Oil falling back after yesterdays rally and the biggest inventory draw in 17 years. Our road map begins with outrage over wells fargo. The bank settling a fraud case that said employees issued debit cards and transferred funds. Twitter shares down after a 6 drop yesterday. The Board Meeting. We will give you the details. And more fed speak sending futures lower. Shaking things up. Speaking of which, stock futures are lower. The boston fed chief saying a reasonable case can be made for hiking rates. He says low rates increase the chance of overheating the economy and that not tightening could shorten the recovery. He is a voting member, jim, and historically relatively dovish. Right. I think this is again trying to prep everybody theres a rate increase coming. Ive been saying that. Thats why the bank stocks have been acting well. We will have to talk about wells. That is the biggest. This is par for what theyre thinking about, not looking at the employment number or retail sales. No exon nous events, theyve wanted to raise for some time and this is it. The unbelievable interview with Stanley Fischer where Steve Liesman said sure, it could be a couple. If its going to be a couple they have to do it in september. I am prepared for it and raised a lot of cash for my charitable trust, really concerned were not ready, because so many people, look, you talk every day about the volatility. Nasdaq has been up forever. In fact, 44 days in a row now, the s p has closed within 1 of an alltime high. In the week you said go elevated cash position because youre seeing weak data into a potential hike. Right. You have the vix at 12. I mean what is everybody on vacation . The volume is low but a big seller comes in, blast it down. I looked at the retailers. Ollies Bargain Store the only one that has really delivered the numbers. When focused on ollies, well lets say its a narrow universe. I am concerned. I think people arent concerned enough and i think people will overlook a kroger. Kroger is a National Supermarket chain down 25 going in but i use that as an example, carl, of well, you know, hey so its a bad number. Wait a second. Supermarket, department store, everybody other than amazon. We are not in shape, the investors are not in shape for the rate increase but the fed is. All right. Ooi i guess. The market has been a conundrum of late, up and down, and no real direction whatsoever. No volatility into what could be a rate hike people dont seem to be ready for at all. Everything is a strofrts day. Yesterday apache. Thats one stock. Apache was good. I listened to a guy on squawk this morning, he likes qualcomm. Up a lot. Im saying theres a group of stocks that people like on a daily basis, like facebook. But another 6,000 stocks i dont like that day. I saw the russell 2,000 up nicely and then were right for a selloff. Although the banks may be right for buying as theyve been higher in august, the best performing group given the expectations of a rate hike. 20 of the market benefits from a rate hike and 80 is negative or nothing. That to me is 20 is not a plurality. I took that class, the arithmetic class. 80 more than 20 . Youre right. With me on that. I am on that one with you. Look at the agreement im able to generate. Consensus right here. Speaking of stocks that could benefit from a rate hike, wells fargo will pay 190 million to settle a customer fraud case. Regulators say the banks employees illegally opened more than 2 million bank and credit card accounts, many without customers knowledge. The complaint says employees were under pressure to meet aggressive sales goals. The bank apologized and said 5300 employees were fired over the inappropriate sales conduct over a fiveyear period. Heres the apology in the journal today. We regret and take full responsibility. This went on for years. This is a suboptimal situation with illadvised decisions. I saw the decision yesterday and the employees impacted that has to be a typo. That did take place as carl said over quite a few years, five years i believe, but 5300 employees . Okay. I dont fully understand exactly what happened here. We have the report. Can i give insight. The reason why my travel trust likes wells fargo because of the cross seller. You open an account and then they do all these other things. Looks like they did all of them for some people who didnt necessarily want that. Now, john should come on, and just read the apology because the reason why so many, why this is the largest bank in market capitalization because theyre the best cross seller. Now im thinking wow. Ive been with them in the cross selling, done it very well for me. Great bank. This was small change. Small change adds up to big numbers over time. Yes. Were not talking about cross selling opportunities where were giving you a mortgage and opening up a big account. Were talking about were opening a tiny account for you you didnt know you had and charging you an Overdraft Fee or some sort of a fee. Illadvised clearly, but this is how one of the reasons why theyve been the most profitable bank. I agree, ive used wells. Theyre not my bank but ive used them. Theyre very effective. Theyve flents places that nobody else has lent in new york. Do you want to go down the road of questioning the overall strategy given this news. Thats what people are going to do. I think thats wrong. I think cross selling is brilliant, fabulous at it, and some guys got too aggressive. Not unlike what we saw with the investment banks that sells mortgages, some place in norway and bury a school board with a mortgage thats your special, im hyping house of cards. Take my cue. Im sorry. Norvick. Very good. Thought that was the best weve done. I probably have to agree. House of cards. It was a great one, thank you. We have a new one we will talk about in a little bit. Talking about his amazon one. We should point out the buffet munger relationship. Asked about wells in the past and said nobody is perfect. Right. I think thats what joey brown concluded in some like it hot. I do think im a man nobodys perfect. But good by the way. Whos jack lemmon. Who had that. Jack lemmon went to harvard. No kidding. Really smart guy. Did not know that. I do think that there is a belief that because buffet is done at 10 he cant be in buying because of the rules. I dont know if hes been able to get an exception. Owns 10 of wells. Not like he can buy more. This is the largest fine that has been levied by the consumer board. It was bad. Tarnishes the brand. Im not going to disagree. I felt the brand was far above. Some people at some of the other banks have criticized me at times for what they think is a bit of a favoritism ive liked wells. Cheerleading. Well, i mean im saying they didnt have any they didnt do a lot of investment. They didnt do the bad stuff because that wasnt what they did. They were bankers. I am aggrieved like others to see this. Would i sell the stock . No. Because theres going to be a rate hike. Speaking of which, were going to talk about that and the fed speak that has futures down this morning. Moving the markets. Still to come this morning. Steve liesman will talk to federal governor daniel tarullo. The premarket, last time the s p went a full august without a 1 move, 95. 95. And then it did it again in september, october, and november. Thanks ryan. Just an amazing lack of volatility this summer. 95 a good year, recovery after the peso tragedy, financial, i dont mean to use that word but you know what i mean. Today i am helping people everywhere do what they do. Better. I work with startups like alpha modus to predict markets five times more accurately. I am helping tv networks use social data to predict what people want to watch. And i worked with marchesa to turn fan feeds into a dress that thinks. Hello, my name is watson. Working together, we can outthink anything. Hello, my name is watson. For decades, investors have used a 60 40 stock and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. Whurbut your time is over. Had a good long run. Its time for something new, something simple. Grown right here in california with absolutely no antibiotics ever. Food were comfortable eating, making, serving. This is the new comfort food. And it starts with foster farms simply raised chicken. California grown with no antibiotics ever. Lets get comfortable with our food again. Look at that. Faber report. Another day, no lack of drama involving the williams companies, of course. That large Pipeline Company that deal to be acquired by ete this summer, failed dramatically in delaware court. The latest news, of course, came out late yesterday in dueling press releases. The first from a Company Called enterprise, a large Midstream Energy Service Provider pipeline saying we made a bid, and we wanted to buy the company and williams didnt engage and now were going away. And thats where we are. Williams comes back with a press release with its own saying we did engage, we were still engaged and now theyve walked away this after enterprise had actually come around right after the failure, soon after the failure of the ete deal and came back with the latest bid in the last couple weeks. What i can tell you about the bid itself is, that, people familiar with the situation said less than a 10 premium. The big deal, spectra deal, 11. 