Transcripts For CNBC Squawk Box 20150917

Between donald trump and his rivals. A lot of attacks too. Before we get to todays other business headline wes have a developing story for you. A major magnitude 8. 3 earthquake off the coast of chile shaking the country leaving 3 people dead. Waves of up to 15 feet pounding coastal areas. A billion people evacuated. This quake was to powerful that it was felt across the continent. Well tell you more about this as we continue to follow the story through the morning. Lets tell you about the big business stories that were watching. The Global Markets are in a wait and see mode ahead of the fed decision. That comes at 2 00 eastern. You wont want to miss it. It tint stop another volatile trading session in china overnight. The shanghai composite closing down with those losses coming in the final 30 minutes. In europe the Swiss National bank keeping it unchanged but if needed it will remain active in the currency market to weaken what it calls a significantly overvalued swiss frank and then Corporate News this morning. General motors reaching a deal with federal prosecutors to resolve a criminal probe involving the deadly problem with ignition switches. Gm will pay a fine of around 900 million more and well have more on all of this from phil in just a bit. Yesterday we had a beer deal and today we have a real deal and it is big. Its in the cable world. European Telecom Altice is buying cablevision for 34. 90 a share. The total value including debt is 17. 7 billion. After in years of speculations, they finally sold. They remain the owners of amc and msg. Altice failed earlier this year to buy time warner cable. They had gone after that after the transaction fell apart with comcast. John malone thinks that the ceo of altice they bought a Company Called sfr in france about a year and a half ago for 23 billion. This is a company thats come out of nowhere, relatively quickly. Patrick is a very aggressive guy. He bought southern link in the United States earlier this year and is now really trying to we should actually probably pick up could we look at i cant look at the stock because its not a Public Company but cox, if you start thinking about the other Cable Companies out there this is a guy thats going to try to buy up all of them. Its a diminishing pool at this point. Theres not a lot left. So if i was in paris was it possible i was watching an altice system. Its very possible. This is one thing he hopes to bring to the United States which is we have the triple play and they have the quadruple play. The fourth is mobile. They sell cell service, mobile Telephone Service and mobile broadband all together as one big package. The question is whether he can get together thats what at t is doing. Its a french company. He was born in morocco. He is a decisive guy. He proposed to his wife about an hour after he met her. If that says something about sort of how you do deals. Doesnt really say great things to me. A couple of things, very expensive price. So theyre paying about 5,900. That was like a week or so. Theyre paying close to 6,000. Which is a lot of money. An hour. A subscriber. No, an hour . He knew her for an hour. Less than a day. That is the famed story. How long have they been married . Quite awhile now . Three hours. I think it was in the late 80s. Wow. So what are we . 2015 now. So i was thinking if it was this year we would monitor it. The one big theres a couple of question marks. One is this company is taking on an enormous amount of debt and they have been really able to build this company out in large part because of low Interest Rates. Does this all work, if you will, in a higher Interest Rate environment . I dont know. If you are a complete and utter skeptic you have visions of avendi and very aggressive players and entrepreneurs that have gone into businesses trying to buy up pieces and havent worked. The flip side of the whole story is what is it that finally, this dolan family convinced them to sell. The answer is the price. One point by the way, we should say also on news day they own channel 12, during the negotiations started in june they tried to keep the assets or there was a conversation about keeping those assets. Now news day not only will the Cable Company be owned by them. So they purely just wanted to own cable assets in the u. S. . It doesnt help their operations. Theyre going to keep the newspaper. But why would a french Cable Company they just want their footprint thnch footprint. This is the beginning. Collectively theyll have about 4. 6 million customer which is makes them the fourth largest Cable Company. And its new york. This is new york. They want to get into cable. Still want to get into it. As long as you own the cord, life is great. Its the content. No, content will always be we go back and forth. But the pipes are the one thing hard to break. Were going to get political here. Who didnt they said themselves up and they say im out of here. We always think its the government but look at that. How do you explain that. Its like people are getting ready. The government is going to get ready. Lets get in here because were going to write it up and where are these guys. Theyre not coming today. I dont know, its weird. The last 20 minutes everything happened. Either that or were wrong about whats driving it up. Thats whats driving it up. Back to politics in last nights big debate. John harwood was there. He joins us now from california with the highlights. Im not sure its a new saturday night live this weekend. Im not sure that theyre putting together a new live but thats what i was going to set my alarm clock to be there for just to see their take on what went on last night but im not sure, i dont think the season premiered wret. It was like a super reality show that i think everybody watched. Well, last nights debate was a pretty good version of saturday night live straight up from the candidates so, no, its unfortunate they wont be able to take off on this. That was a lively mess of a debate last night. It revolved as the first one did around donald trump but this time it had had a new aspect to it and that was Carly Fiorina on the stage. She had an opportunity to take on donald trump after getting to the main stage of the debate with a Strong Performance last time and it produced some fascinating ricochets. Check out this threeway, ultimately a three way conversation in which jeb bush who had been expected to be the front runner, he has been whacked around by donald trump, accused trump of distorting his views about support for women. Trump then responds and it produced this counter response from Carly Fiorina that was quite effective. Take a listen. Hes wrong on a lot of things but on this hes wrong because im the most pro life governor on this stage. He came back later and said he misspoke. I heard when he said the statement. I was watching and i said wow, i cant believe it. I will take care of women. I respect women. Last week in Rolling Stone magazine donald trump said the following about you, quote, look at that face, would anyone vote for that. Can you imagine that . The face of our next president . Mr. Trump later said he was talking about your persona. Not your appearance. Please feel free to respond what you think about his persona. You know, its interesting to me, mr. Trump said that he heard mr. Bush very clearly. And what mr. Bush said. I think women all over this country heard very clearly what mr. Trump said. Now carly wasnt the only candidate to get off a strong response to donald trump. Marco rubio did as well. Donald trump went through his recitation of why americans should asimulate into this country if they have come from somewhere else and speak english. Marco rubio got very personal in response to donald trump. We have a country where you have to speak english and where he was and the way he came out didnt sound great to me. We have to have asimmilation. Im not the first one to say this. Weve had many people over the years for many, many years saying the same thing. This is a country where we speak english and not spanish. My grandfather instilled in me the belief that i was blessed to live in the one society where all of Human History where even i could inspire to have anything and be anything i was willing to work hard to achieve but he taught me that in spanish because it was the language he was most comfortable in. Now marco rubio took the high road in that response. That was also available to Chris Christie later when they were tangling over their records trump pointing to fiorinas unfortunate end to her tenure at hewlettpackard. She was talking about Donald Trumps companies to provide bankruptcy. This provided an opening for Chris Christie to have this very effective line for viewers at home. While im as entertained as everyone about the history of donald and carlys career for the 55yearold construction worker in the audience tonight i have to tell you the truth, they could care less about your careers. They care about theirs. So the question from this guys is whether or not candidates get a lift. Carly fiorina, i think that you can expect she would get a lift. She was very steady and calm and forceful on the debate stage last night in response to the hurricane flowing around her. Chris christie had a good night. Dont know how much thats going to do for him. Jeb bush tried to come out forcefully against trump but he got smacked down by donald trump a couple of times when he tried. So things donald trump said about his wife, he didnt do that. Rubio also had good moments but again the center of attention, donald trump was the sun around which all the planets in that debate revolved. Did this hurt donald trump . Had some good lines. Had some funny lines. Said that he hadnt criticized rand paul for his looks but had a lot of public matter to work with. Drew a lot of laughs at the hall. Dont know how viewers will react at home. Well have to measure the polls and see what the fall out was before our debate, october 28th, boulder, colorado. A lot of people that dont watch debates were watching that debate and i guess thats if republicans were going to try to find a silver lining. You can look at it either way. You can say that people witnessed this squabble it reminded me of i dont know. It was classic. But then you have a lot of people watching and hearing the republican take on a lot of issue as well. If you sift through all the high school stuff, you said this about this person and what do they have to say to you, you sift through it all there were sort of opposing viewpoints on how to teal with putin, syria, what to do in certain ways to try to get the economy going again so there was some stuff there. Minimum wage too. A lot of people that wouldnt normally be watching a Republican Debate were probably watching and then of course people that wouldnt watch the president and hilary said they wouldnt watch no matter what. Theres a lot of people that wouldnt watch anyway. Well, there were moments, joe, of insight on substance and policy but you had to look pretty hard for them. There were fragments. There was not a sustained discussion that would allow anybody who wanted to try to sort these candidates one from another on their approach of policy issues that drove that thread entirely through the conversati conversation. Its september. Theres going to be more debates. Thats right. It would be nice but remember this guys, there was a huge audience for that fox debate and everybody agreed that some candidates like marco rubio had done well in the debate. But look what happened in the polls afterwards. Donald trump didnt fall and marco rubio didnt rise as many people predicted so you dont know how much of the audience there was. When do we get the next polls . There will be polls all the time. Im sure theyre doing them right now. There will be some this morning that i havent seen yet. It would be nice to be a person that gets coronated and doesnt have to talk to be in debates. So this is just the way its going to be on that side. I will say that martin oh mali has been going out pounding on the Democratic National committee saying we need more than six debates. Its not fair. I dont think the cnn debate strengthened his argument among democra democrats. Hillary could use the same line on omalley that trump used on rand paul. Is he above 1 . I thought you meant the other one. No, hes not above 1 . The line weve been talking about no, no, no. No, that you only got 1 . You shouldnt even be on the stage wrch stage. Where is omalley . 1 or 2 . I dont think shes going to fair to Martin Omalley that hes not goodlooking. No, no. Thats something hes been getting reviews for. Im talking about his poll numbers are so low he shouldnt be on. That was a good line. Both of you. Except for thats the line we just ran and cnn knew about the big ratings. Tell me about what you think the fed should do tomorrow, that was did you hear what that guy said about you . You must have something to say back to him. On that note. Was the fed even mentioned last night . No, they talked about the idea of differences and those that agreed with it and didnt. They spent more time on marijuana than tax policy. When the next although there was some. Christie tried to bring it around to, instead of planned parenthood put that one on the president s desk. Cnbc is not the next one is it . Yes it is. Okay. So 8 weeks without 6 weeks. Youre going to have to hype that debate on your show for a long time. We can do that. We can do that. Were not shy. University of colorado and boulder, that should be interesting. Good republican audience there. Exactly. We can certainly touch on marijuana again. Thats for sure. Are you going to be on again in the show . Well talk to you soon or well see you around. Anyway, thanks. You bet. Now lets get to todays big market story. That is the fed. The september date has finally arrived for the decision on Interest Rates. The question now is, do we have to go through all of this again in october or will they finally raise today . Joining us is michelle, the senior economist at bank of America Merrill lynch Senior Research and Global Market strategist on the jp wmorgan funds inside strategy team. Are they going to raise rates today . Can we finally move on from this conversation . Im hoping. Our view is that they will hike. Its a tough call but i continue to go back to the data and what the data is telling us is the fed has the green light. Real activity, gdp growth is running at 2. 