally positive place. Smart. Very brilliantly done. Right. Coming up, breaking data a couple minutes away, and governments read on retail sales in august next, and ceo interview of the morning, doug parker, talks shakeups in the industry and the impact of lower fuel prices. Awe believe active management can protect capital long term. Active management can tap global insights. Active management can take calculated risks. Active management can seek to outperform. Because active Investment Management isnt reactive. Its active. Thats the power of active management. Seconds away from the governments august retail sales numbers, Rick Santelli is standing by in chicago with the numbers for us, and, rick, go ahead, take it away. And the numbers are expecting up. 3 on headline, but we end up. 2 on headline, and the tenth lost is a revision from last months results. The interims, of course, strip out autos, up one tenth of 1 . Strip out autos and gas revenues, and its up. 3. This control group, when mushed together, is up. 4, arguably better than expected, and last month, double down from up. 3 to. 6. No hmatter how you slice it, its on the light side. Empires september read, minus 14. 6 on the back of last months unrevised minus 14. 92, round up to my nuz 15. We needed a number one one of zero, so that, of course, a more con setemporary number, but may youre not interested in manufacturing. How did the market react to both pieces of data . Were at 217 on a 10year, and now at 218, so if you take it in face value, backy, looks like the market, at least, had one basis point of positive regard for the data because Old School Trading would see a higher basis point on what was better than expected data. We all know janet yellen has a big day in the sun, maybe with a couple encore performances by stan fish er. How it turns out . Look at futures or just acknowledge its pretty much impossible to hand cap at this point, at least thats my opinion. Back to you. All right. That answers the questions, so not what you think they should do but will do, thats anybodys guess . Yeah, i think its anybodys call, becky. Maybe at some point down the road, maybe 1015 years post crisis, well get a more rulesbased process. Some are maybe kind of a tailor rule or a portion of that. The market, at least, has a Fair Assessment of what lies ahead, and, of course, that all ignores issues that linger from previous fed programs like large Balance Sheets whether in japan or in the United States. All right. Rick, thank you. Talk to you soon. For more on the data right now, steve leisman, what do you think . Good numbers for gdp. Rick talks about the control group. Its called control group because this is actual data that the Commerce Department takes and puts directly into the Gross Domestic Product report so that control group was higher than expected as rick pointed ou out,. 4 , and a doubling from the prior month in terms of revision flattening gdp. The overall number is a con funding number. Theres a lot of deflation in consumer goods prices right now. What i did, i dont have current data in the next chart. I want to show you the chart, and that shows is on inflation adjusted basis, Consumer Spending is booming, and take a look here, one is a series that not a lot of people use, but its the adjusted inflation retail sales running at 4. 5 a year, and you see the real dollars spent, around 2 or 1 , and this is one of the biggest gaps weve seen going back. Going back 15 years because of whats happening Electronics Products are deflating. Gasoline prices are deflating. A bunch of stuff out there, prices are down. Two things are happening. One is that the actual dollars spent come down, but just because you have a few extra dollars in the pocket does not mean youll spend it on goods. You may well as pointed out in the piece today, spend on services anywhere between 5565 of the economy, depending how you count whether or not eating out is a service or not. How does the fed view the gap like that . Well, i think they will see and say the noninflation side of the economys doing pretty well. They look at that and say, i dont have a lot of problem with consumers right nowment i dont have a lot of problems with labor right now. More people with more paychecks, gasoline prices declining, ultimately, they have to decide, by the way, it looks like the u. S. Economy is overcoming the challenge of lower gasoline prices in terms of the effect of the energy sector. Theres a dinism in the u. S. Economy. This is the last piece of data they get which speaks pretty well. I dont think, of course, they want to see a higher top line number, but it Shows Consumers are in good shape. Steve, thank you. Pleasure. Right now, lets go to phil lebeau with a special guest, good morning, phil. Reporter morning, joe. We are here at the new American Airlines operation center, gorgeous facility, 1600 people managing, what, over a million flights a year. With doug parker, ceo of American Airlines. Is this one of the major pieces