Transcripts For CNBC Squawk On The Street 20240714

Has been a tumultuous quarter. Plus, a rough quarter for ipo shares of ab inbev and Bernie Sanders corporate tax, the 2020 president ial hopeful out with a new plan calling for a tax on companies that pay their ceos way more than their workers it has been a roller coaster ride for stocks in the Third Quarter as we enter the final trading session of q3. Dow and nasdaq aiming for a Third Straight quarterly gain. Mike, awe kn mike, as we know, we went into the month thinking big, bad and scary. I think thats actually the story for the quarter too, the market held itself together and preserved these levels it was at, just about at old highs. Without really a ton turning for the better the way you can look at it is the cost of two and maybe a third fed rate cut was not that steep in the way of suffering through really bad growth or any real stress in the Financial System just yet. So but it does feel tenuous, feels as if the market is sort of maximized what it had to work with to get to this point. I think because old leadership has shown signs of fatigue. What we have seen in the past month is this notable rotation as we have seen yields come up in the past one month, we have seen the performance of the banks improve. We have the financials, the best performing sector of the month regional banks doing better because of the super yield curve. We have technology showing some signs of just fading at this point. Netflix basically almost out of faang, if you ask anybody who follows that, right . Exactly. Well see if that follows more google in the journal this morning, looking at internet protocols. Well talk about that later on today. All of them are at least 5, 6, to 15 below their highs. Yes. The big faang names it shows you that, i think there is two ways to spin that one is the market has essentially been able to preserve its levels without necessarily what used to be the best players exactly. And so thats probably in that positive but the yield story will dictate that rotation, and whether in fact the overall market can make headway. Really we have been tracking, you know, rising Government Bond yields means stocks have headway to move and value to perform and banks can do okay and thats been the pattern. There is a little show me attitude to the bank breakout we have seen recently but it is notable in terms of some of the performance of the faang stocks, facebook, just last week, down 7 and so you got to wonder finally these faang stocks are discounting or more of a valuation discount because of the regulatory head winds such as the ones youve talked about. Youre starting to hear more about ripple effects from the kind of reckoning that the startup world has come about arguably amazon has been a little bit weak because people are a little bit scrutinizing aws. Their customer base, very leveraged to start up activity and all that whether it is true or not, it feels like the sentiment is turning that direction. Lets bring in samantha azarello to talk about the markets. Happy monday good to see you. In addition to all we discussed, we had ipos, a new wrinkle, financial plumbing got interesting late in the quarter. What is what do you think was the defining dynamic of the quarter and what do you think it will be for q4 i think was the issues that popped up with repo. We didnt think the financial plumbing issues are really indicative of anything systemic. It is just liquidity problems. We dont think it is solvency issues but it scared people it points to the fact that in the broader bond market we see liquidity issues Going Forward and only starting to talk about that now. Really . What does the fed need to do what does new york fed need to do the new york fed will get back into their open Market Operations, look at the asset and liability pieces of their balance sheet, but really comes down to the fact that more collateral on the market is probably necessary, especially as funding needs come to call and i think you put that along with the idea of slowing Economic Growth and startup issues and all these Different Things and this all feels kind of frag. Is it a risk off environment . I would argue it is a risk off environment. Were slightly underweight equities for the first time in a long time. Were saying skim off of growth and reallocate to value. That in itself feels risk off. What about the idea as we were saying, we at least so far made it it the end of september. It seems as if sentiment isd po the Fourth Quarter thats the bull spin. I like the bull spin. Im curious how you would answer that. I think longer run we have to make the case for equities i think if you look at flows year to date, all the money has been going into bonds or cash equivalence, were aware of that there has been massive net outflows out of stocks, speaking to the fact that maybe, you know, given flows alone you have more upside potential for equities. In terms of setting up into the last quarter of the year, did you feel it reminiscent of one year ago when we had a rough earnings season, we had china trade tensions and we saw a precipitous decline in the markets . Is it possible we get a 15 decline in the markets this quarter . Absolutely i really do think so especially if the trade tensions deteriorate. News over the weekend, which was alarming, you know, at best about stopping capital flows so if anything, i think there is more downside risk, but i would say it feels very episodic in nature, right . It feels like volatile swings are temporary and everything subdues. I think staying the course is probably key. John stoltfus joins us this morning as well. We have been talking about whether or not there is reason to be cautious in the coming quarter because of some of the new dynamics that revealed themselves in the last few weeks. Fair or not . Absolutely fair the question, anything that would impede the ability of the markets to function on a globalized basis would be a very serious thing. Related to the trade war itself, as it exists with tariffs, that negotiation continues, but especially the news on friday, the possibility that the administration would limit capital flows, that was very worrisome. I want you to know, i was racing to get here. Well give you a chance im nervous about the market. Navarro pushed back, treasury spokesperson over the weekend, said no current plans. Thank goodness. That was very helpful. Do we believe the president authorized a review . Let me put it this way, i think it is very possible given what we have seen thus far since 2016 anything is possible but would say this, i do think there is an election next year and i do think the American People are very concerned that there would be any shakeup of Economic Activity in for the consumer. Doesnt that backdrop though not matter until the markets are way off the record highs being so close to record highs, doesnt that give the president some leeway to do what he wants . I tell you, ive got to say, melissa, i think it is that is a question we really have to see. I think the president is with all the impeachment potential that is out there, i think there is so many things that have so many chickens that have come home to roost at this time efficacy calls for a trade deal, okay both china and the u. S. Need a trade deal right now every day china does not do a trade deal, more companies diversify supply chain away from china. Thats not a good story for long planning when china wants to see 2025 be made in china as a goal, and for the u. S. I think for the administration i think the administration really plans to make every effort it can to get reelected and so i think we come out of this and the markets have been so resilient, the Third Quarter may have been just edging slightly higher, basically, flat the positive bias in return for the s p before dividends and the most recent quarter. But generally speaking, if you look at a stream that shows you all your returns globally, most markets are green and some substantially so which would indicate to us that the markets are expecting some kind of a trade deal, some move that is significant towards normalcy. Samantha, the big question is related to that is what specifically seems right now to be priced in and captured by the market in terms of trade expectations youve seen some day to day sensitivity to the stray headline it is hard to think if you got a deal next week, the market would stop. You get a relief valley i will say to melissas point, i dont think the average American Consumer cares about the trade war and i think thats being shown up in the retail sales data in the consumption data we know ceos and business planners and leaders care, but im not convinced this is trickle down to the consumer yet. And the other question i guess is do you get another rate cut from the fed without trade stress in other words, can you have both either good or neutral news on trade and still get the fed to be more helpful i think it is possible. I think the fed is trying to show us theyre live they dont know what theyre going to do, so there is no way we can know what theyre going to do. Theyre waiting and seeing how the data unfolds john, last word. I think the consumer does care, it is just the consumer hasnt been hit yet. A lot of deals were done in the first 18 months of the trade deal chinese suppliers did everything they could to reduce their prices, reduce the cost of the companies they were supplying things with. Now this is chapter two. The next round might be critical. The breadth and depth of the tariff war has is extended and expanded substantially so it is time for action and positive action from both countries. John, thanks. Thanks for starting us off on a monday. Ab inbevs asia unit going public in hong kong. We have the details straight ahead. Mitch mcconnell on the trade picture and the push to pass the usmca. Hell be up shortly on squawk on the street. Look at futures, were looking at a higher open with the s p looking at 3, dow, 25, much more squawk on the street live from post nine at the nyse when we come right back. Driverless cars. All ground personnel. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. Hong kong bracing for more protests with Chinas National Day hours away sherry kang is on the ground in hong kong with the latest. Sherry good morning, melissa yes, as china is gearing up for its national day holiday, certainly a special occasion for beijing authorities to celebrate, but here in hong kong, at least for pro democracy protesters, it is an occasion that theyre going to, quote, mourn, calling all the other protesters to wear black and participate in the march and we saw a little bit of a preview this weekend, certainly escalation yet again in the past weekend with protesters, you know, basically confronting with Hong Kong Police, with some of that actually setting the entrance of some mtr stations on fire, hurling patrol bombs and Police Officers responding with tear gas as well as pepper sprays as well that with that usual scene, will this further escalation in their action that is highly anticipated tomorrow to mark that occasion, is that going to sit well with beijing authorities as well as those here in hong kong is really the main question. And the meantime, Hong Kong Police sending a text message to hong kong public, warning against such disruptions and also coming out with their statement condemning all protest activities saying all acts are one step closer to, quote, terrorism, and calling on the public not to participate in tomorrows event of course, tomorrow were going to see some scaled down ceremony here in hong kong, but a lot of elements have been scaled down as i said. Fireworks, for example, have been canceled. Back to you. Sherry, thank you for that. Speaking of hong kong, ab inbevs asia unit going public there. Frank holland is back with details on that. Good morning, frank. Shares of bud asia rising 4 after opening slightly above the listing price of 27 hong kong dollars per share. This ipo raising more than 5 billion. This gives bud asia an enterprise value of 45 billion and based on 2020 estimates the price to earnings is 33 times. A lot higher than Parent Company ab inbev, compared to other leading chinese brewers you see more comparable numbers there, also comparable numbers when it comes to revenue growth. But asia third in that market by a very thin margin people with knowledge of this ipo says it was motivated by a desire to reduce debt as well as growth in mergers and acquisitions in asia thats something that ceo jane kraft touched on. Many other markets in southeast asia, were not number one or two, so if you look at vietnam, thailand, philippines, cambodia, there is many markets we could imagine we can create a lot of value together with regional players in the future. People close to the ipo say m a is a longer term goal. The focus is on china, which consumes twice as much beer as the u. S. , about 13 billion gallons a year compared to 6. 2 gallons a year here in the u. S and Debt Reduction the company has 102 billion in debt much from acquiring sab miller in 2016 and the company said its goal is to reduce that net debt as quickly as it can, especially next year. Todays ipo is hong kongs largest ipo of the year and the second largest after u. S. Ride hailing company uber back over to you. Wow frank, everyone is paying attention to where companies decide to list these days. Thank you. Frank holland. Speaking of ipos, talking about what an interesting quarter it has been goldman has a nice chart out today, looking at the percentage of new issues that have uneven Voting Rights at 17. Pretty much the highest in the last decade. Yeah, thats actually kind of a point against those companies, you can look at the performance split from those, they wont get likely put into any indexes thats one of the big overhangs on some of these you had this complete clash between private market valuation math and priorities and what the Public Market wants to swallow thats one piece of it. It is funny that also coincides with the Record Number of dollars raised by unprofitable ipos in a single year i dont know if thats cause and effect or related in some way, but worth noting because thats the trend we have seen this year that we have these founder led companies, retain control, largely unprofitable companies, and they have managed to stay in the private market for so long because of so much money slashing around, a product of zero percent Interest Rates around the world. And lower compound annual growth rates in Public Markets over the past decade, all the money floating to private. Thats where the action was. Fred wilson with an oped today about basically it is a no brainer now. That chart we showed of the big three, there it is buy and sell stocks every day, they feel like they missed out on something, they can get into it immediately the lesson has been learned. If youre not making money, prepare for scrutiny without a doubt and he also goes on to say, talking about this, if it looks and acts like software, the market likes it. If you pretend to be a softwarebased business and dont have the margins, dont have the Network Economics of a software business, the market sees through it. And i think thats been the split between uber has an app, but it does not have software economics. Or peloton. Good example. Which is also indicated open lower again today. Here is the thing about pelot peloton, though, and smile direct, it is not just oh, the Public Market doesnt like the valuation, it is in the moment, the bankers thought they had demand behind them at the ipo price and didnt there is something in that transaction, that reading of the market that has been off lately. A name that priced at the high end, at the last minute we saw what happened still to come, an important interview, Senate Majority leader Mitch Mcconnell with us, well get his take on trade, and the chances of Congress Passing the u. S. Mca well talk about the house inquiry, take another look at the premarket as we kick off as we said a busy week full of central bank speak, data, jobs number and the start of earnings were back in a moment ive been a caregiver for 20 years. No two patients are the same. Predicting the next step for them can be challenging. Today were using the ibm cloud to run new analytics tools that help us better predict and plan a patients recovery. Ultimately, its helping thousands of patients return home. Its got all my favorite shows turn oright there. Boom, i wish my Trading Platform worked like that. Well have you tried thinkorswim . This is totally customizable, so you focus only on what you want. Okay, its got screeners and watchlists. And you can even see how your predictions might affect the value of the stocks youre interested in. Now this is what im talking about. Yeah, itll free up more time for your. Uh, true crime shows . British baking competitions. Hm. Didnt peg you for a crumpet guy. Focus on what matters to you with thinkorswim. Was in an accident. When i called usaa, it was that voice asking me, is your daughter ok . Thats where i felt relief. Were the rivera family and we plan to be with usaa for life. See how much you can save with usaa insurance. Just about seven minutes before the opening bell rings. Lets bring in art cashin. Welcome, good to see you what do you make of this week and how were setting up given earnings, Economic Data, lots ahead of us. Yeah, earnings are going to be important and what is interesting is were the weekend talk shows were consumed with the impeachment deal and it doesnt really seem to have a major Market Impact i think the only way we have seen it as an impact is when these hearings get partisan and acrimonious. It makes the traders feel the chances of getting infrastructure, the chances of getting anything else done are almost nil but the key that is all encompassing remains the china trade. I mean, overnight, for example, they put out a statement that they will have a chinese delegate here in a couple of weeks and the futures turned around so the obsession remains with the china trade rather than impeachment and politics. And you feel like thats running through the bonds . It seems like, you know, we also got decent Economic Data out of china. One number firmer than expected. And then, you know, bond yields able to lift and that seems to set the tone. Yeah, no. I think were going to see movement in bonds again. I dont think we have seen the low yields yet i think you may see them at year end. And well see. And i think this little quote unquote problem with the plumbing may begin to influence the fed to a degree. Because if they have to keep loosening up in the shortterm money, that may or may not take away a rate cut, you know . They can say, hey, look, we fattened up the balance sheet, we dont need the rate cut i dont think the markets are focused on that yet, but i would be keeping an eye. Youre looking for one more cut or you think thats a risk i think that is a mild risk i think they should. But i think the markets may be seeing it as a mild risk in about a couple of weeks. I dont think anybody focused on the repo thing as much as they should and well see if that picks up. All right, art, great to see you. Thank you. Art cashin opening bell is just five minutes away stay tuned youre watching squawk on the street live at post nine. Through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in just over two