5 to 3 , the Unemployment Rate has fallen to 5. 1 which is the long run forecast for the Unemployment Rate so the real economy is improving and the market situation creates some uncertainty. He says the data says that theres no real reason for them to raise at this point. Theres no rush in the sense that you dont have an overheated economy that you need to cool. But what the fed has described this cycle to be has been a normalization process. So if you listen to the fed speak, particularly stanley fisher, he talks about moving from an ultra accommodative stance to one thats still very accommodative but youre simply calibrating policy based off of the health of the economy. Do you think they made their decision yet or is this something that gets decided in the room . Its a big debate. Yesterday was probably really interesting and it continues to be a debate today. Would love to have been a fly on the wall there. You do have. You have a pretty divided committee. You have those really in the hawkish camp that are convinced that the fed needs to see higher Interest Rates and those that are more dovish that are worried about inflation from abroad. What do you think . I think they hike rates today. Its a close call and tough call to make. The fed official versus to focus on the channels of contagion from china and emerging markets and when we list them out whether its trade or financial linkages theyre not all that great so i agree with michelle that the data will prevail. Because if they dont raise rates they do risk quite a bit of credibility here. They told us two things in the july minute meetings and in the statement. Theyre looking for some further improvement in the labor markets and we got it and they also said theyre looking to be reasonably confident. But to be reasonably confident you go right back to the labor market f. The labor market tightens like it has been doing thats what leads them to believe that inflation will ultimately follow. If its such a close call, do you expect that, michelle, maybe youre the one i should ask on this, do you expect if its such a close call theyre either going to raise rates or warn everybody and tell everybody were not going to do this for a long time or theyre not going to raise rates but theyll say we will soon. Our baseline is they raise but they have a pretty dovish message with that. A pretty cautious message. That can be displayed in the press conference and language yellen uses but theres a lot of debate as to how much those are and how much the market should Pay Attention to it and if they take it down maybe they think theyll go slower. Whats the Market Reaction . A bullish one. What that basically tells us is that were finally out of this pe pergatory. We graduated from the overhang of the financial crisis and the economy is good enough. Thats been a big uncertainty dragging on the market so far this year. If they do raise rates i think thats bullish for equities. If they dont that could actually go the other way around because the question then becomes so the economy is doing fine but what is it the fed doesnt know or what is it the fed is so concerned about that theyre scared to raise rates at this juncture and that could be the international picture. If they dont hike rates that could be a bullish, tactically speaking sign for emerging markets because right now they have two big overhangs. The china and the fed. Did we add up the gain in the last two days . It is 400 points . I think so. Its almost 400 and thats with two people that think theyre going to raise. So the market has been able at least half the mark. And its been able to who knows if they raise maybe it goes there, i dont know but from where we were three weeks ago, its stabilize and actually traded higher so thats not that they use markets. But he said he was worried about volatility. There hasnt been as much. Thats been removed as well. If youre ever going up you have to start aisha quarter point if youre ever going up. We shall see. This is something well be talking about a lot today. We do have a programming note for you as well. Cnbc has special fed decision coverage. It begins this afternoon at 1 00 p. M. Eastern time. At 2 00 p. M. Is when we get that decision. Make sure that you stay with us to see what happens later today. The big deal news of the morning, altice looking to expand into cablevision for 18 billion. Well talk to the media analyst rich greenfield when we return. 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. Its a cable show right now its called the intx internet and telecommunications show. They put their hand up and jimmy dolan says we are for share. Theres not a surprise that theyre selling and altice expressed their interest. It just materialized as quickly as it did and altice is being as aggressive as they are to enter and build a presence in the u. S. Broadband market. Does the price make any sense to you . Obviously if youre a cablevision shareholder i assume yes. But im saying from the altice perspective. Theyre paying over 6,000 a preshriv p p prescriber. They think theyre getting this. I read it six times. Im not sure how they get there. It will be interesting to see how they explain that overtime. Altice is known as an incredible cost cutter and rethinking the business. I am confident that there is substantial fat within cablevision just given the very longterm ownership of the dolan family. That being said the Competitive Dynamics really seem to be a challenge and it will be interesting to see. I think the real thing that everyone should be thinking about this morning is how is altice going to rethink the business . The real people that should be worried are programmers and broadcasters. Will altice think about programming as importantly as the dolan family or will you see the team drop programming and really take a far more aggressive stance in those negotiations. Is that what they have done in europe . They really focused on the broadband product and combined it with wireless. They bought sudden liouthern li. It was one of the most aggressive Cable Operators in shifting away and moving to the broadband product. They dropped them a year ago and thats worked out well. Will cablevision take that approach and take a much harder line. Cablevision tried to take a harder line back several years ago. They had gotten into the battle with disney and gotten into a battle with scripts and ultimately caved. But they ultimately caved but i wonder now under new leadership and kind of a very different thought process whether the real, you know, the real thing that everyone should be thinking about on wall street this morning is who is getting dropped. One other thing, look forward on this for me real quick before we go. If the shopping spree continues, who is on that shopping spree list . I mentioned cox earlier and given the amount of debt used in this particular transaction and the fact that Interest Rates may go up, what can they afford to do . Or what will they be able to afford to do . Theres still lots of small Cable Operators in the country. You still have media com out there and you mentioned cox. Its not inconceivable that theyll be spin offs even after the time warner transaction with charter if that ultimately closes and even comcast. Theres ultimately opportunities to buy smaller groups of systems from lots of people if you want to pay these types of prices. So, you know, there isnt a lot and my guess is thats why you mentioned why is this surprising right now . The reality is hes moving very quickly because you have the threat of rising Interest Rates and also not that many players and hes trying to capitalize on the fact that right now charter is tied up in their time warner purchase and comcast has been told by the government you cant buy anything so its a unique opportunity to step in and buy cablevision when there really arent other buyers at the table given the current situation. We appreciate your perspective this morning. We should also mention that patrick is going to be speaking today in new york city. Thats around noon and i believe its going to be open to the media. Maybe well be able to take pieces of that on fed day. So i dont know how much it will balance in the news. Netflix. See thats how old i am. Netscape. Netflix is supposed to be taking all this market share from everybody else. Anyway. Coming up, round two is in the books. Political strategists join us to break down last nights gop debate. Winners, losers, and are we any close tore narrr to narrowing d republican field . Squawk box will be right back. Good. Very good. You see something moving off the shelves and your first thought is to investigate the company. You are type e. Yes, Investment Opportunities can be anywhere. Or not. But you know the difference. E trades bar code scanner. Shorten the distance between intuition and action. E trade opportunity is everywhere. 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. Why should over two hundred years of citi history matter to you . Well, because it tells us something powerful about progress that whether times are good or bad, people and their ideas will continue to move the world forward. As long as they have someone to believe in them. Citi financed the transatlantic cable that connected continents. And the panama canal, that made our world a smaller place. We backed the Marshall Plan that helped europe regain its strength. And pioneered the atm, for cash, anytime. For over two centuries weve supported dreams like these, and the people and companies behind them. So why should that matter to you . Because, today, we are still helping progress makers turn their ideas into reality. And the next great idea could be yours. Really theres a quality thats entertaining about mr. Trump but i am worried and concerned about having him in charge of the nuclear weapons. His response, his response to attack people on their appearance, short, tall, fat, ugly. My goodness, that happened in junior high. Mr. Trump. I never attacked him on his look and believe me theres plenty of subject matter right there. Mr. Trump we dont need an apprentice in the white house. We dont need an apprentice in the white house. We have one right now. He told us all the things in 2008. You talked about business. In wisconsin youre losing 2. 2 billion right now. I would do so much better than that. Do you want to talk about balanced budgets, you talked four Major Projects in the bankruptcy over and over and over again. You cant take america into bankruptcy. He had that all ready, that apprentice line. Trump wasnt one of the apprentices. He was the guy hiring the apprentices. It didnt really work. Joining us now is harold ford. Former u. S. Congressman. Good morning. Youd be great on that maybe even with arnold. Ive never seen the show. But you are aware of the show. Im very much aware of the show. You never seen it. Ive seen the clips. Never watched the show. Youve been around new york city. You know that hes never been home on a night when tv is on. You know that. Are you suggesting that hes out and about. Hes like the mayor of new york but not actually the mayor but may eventually be the actual mayor but at this point hes just the mayor. Youre still working that angle. Good morning. Good morning, sarah, former white house political director under george w. Bush. So i would ask both of you, ill start with you sarah. Net positive or negative watching that last night. Its a positive. The benefit for donald trump is he is drawing a lot of people in to hear what was a very substantive debate. Many of the candidates, particularly the governors i thought did very well. Not only on the Economic Issues but also on the Foreign Policy issues that were discussed last night. We heard a lot of strong views and many of these folks could articulate their visions for the country so that is all net positive for the gop. The down side of course is in my view the donald. He cheapens the discourse of this debate and while he is drawing people in needed to win a general election some of his rhetoric and comments are harmful. Harold, do you know whether david brock or someone hacked into the temperature control . They could have gotten that at the 60s. I didnt know they set it at 80 degrees. You dont know whether hillarys people were actually in there turning up the thermometer, do you . I think sarah is about right. Donald trump has drawn a number of peoples eye balls to this which republicans certainly need. I disagree with her bit about the substance of the debate. I thought the substance could have been better across the board. I do think at some point the focus on mr. Trump begins to hurt the Republican Party brand and begins to hurt whomever. Whomever may emerge whether its trump or bush or whomever. I thought jeb bush had a better night than a few weeks back. He probably shot one under. I thought he shot par before. The best of the evening was carly fiornia. She was able to take trump on in a frankly successful way. I thought rand paul and scott walker probably had the worst of the evening. And i thought ben carson, who didnt say a whole lot but it doesnt seem to hurt him. Soft spoken. I didnt think he was effective last debate so his numbers went up. Ill be curious to see where