of the integration between old american and old u. S. Airways . Its an important one, a couple more to go, but this is a large one. We have 1600 working in here, managing about 6700 flights a day. Over a million a year. A million flights a year, right, over 700,000 customers every day. It all happens here, and this did not exist a year ago, and its a great example of how the integrations coming together. We have people coming together, you know, a quarter of the people were working from pittsburgh, pennsylvania, now here in texas. You cant tell where they worked before. We have technology that is working flawlessly, without a blip in the operation. Its one more example of taking two airlines to build the greatest in the world. An analyst said look how a merger comes together and compare that with united. Youre not running united airlines, but you see issues going on up there and the issues that theyve had over the last five years. What is it that you an airline needs to do in bringing two together, whats the biggest hurdle you encounter that united encountered, and you guys have been able to get past . Yeah, i can speak what weve done than what theyve done. We learn from others. We worked hard to bring teams together early. Theres support of the merger from the employees we tried hard to, and thats helped, having excitement amongst the team about the merger. We keep that going. Profits help being able to use profits to both invest in the airline and in our people helped we want to keep that. Up we have been able to do that. We were worried early on if we had a road bump while the teams were not together, things would unravel. We did not have that, if we have a bump now, the team will pull together and hold together because we feel integrated. Doug, andrew has a question. Hey, doug, great to see you. Hoping you can react to the situation specifically, joe and i have been talking about this home in jenkins piece in the wall street journal saying if youre an airline ceo and negotiating with a state and airport and these things happen, that oftentimes theres all sorts of deals cut. What do you think of that . Well, i have not seen the piece, but what i know is at American Airlines, we fly routes for profitability, for the shareholders, and we have asks all the time from airports and from political officials who are doing what they are supposed to do, represent their constituents, and want more and more service for their constituents, and we listen to those and address those and go back and see if they make sense, but most of the time we come back and tell them that does not make sense because we fly for profits. They understand that. Have you run into a situation where an official asked you to launch a flight that has less to do with the constituents of the state or area and more to do with the constituent that is that individual . I have not. The thing is, doug, for shareholde shareholders, you know, if what the Port Authority is saying, you say you do what makes sense. It doesnt make sense to do the flight, but makes sense if it opens up all kinds of things you ask the Port Authority to do. Thats why is it a gray area whether a ceo decides to get all these things from the Port Authority, it means twice a week you fly to South Carolina . Is that quid pro quo or against the law . Im not commenting on things i dont know about that. Right. I have in inside information on that situation. What i know in response to the question is its not great odds. Its black and white. Right. And once you start making it gray, it gets tough. Yeah. Its simple for us. Our response is always, look, we fly where we make money. We will always talk to communities about ideas they might have about where we might be able to fly. In regigeneral, our team studie that and know where we can be profitable and where we cant. We are responsive to individuals with ideas, but how many times i go and say, we cant serve that route because it doesnt make money. Pricing, whats going on . Things coming down . Seems like prices have come down, past month or two. Well, they have because fuel prices are down is the primary driver. Demand is strong, certainly in the United States, International Demand is weak, brazil in particular for American Airlines, but, you know, in general, demand is strong in the United States, which is where most services were seeing. We have seen fares come down, as a result of capacity increases, but thats largely a result of fuel price declines. Profits are up. Looking at the profits, doug, in the first half of the year, looking at 3. 