minutes. Busy monday obviously, been a busy weekend so much going on in politics as Congress Begins this twoweek reset. Were going to talk to Mitch Mcconnell in the 11 00 a. M. Hour going to try to stay focused this morning on individual stock movers and for that you got to watch apple. Jpm does up their iphone volume forecast says it is going to be offset with some more adverse effects lower margin and profit pricing expectations though december 2020 target now is 265 and thats versus the prior december this year 243 so looking for some appreciation in the next year and what is interesting about it is it was modest tweaks to the iphone outlook it is a call on expectations being low enough and sentiment to the stock being relatively moderate it can rally from here interesting that the stock responds to Something Like that, not like an edgy call, if we think it will be a blowout quarter. I think it tells you that there is a little bit of an upward drift bias to the stock and looks like it might be up almost 1 here in the premarket. We should also watch some of the Exchange Stocks as well as chinese internet stocks, saw all the stocks be under pressure on friday on that report that perhaps white house is looking into forcing the delisting of Chinese Companies. We saw ice trade lower, the asher etf, alibaba is down, indicated to open higher at the open how much will these recoup the losses after treasuries came out and said there are no current plans and navarro said the reports were half baked news it wasnt a table pounding denial of anything it will be interesting to see what the reaction is there. Sure was spicy, though, between navarro, kayla who reports on this day in and day out, wilfred and joe, an interview with navarro this morning if you get a chance to go back and look at it the opening bell and the s p 500 at the cnbc real Time Exchange big board, celebrating the 13th anniversary, resmed. At the nasdaq, envision solar international, maker of electric vehicle chargers and it is going to be a busy week for autos at large. You got day 15 of the gm strike. You got tesla deliveries ril come our way looking for somewhere in the neighborhood of 90 to 100 95 to 100 or so roughly consensus. Musk made comments about his aerospace launch over the weekend. And the delivery numbers itself. Yeah. Well hear from what musk said and then, of course, who knows, now that wto has given us the green light on eu tariffs on all kinds of goods, 7. 5 billion worth, well see if that includes autos if the u. S. Is willing to start a second front war when it comes to trade. Right obviously huge overhang. It is interesting, gm stock is kind of very, very modestly been hit on this. It shows you the state of the industry right there where there really werent many expectations of real acceleration of volumes, you know, at this point in the cycle. Doesnt seem as if there is as much at stake in the neither it seems this industry is figuring out if it is prepared for the next act and tariff were just, really undercut the whole story for a while. Yeah. Shares of unh as well, bmo capital downgrading the stock, been under pressure. A real pushpull because impeachment hearings are thought to set off the negative prote l proposals that are trying to make their way through congress, as the impeachment hearing goes on it looks like the spread between biden and warren gets wider and wider with warren taking the lead. Jeffries had this great chart out a couple of weeks ago, showing that when the spread goes wider, with warren taking the lead, the etf goes down. So healthcare loses when it looks like warren is winning and thats the trade were seeing play out here, but bmo going to market perform from outperform, which has been a stellar performer over the whole year but down 12 in the Third Quarter. Miller last week called it the classic warren indicator if you look at her poll numbers brings you back, though, to the Obamacare Repeal trade, it seemed like the only thing that mat are mattered and in the end, the market sort of settled out beyond that i do think it is worth keeping in mind that the whole impeachment stuff, to me, it filters into the markets in electoral probabilities. Not so much what is going to happen in the next couple of months, if it really just creates a trend in the polls that says this is how 2020 is going to turn out, thats how the market i think would be pricing healthcare and would be the thing to do it. Absolutely. Oil interesting action, we said earlier, back to 55 you had the crown prince on 60 minutes over the weekend, talking about an unimaginably high levels on crude without action on iran at the same time, journal does this fascinating piece on u. S. Production, down 7 year on year not because of pricing but because technology seems to have been flattening out on some of the wells. And you just do not get the yield. Got the best of it maybe, yeah at least kind of been wrong a few times on the whole, you know, peak oil and various iterations that was fascinating the idea it is a path to Energy Independence that is being questioned this whole sector, underloved sector, small sector in the market, the most inconsequential bisector in terms of waiting and a lot of portfolio managers, theyre not allocating the time or resources to covering oil and taking active positions in oil and were seeing that play out in terms of performance of the stocks it has bearing on the whole value trade as well. So if you love value in concept you should love energy. Youll love energy. Youll love completely disrupted cheap retail all the stuff that seems like, well, yeah, i like cheap stocks but not ones going to zero thats kind of the deal you are faced with. Xom, the worst performing dow component with pfizer and unh. Well keep our eye on boeing journal piece out today arguing that the company omitted safeguards in the max that it had earlier used in a military jet. We know that mullenberg will testify in front of congress sometime in october. We have been talking for weeks about the resilience of ba in face of withering headlines all year long. To me, thats the takeaway. You know, what is the market kind of know in terms of cutting to the chase and where is this going to settle out or, you know, is it just one of these things, so many people believe in the long time story and the pipeline and nothing disturbed that yet. Only airbus. Exactly. As an alternative if thats even an alternative at the point where youre ordering planes if youre ready to replace planes, can you switch it and go to airbus . Thats why i think being is being held hossatage in this range. Target shares worth taking note of there, up by. 9 . A fantastic quarter for target this is the best quarter since the Second Quarter of 2003 and still going strong here. So this is sort of the flip side of those disruptive retailers, right, the ones that cant actually competes with the likes of amazon that have a strong bricks and mortar as well as Digital Strategy theyre really taking the lead target, walmart, all these names. Yeah, the anointed few you can own, they have the wherewithal and everything else, massive valuation build. Micron, you think might find some legs, down a little bit after a rough print. And outlook. We talked to sanjay on friday. Again, we have been here before with this company trying to call the bottom of the cycle. Their argument is demand is slowly needing or exceeding supply but the though the stock is doing a little bit better. Mu, a tough week after what has been a great year, right people have taken a flyer. It has been a great year in the context of, you know, a stock that got really watched out from the highs in early 2018 had this not quite completed v move over the course of the past year and a half. It is Consumer Staples that will lead today, at the open, with some information technology. Ill look at the mall reits with forever 21, got confirmation like file for chapter 11 and closed a lot of stores put pressure on store on the store closure story. Simon property is above the flat line, it doesnt seem as if right now this is kind of new news in terms of what impacts the mall reits at least. The names leading now, gap, l brands, ulta, tjx, kohls, nordstrom. Bath got positive street comments we continue to count on the consumer to not be rattled well see what the jobs number looks like on friday yeah. More on bed bath beyond, web bush upgrading it. Good news for today. Altria is worth noting, seeing a little recovery here in altria shares, up 1 on the back of juul ceo stepping down, et cetera, all these headlines which you know so well, carl. We did get those cdc numbers last week. I think meg tirrell brought us up to speed this morning 805 illnesses now. 14 deaths. And no clue on the exact reason, but the scrutiny is beginning to zero in on what is essentially off market, black market thc, dang v dank vaps, juul being the largest player has gotten slathered with bad news. Kevin burns now out. Somebody, i think it was axios suggested this investment is one of the worst corporate investments of all time. Although it is early days. It has got to be in the running. Even when they took that 35 stake, we knew there was hair on that dog on the regulatory front. There is plenty of people scratching their head saying why are you going to pay this much money when there is so many unknowns on the regulatory front when it came to vaping still early days. Which might say a lot about what the company thought of its existing business and just was it just a necessary maneuver to try and, you know, buy a piece of the future. Excitizen sheistential stat. You look at the investments in pot, you think this looked like a company that was sort of desperate to offset