mr. Trump and mr. Carson and which candidate whether its bush, rubio, kasich. I didnt think he had the follow up this time around. Trump wont be hurt by this terribly. Bush helped himself and Carly Fiorina did. I dont think i was going to say i dont think donald hurt himself particularly in this debate though i will say this, i think that if we look back on last night it is likely to be the beginning of the end of donald trump sitting atop the gop field because while there were substantive debates on Foreign Policy and Social Security and other topics whenever that occurred donald trump was really nowhere in the discussion. I would agree. And he has started to show his colors and his lack of experience on the political stage and its going to be very hard for him to go out in two or three more debates and have those performances and be accepted as the nominee of the Republican Party by anybody. His demise has been greatly exaggerated five or six times. Thats like 3 ten year yields in financial speak. We have been waiting for that for five years. He dropped in the Prediction Markets last night. Really . Yeah. He did. He dropped several points. Not that thats tend all be all but its indicative of what others who are watching this spectacle think. How soon do you think we see other people drop out . Weve seen rick perry go. Its hard to have too much substance in a debate when you have this many people standing on the stage. Its hard for anyone to shine. I dont think well see anybody on that stage, the main stage last night drop out. Certainly not before our cnbc debate at the end of next month. But perhaps toward the end of the year as people start running out of money, hard dollars you may see some folks fade but the guy thats been on the bubble that i thought also had a strong night was governor christie. He was particularly effective last evening and barely made the debate stage so if he can translate that into some support he probably ensures a spot, potentially ensures a spot down the road here. Does everybody sit around waiting for donald trump to implode and that keeps people in the debate longer . All of these candidates. Probably so. I think events over the next six weeks between this debate and the debate held on this network could help shape what happens. It could force a surge of substance into it. How does that impact things . The gattis cousin and obviously the deal are there developments there or around the world that force the republican candidates they have to respond to and theyre always ours. All of us know were always ours. So i think events on the national and global stage will help determine the kind of substance and frankly, the caliber of substances dealt with in the next debate which could hurt donald. Could hurt the donald and may help some of the other candidates. The point about when they talk real substance there was a slight absence of mr. Trump from those conversations. So the more substance the better the candidates. Obviously the email server controversy is more than just a media driven situation. We have seen the poll. I know that everything fades in peoples minds but we dont know what, it always seems like theres another shoe. Whether its going to be you hear that the doj or fbi how long does this last and is it salva s salvagable at this point . To bring back the numbers for hillary clinton. All of this is salvagable on her part. Theres a fatigue about talking about these things. From day one there was a fatigue. Thats wearing thin after awhile. Its safe to say without a doubt. Same people from 20 years ago. This should have been handled differently. I still dont think theres much there. Joe this is not going away joe. She is in five investigations and having worked in a white house at the end of an administration that was investigated, everyone is lawyering up, this is not going away. Shes not under investigation lets be clear. Lets remember the email we cant accuse a former secretary of state and former first lady and leading contender of being under investigation if shes not. She is under investigation. Shes not a target but shes under investigation. Her activities are under investigation. Yelling and keep saying it over and over again doesnt make it true. Shes not the target of the investigation. The fbi has not said that. Well leave the debate there. When we return well talk about the other question of the morning. Will they or wont they . The great rate hike debate. Well do it next. Back in a moment. 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. It took Joel Silverman years to become a master dog trainer. But only a few commands to master depositing checks at chase atms. Technology designed for you. So you can easily master the way you bank. 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. We have an all star guest lineup joining us to get ready for the fed this morning. Joe sullivan. Also David Rubenstein and brian rogers. Theyll all be here with us in just a few minutes. Stick around. Squawk box will be right back. So whats your news . I got a job 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 my name is watson. Im helping doctors keep people healthy. Take ted here. Im pulling together data he shared from his wearables, Health Records and family history, so we can analyze it. Hes doing everything right. For the most part. No pain, no gain. You are a beast, ted. My name is watson. How can i help you . We are hours away from the long awaited fed decision on Interest Rates, and joining us now to talk the impact of a possible rate increase is catherine man, the chief economist at the oecd and kevin, the director of Economic Policy studies at the American Enterprise institute, both serving as senior economist at the Federal Reserve so they have a good idea of the conversation taking place today at the fed. Starting with you, cat run, we know the game is a much more global game than ever before. They think about Unemployment Rates in the United States, inflation rates in the United States, but whats happening globally and how we play in all of that. What do you think about the Global Economy right now, and how does the fed measure that all up to figure out what to do today . So we had our interim Economic Outlook released yesterday, and we did downgrade Global Growth just a little bit for 201516, but, frankly, i think that the u. S. Economy, which we upgraded, is Strong Enough, and the Federal Reserve really needs to put to rest the uncertainty about the timing of when they first move off those lower bounds. The timing is whats uncertain at this point, and for the Global Economy, its a good idea to just put that to rest, get the money moving, settle down, and that will reduce uncertainty facing the emerging markets. I dont think we have to worry about higher Interest Rates around the Global Economy because we, after all, we had the European Central bank putting in a lot of money into the system. We have the japanese putting a lot of money into the system, frankly, we have the chinese putting a lot of money into the system as well. Global Interest Rates are not going to be on the rise, but we do have to take the uncertainty about timing out of the picture. Then the Federal Reserve can make clear that it is the pace of increase that matters. What id like to see in the dot plots because well get a new set tomorrow, id like to see the dot plots look a lot more like Market Expectations for Interest Rate trajectory because that removes the second source of uncertainty from what the Federal Reserves going to do. What were looking at is a problem with Real Investment in the Global Economy as well as in the United States. We know that thats not very interest sensitive at all, so 25 basis points is not going to do anything for Real Investment. Right. But what it will do is take a little bit of the speculative money out of the system, potentially eliminate some of these stock buy backs and m as and transition some of that corporate money into Real Investment, and thats the foundation for jobs after all, which is where we really want to go in terms of supporting global demand. Kevin, youre of the same opinion thinking enough is enough, and todays the day to move, correct . Right. We have to put uncertainty behind us. Basically, the last few years, we live in a regime move, bond market socialism where the government sets the price for the short end and long end too creating imbalancing, and Martin Feldstein wrote about this in marketing countries, dollars, loading up on debt and potentially exposing the world to another crisis as they unwind and dollar strengthens. Balances happen when you try to control it, and the fed needs to stop right now. The argument for not doing it right now, really there are two. One is china is weak and might drive a developing market crisis, and the other is we have not seen the upward revision to the jobs numbers as said well see, and if the number were stronger than the move right now is a layup. If it were me, id say, look, put uncertainty behind us as cathy said, and do it with a smaller move and clarity about future moves in order to create a positive buzz, and i go 12. 5 basis points and give timid guidance from there. How strong a stand do the doves have, though, and how persistent will they be in the meetings in saying what does it matter if we wait another month or two . What you guys kind of made fun of me more than a year ago when i said my model of the fed is i think about what theyre going to do that if we make a movie, then the head of the fed would be played by narrow that down. You need to narrow that down to which time we were making fun of you . You always do, yeah. Yeah, yeah, narrow it down. The head of the fed is peewee herman. If i bet money on this, thats where. Thats your thing with peewee herman, hes wimpy, okay. Kevin . Go ahead. Well, were done, okay, sorry. Hes known for other things in more recent history. I didnt what you were saying, thanks, kevin, see you later, thank you both. Coming up, david reubenstein. 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. 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. Is this economy ready for higher Interest Rates . Thats the big decision the Federal Reserve has to make today. The impact on the markets and american businesses straight ahead. Big thinkers this hour to talk about the feds decision and investing for the next 20 years. Legg mason ceo, joe sullivan, and brian rogers. Media merger, european giant buying cable version for nearly 18 billion, including debt. Well talk to an analyst about the next big cable consolidation deal. The second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. This afternoon is our afternoon delight for finding out whats going to happen. What is this . Going to a dairy between for a sundae . Whose delight . I dont know. Lloyd blankfeins is different than why are we playing this . He does it in the afternoon how do you know that . Thats not what im referring to. Lets leave it at that. Andrew, do you follow him around . No, im suggesting no. Some people would be delighted. He goes for dairy queen in the afternoon. Some people will be delighted this afternoon, others wont. All right, welcome back to squawk box, along with the no. The first in business worldwide, i the count down almost over, at 2 00 p. M. , we learn whether the fed raises Interest Rates. No one wants them to rush, though, nine years. Nine years. You know, just got to think about this because i mean, 25 basis points from 0, think about it, think about it. Steve liesman is joining us later this hour, and special coverage of the feds decision gives at 1 00 p. M. Eastern on cnbc. When do they come on and breathlessly say it . Exactly 2 00 p. M. . Its just at 2 00 p. M. . Well, they probably get the assuming the embargo is not broken. And what they say afterwards. Thats important. Even if they cut cut . Minus a half . Youre the outlier there. I dont know anyone predicting that. Thatd be weird. It would be. The other stories we are following at this hour, a major media deal, European Telecom is b buying cablevags. And you might remember they fail this year to buy time warner cable, and the analyst has more on the deal coming up in a few minutes. Also, General Motors reaching a deal with federal prosecutors to examine a problem with the deadly problem of ignition switches. Theyll pay a fine of 900 million, and the agreement is expected to be announced today. Well get an update from phil lebeau at the bottom of the hour. The shanghai closed down more than 2 , most losses coming in the final 30 minutes of the session. Look at that, down 2 there, and if you see whats happening here this morning, it looks like we are all on hold waiting to see what happens with the fed. Right now, things are relatively flat, joe . Thank you, becky. If you missed the gop last night president ial debate, donald trump fended off attacks from the rival in particular, former hpc Carly Fiorina, and the most tweeted moment was her response to trumps comments about her appearance. Last week in Rolling Stone magazine trump said the following about you, quote, look at that face, would anyone vote for that, can you imagine that, the face of our next president. Mr. Trump said he was talking about your persona, not your appearance. Feel free to respond what you think about his persona. Its interesting to me, mr. Trump said that he heard mr. Bush very clearly in what mr. Bush said. I think women all over the country heard clearly what mr. Trump said. [ applause ] which begs to question, she knew that was coming, probably, but not in the form it came. That was not the prepared remark. Quickly thinking, okay, he was just talking about, listening to what jeb bush said. Spectacular. Terrific. Yep. You saw the last time too, right . I didnt watch she was better last night. Did you watch the first yeah. The earlier . I did. I