1 billion, youre going to blow past what you made last year. There is a concern that you dont want to say you cant make more money than youre making, but is this as good as it gets for airlines in north america right now . I dont think so. We saw fuel prices fall so quickly that the capacity did not come in. Capacity takes awhile to react and prices therefore take awhile to fall. Right. There was a time it felt better than what it was for a period of time. Where we are today, everything reacted and in good supply and balanced. As economies rebound, as we do our job as airlines of caring for the customers and controlling costs, this is not an issue. Happy to have the deal in terms of compensation stock based . Absolutely. Youre a man enjoying his stock that has appreciated considerably in the last year. Doug parker, chairman and ceo of American Airlines here at the new operation cementer. Guys, back to you. Thank you, doug and phil. Appreciate it. When we return, the stars of west Texas Investors Club are here on tonights episode, putting a Smart Phone Repair Service to the test. A sneak preview of that and more in just a minute. All right. We got a friend, peggy, at the bar, with a broken phone. Lets see if we can fix it. Hey, peggy this is my friend, kc. Nice to meet you. Hes a hightech fixit man. The screen is broken . Its busted. It is not ideal to do a repair in a bar around alcohol, saltings and elements, but its in front of me. Ill put my money where my mouth is and do a good job doing the repair. How important is your phone . I cant live without it. What do you expect to pay for this . 50 bucks . Man. People dont want to spend money. This is an investment here, okay . The cost is 129. You okay with that . If i can do it here without having to leave, that works for me. Thats a scene of west Texas Investors Club starring investo investors, and, guys, thank you so much for being here. Thank you, yall. I have to give you your hats. Oh, thank you. Thank you. You brought drinks . I got beer out there for you. Okay. Yall got a long day, though. So do you. Im still on water. Ill leave the heavy drinking to like a due rag. Notice they are all his hats. Always. Never my hats. Gils home sick. If hes watching he watches every day all day. Oh, yeah. We heard that. A big fan. Sorry we have not met him yet. You guys are into the season, its amazing, fun to watch. I wonder what you think this far in what you guys have learned . Were enjoying it. I mean, we think its, you know, its pretty entertaining, better than i thought it would be, pretty entertaining, i think, theres a little business in there, a lot of jacking around, but were liking the deal. We met cool people, had a lot of fun with it. Whats your favorite so far . Which one of the different entrepreneurs who came infu was the best . The one thats going to be on tonight were, like, oh the phone repair guy we just saw . No yeah, yeah, the phone repair guy. Were excited about the potential of what he might be able to do and the people he could help. People not familiar with the show and your background, you are selfmade millionaires, spending lives working in the oil fields and the piping business. Right. You know about investing and business and now you try to help other people . We do know a thing or to o about investing and how to invest in the wrong thing. Whats the worst thing you invested in . I talked to my lawyer about this, and i wanted to Say Something bad, but he said i couldnt. Theres deals i got shanghaied on. Before or after the series . Before that. Anything in the series you regret . Not yet, not yet. Its early. Were conservative about certain things, but nothing yet. Well, let me ask about oil and whats happening. This is what we talk about every day. Phenomenal to watch the crushing oil prices. When you figure it out, let us know. Does it make any sense that something that youve been running out of since they drilled the very first oil well, thats when you started running out of it. How can it get cheaper . They are we found so much more. But they are still running out of it. Its a limited supply . Its limited. I dont get it, but, yeah, weve seen it. Weve done that our whole lives. Its always up and down and west texas oil. The most of the rest of the economy seems to prs posper whe oil prices are low. Its a losewin, but the economy seems to prosper when oil is down, which is shouldnt get high, 8090, wed be happy with that. Id be happy with 47. New lows today of 43. Hey, what else do you think you want to get into in future seasons with this . What are the best guests, and what do you want to see more in . Id say i like those apps we dont know anything about. Like, putting it in a slot machine. Like the pilots app . Like, we like, you know, we like them a little bit, but we dont know much about them, but as far as just down to basic things, i mean, that one guy, we like that one guy we had trouble with that had to cut, we liked that, but one of the things we thought would work, but, you know, just regular black and white things we like those, but the apps intrigue us a little bit. Yeah. But you, i mean, youll cover the whole range, any type of startup, youll go from, you know, the san francisco, like, sprouts, whatever, all the way to some red neck star, you go across the board to High Technology to something totally low mustang ramps, who knows, you guys would consider dr. Like you said, its shark tank for hill