those declines in cigarette volumes. Well see. Stocks have been under pressure on the back of this vaping controversy. Going to take a quick look at alphabet we had yet another route of news about scrutiny, some of its practices and such, down. 75 . It is not a panic move, but there has been a real slow relatively slow compression in valuation of an alphabet and facebook alphabet was 28 times earnings, not that long ago, like below 23 not cheap, but showing there is an overlay of concern that the business longer impacted by this think of when they reported earnings last quarter. They dispelled the notions that advertisers would walk away, the stock rerated, everybody thought this was a new chapter for alphabet you know, watch out for these earnings again well see if this is going to be a repeat. Thats exactly what mike wilson argues today over at Morgan Stanley as you all know hes been net negative or cautious, i should say still believe their earnings model shows earnings are 10 , consensus is 10 ahead of what is going to come out were going to know pretty soon whether or not the Companies Get started with pepsi this week whether or not the year is in tact. I would say one year ago, the forward estimate for the by the consensus was a good deal higher than we actually have gotten in the last year. The market is up a little bit. You got the help of much lower yields and changing orientation of the fed you cant necessarily get that again to support the market and the absence of earningsgrowth. It is hard to know exactly what is priced in and what the consensus is if thats the same thing. So thanks to market apple, dow up 81. To bob pisani. Nice little move up again it is tech that is sort of the mover and always is. Semiconductors in that sub sector is the marginal mover for the market their semi is up nicely. Industrials, these are the cyclical sectors doing better. Banks on the upside. Energy is laggard, has been for a while now after a very brief move to the upside earlier in the month. We just want to show you some china stocks that are moving today, baidu, all this down big on friday on some reports that the u. S. Might be considering restricting investments in china over the weekend secretary mnuchin came out and said they have no current plans to stop companies from listing here in the United States. So we see a modest bounce, not the kind of return that we saw compared to the downward moves on friday. So today is the last day of the Third Quarter. It is important to note how we have been looking globally it is a little bit of a mixed market here. I want to mention the recent ip oxs we had when some of them had a tough time last week peloton up, smile direct slack, all bouncing a little bit, pagerduty, rough week, lyft down 1 like i mentioned last day of the Third Quarter, if you look at how we have done at year for the quarter, for the quarter, s p has done well, hong kong rough time for a number of particular factors. Shanghai down 3 modest moves outperformance from japan and europe this is the stock 600, roughly the s p 500 for europe leaders in q3, odd group, laggards, laggards first, all your cyclical groups we had a tremendous cyclical selloff that came back in the last few week weeks. Biotech tough time, particularly in the last week retail down about 1 in terms of sector leaders, believe it or not, odd groups, here, gold has been a big mover up 20 year treasury etfs, outperforming everything for a while, except for gold utilities and Consumer Staples, you see how defensive the Third Quarter has been as for the earnings overall for the years, we go into the Fourth Quarter, i keep using this word flattish, using it for three quarters, thats the key thing here what could move the needle for the Fourth Quarter trade talks, well see some things there, the issue here is tariffs, no tariffs, more tariffs or less tariffs in the Fourth Quarter and on hold or not for the Federal Reserve, main thing. Earnings 2019, as i mentioned, kind of flattish the whole quarter. So far for the s p 500, companies in the Fourth Quarter, 14 companies are reporting for Fourth Quarter the only thing that concerns me is 13 of the 14 have seen analyst lower the numbers after the companys reports have come out. Thats more than expected. I would note some serious downward revisions that we have seen recently in some recent names. Carnival, fedex, and micron. Overall, on the quarter, though, remember, flattish is the key word for the year. Essentially up or down 1 or 2 for first quarter. Second quarter and Third Quarter, Fourth Quarter right now looking 4 or 5 to the upside well see how that ends out for the quarter. Melissa, back to you. Bob, thank you. Bob pisani. Chicago pmi due out in moments for now. Lets head to the bond pits. Rick santelli is at the bond pits in chicago. Hey, rick. Threeday of two year gives you quite a bit of information rates do move up on days like today. Were up a couple of basis points across the curve. As you see over the threeday, were not going anywhere but we are firm. One week of ten years shows you the basically the same thing lots of sideways activity, much hovering between the high 160s and low 170s bund yields, they have ticked up a bit relative to the history. But truly minus 56, minus 57 now is a nice cushion for minus 71 the historic low yield close dollar index once again, for the last couple of weeks on a tear, firm all year, remember, were up a little over 3 for this quarter, which ends today. You can see the strength on a twoday chart it really comes home if you lob ok at may 1st of 201 where were getting our fresh 28month highs, and, of course, as we await the september read to the chicago pmi, were always very cognizant of the notion there is a lot of ways to try to interpret what is going on the industrial side, the manufacturing side but maybe the biggest issue, of course, is acknowledging the fact that there could be reversals once we get a trade agreement. That data is out, it is weaker than expected, 47. 1. So much weaker, mike, on the pmi read and, of course, we want to pay close attention in front of the big earnings coming up shortly how this is all going to figure into expectations back to you, mike. Sure do, rick, thank you very much. The tech sector outperforming the s p 500 for this quarter lets go to Bertha Coombs at the nasdaq for more. Good morning, mike. Apple a big reason why a big bounceback for apple this month really recouping all of its losses from last month and then some. Apple up for a Third Straight quarter and getting back in that 1 trillion market cap neighborhood what we saw in terms of tech strength this month has been apple. And it brought chips up as well. So if you read that as a barometer on trade, it looks pretty good. Overall. The faang names for the most part sitting out the month sitting out the quarter. Alphabet among the few in that foursome that is to the upside this month but it is really been a stellar month when it comes to small caps small caps and midcaps have been the big outperformers this month. The small caps russell 2000 is down for the quarter, nonetheless what we have seen there has been rotation into small and midcap consumer names, Consumer Staples, consumer discretionary. And financial names, some of the big gainers include office depot, up nearly 30 for the month. And some of the small banks like Service First bank shares up double digits as well. That is offset by the performance of biotech which is down for the month and down 9 for the quarter. Thats really where we continue to see that uncertainty in healthcare whether it is the prospect potentially of Congress Moving forward with regulation or the prospect of Elizabeth Warren and the more liberal wing of the Democratic Party coming in with even tighter reforms back over to you. All right, bertha, thanks so much when we come back, later this morning, were going to talk with the Senate Majority leader Mitch Mcconnell about everything from trade to the usmca to the impeachment inquiry. Dow is up 59 here, holding on to gains after that another contract nation chicago pmi. Ba ia nu turl so as we put the quarter to bed today, take a look at the biggest blue chip gainers so far. P g, apeple, nike, home depote and walmart. Back in a moment democratic president ial candidate Bernie Sanders unveiling his income inequality tax plan robert frafr robert frank is back at headquarters with the details. It is time to send a message to america if you do not end your greedy corruption, well do it for you. This would Cover Companies with revenues more than 100 million. The tax kicks in when a ceo is paid more than 50 times the mediocre salary of a worker. Rising to 5 for companies who make more than 500 times more than the madi they have Larger Forces and lower paid employees, or those companies with operations in developing countries. Mcdonalds, for instance, would have had to pay an extra 110 million in taxes last year under the plan walmart would have had to pay 80 800 million more. Some of the other companies with larng p large pay gaps include chipotle, kohls and gap is one of the highest. This all made possible by a recent s. E. C. Rule that requires companies to disclose that pay gap. This is the problem. There are no set rules for how companies have to calculate that median pay already in the two years weve had it, weve seen big changes in what Companies Report the first year versus the second year, but regardless, this is, you know, given that ceo pay from the 1980s to now used to be 30 to one. Now its 300 to one. This could be popular with voters back to you. Robert, would pay include benefits at all . I mean, theres some argument that some Companies May not pay a huge salary, but