5 , with em bridge buying that over a 52week high. Williams said its less than well less than that premium thats being offered and were certainly nowhere near our 52week high. By the way, the last time enterprise came around, that first bid earlier this summer, was even below where the market value of the company is right now given it was it has moved up in the stock prices. Did speak to Keith Meister a few moments ago. Large shareholderpp who is running a proxy fight to replace the entire board of directors at williams and this is what he had to say. He basically said listen, you know what, this whole thing, is somewhat shocking. The three new directors on this board need to go out and they need to Start Talking to the shareholders and engaging with their Shareholder Base and fully understand all the benefits that could conceivably accrue from a deal with enterprise. Meister saying, for example, that a combination of enterprise, even without any premium at all in his opinion, still makes sense. Given all the synergies, given the cost of capital that would come down dramatically, given the scale that company would have and by the way, the offer from enterprise, was entirely in its units, its partnership units, so you would benefit as a williams shareholder in the combination. He talked about the fact that, again, these three new williams board of directors who were appointed recently should engage and fully understand on both front the and then see what they think because he views them as the only serious members of this nineperson board. Scott sheffield one of the guys that joined, from pioneer, and i think that i would love to hear what scott has to say about this. And so mr. Meister making no bones about it in our conversation a bit ago talking about writing an open letter to those three directors saying call frank mcgig begin nis and laura suggs and see what they have to say as well. And he says theres no defense for not engaging on this bid. He believes williams has not engaged. As i said the company says differently. Says it actually was still engaged but theres an idea that scale, cost of capital which will come down as an Investment Grade company, ability to offer higher dividends matters in this industry and why even at a low premium conceivably you would still be delivering a lot of value to williams shareholders. Enterprise has one of the best Balance Sheets other than spectra and enbridge. Its a remarkable company. Forward thinking. The first one to recognize they could sell natural gas liquids overseas. Its not doing that well right now but youre talking about enterprise the highest quality of the mlps and they are right to merge these two. Williams is down but you know what together this would be powerful enterprise and spectra continues to go higher. Spectra goes higher. Both stocks going higher on the deal from this week. Huge pipeline. Williams says theyre just trying to buy us on the cheap. They werent serious given that premium. Well you know what, it doesnt matter. The combination would be ideal and great for shareholders. And thats why i say, i think sheffield is a guy and i think that obviously meister thinks and i forget he says enterprise is a better partner than ete. Couldnt agree more. Ete is gunslinger. When we come back, remembering 9 11. A moment of silence here at the big board and nasdaq when we come right back. Whats going on here . Im val, the orange money retirement squirrel from voya. Were putting away acorns. You know, to show the importance of saving for the future. So youre sort of like a Spokes Person . More of a spokes metaphor. Get organized at voya. Com. Our special today is the dont you hate that . When they dont tell you how much something costs and you have to ask . Maybe thats why i always make sure to. Bring up the costs associated with your services. I know. Transparency about costs. Just one way edward jones makes sense of investing. The nyse and nasdaq about to observe a moment of silence for those who lost their lives on 9 11, 15 years ago on sunday. Four coordinated attacks on this country in new york city. The pentagon stony creek township near shanksville pennsylvania, 2,996 people killed, more than 6,000 people injured, 10 billion in property and infrastructure damaged. Took 11 years just to clean up the World Trade Center site alone. I know you have a he done some work on this, jim, with your documentary. A fabulous documentary staff here that worked with me to develop something on sunday night, 9 11, at 10 00 that is more about resilience than it is its actually a more prospective than retrospective. As an honor and dignity, of course, we go and respect. By the way, david recommendnick, editor of new yorker says its our gete egettysburg. A difficult day for us and for you, im sure. Well be thinking of the families on sunday. In the meantime here is that moment of silence. Ar . Its what the National Debt could do to our economy. If we dont solve our debt problem 19 trillion and growing money for programs like education will shrink. In just 8 years, interest on the debt will be our Third Largest federal program. Bad news for small businesses. The good news . Theres still time for a solution. Ask the candidates for a plan to secure our future. Its a very specific moment, the launch window. We have to be very precise. If were not ready when the planets are perfectly aligned, thats it. We need really tight temperature controls. Engineering, aerodynamics a split second too long could mean scrapping it all and starting over. Propulsion, Structural Analysis Maple Bourbon caramel. Thats what were working on right now. From design through production, Siemens Technology helps manufacturers meet critical deadlines. I think thisll be our biggest flavor yet. When you only have one shot, you need a whole lot of ingenuity. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in just about six minutes. Futures decidedly in the red after bostons fed chief rosengren says recessions dont happen, guys, because its been a long time since the last one. They happen because of policy mistakeses and as he puts it right now its hard to see us raising rates too rapidly. Yeah. Obviously all the data for the last two weeks has been weak, but i think theyve made up their mind and theyre not looking at the near term data. Theyre looking at a broader panoply of whats going on in the country and thinking things are fine and therefore we dont need emergency levels we can get off of the emergency levels. Ive been saying theyre going to do this. Ive been saying you have to be careful. Wall street is not set up for it. Theres been thin volume. Not like people have been running for the exits and we have to deal with it. I caution people that this is there are many people who have forgotten what happened when we raised in december. Which was we had a down leg, repause, and big down because of oil. But then still, go back and look at the tape. Right. We were not ready for the rate hike when we were told it was going to be a rate hike. Now weve got a rate hike coming and we havent been told. The percentages for thinking about a rate hike last week were like very small. People went and said jim, you cant say theres going to be a rate hike because theres not. You know what, the panthers did not win last night. Yeah, the panthers won, you cant do that. Yeah. You want to get to a mad dash. I would love to. Holy cow. What a great idea. All right. Restoration hardware, the analysts are poohpoohing the turnaround. I think its real. Gary friedman did a called shot like jamie dimon did, versus john stumpf, figure out who you like right here, but Gary Friedman the ceo that delivered a great quarter and the shorts are scrambling and they finally got the Membership Program down right and texas, miami and canada doing better. I am in agreement with the bulls, but remember, its in the end a Furniture Company and we could be going when you raise rates you dont want to be in that. Kroger, down 25 . They made an acquisition call. This was the acquisition too far. Kroger had been very good, when they built buy a company. The numbers here, samestore sales, the prospects here of what theyre saying are its a very big disappointing guide down. That says its a fine company. Youre not going to see this thing down 35, 40. Its down already 26. So be aware that kroger is a good company, but food deflation is weighing on everybody. The halo. What happened to the halo around kroeger . Halo. There isnt. No. That rowdys deal was bad and in the end theres a price war in the supermarkets of unparalleled proportions. Were seeing it go to the suppliers. The food deflation weve talked about fascinating. Dairy down 50 . I do the food shopping in my house. No, you dont. I dont believe it. I go to kings and buy a chicken every night. Thats what i eat. Shares down 14 . In three months. Its not a disaster though. And the full year estimate they see 210 to 220. Street said 328. Look, exfuel, minus 0. 5 to 1. 5. That is disappointing because this quarter was better and if you read the report its not clean. Theyre talking about how they did erowdies. They bought in december. I dont want to hear xrowdies. How did you do x the losses you had . On restoration you mentioned the beat but a lot came from a shift forward in sales. I think theyre trying to temper expectation. Rh modern down 90 in the stock. They were not ready for it. Membership program, wrong card. The texas, miami, canada minus 4, now minus 1. I believe this is set up, look, i dont like to buy, i recommend a stock up more than 10 , but restoration could be back here and the company just doesnt want to get ahead. Theyve learned their lesson. They got too bullish, too complacent. Thats over. I like the Membership Program. New book coming. Remember they go by catalog, not really a website company. I wish the stock hadnt run so much. William blair has a survey, take it for what its worth, young adults and teens asking how often theyre going to the mall. 41 say theyre going more often this year. 37 say theyre going less often. Seen as a threat thats funny. L brands would tell you the malls are alive and well. Pink. Its very jammed. And then bath and body works, very good. Victoria secret will make a turn. Urban. Anthropology and urban doing better. Look at macys. Pulling back from 100 stores. Wow. I mean, we cant forget that. That is you know, like on delivering alpha the stock did a two for one split, no got cut in half and still not right. Big number of their store base. Those are large stores. They are. I thought the dave and busters would move into them. I had them on. Theyre going to expand by one more talk about ten. Finally on amazon, bloomberg reports they are looking at, interested in sports rights for television. Wow. Streaming. French open. Some rugby. A lot of those rights are locked up for a long time. But theyre expressing interest. I kept thinking that alphabet would do that and put them on youtube. I want them to get the chinese right, the nfl china