watched earlier, but she was on the main stage this time. But afterwards she was great, an interchange with chris matthews. I didnt see that. Yeah. It was pretty amazing. Anyway, you were hearing it, working on the altice deal . I had it on, but multitasking. Amazing. In the meantime from the debates to the other big debate about financing and what the fed does to the big conversations about the next 20 years, were going to get some major market voices to weigh in now counting down to todays highly participated fed meeting, joe sullivan, the chairman and ceo of the legg mason, the firm, of course, with over 680 billion, with a b, in management, and were joined by david reuben reubenstein, but lets talk about what the next couple hours look like or what may transpire. Sure. Help us, what do you think will happen, what do you want to happen . Sure. To first of all, i think we all know that the fed really wants to move off of its zero Interest Rate policy. They are clear about that. Theres other Market Participants that agree with that. I agree with that. We, at legg mason, are anxious for rates to normalize and get the fed out of the market. We think thats a good thing. That said, despite the fact that i hope they raise rates and i think its going to be a very, very close call, i think ultimately the end of the daying we think they do not raise rates. We think they are going to hold off, and we think so for a couple reasons. First of all, you know, we all know that the mandate of the fed is employment and inflation. Clearly, theres. Improvement on the employment front, encouraging, good news, but the inflation piece is trickier, and later in the session, well have john bellows with us to talk about that from western asset. Thats trickier. It was not all that long ago, if you recall, we were actually there was chatter in the markets about deflation, and thats probably the scariest of all things to the fed, so i think thats app issue. I also think, you know, the Global Economic data that weve gotten more recently is challenging, now, theres those who i think dismiss that or dont think the fed considers that as much as i do. I think, again, we should ask john about that, but i have to believe that what were seeing out of china and some of the other markets has to impact at least or enter into the thinking of the fed. That Global Economic data has become more mixed, and then the last piece, andrew, is really the markets, and i dont know how much they consider this, but the reality is the markets are fragi fragile. Its been a bumpy summer. August was really rough. You know, how do the markets receive that . Right. Well see. At the end of the day, well land, a close call, not surprised, happy if im wrong, but we think they do not raise rates. David, weigh in. Youre on an airplane traveling the world, raising money in all sorts of locations, and, also, weigh in what the implications are for the Global Economy when you spend time in asia and elsewhere. Well, right now, i agree with joe, that i dont think its likely the fed will increase rates at this session. I think the fed is very good at telegraphing what its going to do, and i think its not telegraph its going to do it in this session, telegraphing its going to do something probably this year. I suspect the most recent numbers suggest its waiting another month or two would be better m i think around the world, people are paying enormous amount of attention to this because the fed is really the central bank of the world, and the fed increases Interest Rates a little bit, it will impact all over the world, particularly in the emerging markets. The fed is sensitive to that, and, therefore, the fed is likely to wait another month or two to get Additional Data and probably telegraph better than has now that its about ready to do it in a particular time. David, what are you seeing in the businesses you own internationally . Well, right now, there is modest growth in the overseas markets, emerging markets are really slowing down in their growth, and i think the feds increasing Interest Rates would increase that slow down a bit. For private equity, thats not a bad problem because we buy with dise quill librium and uncertainty. For the economies themselves, they are slowing down a bit. All right. And briefly, just in terms of Interest Rates, how will it change the economics for you as someone whos in the buyout business, how are you thinking about it . The deal, one of the largest lbos of the year, how do you think about that, david, in terms of future business to Andrews Point in. Well, nobody really likes more expensive money, so i wouldnt say id love to have rates go up. Nobody likes money to be more expensive, but reality sets in, and you need to recognize that probably at some point in time Interest Rates need to go up. For our business, it really is not going to be that cataclysmic or dangerous because the truth is when Interest Rates go up, prices go down in the Public Markets, therefore, prices are less expensive, and its easier to buy things. Right now, as you know that deal aside, private equity firms find it difficult to purchase in the current environment because prices are high. That changes as Interest Rates begin their assent upward, and, this afternoon, a good buying opportunity. Obviously, private equity people sell in the last couping years so theres not many things to sell, and right now, were in the buying mode, and our firm has dry powder looking to buy things at cheaper prices when Interest Rates go up. But, david, youre talking about a gradual process, not raising 25 points today creates that big price differential. Youre correct. 25 basis points wont mean all that much. The real issue is not Interest Rates going up. Its credit availability, and i dont see any signs that va availability is curtailed. As for the existing companies we own on behalf of our investors, the Interest Rates we pay now on debt is fixed. Its not likely to be adjusted that much even when Interest Rates go up. Its future acquisitions that are affected, but well do is lower the prices we pay a bit and take intoing the the higher interest charges. I think its going to slow down our industry, accelerate our ability to buy things and make compani compani companies efficient and make economies better as a result. Do you think the private markets, increasingly are Public Markets because competitors and yourselves have got into those businesses as well . I think david can speak to the private markets more. I think in the Public Markets, you know, can doddfrank and regulations of trading inventories, things like that, i think actually the level of risk taking has been curtailed a bit, so i think its very different than it was in the course of the crisis. Im not as worried about that as i was during the crisis. Now, in the private side, david could speak to it. You know, clearly, cheap money, which weve had, has given people the powder and made deals more economic to do, and to davids point, locking in low long term rates, that gives them advantage in terms of a long, you know, the iors on a longer term basis. Everyone worries about the unicorn markets breaking down. Do you . Well, i think if theres bubbles any further in the world, it could be said that perhaps in the unicorn market there is because you have about 85 companies with a billion dollars or more of market value, even though they not public. Thats unprecedented. I suspect valuations come down. Some companies are transformative, and perhaps uber is one, but companies have valuations not justified in the private markets, and i suspect Interest Rates go up and theres a market correction, some of the unicorn valuations go down. David, a political question. Theres trump, bush, obama, clearly, and hillary wanting to get rid of tax and carried interest as a capital gain. What do you think . Andrew, i had a bet with my colleagues about how long it would take you to ask that Interest Rate question. I mean, the carried interest question. I think our view in the industry and other industries that are effective, real estate 1 more affected than private equity, perhaps, is in the context of comprehensive tax reform, everything should be on the table, but what we learn is that the tax code is complete with a lot of redundancies, mistakes, and a lot of inequities, but it comes about because we have tried to fix things or change thin things. You have tuesday it comprehensively. If the tax code is changed, it has to be comprehensive. Everything should be on the table. Thats our position in the industry, the real estate industry, i believe, and if the next president wants comprehensive tax reform, looking at the issue is a fair thing to look at, sure. Okay. Before we take a pause, david, one political question in d. C. Youre a d. C. Guy. Yes. What do you think of the debates, and does joe biden enter in the democratic side . I dont think the lincolndouglass debates are removed by that. Difficult to debate with 11 people. I cant imagine being on the stage with 11 people. Thats difficult to get in words in edge wise, but given that context, it was a reasonably educational exercise, the American People benefitted from it, and the more debates the better. Would you invest in a business run by donald trump or Carly Fiorina . I invest in things i know a lot about, and i dont know about their businesses. Im happy with investing in the companies that we have, and i dont know their businesses that well. Good answer. Andrew, not to correct you, but, david, i hope you dont mind. Davids a baltimore guy. Hes original from baltimore. I am originally from baltimore and pleased to be able to say so, and joe is a resident of baltimore now. Great to see you, joes going to be here the rest of the hour. More to talk about. David, thank you. Good to see you. When we come back this morning, two more big thinkers on the future of investing coming this hour, and john bellows, a 2 trillion error caught, thats right, trillion with a t, caught it in 2011 with the Treasury Department. Hell weigh in at 7 30 eastern time. The chairman and cio of trowe price is joining us with 30 billion under asset management. Also, a programming note for you today, at 1 00 p. M. Eastern time, watch cnbc for full coverage of the feds big announcement today. 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. 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. Welcome back to squawk box this morning, another media mer merger in the works, altice buying cable vision. Here to talk about it is the Senior Analyst at moffit. Good morning to you. You look at the price tag, the company, altice, the french company, you think to yourself, this is the beginning of a new conglomerate . Well, i dont know about conglomerate in terms of diversification, but, look, they said they want to get big in cable in the u. S. , and whats left to buy . You can buy cable vision. I dont think cox is for sale, and after that, youre talking about Small Companies like mediacom and smaller and smaller, cable one, half a million subscribers. To get big, its a lot of small acquisitions. Anything to be said its won out now after all this time in. Look, this is a tough time. Cablevisions cash flow is growing at negative 3 right now. They are not growing the broadband Subscriber Base anymore. They are the only cable operator in the United States with a headtohead fiber competitor in most of its footprint with verizon fios, making it tougher. They know the business better than anybody, and they are sellers. Do you think they can make a go of it . Its tough, right, but tlrks m. O. Is to dramatically cut cost, and in the u. S. , you know, theyve said themselves they expect 20, 25 of the video subscribers of the business to lee. They are the same size economically for the a cable operator, if you lose 25 of the video, you have to grow the business by 25 . Youre not going to spend money youre not spending money. We have not heard the numbers yet in details, but they said they are going to cut what amounted to 25 of the costs of the business outside of programming. Thats a tough thing to do. So rich greenfield said last hour what he thinks to focus on is not only do they cut from the operational side but on the programming side, that all the sudden, they will try just decide not willie nilly, by theres certain of pieces of programming they dont mewant, d that could be a model for others, whats that mean more broadly . Cable operators are down that. Draghi described the business as a connectivity business, and that speaks to the business of broadband not video. Content is not king in that i dont think its been king for a long time, but the challenge for this particular business is you have a headtohead competitor in verizon that is willing to be aggressive with video packages, with bundle pricing, and if youre model is, im going to lose a lot of video, even if its by cutting the programmin , your model has to grow broadband. Ri raise prices, but how when youre head to head against verizon . To what extent have they been investing . In infrastructure . Is it a good time for, frankly, for someone else to acquire them . Its a cyclical investment in that they went through a period where capital intensity was quite low, and arguably too low, and so they built it back up. They aggressively reinvested to bolster the plant. The plants in good shape, but its another plant thats also in good shape,hearted harder to pricing. Thank you, sir. My pleasure. Gm settles with prosecutors over faulty ignition switches, weaver told, details ahead. Well be right back. Time now for todays aflac trivia question. What was the highest rated tv show in 1995. The answer when cnbc squawk box continues. Hale. Aflac and a gentle wavelike motion. Ahhh ahhhhhh. Liberate your spine. Ahhhahhhhhh. Aflac and reach, toes blossoming. Not that great at yoga. Yeah, but when i slipped a disk he paid my claim in just one day. Ahh so he had your back . Yep. In just one day, we approve and pay. One day pay, only from aflac. [duck snoring] now the answer to todays aflac trivia question. What was the highest rated tv show in 1995 . The answer, e. R. Welcome back to squawk box, im phil lebeau, sources say General Motors agreed to enter into deferred prosecution agreement with the federal government in relationship to a criminal investigation into faulty ignition switches. Later today, the federal government will announce gm agreed to a 900 million fine, no current or former employees charged as part of the agreement. This caps the criminal investigation into faulty ignition switches issue and separate from that, gm agreed to pay off 124 families of victims killed in accidents related to the switches. 