they do offer, for instance, Health Benefits could which really add up. It does, and its very complicated. In excludes contractors, but it does include parttime workers, so you get into the situation where some have benefits and some dont weve seen last year they would sell off divisions that had a large number of lower paid workers or they could make some parttimers contractors and shift it that way. Theres a lot of give and take in how this number is fixed. Of course, not a lot focused on how to fix those ceo salaries which of course is Bernie Sanders focus. One of the reason you have so mean the rule that say pay over 1 million is going to be taxed at a higher level. They kind adjusted how they pay i guess youd have to be on alert for unintended consequences. The backdrop as you know well is stock price these companies the krooceos, is tied to the stock price. And so whatever you do in the median and the bottom, its not going to change the fact that most executives as they should are paid on their Stock Performance and stocks have done great, much better than of course wage growth. Robert, markets definitely paying more attention to some of these democratic proposals, early as it is. When we come back, u. S. Trade prospects, the new nafta and the impeachment inquiry. Were going to discuss it all with Senate Majority leader Mitch Mcconnell. Dow is up 76 good monday morning. Welcome back to squawk on the street. David and sara have the morning off. Dow is holding on to a nice gain to start this final day of the quarter as we get a price target increase on apple. Well talk more about that as the dow is up 89. Our road map starts with stocks closing out the Third Quarter. Well fill you in on the winners and losers and where the markets are headed to end the year. Plus Peter Navorro calling limits fake news and hong kong bracing for another day of protests. Well take you live to the scene on what to expect there. Fake news says white house trade adviser Peter Navorro speaking earlier on squawk box dismissing reports the white house is considering Delisting Chinese Companies. Goldman sachs dramatically increased the waiting in the msci index which effectively forces investors to increase their investments there, so these are the issues i think that the white house and capitol hill are looking at. And thats all im going to say about what happened internally other than to say that story was fake news. Joining us now, kirk hardman, global chief investment of wells fargo and the senior fellow and former head of imfs China Division good morning to you both if we could start with you put this in context. Obviously the administration walking halfway back on this idea they are considering these investment limits or delisting actions. What does that mean do you think for the way these negotiations might proceed . The context is important here about two weeks ago there seemed to be some progress on both sides in terms of finding a way to move forward in the negotiations and then about 10 days ago trump made a very harsh statement about the u. S. Not needing a deal and china being much more destined for a deal. Then more recently, of course, hes talked about getting chinese funds listed on stock exchanges to be forcibly delisted it makes it much harder to find a way forward, because the ch n chinese are more loath to macon sessions because they know it could be pulled back on the basis of a president ial win. The upshot there is that these talks that are beginning in october do not look like they have a high probability of making much progress no. Certainly this recent set of remarks are going to add a very hard edge tho the negotiations and its going to make the chinese much more sir cup expe might raise the bar or take a actions. It makes the path that much harder the Trump Administration has also sort of made the point that china is going to run out the clock in 2020 might backfire if, in fact, this administration stays in power trump has made that threat as well certainly it doesnt set a good basis for the negotiations to succeed. Kirk, how does this play into your Market Outlook . How much does the market need some kind of progress on trade or at least no further escalation and what does it mean for the fed and the economy itself well, i think there are a lot of issues. I think the market highs on the year will still be the highs at the end of the year. I think you dont change your investment outlook, but certainly any kind of restrictions on global listings or the u. S. Ability to invest in china, you know, is not good for the markets, so well have to see. I tend to think this is all posturing for the trade negotiations i think there will be some deal, especially protection of intellectual Property Rights and i think the big question here is whats going to happen to the dollar, because the dollar is driving a lot of this and interestingly the more you have trade tensions, the dollar just continues to be strong. So i think thats something to keep an eye on. Kirk, are you saying that investors should not be paying too close of attention to the daily headlines at least insofar as it changes their portfolio strategies i think you have to look through it i think its very difficult to trade this theres so much uncertainty. I think if youre betting, i would say there will be some kind of deal which will be positive, but i dont think its going to be any kind of global macro deal that settles all the issues and i think china is probably playing a waiting game and will wait to see what happens a year from now. The other issue i would say is china has a lot of pride here. Huawei and Companies Like that are a source of Great National pride, so theres a lot of issues here at stake so kirk, just to follow on your idea that the highs for the year are probably there, do you see significant down side risk what plays into this, that the market is going to be capped here i dont think the market can go down too much here. The u. S. Economy is strong on the other hand, i think its hard to argue that rates are going to go up excuse me, that the market is going to go up i think you have to worry about Interest Rates going up and you have to worry, you know, whats going to happen in terms of our multinationals with the strong dollar i think its going to be very hard for companies to continue to put up the Earnings Growth that theyve put up and that therefore i think the july highs are where we are going to end the year. Just finally, we did get some economic numbers out of china overnight that were a little bit better than expected how does the current path of the chinese economy play into all this the chinese economy is certainly slowing down, but its obvious that the Chinese Government is hardly in panic mode and there are some indicators that have come in somewhat more positive than expected there has been some fiscal and monetary stimulus, some tax cuts, a small Interest Rate that the government has put in place, but they have a lot of room to monitoring fiscal stimulus they seem to be quite confident they can ride this through and if the economy starts going down, they have a lot of room to boost up the economy with Macro Economic stimulus. You know, weve been awaiting the 70th anniversary of the modern government for a while. The arguments been out there that given the level of pride in china regarding that date that it makes xi less likely to want to appear to be giving in to anything is that overstated i think certainly the chinese are not willing to be pushed around anymore the anniversary plays into it in some significant ways, but the overall issue is that china does not feel that its going to macon sessions and that it has to make concessions in order to keep the economy going it hurts the economy if the trade war continues, but theyre not going to bend over and make all the concessions the u. S. Seems to want from the chinese side. It seems not. Well leave it there thank you very much for your time thank you the fed coming off a big test in its efforts to calm the short term funding market, don chu joins us with the repo operations. The biggest banked tapped the new York Federal Reserve for 63 billion. The fed would have allowed up to 10 100 100 billion of those loans so it was securing overnight cash and underprescribed. One of the positive interpretations is that there isnt as much of a pressing need to access fed cash as there has been in recent weeks meaning ultra short term Interest Rates have now stabilized. It was a closely watched money market operation this morning given that surge as you can see there in overnight borrowing rates that occurred earlier in the month. Some had said that the surge in rates could signal the early stages of a possible credit event that could lead to a Broader Market downturn. The Federal Reserve itself then stepped in to supply cash to the system through overnight and two week purchase agreements or repo agreements to make sure that the Financial System was adequately supplied with cash the bottom line here, folks, is that it worked there is a consensus, though, building up that one of the reasons for the spike in those rates had to do with the unintended consequences of the feds efforts to boost cash in the system in the wake of the financial crisis a decade ago. You mix that with new Bank Regulatory requirements on capital. You mix that with seasonal demands for cash by big bank clients and you get what we saw. The banktobank lending market plays a Mission Critical role in the way our Financial Markets operate, but up until now its only really been talked about by those in the cash and collateral trading businesses and money market circles it is now fair to say that much of wall street is now