games. Think when those would run. Talk about prime time. Lets get to the opening bell and the s p at the bottom of your screen. At the big board its 9 11 national day of service. And the National September 11th memorial and museum. Observing the 15th anniversary of the september 11th attacks on america. Over at the nasdaq, tuesdays children, a nonprofit supporting families impacted by terrorism and traumatic loss. So i guess well keep our eye on wells. You said earlier you wouldnt sell the shares on this and not many people will. Do i condone it . People are saying i condone it. Are you kidding me . I believe if there were criminal violations there should be criminal prosecutions. I believe they stole from peoples cannot. They offered an apology and i have often embraced john stumpf as the Great American banker, but this is not cricket and if there was criminal if laws were broken why is there just like, you know, a fine. Can anyone explain that to me . Does anyone ever get prosecuted for doing anything in banking . What do you have to do . Only guys that get prosecuted are guys who rob banks. Theres not a long history of executives or other people getting prosecuted. Its a Small Justice department. Its a small list. How about the Justice Department. How about them. They were very aggressive and they were very successful in getting quite large fines. But thats the civil thing. And reaching those it is civil, yes. Although remember they reached those deals. Right. Where they neither some people confirmed or denied the charges. There was bad judgment and you could say they shouldnt be prosecuted criminally. If i opened an account in your name, that doesnt seem right to me. Right. Well some of the cases where youve already said you wanted to open an account or you did, but theyve done things differently than you instructed them. That seems it seems wrong. But seems civilly wrong or criminally wrong. I am not a lawyer. It could open the door for more policy risk by a more aggressive Regulatory Environment . Oh, my. If thats the case, were really dead. I just think that what happens is, unless you prosecute someone criminally, this stuff doesnt seem to stop. Jail is bad. Fines are what we pay when we leave our car on tuesdays when youre supposed to get it at 9 00. Yeah. And as large as the penalty is, given the history of the cfpb, its some argue not much. Thats why my travel trust we will not sell, we will buy it on this if it gets hit. Why . The government does not believe i mean look im waiting for Elizabeth Warren to be, if the senate goes democrat, can you imagine . I hope so. Still in favor of using banks . Because buy mattress firm. Maybe thats why they bought mattress firm. Elizabeth warren could be a store of value so to speak. Mattress firm may be. What kind of rates do you get. If about the same in the bank. Seleepys gives you what kin of rate. A better rate than the ecb or japan you have to leave the s off for savings. Cds. Maybe theyre selling a lot of these in japan and europe. Maybe thats a burgeoning market for mattresses. Might be. I havent thought of that. Remember the burning bed ohio mattress. Of course i do. That was a bank that went bad. Your thoughts on oil after that draw yesterday, jim. I have to tell you, initially i was i was shocked. Some people said it was the storm. Now were talking about the greatest drawn down since 82. Yeah. Its not the storm. Theres a pickup in demand. Fight it. Lets stop. Its a pickup in demand. There is definitely one. And ive got to tell you when i saw the actual size of the draw down the largest since 1999, the second biggest since the 82 benchmark you cant blame it on the store, for heavens sake. Its import coming in, pickup in use. Its one number. Iran still flooding, libya, nigeria, but it was surprising and caught people off guard and now ive got to tell you that was one of those that shouldnt have happened. Think the demand is stronger, stronger than we thought. Shares of twitter are down again. They were down sharply yesterday. Of course we did focus people on that Board Meeting that took place yesterday. That was last thursday when we reported on that and a number of members of the board according it people familiar with its deliberations who were moving the overall consensus towards at least trying to focus on outreach or even a potential for a process of some point in the future in which they might consider a sale at twitter. I have nothing to offer from what took place in the Board Meeting yesterday. I did mention, of course, the fact that it was not lost on a number of Board Members. The possibility that an activist could get involved. The New York Post reporting carl icahn is not that activist. I never said he was and hes not. Well see where this ends up. These things take place over time. And changing consensus on a board of directors can take time. And there have been no shortage by the way of people out there trying to bet on the idea that twitter could be a sell candidate at some or who might step up to buy it. There had been no expressions of interest. When i talked about this last thursday i never mentioned that at all. But they do come back to the stock based compp issue. Didnt stop linkedin but represents about 100 of the ebitda, it would eviscerate all of it. Geez. Yeah. Well look, i these boards are reluctant to sell underneath a new ceo and hes still a new ceo . Although its problematic in the sense hes still running two companies. That is a rare thing. When you speak to people who are high level at either company, theyre like, what are you worried about. And i have been saying, okay, listen, really good candidate comes to see you at twitter. Maybe you would say how about square. But no one, i mean when i say that people were upset with me that at the highest level of the companies i think thats what do you know. What do you know. I ran a hedge fund and street. Com and let me tell you something i sleep three hours a night and i was pressed. And you were pressed. I was pressed. I was not a nice guy during that period. I was not zenlike. Now sleeping four and youre good. No zen. No one talked to me about being gandhi but its all changed. It does bring to mind the power of snapchat hiring Morgan Stanley to do this debt financing. Adding jpm, Deutsch Goldman and Credit Suisse to the list. Some people argue twitter could be a way in for snapchat to public life. That would be something. Look i said that it would be like linkedin you saw another bidder there, sales force, but you cant take the current configuration of twitter and make it a business without killing your earnings. Especially if you have to pay 28 a share. You mentioned many times salesforce which seems to be wanting to use cash to diversify and was a followup bidder on linkedin made it clear that they you know, conversations they had meetings yesterday that were arranged by Morgan Stanley with some investors. Theyre openly saying yeah, you know, certainly something we might consider. But when i have mentioned to you what i think that twitter has to do, this is what i see it as, you cant look at it is now. You have to believe direct messaging is a way for a bank to get in touch with you or a Credit Card Company like a paypal. I hope so. I dont know about you but im tired of the haters on twitter. I have guys attacking me for like im almost done. Really . Yeah. I am. Im not interested. I had people like my fantasy team is a killer fantasy team, thank you Adam Schefter from espn, people say you idiot. Im an idiot no matter what i do. The only person who has not been attacked is my dog. David carr would have turned 60 this week, the old New York Times media columnist. He used to say leave them screaming down a hole. Thats the attitude you have to have. My daughter who is zenlike said you cant respond to any of the haters. Period. But i have to tell you, the people who signed up with me since i stopped responding to haters leveled off. They like combat. Its like gladdaters. Been to the coliseum. They show you you can see where i dont mind consuming it. No benefit to interacting i dont think. You dont think so . No. Dont want to just people have been nice about my documentary. I know. Thank every one of them. Most are. But dow down 140. The first triple digit drop since july 5th. Bob is on the floor. Hey, carl. Finally a little bit of volume and volatility. We had volume yesterday. One of the best numbers weve seen all month here. Rosengren definitely moved the markets. Want to show you the s p futures prior to the open. We were down a little bit but when the headlines started coming out close to 7 30, 8 00, thats when we moved down. That cost us five or six points immediately in the futures and, of course, the bond yields a lot of the action we saw. We 5 basis points or so up. 1. 65 in the 10year. You see there thats the highest since the end of june and higher yields in germany and japan. Hes not the only one. Gun locke was out talking about this saying its time for fixed income investors to prepare for rising Interest Rates. Interest rates have bottomed. And remember yesterdays ecb decision to stand and not do anything. That drove rates higher as well. A confluence of things going on here today, not just rosengren himself. The sectors, the impact the comments have been having. Interest rate sensitive groups, utilities which compete for yield are down, Consumer Staples similar situation are down. Generally bank stocks are outperforming the bank index, the kbe, etf down a bit. Take a look at the major bank stocks, bank of america, at least at the open, bank of america, citigroup are on the upside. Jpmorgan slightly down and wells fargo only down fractionally despite the large fine levied against them. Banks have done terrific this quarter. Despite the fact that Interest Rates havent moved up much, better loan growth, higher fee levels have been helping them. Look at Morgan Stanley and bank of america and Goldman Sachs and citigroup. Jpmorgan is up about 8 . The question is, is there much room left for these stocks to move up even if Interest Rates move up. Because they made the call on jpmorgan. They downgraded jpmorgan this morning, mccarey did to neutral saying its a Premium Company and valuation but the p e is in line with the average, 14year average, it does have some loan growth but the low rate environment will be a tailwind for that and they said its fairly valued right now. So that downgrade to neutral there. You mentioned the wells farrgo fine for opening an unauthorized account but look at the numbers, 190 million fine only 2 cents a share. They will make 4. 