billiebillies. Can i tell you hillbillies . Shark tank for hillbillies. Theres a number of people who have money or investment money. Were never going to run out of people who want to ask for money. I promisepeople. Well never run out of people asking for money. Were you at the trump rally in dall dallas. We didnt make it. Thats an interesting political question. Thats what i was go for it. Here we go. Lets just talk about the confederate flag, why dont we. Now that youre a reality tv star, what do you think of the other reality tv star being president of the United States . Ben carson is my man. Im playing it safe. Ben carson is your man. You know what ive been quoted about trump . His biggest problem is eventually his thoughts turn into words. Hell have to deal with that. It happens to all politicians, though. It does. He deals with it. He owns it okay, i said it he tweaks it at the end after he gets caught. The guy has a way of we got pretty pc. Someone said we would have a constitutional amendment that every person in this country has the right to live without being upset. Im all for people thickening up their skin. People are too sensitive. The golden rule doesnt even work anymore. Doesnt bother me. Bothers other people. Which i can understand that its still people are so thin skinned, they need to own up to it. Any one of you guys giving money to hillary . It is hillary. Is she coming on the show . We have not had her on the show. She have a good deal . If she has a good deal, well look at it. She has a server business shes running. Yeah. Well help her out with that one. It was cleaned. She can start a new hide and go seek game. Guys, thank you for the hats. Im wearing this hat. Me, too ready . Going to mess up your hair, joe. My hair might come off in the hat. Awesome to have you here. I dont know where the miller lite is there a miller lite for us, too. You bet. Hes back. When we come back, jim cramer returning in time for the fed hoopla. Well get his talk when squawk returns. Its more than the cloud. Its security and flexibility. Its where great ideas and vital data are stored. With centurylink you get advanced Technology Solutions from a trusted it partner. Including cloud and hosting services all backed by an industry leading Broadband Network and people committed to helping you grow your business. You get a company thats more than just the sum of its parts. Centurylink. Your link to whats next. Lets get down to the new york stock exchange. Jim cramer joins us now. Down earlier, now up a bit. You dont like talking about the fed that much, because theres other things that are probably more important, but were showing a countdown clock. What do you think . I think if they give the wrong statement, raise a quarter percent, as much as people think its about time. I look at china see that index hovering around 3,000, that probably goes to 2,200. The euro should be weak if we raise. I see a lot of negatives. I see no positives, none, if they raise. Its difficult to come up with a thesis that says now that its over well do better. Come friday, the fed has to act again. Once they act, the drum beat to act again is too loud. As far as Everything Else goes, i guess were in a 5. 1 employment universe, but were are we in a 3 gdp universe . Can we count on that . Is there a slowdown looming because of china . I think a slowdown looming because of china, because of oil. Oil manufacturing domestically, the autos, i think if Interest Rates go higher, we could be at peak housing. I dont want to present myself being a bear, most of the stocks have been killed already. I hear the music. Well see you in a few minutes. Busted. Police investigating a high speed car chase. Driverassist systems. It recognizes pedestrians and alerts you. Warns you about incoming crosstraffic. Cameras and radar detect dangers you dont. And it can even stop by itself. So in this crash test, one things missing a crash. The 2016 eclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. When youre not confident you have complete visibility into your business, it can quickly become the only thing you think about. Thats where at t can help. At ts Innovative Solutions connect machines and people. To keep your internet of things insync, in realtime. Leaving you free to focus on what matters most. Check this out. Police and a half Beverly Hills investigating a street race caught on youtube. Officers on the scene arrived too late to see the cars race or, as you saw there, thats a stop time that they went through. Man approached them and said he owned the cars and had diplomatic immunity. Police are conferring with the u. S. State department. Got no time left. I want to know where they were from. Reminded me of against all odds. James woods and jeff bridges. Love james woods. Love him. Join us tomorrow. Squawk on the street is next. Good tuesday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer back from a honeymoon. Welcome back. Thank you. Thank you for mentioning it. It was a honeymoon