paying a lot of attention to those money markets as a possible indicator for any kind of systemic stress. Those rates for key. For right now they are stable. Well send things back over to you. Dom, given that today is the last day of the quarter, is there a sense out there that this has been taken care of . There was a lot of anxiety that quarter end would be a bit of a flareup moment for this market. Thats exactly right, mike. So there was this kind of overnight operation put into place today, but remember also throughout the course of the past couple of weeks, we have seen a string of these overnight operations and then we even saw a two week operation happen over the course of the last week or so so the idea there was that between these multiple overnight oneday operations and one where you had longer terms that would carry you into october that you could see some of those funding stresses alleviated. We have seen that. One of the trends that we will point to is that over the course of the last week and a half, guys, we have seen the use of these fed credit lines for these repurchase agreements used less and less undersubscribed so to speak, so it may indicate that the banktobank lending market is taking over where the fed would have been, so thats probably a good sign for some out there, guy. Yeah. Well see what happens after the 10th of october. Dom, thank you when we come back, the vaping backlash, the latest regulatory pressures and where the industry goes from here. Later on were going to hear from kyle bass on those potential China Investment limits dow is up 86 points on this monday more squawk on the street in a moment ah come on lets hide in the attic. No. In the basement. Why cant we just get in the running car . Are you crazy . Lets hide behind the chainsaws. Smart. Yeah. Ok. If youre in a horror movie, you make poor decisions. Its what you do. This was a good idea. Shhhh. Im being quiet. Youre breathing on me if you want to save fifteen percent or more on car insurance, you switch to geico. Its what you do. Lets go to the cemetery the cdc continues to investigate vapingrelated lung injury cases there are 805 cases currently open with at least 13 reported deaths matt hawkins and jeffrey jbennet join us. I have to say very few of these headlines are positive when you look at a company like juul. Is there a possibility that all juul products could be remove and what is the risk to a company like altria who had as 35 stake . The issue at the moment in the u. S. A s a lais a lack of ro in nicotine. If you look in the uc where they have implemented regulations in 2016, youre not seeing the issues youre seeing in the u. S. One of the big issues obviously, juul teenage usage and given what theyre bringing into action now, it doesnt impair a real risk to juul flavors removed from the market but all their products, given the requirements and the intended consequences, that being teenage usage. How will that play into altria thats a big negative given their stake. Basically they stopped selling their antivapor portfolio but other names across the space it will be a positive one of the things weighing on that it will come down in regulation and supports that a lot of these products on the market like juul, these are flavored products like these things from the fda dont know whats on the market, theyll have to come off the market. Matt, what are your thoughts on regulation . Cresco Just Launched the largest cannabis pe fund is that the answer here . More regulation . Absolutely. Theres no doubt that if the United States would get more involved on the regulatory side of this, then the illicit market would be tamped down not only on the regulatory side right now there is a huge difference to where the illicit market can thrive because of taxation in the states is too high i think with a federal regulatory climate that includes some, you know, altering of the Taxation Program in some of these legalized states we will get rid of the illegal market which is where all the on the cannabis side where all this trouble is occurring and the legalized vaping products on the cannabis side, these are close looped systems that use a cutting agent, not the awful things that such soe you all mentioned dank, this illicit problem thats been on the street. Is altrias playbook to introduce it in the states and do regulation the right way and can it coexist with a juul product as well . Well, theres two elements to that i think in the long run its probably better for altria it proves successful given they have more of the economics around it. We dont know what the license fee or its likely to be more than 35 of juul. Secondly, i guess linked to that low is a big question mark, will heated tobacco work in the u. S over markets globally where its gone against an established producer market such as vapor heated tobacco hasnt had much traction the other thing you need to consider in the u. S. Is the nicotine stretch the nicotine cigarettes in the u. S. Is 1. 1 milligrams what you get off heated tobacco is generally not that impressive so it does well in a market like japan. Maybe theyll do well in europe. But will it satisfy a u. S. Tobacco consumer given the differences in nicotine here matt, obviously theres been a lot of criticism about some of these illnesses potentially being related to thc that was perhaps bought illegally, so if you are a Cannabis Company and youre operating within the legal ramifications, what should you be doing what message should you be getting out to the market . Exactly what i just said. Pushing for further regulatory efforts by the federal government, pushing the fact that your products are safe, and that really is the message theres a clear difference between the cannabis problem and the nicotine problem i think youre going to start seeing a lot of different delivery mechanisms and foreign factors come into play on the cannabis side. Who knows, there could be a product on the cannabis side, too, thats the heat not burned aspect again, that gives us something to be excited about on the industry side of the cannabis industry, because there are a lot of different ways you can deliver the product as opposed to the unfortunate side of the nicotine where it seems to be just theres one round and one round only finally on ecigarettes we saw the walmart category go away do you expect a Convenient Store chain to follow suit and would that be more detrimental to juuls distribution . I mean, potentially you could see more stores do this until the fda have got all these products off the market and then theyll probably allow them back on if that does happen, then yes, it would impact juul arguably less so than some of the others because theyve pulled their flavors from Convenient Stores ahead of time. They wanted to get in the fdas favor. Thank you very much for being with us today to talk about this topic that we will continue to discuss. Thank you still to come this morning, dont miss an interview with Mitch Mcconnell as he pushes the house to pass the usmca. More squawk on the street when we return. The gm strike is heading into the third week with losses mounting and now suppliers feeling the pain phil lebeau joins us with the latest. Carl, day 15, the negotiators or the uaw and General Motors back at the table this morning though we get no indication theyre expected to announce a deal anytime soon. As this strike enters the third week, rbc capital is out with a note saying when you look at the Financial Impact for General Motors, it is the estimate of rbc capital that its now 75 to 100 per day at the beginning they said we think its going to be about 50 million a day. In the note the analyst writes we are getting to the point where it will be difficult to recover the lost production this year and a big concern is with supplierings were talking about american axle, tentacle look at these stocks since the strike began theyre all down anywhere between 10 and 15 . As for General Motors, if you take a look at that stock, it heal raent be really hasnt been a whole lot of reaction. The dealers are going to be okay for a couple more weeks. If you go two or three weeks more and the strike has not been resolved, then you might start to see shares of General Motors really feel some pressure. We have seen some stories sighing the big issues are at the main table, so to speak suggesting that they could put this to bed relatively soon. Do you tbbelieve it no. Yeah, theyre at the main table, but if you talk to people familiar with the negotiations, you get no sense theyre close to a deal. It wasnt eminent last week or over the weekend could they reach an agreement over the next couple of days sure, thats possible. But the big issue here, job guarantees which is what the uaw wants versus temporary workers gm thinks the temporary workers are crucial when they ramp up production and need to higher more people and bring down production which is always a possibility in this market thats at the heart of the issues between General Motors and the union. Thank you, phil it looks like we could have a ways to go before this is resolved gm shares down about a percent. Taking a look at retail with the xrt moving higher and about to wrap up a strong september. Up more than 6 . Target is among the groups top holdings, surging by more than 23 . Higher by about a percent today. On the opposite end you have forever 21 filing for bankruptcy this could be a big one. They have more than 800 stores theyre looking to close 1 sfra 178 in the u. S it makes it the sixth largest tent ant outside of the Department Stores and about 1. 