03. Its min maul. The reputation impact which jim mentioned and thats what matters here. We said they would have a comment from Piper Jaffray and they see near impact but could have an incremental impact to wells capas tighty to cross stel products over the long term which jim and david were mentioning this morning. Mixed market as you can see. Today we are approaching the 15th anniversary of 9 11 as we just saw with that one minute of silence. I was there for that terrible day. The great thing about life it does go on. The downtown is completely different than it was 15 years ago. There are now 60,000 People Living downtown. A massive increase. Many of them millennials occupying the buildings that used to be held by wall street firms. Theres 232,000 people who work in the private sector downtown. Much, much higher numbers than there were prior to 9 11. Theres a much more diversified environment down here. Its no longer just wall street really, in fact, wall street is a small part of what exists down here. Theres education, theres health care, theres media companies, theres families living in the world financial area across the way. Theres a much more diversified environment. I think none of us were [ inaudible ] and you werent jim and david and carl but life does go on and its a much more diverse environment than 15 years ago. That is at least the good news. Back to you. Thank you, bob. Yeah. The never ending ability of this city to remake itself over the years in new york here. Lets goat a couple of followups on the faber report. Starting with monsanto which i last reported on tuesday, recall that report i said that they were getting close to a deal. It could be the next week to week and a half call it at that point. And price seemed to be close as well. What i can tell you now is, even closer to a deal between monsanto and its buyer and it is buyer, know not bay er. The aspirin. They pronounce it bayer. I will too. They are going to be the buyer of monsanto. The deal announced as soon as likely at this point to be announced next week and the price which lasts reported at 127. 50, confirmed by the companies, may be a bit higher than that, but it will not be 130. So a high 120s is what people familiar with the situation are guiding me towards in terms of an expected price there, perhaps bayer does raise a bit from 127. 50. The key here, though, is going to be regulatory issues. Of course the scrutiny of this deal will get from regulators here in the United States and perhaps even more importantly in the eu. What specific actions will bayer contract actually bind itself to to get the deal done. Not hell or high water as we say, but perhaps specific divestitures. This still an area of negotiation for the two companies, though they are getting close to ironing all of that out including what we call a reverse break fee which would go from bayer to monsanto in the event it was turned down by the regulatory authority. So thats sort of where things stand on that deal. But again they do seem to be moving with all deliberate speed at this point after a long period towards a deal again perhaps as soon as, in fact, likely at this point late next week. Well see no what did you think about the eu kind of basically saying theyre not on dupont. It got a lot of peoples notice, jim, including yours i know and the time itself. I mean, any deal of this type is going to take the time itself will take so long. People may look at monsanto, why isnt it going up, 108, 109 on a 128, 129 deal takes 12 months or more. Thats where you end up. Really quickly a followup as well on viacom. Wanted to say there was a lot of talk about a Strategic Review by the board of directors this week, reporting from reuters and bloomberg, focused on capital structure, rating agencies, on their debt, on how theyre staggering things, all those kind of things and they are being advised on that at the board and not dealing at all with a potential paramount deal which seems to be completely and totally off the radar or anything having to do with link up in some way with cbs. Those are issues that will be dealt with, that being forget paramount not selling a part of that, but down the road on other things. I did want to update on viacom. It was down yesterday. Idle speculation. At some point it may be true but not now. The key focus is going to be who is the ceo, tom dooley who currently has the job or bring in an outside candidate. More on that we move ahead. To Rick Santelli going to check on the bond markets on what is not a good day for the equity markets. Well, you know, i define good differently than most. Up, down, all around, anything thats not good, its comments like rosengren, the economy is overheating. No. Its oversaturated with bad policy, central bankers gone wild, and coming home to roost. Big institutional bond managers around the globe calling for more record low Interest Rates are caught off sides and thats important. Thats important. Remember what they said. Remember where were at and what positions are in the middle. If you look at a twoday of 2s theyre a on the rise, two day of 10s on the rise as well. How much on the rise . Yields we havent closed at since june, because weve been in such a tight range. You can really see the breakout on the start of july 1st on the 10year. Look at bunds. Same start. July 1st. Theyre hovering near zero. Does zero sound like a selloff, it doesnt, trust me it is. And that same zero rate, wow, you look at a march 1st start of jgbs, the japanese government bonds are moving too and they trade by employment and theres none around but theres still selling off. Ponder that. If you look at guilds, call it the brexit fwlom rates because we havent been at these levels basically since then. Theyre hovering at 85 basis points. The one laggard that may have to wake up, traders are thinking maybe what youre supposed to concentrate on is dollar index. The start since august 1st. Its the lazy guy in the group. Because Foreign Exchange is completely discombobulated trying to navigate the issues of the day. Carl, back to you. All right. Thanks, rick. On that note Steve Liesman will talk to fed governor dan tarullo this morning. Dow down 132. 98,352 whats that . The number of units well make next month to maximize earnings. Thats a projection. No, its a fact. Based on hundreds of proprietary and open data sets folded into a realtime, actionable analytics model. Nine. Eight. Three. Five. Two. Youre not gonna round that up . You dont round up facts. Powerful analytics driving decisions for the worlds most valuable brands. Hewlett packard enterprise. Across new york state, from long island to buffalo, from rochester to the hudson valley, from albany to utica, Creative Business incentives, infrastructure investment, university partnerships, and the lowest taxes in decades are creating a stronger economy and the right environment in new york state for business to thrive. Let us help grow your companys tomorrow today at business. Ny. Gov 15 years after the 9 11 attacks the World Trade Center is open for business. 1 world trade is more than a huge new Office Building for obvious reasons, it had to be one of the safest. The unique safety features inside 1 world trade are a key reason it cost 3. 9 billion. 2 billion more than any other skyscraper in the world. It was designed precisely to survive a 9 11 type attack which makes it both a shield and a bulls eye. The World Trade Center remains a target. Remains a target for the al qaeda groups, isis. Reporter don spent 25 years with the fbi. And helped lead new york citys Antiterrorism Task force after 9 11. Hes now an nbc news analyst. Do you think there have been any Credible Threats even during the time of the building . Lots. Lots . I would say lots. Unbelievable. The political hoops, the Architectural Engineering hoops that designers had to go through on this one. Yes. I have to tell you that i of the opinion even though a lot of people took a long time, that well look back and be surprised given all the constituencies that it happened so quickly as bob talked about, it is a remarkable development. One of the things that did not make the doc on sunday at 10 00 is, they were thinking at one point maybe it should look like rockefeller center, all the buildings should be the same. They decided no, we have to have individual architects. The architecture over there, the amazing buildings, i dont want to minimize anything that happened on the anniversary, but i want everyone to check it out and make up their mind whether its the right thing. I got a nice ler from the fire commissioner saying i did a good job and im proud of that. I called my wife and said listen. Her grandfather was a chief and i just feel like that what i see here is that this is a remarkab remarkable renaissance people should go to and make up their mind whether its right there be commercial property there, see the names, go to the museum, but be prepared, dont go to the museum thinking that its going to be a celebration. It is the most other than the Holocaust Museum in israel, i have never been as impacted as taking my breath away. Do not miss jims documentary as he said, ground zero rising, sunday night, at 10 00 p. M. Eastern time. Well get stop trading after a break. 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Hotcakes. This place has hotcakes. So why arent they selling like hotcakes . With comcast Business Internet and wifi pro, they could be. Just add a customized message to your wifi pro splash page and youll reach your customers where their eyes are already on their devices. Order up. Its more than just wifi, it can help grow your business. You dont see that every day. Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. Time for cramer and stop trading. Sea of red. Continue to see strong worldwide demand for Telecom Equipment components a good statement by jerry the,tive executive chairman and the only good stock i see if whats on tonight . Twlo one of my favorites, a company that has done remarkable back office work for airbnb and companies and they take a share of each they do and the most exciting ipo this year. Cant wait to speaks to the ceo. Go birds. 3 1 2. See you tonight and monday, jim cramer. When we come back fed governor dan tarullo, dow session lows 155. Hello friday ive been waiting for you a long time good friday morning. Welcome back to squawk on the street. Im carl quintanilla. Along with Kayla Tausche and david faber at the new york stock exchange. Sara eisen is off today. Worst day for stocks since june 27th. We have a full 1 loss. Potentially breaking that streak of having no 1 moves for about 44 days. 10year breaking out of a range as well up to 1. 66. Got Economic Data crossing the tape. Over to Rick Santelli. Good morning, rick. Good morning, carl. Were getting our final read on wholesale inventories for july. Our midread was unchanged. Guess what . Our final read is also unchanged. When it comes to wholesale trade for the month of july were looking for a number slightly positive. We ended up with a number slightly negative. Down 0. 4 and last month we lost a couple tents from originally 1. 9 to 1. 7 and that 0. 4 actually is the second worst trade number of the year outside of january which was down 1. 9. We are breaking out of ranges in all sovereigns, pay close attention, especially if europe. Carl, back to you no thank you for that. Rick santelli. Its been a busy morning in terms of fed speak. To Steve Liesman sitting down in washington with a special guest, good morning steve. Good morning, carl. Thanks very much. Im here with Federal Reserve governor dan tarullo. Thanks for joining us. Good to be with you, steve. Unfortunately, with your brief, im going to displease half the audience wherever i start but i am going to start with what is the news of the morning which there is two news stories on the banking front, which is, obviously, the other half of your brief. So many billions of fines paid by banks and, obviously, im talking about the story by wells fargo, about wells fargo this morning, opening fake accounts, fake credit card accounts, so my question is, after all of these billions of fines have been paid, has bank behavior changed at all for the better . Well, i dont think its changed enough, steve, and i think we see evidence of that in our own supervisory work. Obviously, i cant comment on the wells fargo case because that was a cfpb enforcement action. Consumer financial protection bure are for the uninitiated. First, what i have seen is that too many banks instead of putting in place a comprehensive system for assuring that all their employees understand what is legal and ethical across the board, only respond when theres a particular problem. And for banks that are in that situation, they really need to change. They really need to be much more proactive in stating their expectations across a range of behaviors to their employees. Its a little bit parallel, steve, i think to what we saw in risk management, where there was too much siloing of risks in the precrisis period and only gradually have banks learned thou integrate all the risks. Here they need to integrate all their xwlins issues. Second thing i would compliance issues. Second thing i would say there is a need for focus on individuals as well as the fines put on the institutions. Inappropriate cases, i think that fines for individuals, prohibition orders, obviously, this is a much higher standard but for Justice Department prose kugsz, are things that need to be pursued in order to make the point that there is individual culpability as well as collective. You keep hearing that as a potential next level but we never get there. Billions of fines leveled. Companies are allowed to not admit guilt and yet pay the fine and keep hearing if it keeps going were going to ratchet up but it never happens. Is it time now . There are it takes time for some of these things to work their way through. Supervisory regulatory agencies need to make pretty careful and thorough investigations, but i can tell you that we have had some prohibition orders in the recent past and we will continue to look inappropriate cases and, indeed, on an ongoing basis are looking at instances in which either civil money penalties or prohibition orders might be appropriate. Another news story today from the banking Regulatory Fund is youre out with recommendations for banks and prohibitions against them investing in nonfinancial companies. This is already been criticized by bank lobbies on two fronts. One is they say this has not led to any additional risk in the Banking System and second, its just seen as regulatory overreach. More decisions from Central Planning so to speak in the Banking System. How do you defend these recommendations. First off be clear these are recommendations were making to congress for congressional action. This is not the fed saying we think that there should be no Merchant Banking authority, therefore there isnt. This is us saying, we think that congress should consider repealing the portion that allowed it. The base ek reasons for that, be steve, are first, the traditional separation of banking and commerce still has potency, i think. The reasons for it still have potency. Secondly, even though a risk may not have matured to this point, because of the potential for, for example, tort liability that substantially exceeds the amount of an investment, that can go along with certain kinds of business, for example, Minerals Extraction or transporting oil. Holding physical commodities. Certainly if youre in the business of transporting them or extracting them, absolutely. And third, this is not an easy sort of thing for financial supervisors to oversea. Making a judgment as to the safety and soundness of nonfinancial businesses that may be held in both geographic and corporate distance from the Main Operations of the firm. So our sense is that the benefits of this to the economy have been outweighed by the potential risks. And while it is true that to date we havent seen one of these risks mature into an actual substantial loss, i think if theres a lesson from the crisis its that we should be trying to get ahead of potential risks and not waiting for disaster to befall us. Okay. I have a lot of questions about that but i need to move on. One more regulatory question and then the Monetary Policy story. Youre on your way to basel tomorrow for much anticipated meetings by the banking industry. They have labeled the current effort a basel 4 and say what youre doing and the Basel Committee is proposing is an end run on raising capital standards through a complicated way. Is that accurate . Are you moving to increase capital standards by changing around the rules around risk rating . So, let me first say, i cant understand why some people in the industry have thought that this may have been a basel 4 like effort. Thats not the way it was intended or the way that it will evolve in the end. What this exercise is, is an effort to wrap up as it were basel 3 by dealing with some of the risk weighting issues, increasing the sensitivity of the risk weights, dealing with Operational Risk measures, which havent been particularly satisfactory to date. The Basel Committee as a group, agreed that the outcome of this exercise should not be a significant increase in Capital Requirements across the board, and i think what the Basel Committee has learned is that some of the proposals may have moved in that direction and so i believe there is an effort to the original purpose of readjusting risk weights while not overall increasing Capital Requirements. Youre not going to end up in a place with these new rules thats going to result in banks having to raise substantial amounts of capital . Two different issues here. Are requirements going up significantly and what are the positions of individual banks. We agree with the premise of the Basel Committee that this exercise was about not raising Capital Requirements. But if there are banks, internationally active banks, which are not meeting the current Capital Requirements, this exercise should not be a validation of that. Instead, it should be the occasion for making sure they bring their capital up. Now i have to pivot to the Monetary Policy economic outlook, part of your brief. Weve had a bunch of data of late that has raised the questions about the economic recovery, specifically the recent ism reports for manufacturing and services came in below expectations. The jobs report i guess kind of luke warm. Give us your overall sense of the economy and economic momentum right now . Well, let me say two things about that, steve. First off as you know, ive been characterized as being in the show me camp which is to say i would like to see some more tangible evidence of inflation given the background context of employment continuing to increase without the Unemployment Rate going down. The fact that were not running a hot economy. The fact that we dont have as many tools to respond to a potential recession as we would if growth were to pick up. But having said all that, i think even if you didnt have my position on looking for more tangible evidence of inflation, i think you would want to be looking as you say, at the overall momentum of the economy and even if youre looking for an opportunity to gradually remove accommodation, you dont want to be backward looking. You want to say, whats going to be happening over the next couple of quarters. And there, as you suggest, is room for a robust discussion because while consumer spending, for example, has held up pretty well and there are some indications that maybe Business Investment will finally pick up at least a little bit, on the other hand, the labor market is basically been flat for a while. Weve had unemployment not going down for a year. Some of the indicators of under employment have