275 people were injury in those accident, and that Compensation Fund cost 625 million, the 900 million fine is less than what some on wall street expected. Rbc capital out with a note last night said it expected the agreement for a fine to be about 1. 5 billion and the fact itll be well below that means that we could see an adjustment to some of the price targets, certainly, rbc will be adjusting its price target. Looking at shares of General Motors, it is up 1. 3 in after hours trading, down 13 since the scandal broke in february of last year. Interesting to see if shares pop once this deferred prosecution agreement is announced later today. Back with more squawk box in a bit with a live report from the september fed meeting in washington, d. C. Stay tuned. To raise or not to raise . That is the question. Whether tis nobler to suffer the shock of a turmoil of a quarter point hike or take odds against economic uncertainty, and by keeping rates low, stimulate. To hike, to ease no more. The wait nearly over, at 2 00 p. M. , we find out if they raise Interest Rates, steve, where do you stand at this point . People are evenly divided it seems. Yeah, im more in the just slightly they wait another month, but the fed could hike rates for the first time in nine years. I want to look at this differently. Lets look at the current makeup of the Voting Committee and see e if yellen has the votes to headache. First thing youll notice at a wide view, a view of morgan stanley. Its a dovish committee than we had in the past, maybe more inclined to hold the line and risk averse than to hike. Theres board politics and governors appointed by the president , confirmed by the senate are unlikely to oppose the chair. New york fed president bill dudley close to yellen, a dudley dissent unlikely. San francisco fed from the John Williams to the right there, mr. Cameraman, he was head of research at the bank when yellen had his job. He wants to hike this year, but not Strong Enough to dissent if he does not get his way this time. All the way over on the rightla likely no vote on the hike, he gave a case against delaying, but he gives a vote carefully, no hike, but a clear message its coming satisfies lacker. A dovish governor could di send as well. Evans on the left the most likely candidate, the chicago fed president. Guys, its the chairs committee. Thats by virtual of fed tradition and virtue of personnel on the committee. Thats what makes the failure to talk so confounding. If we knew where she sat, wed knew where others stand. Thank you. I like the break down, the equivalent of the Electoral College on election night. Well see you a little bit later. Lets bring in another voice. Or if shed carry a briefcase, steve, right . You know, i didnt think about that, joe, a good question. You know, they picked i guess women carry briefcases, but not to the extent men do and not large cases with papers from them. Were missing that particular indicator telling us very clearly what would happen. You remember. I mean, they brag about their more transparent now, really . Alan greenspan told us faber was right. Remember . Unbelievable, a cameraman there, hed come around the corner alone, greenspan, and just walk not on a crosswalk, you know, just trot across the street and walk up these steps to the building. I guess that was we were innocent back then, werent we, steve . Unbelievable. Well, it was nine years ago, and i think it was the great mark haines the best of determining whether its a fat or thin briefcase then. Right. Funny thing, he talked about it, see how much stuff there he is. Actually, right there. Joe . Joe . It was nine years ago. See what he says here. Hi, im alan greenspan, how are you . Look at that guy. [ laughter ] ive seen that act on tv, just keep walking. Anyway it was nine years ago, joe, no ipad, no iphone, you couldnt tweet about it. Thank you. There was no twitter. Bernanke rode in an suv with tinted windows. That was not as good, but greenspan had the trench coat, we played music as he trotted across the street. The good ole days, steve. Joining us now on set, john bellows, portfolio manager, a former assistant secretary at the Treasury Department where in 2011, credited for catching a 2 trillion era that s p made in downgrading the u. S. Credit Rating Agency and actually back then 2 trillion was a lot of money. Back then. Our guest host, joe sullivan, ceo of legg mason, and we talked off camera, how did they do it . How do you mess up i mean, theres a lot of numbers. Theres a lot of numbers, yep. So was it a decimal appointment . In fairness to them, its complicated, but it was a spread sheet error. They came up with the long answer by a lot. It goes to show its important to get numbers right. I thought spread sheets, you plug them into something that doesnt make a mistake . Well, somebody decides which rows to add together, and that was the error. It was, you know so the total what did 2 trillion represent as a percentage, how much did it skew the number . It was material. This was an error on the amount of debt the government would have in ten years, so probably 10 . A ten percentage point difference. Do you know by looking at the numbers there was an error and you went line by line . Exactly. People who do this, and this is my previous life, you know the numbers inside and out, thats your responsibility, and so it was immediately obvious that they had made a mistake. But didnt matter for the steps took. This is where the disagreement was. The Treasury Department thought it was material, mattered a lot, ten points on the numbers is a big deal. S p came to another conclusion, and, you know, thats when the fireworks started. How many years ago is this . This was august of 11. 2011, so they didnt downgrade anything in 2008. Right. Decided to downgrade the u. S. In 2011. I mean, we all sort of saw what it was, didnt we . I mean well, you know, so they dont rate us, do they . Do i have to worry about s p . They rate us, so we do. Great firm, great firm. Yeah, okay. All right. So what do they do today, the fed . Commenting on the greenspan comparison, whats interesting today, theres a split decision by economists, different than in 2004. In 2004, it was telegraphed, it was coming, key words were in the statement, and now a few hours away, and we debate will they or wont they. Thats dmifferent. With a fed chair, its different. Thats right. That uncertainty r characterizes that cycle. They want to be characterized of being responsive than predictable. Too predictable in 2004. They want to have emphasis, again, on being responsive today, and when you are responsive, that means you might change in response to whatever happens. Leading to volatility in the markets, not knowing whats going to happen. Thats a tension they may be comfortable with and being spojss is something prioritizes. They are data driven, right . Data driven and outlook driven. If the risks increase, does not show up, they need to respond to that. So our call today, a close call, theres uncertainty, but we think they hold off because of the increasing risks in the outlook. So how do you think about, you know, we talked about this, the employment picture strengthened, a good thing, but inflation is trickier. Is that more the outlook than the data, and how do you think about that . Thats right. The questions on inflation are about the outlook. You know, the feds case is that inflations low right now for temporary reasons, the dollar, oil, those are going to come out, and inflation heads up. They may be right about that. That has merit. Its september . So september between now and december, so just work with me here. China starts, you know, starts getting volatile again in shanghai. Citi group the other day said base case for 2016 is a global slow down, global recession. Numbers start coming in bad. We had had a terrible durable goods number, i think, recently. So things rolling down between now and december. Then they cant get out in december. Here we are. Thats the scariest thing. You know, the worst case scenar scenario. Worse if they raise and those things happen and stop . I dont know. Be in 0 in 2018, still . We want rates higher, and we think its the right thing, but im not sure they want to raise and raise and cut. Others say, yeah, so that you have a way to cut so you have something to throw at it rather than negative Interest Rates or another route of qe. The other question is what if they are not resolved by december . Chinas hanging out there, oil prices under pressure, what do you do . Were in the roach motel, you checked in, and you cant check out, and were all addicted, like an addict. Im more optimistic than that. If you get stability from china, you got resolution, the employment picture looks okay. I think they are on track would you like to raise today . You think its okay, dont you . Our positions would benefit, probably, but i think theyll probably for the good of the country . Youre not sure . You know, i think for the good of the country, being responsive being more cautious, taking account change of outlook is appropriate. Considering the economy is based on what the Federal Reserve does now, also our own problem. Used to be based on the private sector. Another reason to be cautious and be responsive. Okay. Okay. Thank you. When we come back, our special conversation on the future of investing continues. Trowe price chairman and cio brine rogers is next, saying rate hikes are positive. Well talk in a moment. 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. 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. Welcome back, everybody, our next guest is a lemg dagendary investor in business for 30 years, incoming the biggest firms on wall street, and brian rogers is the chairman and cio of trowe price group, and manages another 15 million in institutional assets, and with us this morning, our guest host, joe sullivan, the ceo of legg mason, and, brian, welcome, great to see you this morning. Great to be with you all today. Weigh in on the debate were having, longer term answers and investing, but first off, the question at hand, what the fed does today, what you think they should do and will do . Oh, i was listening to the conversation, and it seems to me that i think they wish they had already done it. Yeah. And they were in a position now where i think a lot of the Economic Data justifies a small increase. I think if they dont raise rates today, their languages and suggests tightening later, but i have a sneaking suspicion they may go ahead and do it, and im of the view the 25 point basis increase does not make a difference, and i think they want to do it. I think they are unsettled by the recent volatility in market, but, basically, they should do t and they are running out of time to do it. Im not surprised if they bump them this afternoon. Brian, how do you think the markets react, particularly the equity markets . Well, my sense is that the equity market would not be averse to a small increase, particularly if the language says due to improving Economic Conditions and continued employment gains, those are phrases Equity Investors like to hear suggesting Economic Growth is good, so i think if an increase comes along with language that we did this because we continue to see a firming economy, even if its a slowly firming economy, thats good news for the equity market. What happens today and tomorrow is anybodys guess, but longer term, Equity Investors, think about the language with the rate hike, they react well to that. And is there theres a benefit to taking some uncertainty in the market, the waiting for the fed, waiting for the fed, a benefit there as well . Weve. Waiting for the fed for a number of months k and its almost like the fed is waiting to see the poll numbers turn in terms of supporting the rate increase, much like a politician runnings his or her Campaign Based on polling data. What i think the fed ought not look at the market probabilities built into a rate hike and just go ahead and do what they think is the right thing from a policy stand point, and data suggests they ought to do it. A big shock if they did. To do the right thing. If they did the right thing, would you be shocked . No, not necessarily. Really . Theres a bunch of smart people there. Wow, yellen, you go. I would cheer, like, wow, there is someone who does, you know, acts on that. 5. 