4 of brookfield gdp base minimum rent we dont talk about it much but it has had an impact on the world of fashion it drove prices lower in a lot of cases you can buy tops for as little as 5 and 7 its been a very interesting play in the world of fast fashion and really beyond, but more customers have gotten interested in sort of sustainable fashion and somewhat less interested in buying these very disposable clothing which im not saying that as a negative, but thats often sort of how its viewed very different than what were seeing from some of the other staple names dollar tree, nike at all time highs. Of course, not all is well with retail youve got to play the right game at the right time. This is not a socalled bright equity blowup. No. This is privately held this is a bankruptcy filing, but they are looking to reorganize, so this doesnt necessarily mean its going out of business we have to clarify that. Its not a for sure liquidation but that could be a possibility if they cant get this reorganized. A reducible print, but they say theyre not going to exit any markets. It is a pretty significant for simon and brookfield gdp which are among the two biggest. Lets now send it over to sue herera. Good morning, mike. Good morning, everyone heres whats happening at this hour Officials Say somalias islamic extremist rebels launched two attacks on u. S. And European Military targets the somali army says it repelled an attempt to storm a military airstrip which hosts somali and u. S. Forces. The Second Attack was by a suicide car bomber targeting italian peace keepers. Luckily no casualties reported dozens of students rallied in hong kongs charter garden central to spread the message five demands, not one less thats their slogan. Those demands include the resignation of chief executive carrie lam chinese president xi xi made his remarks at a celebration of the peoples republic 70th anniversary. Here at home snow hammering parts of northwest montana over the weekend bringing high winds that closed roads, downed trees, and caused scattered power outages. Up to 2 feet of snow fell in the mountains. Other western states were also hit by that storm. You are up to date that is the news update this hour but i think it was a snow day for a lot of kids. Carl thats hard to believe, sue. Thats the upside i guess. When we come back, kyle bass on all things china. When squawk on the street conditions dow is up 67 at Southern New Hampshire university, we believe in education built for all people. [woman] snhu was the best experience of my life. [man] without snhu, i wouldnt be the leader i am today. [woman] i graduated high school 19 years ago. I still finished. [man] in the military, you feel that sense of accomplishment. Thats what snhu is. You will march from this arena and say to the world. I did it. [woman] you did it. I love you. [graduate] i love you too. Our eyes are on hong kong once again bracing for more protests with Chinas National Day just hours away. She sh sheri kang is on the ground in hong kong with the latest. We saw 17 straight weekends of protests and certainly a further escalation of aggression on both hong kong protesters calling for more democracy for hong kong and the police here in the city of course, thats certainly an ominous setup for Chinas National Day 70th anniversary. Certainly a special occasion for the prc and chinese president xi jinping as well. We saw that preview of what we can expect tomorrow marking that occasion a lot of protesters marching despite a police ban and also episodes of vandalism at mtr stations some testers setting the entrance of subway stations on fire and vandalizing some restaurants that shop and Police Officers responding with tear gas and Water Cannons as well. So thats escalation really the question is, how much of that escalation are we going to see tomorrow marking that occasion behind me youre looking at the square where hong kong is one of the territories of of china is supposed to observe that occasion, celebrate that occasion tomorrow, but some elements of that celebration have been scaled down. For example, fire works have been canceled and we are expecting hong kong protesters to, quote, mourn the celebration, mourn the anniversary rather than to celebrate. In the meantime, Hong Kong Police are sending out some ominous messages as well, sending Text Messages as well to hong kong public, to basically brace themselves for severe disruptions and calling the activities that we saw from hong kong protesters over the weekend something thats getting very close to, quote, terrorism carl, back to you. Thank you for that. For more on hong kong, on china and these reports of the u. S. Potentially weighing Delisting Chinese Companies from u. S. Markets, were joined by chief Investment Officer kyle bass welcome back its good to see you again. Good to see you too, carl. Quite a bit of news we got out of bloomberg on friday the treasury spokesperson pushed back on that how far do you think this went or is going despite the pushback carl, i think its really important for the American Public to know that Chinese Companies, when they list in the u. S. , china signed a special mou with the u. S. In 2013 that basically exempts Chinese Companies from having to submit themselves to covered audit or be doddfrank compliant. All of the money that goes into Chinese Companies goes into companies that dont operate under a rule of law and dont submit themselves to audit imagine what kind of fraud is behind some of these companies so they dont deserve to be here essentially, right . And is this being done do you think to protect american investors or to put some pain on to china well, forget about what its being done to do except for the fact that what were saying is maybe, just maybe, china should have to adhere to u. S. Law if they want to raise money in the u. S. Were not saying that money cant go to china. Were not saying that Chinese Companies cant list were simply saying you have to submit yourself to u. S. Covered Audit Standards and be doddfrank compliant if you want u. S. Investors to invest then think about this also all the money thats going through the msci indices into china for all the fiduciaries that invest military and government pensions into chinese equities, maybe the u. S. Money should also adhere to the same standards. They shouldnt invest in companies that dont comply with u. S. Securities laws i know that sounds crazy, carl, but i actually think thats where we should be today kyle, you know, the Chinese Companies have been placed inside the predominant indexes you have all these Pension Funds on auto pilot. It seems like theres multiple stages to any process of unwinding this in fact, if they havent to this point decided that these companies should be compliant by your standards, whats now the impetus to do that well, lets see in the u. S. There are 188 Chinese Listed Companies that have a collective market cap of 2 trillion. By 2021 if msci implements everything they say theyre going to implement, u. S. Investors will have over a trillion dollars invested in companies that dont have a rule of law and they dont submit themselves to u. S. Audits. What im saying is this is not an unwind. All were saying is lets raise Chinese Company standards up to ours just so that u. S. Investors are protected in the long run. This has nothing to do with imposing pain on anyone. Its looking back to 2013 and saying what we did as a country is really stupid and what weve got to do to protect investors from investing in a region that has no rule of law, no accounting standards, we should force them to adhere to what u. S. Companies have to adhere to already. Kyle, in the meantime, are you still short these u. S. Or these Chinese Companies that are traded here in the United States so your fund could be benefiting from the fact that trump is moving in this direction so nice try ive never been short a Chinese Company in the United States i have no chinese positions in china or in the United States. What im working on is protecting u. S. National security and our investors money. Kyle, i assume this would go for any other country other than china thats in the same position, right . Right so when you look at the mou, there are a few countries other than hong kong and china does it matter albainian equities doesnt meet u. S. Standards . None of our money goes into those. Weve got a trillion dollars of capital moving into china between now and 2021 based upon indexation and passive flows and weve already got 2. 