flattened out rather than continuing to improve and as you said the ism surveys by their nature forward looking, suggests some ground for questioning. Thats the discussion that needs to be had. I want to emphasize that people no one should focus on particular pieces of data and certainly not in a backward looking way. We need to be focused on the overall picture which helps us to understand the momentum of the economy Going Forward. So all of that said, if you take all of this data together and you come up with a sense of the momentum of the economy, where does that leave you on the need to raise rates, keep rates the same . Whats your outlook for where rates ought to be right now . Is the current level appropriate . Im not going to comment on particular moments for rate increases, steve. What i would say is that again, from my personal perspective, i think we have an opportunity to continue to get employment gains in this country. Remember our mandate is maximum employment, not some constructed view of full employment and what weve seen over the last year is that the Unemployment Rate has remained just about stable, while weve had about a million jobs above the replacement needs in the labor market created. Well thats a million jobs that have presumably been created by trying on existing slack in the economy and so i dont think anybody really knows where full employment is and i think we have an opportunity to continue to benefit from some of those gains while as i say, not running a hot economy, and, of course, as inflation in my view shows that its picking up in a Sustainable Way to be at target rather than being below where its been most of the last five or six years then would raise rates. A bunch of inflation indicators have ticked up, not necessarily the feds preferred indicator the pce price index, however, when you look at cpi, when you look at even the cleveland came out this morning about 2 of a series of indicators, dont they cause you concern . There are things to look at, of course, but he used the right verb which is ticked. When you look at the charts, if you see things going up and down but then youre looking over a longer period of time and what have we seen, weve seen five or six years where the inflation rate, and we do use pce, where that has not been at or really near 2 , and so regardless of what measure you use, and remember they sort of core relate differently, but regardless of what measure you use, from my point of view what is optimal right now is to look to see actually evidence that the rates, inflation rate, would continue to go up and would be sustained at around the target, because weve had so many false up and downs in the past. I know you dont want to peg us rate hike or rate cut or whatever. Youre right. Could you see rates going up this year . I wouldnt take i wouldnt foreclose that possibility. You know, and i think its important for all of us in going into each meeting, to remain open to the possibility that momentum has changed, that expectations have changed, and thus for us to change our own views. One more question. Your colleague on the fomc, eric rosengren, hes a voter this year, president of boston, is very concerned about Financial Stability when it comes to these low rates. Is that something that animates your thinking about rates that weve had rates so for so low so long weve created excesses in the Financial System . Theres no question, but that when rates are low for a long time, that there are opportunities for frothiness and, perhaps, overleverage in particular asset markets. I think we need to be aware of that. Being aware of it is different from saying, therefore, the answer is to raise rates. Now, i, again, myself, dont exclude the possibility that in some circumstances, the federal funds rate increase could be an appropriate response to Financial Stability concerns. I think those would be pretty unusual circumstances and i dont think were in them right now. I think weve definitely seen some movement in asset prices up. Weve had some supervisory response on commercial real estate, for example, making sure that lending standards are as strong as they should be. You know, steve, over the course of the last five or six years weve seen a number of asset prices go up and start to raise some concerns, and frequently then they go down. When as with leverage lending they didnt seem as though they were going to go down, we did take supervisory action. The last thing i will say is i do think if we are going to be in an environment in which our star, the neutral rate of interest, is pretty low Going Forward for quite a while, were going to have to think about a framework for Financial Stability that includes, obviously, supervision and regulation, but that also has to think about the framework for Monetary Policy and whether we need to think differently about how we conduct it. Thank you for joining us. Thank you, steve. Carl, back to you, from washington, d. C. Thanks to you, steve. Our Steve Liesman. When we come back, Hsbc Pat Burke his reaction to tarullos comments and impact of brexit on banks and a lot more as we go to break, take a look at where the markets are trading. S p down not quite a full percent although did it get there this morning. A lot more squawk on the street after the break. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. 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Boeing, verizon, coke the biggest laggards. The fed speak, one of the primary culprits bostons rosengren says he can see raising rates even though hes historically dovish. Thanks, carl. You heard feds dan tarullo comment on banking and fed policy saying that overall momentum in the economy is an important factor and adding, by the way, there is still room for employment gains. Lets bring in pat burke, hsbc usa president and ceo, but right now, hes in beijing. And he joins us from there. Nice to have you this morning. You know, actually, what comes to mind for me, first, mr. Burke is not necessarily tarullos comments now but the election, of course, continued comments from both candidates, specific though to mr. Trump and what he may or may not do when it comes to trade with china. Is there more concern over there about the possibility of a Trump Presidency and what that will mean for the relationship and, therefore, for the business that you oversee in terms of getting business here to do business over there and vice versa . So look, i think the clients that were dealing with on a daytoday basis, theyre just more focused on the Market Opportunities and i think the advice that were trying to help them understand, whether or not they should be investing in certain places or not, that tends to be their focus. To be honest, i dont get much in the way of feedback on whats happening with the president ial race in the u. S. No. So youre not really hearing that from any of your clients in terms of the concern from what might arise there . Yeah. I think the clients, particularly i think the chinese clients here that are looking to invest in the United States, theyre thinking in a fairly longterm horizon, so i think the next election to them isnt necessarily the most critical step in the process for themselves. Whats the Investment Strategy of corporates who are trying to issue debt right now and in this brave new world actually getting a return on the . If someone came to you and said i want to sell debt for my company at a negative Interest Rate would hsbc underwrite that . So look, in the United States, of course, we dont have negative Interest Rates. And so i think the focus for us with our clients would be, what can we do to actually help you get a placement thats going to give you a market premium and one thats relatively affordable for what youre trying to do. We just heard fed governor tarullo talk about the fact that he thinks that bank behavior, while it has improved marginally since the financial crisis, he said its still reactive to Enforcement Actions that are being brought and that compliance across the board at banks actually hasnt changed. What would you say to that as an executive at a bank who has been in the cross hairs of the feds and other regulators . Well look, we have a great deal of respect for the feds mission to regulate the banks and so i mean i cant offer much of an opinion based on governor tarullos comments. I can tell you at hsbc, we take very seriously the feed to comply with all of the regulations, not just the letter, but also the spirit. So i think in that vain were working i think very directly to address any compliance, any control issues in the company. How much is your business in the u. S. Growing these days . We all hear about, of course, some of the billionaires in china buying apartments in the sky here in new york city, for example, but overall, in terms of the crossborder relationship, what are the growth rates that you have put up and what are you looking for . So i think if you put them in relative terms, as we know, china itself, its gdp is growing between 6 and 7 . Obviously in the u. S. Were 2 , maybe a little bit more than 2 , little less than 2 . But if we look at our clients in the activity that theyre conducting across the corridors, whether u. S. Clients coming to china or chinese clients coming to the United States, were seeing the growth rate during the first half of 2016, being north actually of 10 . So the actual growth rate of the business between the two countries is actually higher than the gdp, so again, i think thats just reflective of the notion that particularly chinese clients, very interested in investment in the u. S. Market. Right. You know, which always brings me back to the concern that there is among some investors about capital flight from china itself and continued concern about the growth of credit in that country. Is there a concern of yours at all . Do you know cuss at all on the possibility focus on the possibility of continued capital flight . No. I think the approach that the chinese are taking with respect to their china out strategy, meaning they want to actually have their enterprises do more investment outside of china, i think thats a very sound policy, given the level of reserves and just the sheer amount of money they have in china today, they need to be able to put it in places where they can gain productivity, they can gain necessary technologies, they can gain anything really that helps them in their core fundamental business. And the United States is a very attractive place in that regard. Yes, it is. Mr. Burke, we certainly appreciate your joining us, pat burkes hsbc usa president and ceo joining us from beijing. Thank you. Coming up, the football season kicking off last night with a super bowl rematch. Nfl sports super agent drew rosenhaas joins us. The dows loss escalating to 157 points. Stay with us. Youre watching squawk on the street. This car is traveling over 200 miles per hour. To win, every millisecond matters. Both on the track and thousands of miles away. With the help of at t, Red Bull Racing can share critical information about every inch of the car from virtually anywhere. Brakes are getting warm. Confirmed, daniel you need to cool your brakes. Understood, brake bias back 2 clicks. Giving them the agility to have speed precision. Because no one knows like at t. 