1 at 0. Yeah, motto for today is nike, that has janet, just do. Thank you. Where are you . Are you around here . Are you close enough to get in here and sit with me in the studio . No. Im in baltimore today. All right. Well, thats right on another note, unicorns, you invested in a number of unicorns like uber, and those valuations are not down in part because they are private. They are not market to market, but what do you think whats happened out in the valley, and do the valuations old up . Well, i think the private market value of some of the Companies Might be a little bit extended, but these are Game Changing organizations and Game Changing business models, and so they deserve rich valuations generally. I would say theres a lot of capital going into a small number of companies, the socalled unicorns, as you called them, but the companies are doing really well and valuations have been justified. Time will tell. I would say in terms of our activity, while we seem to get a fair amount of press for what we are doing, our exposure in any one Fund Portfolio to the company is small. We might be a large invester in uber, but relative to the funds that hold it, were talking 13 in total of private investments in all the funds, so the exposure and the risk consequently in any funds is fairly small. Even if we do, like, the companies what weve been investing in some of them for a couple years now. For you, sfe specifically, t are not straight valuations, from what i understand, there are provisions that force ipos or force them to give you more on the other end. We look at the 50 billion valuation of uber, do you say its worth 50 billion or because theres other provisions in the deal, its worth Something Different . Well, im not our inhouse expert on uber, but i know the companys doing really, really well, and i think the valuations are open to debate like, you know, Public Market valuations are open to debate. We can take a look and try to figure out is the valuation of Procter Gamble justified today . I think as long as fundamentals are in tact and companies are staying private longer because they like being private companies and ultimately they are the ultimate test. Think back to ali baba, all the hype, went up, came back down, and facebook did that after its ipo. It was a great investment coming out of the short term, and it sold way back off, and its been forward ever since. I think the path for the Companies Like air bb and uber are similar, but long term, if they deliver on the business proposition, theyll be fine investments. Brian, a huge part of the holdings include the financials, bank of america, jpmorgan, wells fargo, all benefit if rates increase. You do expect over the next, lets say two years, rates are higher helping those companies . Becky, i think over the next two years, rates have to be a little higher. Think of where we are. Were five years into an economic recovery. Its been a slow economic recovery. In any other cycle, rates at the short end of the yield curve would be, i dont know, 150 basis points, and were talking today going from 0 Interest Rate policy up to 25 basis points so i think over the course of the next couple years, rates, generally, will be on a slightly upward trajectory. I think that will be a challenge for some fixed income investors, but at the same time, at the short end of the curve, rates are clearly artificially low and held there for a long period of time, and thats why the fed feels its in a box because back to one of my earlier comments, they wish they had already done it. Joe, you agree with that . I do. I do. No, not you. Okay. I dont care. The other joe. Just the idea its tougher for fixed income investors down the road, looking at higher rates, and you need to be nimble . Overall, once we get to a normalized rate environment, fixed income looks interesting, right . We get back there and look forward to t but, also, along the way, the white water along the way, rates rise, depends on what fixed income youre in. You can mitigate a little bit of that with alternative or unconstrained type strategies. You can mitigate or credit strategy some of the volatility in the portfolio. Yeah. Joe . My comment, joe was primarily aimed at the traditional 10year treasure try and caption to it if rates move up, and you lose money on principle in the short term. My comment was a general response of duration to a slight rise in rates. Yep, and thats right. I agree. Brian, thank you, great talking to you. Becky, thanks very much, thanks, everybody. Thanks, brian. Great to see you. Likewise. Twitter can measure mentions, right . Yes. You have gone from bitcoin to now unicorn. Unico unicorn. You love the unicorns. You love them. I get on a thing. You do. You do. What happened to others . Finished with. What about bitcoin . New news. Thats why its news. There is another debate between now and cnbc debate. 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. We want to thank joe sullivan for joining us for the hour. So you think they should, but they wont, probably . Right, right. Close call. Very close call. We appreciate it. Talki inabout the debate, six democrats, sanders, hillary clinton, u. S. Senator jim web and lincoln, and my prediction, its on cnn, they invite donald. They invite the donald to be part of it, even though they reach across the aisle. Thats what we need. Dont put it beyond cnn to bring it in for ratings. Would bump ratings. They are not above that. Thank you for being here. A great conversation. My pleasure. Come back. I will. We have a very biusy mornin, the big media deal of the morning, and gms ignition switch settlement, and eagerly at anticipated fed announcement, and the ceos of caterpillar and honeywell joining us. We return in a moment. At t and directv are now one. Which means you can watch movies while youre on the move. Sitcoms, while you sit on those. And even fargo, in fargo binge, while you lose weight and enjoy a good cliffhanger while you hang from a. Why am i yelling . The revolution will not only be televised. The revolution will be mobilized. Introducing the all in one plan. Only from directv and at t. Im watson. And today hundreds of companies are putting me to work. Im teaching watson to help your vet speak dog. Youre a dog, right . Im teaching watson to help you make healthy choices. Im teaching watson to help design a vacation around your personality. Dont judge. Im teaching watson to answer endless questions. How big is infinity . Where do babies come from . Why cant i have chocolate for breakfast . Im watson and im ready to work with you. The internet of things. What were recommending as your consultants. The new consultants are here. Its not just big data, its bigger data. Were beta testing the new wearable interface. Xerox believes finding the right solution shouldnt be so much work. By engineering a better way for people, process and technology to work together. Work can work better. With xerox. 20 years of power, money, and mayhem. 20 years of unprecedented access. I know things. Oh, you do know things . I know things. And 20 years of bringing wall street to main street. Could be here or markets in china. Now its time for the next 20. Joined by doug by caterpillar and catpillar, two industrial giants, over a century of business experience from rockets to roads, bulldozers to brake pads. They have their finger on the pulse of the Global Economy. We zero in on the future of manufacturing. Jobs, china, and what needs to be done to keep america great, this special hour of squawk box conversations for the next 20 years begins right now. Live from the most powerful city in the world, new york, this is squawk box. Welcome back, everybody, lets look at the futures this morning. We are all waiting on the fed and as a result, youre not seeing a lot of activity this morning. That announcements coming at 2 00 p. M. Europe time today. Ahead of that, the futures weaker with the dow futures down by 14 points, s p down by 6, and nasdaq down by 1. Special guests in studio with us this morning, and we have chairman and ceo, dave cody. App drew has the top headlines. Andrew to you. Thank you, we have the big stories investors are talking about today, of course, the biggest decisions set for 2 00 p. M. Eastern time, that announcement followed by a yellen News Conference 30 minutes later, and corporate nudes this morni news this morning, altice is buying cablevision. Stocks soaring on that news this the morning. The other talker, gop white house hopefuls squared off in the second debate last night, fighting for attention on a very crowded stage. Much of the focus on trump releasing interesting numbers. The top issue discussed on the social networks sites was between immigration. Well find out more about that and the debate in just a bit. Over to you. Andrews todays conversation for the next 20 years centers on manufacturing and creating jobs across america, and we have with us this morning as you had just mentioned, caterpillar and honeywell, fortune 100 members who recently celebrated 60 years of working together by ringing the opening bell at the nyc. The ceo of caterpillar and he comes on rain or shine, which we appreciate. He join the company in 1994, and hes celebrating the 90 th anniversary, and did you know 60 of its audience are outside the United States . Looked good senior year in high school, doug. What was your wow. All right, also, with us, david cody, chairman and ceo of honeywell, and they joined the company in 2002. And before that, the company. And bmw, and then before that . Honeywell made 84 acquisitions, and 655 brands and focuses on manufacturing in just a moment, but, first, we want to start with the state of the u. S. Economy, the decision coming today and current turmoil in china. Would eat one of you be mortified with 25 basis points . Would business grind to a halt . I dont think so. You wish they would do it . I think were on that cusp where markets expect it, but that doesnt mean theres a negative reaction. Im going to say im receptive to the idea if you go up, you can go down if theres a problem. I have a tough time seeing it being an issue. The dollar could strengthen, tougher for that reason, do you wish they wouldnt raise . Im with david exactly. Some of the debate, were on the cusp, peel the bandaid off, 25 points is not going to affect, i think, the actual physical thfl of capital. Lets move on. On the other hand, the economys weak around the world. I worry about that a bit, but at this point in time with all the headlines, the debate, the trauma around it, i kind of think, lets go and move on. I dont think theres much after that, though. Youre both humble, and, i mean, i can say anything with a straight face. Anyway, youre both humble. Which of you thinks they know more about china and the situation there . Dave does. [ laughter ] oh, you were too quick on that. Okay. So were going to do a quick hit on the fed, do a quick hit on china. Does it yet worse from here or dealing with this for five years already, and does it stabilize . First, id put this in kind of the context of the 21st century. China is the story of the 21st century. Its possible if things go awry, does not work out how we anticipa anticipate, but i think they are the 21st century story. All right. They have an ability what about in the next six months . Thats tough to tell, but they grow in the 56 range. Really . We still see sales growing there, and, in fact, china, two years ago, became the biggest countries for sales outside the u. S. So were not in that boat yet. Were, of course, construction slowed significantly in china. Im with dave. In our case, weve seen emerging markets ups and downs for 70 years, and this is another emerging market coming through to join the most developed nations club. Its not going to grow at 5 forever. It wouldnt grow at 13 forever. Well see ups and downs, and in our case, if yeah not in china, we jeopardize our future in the long term because theres going to be an emerging one or two or three Construction Companies that come out and corollary to this is japan in the early 1960s. We went over there in the 60s, and its been a battle. Today, we have a very good market position because we were there early to take on the japanese, today, our number two competitor in the world. We have to win on this in the short, medium, and long term. Last week, we were joined by well known china analyst, who raised the red flag. The chinese economy since i was on squawk in 2010 was growing at 15 nominal. Its now growing at 5 nominal, 7 real, 2 deflation. Its going down in terms of the kme of 2 a year. Thats going to continue. The model is broke opinin, hes caterpillar. What do you think . Well, facts are the facts. I mean, hes right. China has been slowing down for five years. For us, its still the largest Construction Equipment market in the world. We have got to be there. Were building our business model, building plants, design, and research and Development Plants there, a lot of regional design happens in china, and were seeing two or three chinese manufacturers come out of china to challenge us around the world, including in this country, and i firmly believe that were not there for the short term and long term to find a way to get through the six months as joe talked about, well lose in the longer term. We have to play to win over there. What about the pressures from china in terms of espionage, in terms of the next week, how this all plays out in relation between the two countries. How do you navigate that . Its hart of the equation, and, again, weve seen these things come and go, not on this scale. You look at chanos and say thats too short term . Valuation perspective, and what do you say to him . Were doing all we can internally to fortify our company. Right. Its that simple. This is not the first rodeo on a slow down in a cycle weve been through. Ive been through a half dozen. They come and go in industries. They are cyclical. China is in a cycle. 