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Get Better Internet installed on your schedule. Comcast business. Built for business. Welcome back to squawk on the street. Breaking news in the auto industry. Earlier this morning, a criminal intimes was unsealed indictment was unsealed in detroit wrens against a volkswagen employee. The nbc affiliate has identified the person as james liang a german national, engineer with volkswagen a man who has been involved in directing the defeat device tied to the diesel emissions cheating scanned. We do not know details about what the indictment holds, what charges are in there nor do we know what plea agreement is in place. We do know however from our affiliate there in detroit a plea agreement is in place. As we follow the developing story we will bring you more details as we know more. For now thats what we know. A criminal indictment against an employee of volkswagen. Now on to sue herera with a news update. Thank you very much, dom. Heres whats happening at this hour. North korea says it has conducted a Nuclear Warhead explosion test to counter what it called u. S. Hostility. In a written statement president obama condemned the test saying the u. S. Will never accept north korea as a nuclear state. The United Nations Security Council will hold a closeddoor meeting this afternoon to discuss that incident. Secretary of state john kerry arriving in geneva for facetoface talks with his russian counterpart on the syrian crisis. Russia is a key ally of syrian president bashar al assad. French Police Arrested three women after a violent standoff in paris last night. They were linked to the discovery of gas canisters found in an abandoned car near Notre Dame Cathedral this week. One of the woman, a 19yearold, stabbed a Police Officer with a knife and then was shot in the leg. She declared her allegiance to isis. And the last 17 people who were trapped in cable cars dangling above the alps overnight have been rescued this morning. Four helicopters were deployed after 110 people became stuck when those cars stalled due to a technical snafu. Yikes. Thats the news update this hour. Carl, ill send it back to you. Thats a long evening im sure for the people. Indeed, sue. Thank you very much. We will look at live pictures here of the house of representatives, holding a ceremony to mark the 15th anniversary of 9 11. Which, of course, is sunday. On the steps of the capital. Theres speaker ryan. If we get headlines from that we will bring them to you. In the meantime we want to check on the markets. The dow down 170 now. The s p down 1 . Once again ubs director of floor operations art cashin joins us at post nine to talk about today and whether or not it is ushering in a different kind of market than weve had all summer. Hit with a onetwo punch of gund lack and rosengren who had been a dove but turned a bit hawkish in the immediate prior appearance. So these guys baffle me. Theyre supposed to be data dependent and the data is not that good so theyre changing their mind again. Its a little dangerous. If they insist on pushing something through in september i think they cannot begin to imagine what kind of market shock there may be. Yeah. Market is not ready for it. Thats been certainly cramers thesis. So much near term uncertainty. Ecb, bank of japan, fed, first debate, over the next couple three weeks, is the market paralyzed by that . Well, you know, youre right. Youve got all that going on. Youve got pillebillions and bis of dollars in variable rate mortgages that will be reset at the end of the month based on libor thats another wild card in there. If they want to do something this year fine, but aim for december. September could be a dangerous month to do anything of this stuff. Any of this stuff. Thats why people have been bullish on three month lie bore because theyve been positioning for the move. We heard governor tarullo acknowledge there are opportunities for frothszyness in the frothiness in the market but he said the answer is not to raise rates. What is the answer . How does the fed or anyone cure frothiness . I think youve got to see where it is occurring. The signs of frothiness, equities, the nasdaq is at an alltime high, but away interest certain pockets of the Real Estate Market theres not a heck of a lot of frothiness around. Its been a surprisingly firm summer, but, you know, turned out not to be sell and may and go away but sell in may and ruin that day. It has not worked out. Thats again because of the fed. Many of the seasonalities in others things have been turned on their head. So, we will see. I think the fed still has opportunities within the present framework. Theyre paying a half a point on excess reserves. They could tamper with that. They could free up some extra reserves if they needed them. Heaven forbid if the economy slowed down. They could opt to pay a quarter. And i think people would then say, well let me see if i can lend some money in here. They have latitude. Theyre not as cornered as they make out to be. Have you noticed the german 10year today . Yes. Positive yield for the First Time Since late july. Does that mean anything . I think it means that theyve noticed every central bank appears to be reviewing whats going on. We hope to hear from the bank of japan. Everybody had assumed they were going to go full blast and keep moving down. Theyre still waiting on the review. There are some people who believe that draghi was no move and disappointing yesterday because he got a signal from the fed that they were considering september, and not to have the markets pull two ways. So i think youre looking at a period of central bank reassessment here and why any moves that come out will be very important. We will see where this day brings us now. Good to talk to you. Thank you. With 60 days until election day what effect the rhetoric from the 2016 campaign trail is having on Investor Sentiment and Market Action some joining us is cnbc contributor jared bernstein, former economic adviser to Vice President biden and Donald Trumps economic adviser Peter Navarro from uc irvine. Jared, ill start with you economic hasnt been the center of this weeks discussion on the campaign trail. It was supposed to be the week that both candidates were able to show their Foreign Policy and National Security chops. Im wondering if you think either candidate really rose to that occasion . I think as usual, the news cycle has been dominated by controversies around stuff that trump has said largely praise for putin and speaking on russian tv and all that sort of thing. I must say im much more focused as i suspect we all are on the Economic Issues and some of the implications for investors and broader economy, middle class households and it is true that those issues havent been elevated as much and i really think they should be. I think they need to be. I think trumps tax plans really needs scrutiny because i think its going to be hurtful to the middle class where i think Hillary Clinton has a much more middle class working american agenda. There was a usa today poll this week that asked respondents if they thought the outcome of the u. S. Election, regardless of the outcome, if the outcome of the u. S. Election would cause a recession. 55 said yes, 45 said no. What do you think that means about the concerns of people voting this year . Well, lets talk about whats going on with the markets and economy now. What i see is, the slowest recovery since world war ii and basically because Interest Rates are so low, money is going into the equity market so it creates this kind of paper bull market. Its not its an illegal. Every time the fed talks about raising rates that raises the prospect of money going back into the bond market but the underlying strength in the economy not there to sustain it. So whats going to happen, depending on who gets elected. You look at donald trump, he says he wants to cut taxes, cut regulation, Lower Energy Costs and reduce the trade deficit. That seems to me a recipe for a very Strong Economy and a bull market. On the other hand, if you look at Hillary Clinton, shes on record raising taxes, basically, raising energy costs, basically been responsible for those trade deficits, and that seems to be a recipe for a bear market, so theres the choice. Why then has so much of the money that has been contributed from executives in the oil and gas industry, gone to secretary clinton instead of going to donald trump . If you look at the corporate money thats being allocated between clinton and trump you see the corporate money that loves to take their faktss offshore to factories to china and mexico thats going to clinton because shes cut the trade deals that allowed that to happen. If you look at silicon valley, the folks there like the design stuff maybe here in america but they always like to make it in places where they can get cheaper labor and pollution havens, so where the corporate money is not telling you where the American People are