90 years, weve pulled through them, and for 40 years ive seen it. Well pull through it. I dont think chinas going to implode and pulls rest of the world down. Right. This is a video a little different this time. Everyonemen menmen menwants a b on the economy. This is from last week. If you talk to anyone who knows anything about china, theyll tell you that 7 is a fiction, 5 is probably a fiction, and real growth in china is Something Like 14 . We were involved in china, i was reading the situation there; they are wrong, and i thought they were easing when they really were not easing, and i lost money in the chinese market. They just keep making policy mistake after mistake after mistake over there. Right. I think its a learning curve to get on to market economy, you could say that, and maybe one day theyll get it. What do you think of that . Well, theres a lot of the stuff that all these guys are saying are true, all right . You take a a look at the currency intervention, stock market intervention, growth rate decline, need to shift their economy, all those things are true, but they are the number two economy in the world, and they are doing something about all this because they know they got to work their way through it, im with doug on this one is to say, okay, if i take a long term view, do i believe they work through it . Do i believe we need to be there to be part of the fabric of the country . Absolutely. Now, what happens in the short term with some of this . I guess tough to tell, but i could say overall were growing. We have 13,000 people over there now up from about 500 13 years ago. Its going to continue to grow. Right. Theyll figure it out. Its a huge market. We cant ignore it. They come at us everywhere in the world and compete with us. We have to do it, and theres going to be cycles, were in one right now, convinced well get through it, and its probably tough and painful, but what if we were not there . Right. Jeopardize the business. Building on dougs point, i say this to all businesses is the next big global competitor is likely to be from china than anywhere else in the world. Are you going to be in seattle, either of you, next week . Yes. Both of you . What do you think of the debate . Theres a good cop, bad cop debate how the president of the United States, obama, is going to be trying to give president xi a hard time on a number of Economic Issues, and that, perhaps, then this other meeting thats going to take place with the ceos, u. S. Ceos undermines whatever hes going to have to try to do on the bad cop side because, of course, youre going to try to be the good cop to do more business in chie china. Well, id say i find it hard to believe the president spends time being a bad cop the whole time. At the end of the day, this is a relationship built on mutual republic. I have a tough time seeing it being kind of stark as that, and when it comes to ceos, i would say there are times where as a group well be pretty bam by when it comes to what needs to be done. That said, its possible to be straight what needs to be done without being nasty about it. People will say it in a nice way. Theres issues. We got to talk about them. If we dont engage china, its going to be worse. Im all for it. The more dialogue the better, and i think business dialogue many times creates elements for further dialogue. Government hacks is a little more than thats a big issue. Yeah. Were not doing that, are we . Cant say everybody does it. I dont think were doing it. Thats what i mean. You know, we dont want to be passe. We want to be nice and get along with everyone, but we talked about this over the last couple days, it would be nice to have a regime among sophisticated nations for cyber hacking, try to get it, but you dont do that if you dont talk to somebody. The Republican Party split on engaging, and they dont even, you know, what is it does should we, what about iran . Be that conciliatory to the iranians . I have not read it and im not commenting on it. I have enough worry about all the other things in the world, but if we dont engage, what happens . I think we have to try engaugement. And did you watch the debate last night . Much of it, not all of it. Yeah. And . It was fun. It was fun. [ laughter ] how can you not enjoy that . American democracy at its best. I dont know how long they practiced that line, but it was well used when the time came. Yeah. Do either of you care are you going to move workers because of xm like ge in the last couple days, right . Where are you on that . We need them, bottom line. Do you move in the theres more turbine jobs moving to europe, acting very quickly. Yeah, i dont think wed move immediately, but i think thats another nick in the competitiveness of american manufacturing. Talk about were going to have a big discussion at 8 30. Getting rid of xm bank jeopardizes one job at ge, caterpillar, a tiny supplier, why would we do this . Right. Hopefully you both believe given the right policies, renaissance, well talk about it, but a renaissance is possible . Even though labor costs. Manufacturing . Oh, yes. Its happening now. In the Corporate Tax system, its possible to bring back manufacturing here . Oh, id say a couple different questions. Lets wait until 8 30 . How about that. Just keep talking, joe. We can be competitive around the u. S. Be more competitive in the u. S. With a few things. Yeah. Like tax reform. So have you picked a candidate on either side . No, not yet. Of course i have, but im not telling you. [ laughter ] you have . Yeah. I have favorites. Different question. As business guys i mean i have to expect it, its not like you watch it with no view at all. How do you judge the two people on the republican side with background in business, trump and Carly Fiorina . I cant wait to see it evolve. Yeah, i think we tried the political approach. Maybe its time to try a business approach. Right now, its a lot of fun. Theres a long way to go between now and next november. Will be interesting. Hopefully noisier, its enjoy e enjoyable. Dont look at me. Would you invest with Carly Fiorina or i asked off camera. Would you invest in a company with president obama as the ceo . Im not sure i would. I dont think hes had a huge business background. Okay. Thats just the point. They are two different skill sets. Thats right. Tendency to want to look at, geez, how come government doesnt run like a business . Unfortunately, when it comes to government stuff, we get stuff now, saying how come companies are not democratic like the government . You know, theres two different things. Up here you want stainability and trade off productivity. Here you want productivity and you trade off stainability. Those are two very different things. A good way to think about it. It is very different. Here, you want to make sure it stays for 200 years. Here, you or longer. You dont care, 20 years from now, okay, cant cut it, youre gone. Who would you like as a partner to generate Economic Activity to hire people . Well, that you want government equals business . It would be very helpful. It is to enable. Exactly. In a perfect world. There is a role for government in it. Right, there is. More to come, including conversations about manufacturing 20 years from now. First, though, it is the decision day for the fed, talking expectations. Also, the jobless claims data comes out at 8 30 eastern time, again, check out the futures, things flat as all of wall street awaits that fed decision at 2 00 p. M. Eastern time. We have special coverage of the feds decision beginning at 1 00 p. M. Eastern time today. Stick around, squawk box will be right back. Proud of you, son. Ge a manufacturer. Well thats why i dug this out for you. Its your grandpappys hammer and he would have wanted you to have it. It meant a lot to him. Yes, ge makes powerful machines. But ill be writing the code that will allow those machines to share information with each other. Ill be changing the way the world works. interrupting you cant pick it up, can you . Go ahead. He cant lift the hammer. Its okay though youre going to change the world. Welcome back to squawk box, everybody, we have corporate stories this morning, oracles earnings topping estimates, but revenue missing, also, its Current Quarter revenue analyst short, hurt by a strong dollar and shares of the software. The drug story chain messes a mark on earnings and trimming Profit Guidance slightly, riteaid cites sales and acquisition of pharmacy, benefits manager, vision rx. Still to come, more from the special guest this hour, ceo of caterpillar and honeywell, and tomorrow, another great lineup, the ceo of sprint joining us exclusi exclusively, and a special conferring about health care with the ceo of aetna and cardinal health. All this plus reaction to the feds market race decision. Its an interesting morning. Stick around. 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. The great part its with the audience. Making tv worthwhile. For everyone in the world, and you hear from them. You get good figures and give them a chance to speak. They listen to learn. Happy birthday, squawk box. We watch every morning. Happy birthday, squawk box, you guys are doing a great job. Congratulations. Happy birthday, squawk box, to becky, andrew, and even you, joe. Happy 20th birthday, squawk box. Happy 20th birthday squawk box. Happy 20 th anniversary, squawk box. Congratulations on the next 20, and then after that, well think about it. After the next 20 years, andrew, i want to be your guest. The mercedesbenz cclass. Five driving modes let you customize the steering, shift points, and suspension to fit the mood youre in. And the road youre on. The 2016 cclass. See your authorized dealer for exceptional offers through mercedesbenz financial services. Hey hi our cloud its a platform based on awesomeization really . Can it keep our data where it needs to be no matter what country were in . Integrate with our systems to help keep transactions secure . Combine Customer Data with likes, tweets, the weather, to predict trends . That would be awesome. Tote . Now theres a cloud that understands business. Now theres the ibm cloud. We are counting down to jobless claims and housing start, and were going to go to Rick Santelli at the cme in chicago, rick, your thoughts before the numbers . I know you got a lot on your mind between the feds decision and last nights debate. Well, i dont know if anything that we do now that we called debates are really debates, i dont know, more like shooting republican fish in a barrel seems to me, but in terms of the feds, the wall street journal oned had a term i liked. Black box fed. Hes right. We have a block box fed. For me to look into the cam are with certainty i can tell you whats going to come out in the black box fed would be crazy. My personal opinion . Its split decision. I bet in November Steve leisman theres no tightening in. Would make the bet again, but should the fed . Absolutely. Anyone listening to the president yesterday in front of the business round table went on for 15 minutes about how great the economy is. Who is right . Who is wrong here . Okay . So janet yellen . Did she hear that . And lloyd speaking out against rate timing. I dont know the exact stance on stocks, but, certainly, it seems like the blue bloods of wall street have not put a stop sign in front of the entry to stocks, so its difficult to reconcile because so many with such big presence in the marketplace, whether its from the commercial side, the institutional side, the government side, and they all have questions in the game, unfortunately, i think thats difficult. All i can say, the fed doesnt have enough confidence in the u. S. Economy after almost 7 years to keep it at 0. I dont know, i dont think its a good scenario. Theres data coming out, were looking at a countdown to 109 billion, thats actually a little less red ink, of course, to the trade deficit, but maybe august Housing Starts give us a better clue, annualized units, one says its light on expectations, and sequentially, its most definitely light from 1. 16, starting at 1. 2 million so you can see its a plus number down number about 3 , but it would have been down more, look at building permits, they are not bad numbers, but over a million. They are on the high side, even though they have come down, and permits are 1. 17 million analyzed. This on a sequential basis is a bit better than 1. 13, looking at up about to sustain that starts down maybe up, what, 3. 5 . Last month, revisions ement, so thats a side of the equation. Look at initial jobless claims, this is interesting to me. No matter how low they are, i dont know what it tells me anymore. Tells me that companies are not laying off as much or does it tell us that doesnt seem to be the case, look at challenger, what it tells me is the ability of people to go and file for this may be a skewed to some extent, but its 264,000, down 11,000 from the 275,000, and its not bad news, the directions are good, direction 2. 3 million on continuing claims. We briefly flirted with 230 and so and flirting with 310 and 30s. Its all yours, andrew. Thank you. The fed is in focus today, and well have steve joins right now to talk more about what he makes of the numbers, hes from washington at the moment. Steve, we have to get these guys into the conversation as well. Yeah, quick, on the data, andrew, we have the Housing Starts at lower than expected, a big fall off in the northeast, nigh mus 33. 