going. Mark zandi, i think a widely respected economist no, hes a democrat come on. I did not interrupt you. Show me the same respect. Dont play the z card. Well give you an opportunity to respond. Thank you. So mark zandi released a report where inn he evaluated the Economic Impact of both Hillary Clintons plan and Donald Trumps economic plan. Now this gets to your question about recession. Now he forecasted that the trump plan would lead to a recession and the hillary plan to growth and jobs. Im not going it bank much on a 10year forecast and i think peter has every right to criticize the forecast. However, there is this, what was the basis of zandis forecast was the deportation of 11 Million People out of our economy and labor market. If peter wants to defend that as good for the economy go ahead but on cnbc, i dont think youre going have a lot of theres an invitation. Two things. One, zandi is a democratic shill and major contributory Hillary Clinton. He has zero credibility. As far as the immigration issue, the black community in this country has been at the tip of the spear of illegal immigration and they understand that im addressing that. No, youre not. Illegal immigrants are taking jobs from the black and Latino Community here in the u. S. Its good for america to have a closed borders, Hillary Clinton wants open borders. Very clear. We can play he said he said all afternoon but were out of time and have to leave it there. Jared and peter, have a great weekend. Thank you. Byebye. As we go to break take a look at where markets are trading. Dow down 186. Awfully close to session lows. More squawk on the street after this break. They say the world does not revolve around you. But today, maybe it can. I am helping 1800flowers find the perfect gift out of trillions of combinations. And working with the new York Genome Center to find treatments as personal as dna. And i am helping sesame street make education unique to every child. Hello, my name is watson. Working together, we can outthink anything. Hello, my name is watson. With dand bold styling to to stay ahead of the curve. The lexus rx, rx hybrid and rx f sport. This is the rx, elevated. This is the pursuit of perfection. The s p 500 is doing something its never done before. Find out what that is and what it could mean for your money on tradingnation. Cnbc. Com. More squawk on the street coming right up. Theres a lot of places you never want to see 7. 95. [ beep ] but youll be glad to see it here. Fidelity where smarter investors will always be. If only the signs were as obvious when you trade. Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. Keep an eye on this selloff. Dow, s p, and nasdaq all down more than 1 . The s p had been eyeing 44 Straight Days without a 1 move. That streak is broken today. Squawk on the street will be right back. Or not. You want to stay with us. The super bowl champs picked up where they left off last night. The Denver Broncos eeking out a win against the Carolina Panthers the start of the 2016 nfl season and marks the first since 97 with both Peyton Manning and tom brady missing kickoff week. Manning retired, brady with the fourgame suspension. Joining us with what to expect from the season is famed sports agent drew rosenhaas. Good morning. Good morning. Here in denver. Well, im from denver, so im happy about last night, although it sounds like were going to continue to have discussions about officiating and concussions. I wonder how long you think newton can play a season like this . Well, he is a very physical quarterback, and he is a big, big man. Probably the biggest quarterback in the history of the nfl and he is hes very physical. And he takes a lot of hits because of the style of play that he has. The referees have to protect him like they would any quarterback. It doesnt matter how big and strong he is. He deserves to be protected the same way. Did that happen last night . Well, im a little bit surprised that the referees, the officials, did not stop the game after the hit towards the end of the game, to check him for a concussion. I thought that would have been merited and i thought that was unfortunate. Apparently they consulted with the doctors for the panthers and the independent concussion people and felt that he didnt need to be evaluated, but i thought that a break in the game would have made sense to check him out. So many interesting narratives running through the league this season. Whether its kaepernick, newton, just general strategy decisions. I wonder what do you think are going to be the main stories at least for the first half . Well, its always going to be the product on the field. The nfl is the number one form of entertainment in the United States and its going to be a great product. The games are going to be fabulo fabulous. The game last night was unbelievable. It came down to the last second. Yep. On a missed field goal. You know, the super bowl champs, they won in stunning fashion. Wonderful drama with some of the best players in the game. Thats what this league is all about. The kaepernick stuff, concussions, its all important. Player safety and players rights to express themselves, hey, thats going to be a part of the game and but its always going to center around the drama on the field, will take center stage. Im glad the games are back. I, for one, prefer the drama on the field than the drama off the field. So to speak. Yeah. I think a lot of people agree and would probably argue weve been robbed the past few seasons by a lot of exogenous events. Who do you think is going to stage the best revival team wise . Well ill tell you what, revival wise, i would have said the philadelphia eagles. I like the fact that the eagles made a lot of moves this offseason. But that trade of sam bradford and handing the keys over to the rookie, carson wentz, is tough. I dont blame the eagles for making the trade. They got a kings ransom. I give the Minnesota Vikings a lot of credit for salvaging their season after losing teddy bridgewater, their great young quarterback, and acquiring sam bradford. Finally, drew, were getting some early overnight ratings on last nights game. But were also going to be paying attention to twitter and whether or not they can leverage this content on their platform. Do you think people are seriously going to watch games differently over the next few years . Oh, absolutely. Look, if youre not in front of your tv, if youre on the road, and you have the ability to watch a game on your phone or on your laptop on twitter, thats awesome. I love that idea. You know, when i think its absolutely tremendous. The more ways fans can connect with the game the better. The fact that you can watch the gail on your phone on wifi. On a flight. The technology is unbelievable and kudos to the nfl for tapping into that. Its going to be great for them. The nfl is such a great product. Id like to seek access to it in as many ways as we can. We cant wait. Drew joining us in denver. Lucky guy. So are you as a denver fan. Chaos at sea at 14 billion orthopedic of cargo gets stuck offshore. And heres where stocks are trading at this hour. We are having a significantly down day on the broader markets. Squawk on the street is coming right back. People get anxious and my office gets flooded with calls. So many things can go wrong. Its my worst nightmare. Every second that power is out, my citys at risk. Siemens digital grid manages and reroutes power, so service can be restored within seconds. Priority number one is keeping those lights on. It takes ingenuity to defeat the monsters that live in the dark. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. 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Introducing wifi pro, wifi that helps grow your business. Comcast business. Built for business. We told you about the indictment of a vw engineer tied to the teesel emissions scandal. Im holding the unsealed indictment against that engineer and he pled guilty. We do have headlines and reports now that volkswagen itself is in talks to settle related criminal allegations against other employe employees. Morgan is live across from the port of newark and tells us more about this story. Morgan. So we have nearly 80 vessels filled with clothes and toys and frozen meat refrigerators and stranded at sea and at least four of those vessels have been waiting along u. S. Coasts. We have three hoping to come into one of the Southern California ports. Including one scheduled to refuel today and another making circles here in the Atlantic Ocean that was scheduled to arrive here at the new York New Jersey complex right behind me across the water here we have a second one underway in this area started at 10 00 a. M. Eastern today. Still these ships continue to be stranded. Its either not coming into these ports and one of the biggest reasons is Cargo Handlers not willing to off load that cargo. Theyre afraid theyre not going to get paid. I have sources up and down both coasts telling me theyre looking for up front handling costs before they even touch this cargo. Thats largely going to fall on the he retailers and other shippers that by the way already made those payments so theyre essentially going to be making those payments twice. That really adds to their status as credit ors. Also ill note this has been a game for other carriers. According to online freight shipment marketplace the average price for container has spiked 56 over the past week. Back over to you. And also were going to check in with two big Board Members that just joined there and walt has some thoughts about the design of the iphone 7 and what he says might surprise you. All that and more coming up on squawk alley. Mary buys a little lamb. One of millions of orders on this companys servers. Accessible by thousands of suppliers and employees globally. But with Cyber Threats on the rise, marys data could be under attack. With the help of at t, and security that senses and mitigates Cyber Threats, their Critical Data is safer than ever. Giving them the agility to be open secure. Because no one knows like at t. Good morning. Its 8 00 a. M. At twitter headquaters and squawk alley is live