7 , and the story is that we had this big tax break in june, came off in june, and there was more expected in terms of balancing back or coming back to a more normal level on that, and so youre on a pace here, not holding off the gains from may and june here. On the housing, on jobless claims, i wouldnt do much with that. You had the labor, the vacation week in there, and so you want to just be careful in terms of how it minus 11,000, i said probably 275, and, rick asked the question, means were probably 250 plus environment of job growth, payroll. Thank you, steve for that, i dont know if you can hear us, but appreciate that. Your stance on this, now, i want to get these guys perspective, and, also, you spent time with president obama. I want your sense of what you made of what he had to say. Well, i like the president. From my what you said, joe cringing already, but at the end of the day crony capitalism. [ laughter ] get the big contract from the government. Set me up for that one. Got the numbers and straight to it. Geez, at the end of the day, they look at how much came out of it, and how much relative what we went through as a country, and what the world went through, and i dont think he gets credit for what they did here. You dont think he gets the country . What do you give him the credit for . How do you balance the credit you give him against what a lot of people say that the Federal Reserve deserves for what theyve done . It is both, so the Federal Reserve plays a role also. If you look what happened in the depression, for example, i think both fiscal fine and the fed side, and neither one of them did what they should have done. It made things a lot worse. We went through a real trauma six or seven years ago, and ive said one of the interesting things about leadership is one of the most undervalued things you do, one of the most valuable things you do is avoid trouble in the first place. If you look at president bush, he got almost no credit for the fact that there was not another attack in the United States, even though, go back to 9 11, if you go back to 9 12, we were all sitting there saying there will be another attack. Like 14 thwarted attacks. He got 0 create for that. Same thing is true for the president. Man, you are a ceo. Anyone talking . At the board meeting, did you see jeb say that last night. Did you see jeb say that last night . My brother kept it no, i like that. I thought he was right. Okay. Its an interesting thing about leadership. Getting back to the point, the president doesnt get credit at all for the fact that there was not a depression which was truly one of the possibilities, and i think when it comes to leadership, if things go well, everybody assumes, oh, would have gone well no matter what as the guy did nothing. Leadership makes a difference. The president doesnt get credit. Although, back to his point, looking at it both ways, this is a great economy and a good one we should be raising rates or an economy to continue to have 0 Interest Rates . I dont know how we get out of 0 Interest Rates. The economy is not overly strong. I wish we had the economy pushing us for higher Interest Rates. We dont. At the same time, all the speculation from around it, around 25 basis points were not going to see, but typically, we raise Interest Rates when things are boiling. They are not boiling. We got a Global Economy thats slower than its been in years. Typically, were not starting at 0. Being at 0 for nine years if you sit at a quarter point on the way to four quarter point raises, thats one thing. If you say its a quarter point, im with doug, i have a tough time seeing it. Usually labor inflation pushes it first. Theres no labor inflation unfortunately. I want to see them. Within 0 Interest Rates, how many rounds of qe, and in terms of historical recoveries coming out of recessions, this ranks probably as one of the weakest. Would you say focusing on obamacare in the first two years of the presidency of the first term presidency was the right move . Anything that held back the economy in terms of regulation, focusing on obamacare, raising taxes, abiding, you know, not talking to republicans about anything in terms of what was the what do you say i give him 100 . What i did say that he got little credit for the work. An expression of confidence. Getting the deals done with the congress that did happen. All right. I think the Bigger Picture here for us is that dysfunction is in washington. Ill blame everybody. Okay. The last five years. If we could have had some things come together quickly, remember every year in june or july, wed have the debt bust back in 10, 11, 12, and 13, the economy took off in the first and second quarters and in the second half, and it allows sometimes people come in and are able to bring sides together. By the way, this is the lifelong republican. You find it hard to believe, but ill get notes from the republican buddies out there. Okay. Whats your email . [ laughter ] ill say it, everybody else knows, but im not giving it to you. Thanks, guys, when we return, what will the next 20 years of manufacturing look like . A closer look at the factories of the future. You might be on to something here. Yeah . How many jobs will be gone that will be automated . Talking about that with our guest. Were going to speak of manufacturing, and heres the fastest car back in 1995. The year is squawk box started. Data compiled by standpointings. Com. Well be right back. 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 . Big day . Ah, the usual. Moved some new cars. Hauled a bunch of steel. Kept the supermarket shelves stocked. Made sure everyone got their latest gadgets. Whats up for the next shift . Ah, nothing much. Just keeping the lights on. laugh nice. Doing the big things that move an economy. See you tomorrow, mac. See you tomorrow, sam. Just another day at norfolk southern. Rolled into tubes are cut into proper lengths fortunate jobs theyll perform. That was a National Association of Manufacturing Commercial from the early 1950s. U. S. Manufacturing peaked in 1979 with close to 19. 5 million jobs in the United States. In 2010, there was only 11. 5 million, cut nearly in half over the span of 30 years. Employment in the sector, though, bounced back, and while we are in the midfdle of a manufacturing renaissance, question is, will we see the golden days of manufacturing again . Our panel is still with us, the ceo of caterpillar, and david cody, the ceo of honeywell, and, gentlemen, you know a lot about in topic. Where do you say we are in terms of the renaissance . Were in the very beginning of the renaissance, its contingent on Technology Innovation coming at all. To some degree, traditional manufacturing like us is behind the curve compared to the Hightech Industries we see. We see what were doing, and well see, i think, a lot more manufacturing possibilities. We need some help, though, in terps of policies in the country, tax reform would be at the top of the list, trade agreements that seem to be so controversial on our en, and i understand that, but with us 45 of the worlds population, we have to play on a level Playing Field and so on. Theres a lot of things happening inside the factories that are cool. Next 20 years you see the old packs in 1950, think 20 years from now, how does it look . Its exciting. Whats the spurring of the renaissance . Low Energy Prices here . Partially just changes in currency . No. A couple things drive it. First one is just softwares more and more important. Honeywell, for example, 40 million company, and jet engine, turbo chargers, cockpits, control systems, some chemicals you think about it, mechanical engineering, looking at the 20,000 plus engineers, they are focussed on developing software, whether its a simulation level, product enablement, or software as a service, software is a bigger piece. Thats a dynamic thats not going to change and will continue. We need to have our Education System to support that. Software is one. Second is cultural side. You see most companies, and weve done a good job of this at honeywell, focusing on how do you have everybody more involved in the process than you did before . Really, toyotas been on this for 4050 years, and for us, take the system and honeywellize it. Interview people, start a culture right away, 80yearold factories with people an average of tenure of 30 years, you go about it differently. That cultural renaissance is important also. If you were to move back for a couple reasons, number one, they sell stuff overseas, theres a factory there. Cheaper labor, but you may leave money there because you cant bring it back because tax rates are different. You saw bushs idea of what to do. Lets say you go to 20 on the Corporate Tax rate and people tax it at 10 , will that overcome just the thatll certainly wouldnt people still move, build over there and because of cheap labor, does that counteract . We build a lot overseas, first was 1950 in brazil, it is and was a good market. A good republican to do it. We cant ship from the United States to brazil and compete with someone making it locally. And the stronger dollar. Coupled with the currency. If theres a way to be on a level Playing Field with tax rates, on overall competitiveness i can only speak for honeywell, but for us, we placed jobs based on where markets are, and so weve looked at it, if we grow in china, youre not going to do it by producing in the u. S. You have to produce. Same with india and u. S. Its hard for a company like ours to chase cheap labor. Put plant down, its there 40 years, we go where the market is and work on production for the market and regionalize the product for the market. Will there be more jobs in the United States or not . Even if you get manufacturing back here, likely to be highly automated. Heres the an, see 4 growth in the u. S. Or 2 . That will drive the biggest amount of jobs of manufacturing we could ever hope for. If we see 2 growth, watch out. Were in the mode right now of being fairly static. In fact, our teams talked about that a little bit, the Quarterly Survey yesterday of over 200 i think it was in terms of the next six months outlook, two quarters in a row now, sales, capital expenditure, and hiring down in the next six months. Its tough. We have the greatest private sector president in history, only 2 . How do we get to 4 . I thought you were talking about me. [ laughter ] hes done everything recently too. I thought he was talking about me. [ laughter ] i think we have to do everything we can to support manufacturing in the country. True. Even with the advent of robot, yeah, somebody has to make the robot, design them, program them. Thats a great way to keep stimulating manufacturing in the u. S. We have to continue to do that. You talk about innovation. Yeah. Whats that for us . This is a good one. You can argue it may be, yours is for your son. We have to get a smaller one for joes head. Chief. Look at this. All right. We have to get this shot. All right. [ laughter ] you bring us maybe you can go down here like this. This is pretty depends on the day. All right. Can flip it out. Its heavy. The weight of the equipment. Nay are fit. Thats the point. Were going to wrap it up. Much more in a few minutes with these gentlemen. I kind of these this, twa actua. Cramer is comie inup and whao watch in the trading session this afternoon. 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. People have been in this game for 25 years and theyre losing their jobs and the firms are going out of business. And theyre nuts, they know nothing. That was jim cramer gapping the spotlight in 2007. Here we are eight years later, and jim cramer joins us this morning, what do you think . Does the fed get it now . What are they seeing . I think it is part of this whole conglomeration of people. Hey listen, this time does not resonate with me at all. Its not like things are robust. I think the rest of the world is not ready and both gentleman know how much business is done in the rest of the world that can impact our own manufacturing. You want to respond to gym . Tough to disagree. We had an economist on from the oeck earlier this morning. She thinks it would be a relief because of the uncertainty of the timing that bogged people down at this time. How about if they say were not doing anything until the rest of the world stabilizes. Wells fargo said commerce is slowing. I need to know the urgency. It is great if you dont own stocks and they race, but i focus on stocks. Its tougher to build wealth. If you focus on wealth its not a relief. So you could see zero Interest Rates . How about 4. 2 . What employment number would get you to the point where you would say theyre behind the curve. I would like to see people make a little more. I would like to see an economy not just centered and a debate not just centered on the United States. I wish that we were all kroger, okay . I wish every company were just home depot, but most have expanded around the world. We have to be more worried about others. We can always foe focus on employment numbers. There are other factors. Bernanke would not do anything. Good to see you, gym, well see glow a few minutes. We will wrap up our conversation with david cody in junction a moment. Coming up tomorrow on squawk box a conversation about the future of america. Welcome back to squawk box this morning. We have the chairman and ceo of honeywell. Let me ask you something, the robot question. It goes to the jobs issue long term. We talk about moving overseas and all of that, what do you think happens in terms of the robotic i go back to the black smith. And he is shoeing horses and whatever else, the automobiles came and everyone thought the world would end. If were not innovative and looking to the future, the alternative is worse. We have to do this. And we have to find other ways to create service jobs and everything else. The thing that comes out of this is that there is a lot of ancillary businesses can we get the camera on these. These are all connected machines right back to our factories, to design engineers. But that generates lots of opportunity to make those more efficient. It will not be the manufacturing job of old, today it isnt. It comes back to the need for productivity. All of these things will be about productivity, and people live better and that means robotices and the software required to program them gets more and more important. That with a little structural change around ax reform, it would be very nice. Yes, gentleman, thank you. That was fun, thanks. Testify riffic. A little too late. Muk boots will come in handy. They came in a little bit thats why they are higher than yours, he has a way and we gave you elegant onces. Join us later, squawk in the street is next. Good thursday morning, welcome to squawk on the street. At one market in san francisco, the green force come for instance