2 trillion of listed entities where they dont adhere to u. S. Law this is insane and i bet american investors dont know it. Heres another fun fact. When chinese investors invest in the United States and lets say the Chinese Government gives 5 billion to bridgewater, chinese investors investing in the u. S. Pay no tax all of these things have got to start changing when were talking about amending our tax laws, we should start thinking about making Foreign Investors pay the tax to the United States that u. S. Investors pay in the u. S. Marco rubio has been writing about this for a year or more. Are you saying this was leaked to bloomberg two weeks before the chinese officials appear here by coincidence . I have no idea what was leaked to bloomberg, but if you go back and look at the at rubios equitiable act, when he lunched it several weeks ago, if you just read the text, when it says is it con testimony platte delisting. Forget about delisting we should deregister Chinese Companies have borrowed a trillion dollars that enables them if they have registered securities, they can sell bonds to investors abroad in dollars without registering and filing Financial Statements and submitting themselves to audits. These things that are going on behind the scenes are crazy and marco rubio is trying to fix it. Its not just marco. Its a bipartisan effort to protect the National Security of the u. S. And to protect u. S. Investors. Marco rubio is on the tip of the sphere ive never mit him, but i think what hes doing is amazing theyre looking after u. S. Investors because it seems like no one else is. Kyle, we had you with us on august 20 and you said at the time regarding broader u. S. Trade, i think trumps political calculus is to keep talking. If he does a deal too easy hell be attacked from the right if he does a deal too difficult, they wont sign it hell get attacked from the right and the left if he actually does a deal with china. You still feel the same way . I do. As you and i both. Its difficult to handicap president trump. He wakes up every day and tries to make the best decisions he can that day as per his book whether his national skusecurit apparatus or military, theyre allteling him the same thing how to engage or not engage with a country that wont sign a deal or live up to a deal thats measurable and enforceable, but you never know which side of the pillow trump is going to wake up on and my fear is i hope he doesnt do a deal that jeopardizes the long term National Security of our country because he wants the stock market to go up. Other than that, i think his entire team is now working with the whole of government approach to understanding the threat and the problem that china poses to us by the way, the only people that seem to not think china is a threat is wall street. Youve got everyone in the intelligence apparatus, again in the Security Apparatus and the military that if you look at the Defense Intelligence authorization act of 2019 they call four countries hard target adversaries and china is one of the four and yet wall street cant wait to invest another dollar in chinese equities we cant wait to earn more fees there when its threatening the entire National Security. You should be talking to Media Companies that have been facing pi facing piracy for generations. Its unbelievable. The other side of that, and it wasnt too long ago we were saying lets try to give u. S. Investors the ability to access the second largest economy in the world from an investment perspective and what were hearing now and based on what youre saying, what the president effectively said in his speech at the uchl u. N. , should that be the premise that investors have this is a process under way . You know, were going to have to go to human rights real quick. We are currently engaged with a regime, i dont know if you read the uk tribunals results of live organ harvesting, but the same qc that presided over the war crimes trial held a tribunal in the suruk and interviewed hundreds of witnesses to people that were part of the process of literally paralyzing chinese prisoners of conscience and ripping their organs out while theyre alive and dying the most horrific deaths. How do we engage with a regime thats got millions of people in prison because of their religious preference where its like a buffet line for organs and yet we cant wait to invest in this country. So youre saying should we decouple my first answer is i dont know why were engaged with them in the first place. Second of all, im not suggesting that we should just walk away tomorrow what im saying is china should actually adhere to u. S. Legal standards if they want to invest in our markets its plain and simple. Its not im not saying runaway and deglobalize. What im saying is at the very least they should live up to our law. There is of course Chinese Investment in the United States low it has fallen to 5. 4 billion last year do you think that china should not be allowed toin ve invest ir market whether its real estate or otherwise no. I think china should adhere to u. S. Laws. Thats all im saying. We should raise the standard of the Chinese Companies in the u. S. Now, if you ask if i think china should invest in Sensitive Industries like ai, ar, vr, anything thats part of the Civil Military fusion for china 2025, no, i dont think we should i think we should have its blocking deals, like the chinese tried to invest in tinder. You know why they wanted to buy tinder they wanted to be able to cross reference the hack that they did on the opm in d. C. Where they have all our Government Employees data and then find out which Government Employees might be closest gay so that they can then influence them or bribe them or cajole them or threaten them all of these things china is doing are very, very bad for u. S. National security what im suggesting is we should raise our awareness and it seems like we are raising our awareness. But again, wall street cant wait to invest more money in china because all we see is profit at the end of the line. I mean, you do realize the president tweets repeatedly about this ongoing negotiation and what he largely tweets about is whether or not theyre going to be ordering more cargos of soil any president of the United States to get the chinese to buy food from the United States, the first place the chinese went when we engaged in a tariff battle is they imposed tariffs on 95 of u. S. Agriculture they went to the heart of the farm belt because the chinese know those voters matter to any u. S. President but if all were going to do is get them to buy some soybeans and let them continue to rape and pillage us, then that will be the dumbest deal trumps ever done in his life and i know hes done some humdingers. Kyle, good discussion an issue were going to keep our eyes on. Well see you soon. Take care as we go to break, take a look at the biggest dow gainers for the quarter. P g up 14 leading the way apple and nike as well nike hitting all time highs today. Rwkn e re enstetwh weeturn. As a principal i can tell you this. When one student gets left behind, we all get left behind. This is a problem that affects each and every one of us. Together with ibm, we created a whole new kind of School Called ptech. Within six years, students can graduate with a high school diploma, a college degree, and a pathway to a competitive job. You know whats going up today . My poster. Today, there are more than a hundred thousand ptech students around the world. Its a game changer. Car vending machines and buying a car 100 online. Vented now weve created a brand new way for you to sell your car. Whether its a year old or a few years old, we want to buy your car. So go to carvana and enter your license plate, answer a few questions, and our technowizardry calculates your cars value and gives you a real offer in seconds. When youre ready, well come to you, pay you on the spot, and pick up your car. Thats it. So ditch the old way of selling your car, and say hello to the new way at carvana. Trade headlines causing market waves again this development would be an unmitigated disaster if it comes to pass. Find out more on trading nations on cnbc. Com. More squawk on the street is coming up. Its how we care for our patients like job. His team at ctca treated his cancer and side effects. So job can stay strong for his family. Cancer Treatment Centers of america. Appointments available now. Getting breaking news on wework. Carl, wework is now officially pulling its ipo they said it for the record. The embattled office space sharing company saying in a statement from the coceos, weve decided to postpone our ipo to focus on our core business we are as committed as ever to serving our members, enterprise customers, landlord partners, employees and shareholders we have every intention to operate wework as a Public Company and look forward to revisiting the public equity markets in the future. Again, guys f there was any doubt that wework was going to have some ipo issues, they have now put that to rest saying all those issues have led to them postpones the ipos thats an official statement more thats an official statement from wework. Back to you. Thank you very much, dom, for the update. Lets get to the cme group in chicago with Rick Santelli and the santelli exchange. Hi there, rick. I want to welcome my guest, alex rover, head of Interest Rate strategy at jpmorgan chase. Lets get right into it. The wall street journal had an article today talking about why were they surprised in terms o repo need in funding markets, new york fed president was kind of blindsided . What are your thoughts. I dont think they were blindsided the way the wall street journal described them there was an event on the 16th thats not uncommon, the scale of it was uncommon in essence basically you had treasury settlements, cash withdrawn from mutual funds, big supplier of cash to repo market, there were dealers and other parties on the other side counting on the cash showing up that werent able to get it immediately. If we go back to the 16th, you had taxes due, and 78 billion in supply of treasuries that had a settlement on the 16th thats right. Today is the last day of the quarter, we have 113 billion of settlement from auctions last week zoour do you think a permanent facility is in order the bonding market has grown in terms of needs. What we found after the 16th is that the market was sensitive about the idea of not being enough cash to go around to dealers and keep the financing and funding machine of the markets running. So i think even if we dont see these over Market Operations used, or even if they fall into disuse, i think they stick around whether or not they get into putting together a permanent standing facility is a question remains to be seen there are a lot of questions how it should be structured. One particular facility would almost fulfill the requirement and both think it is coming, thats general quantitative easing it is not like repos with certain short term life. But in the end, coming in, buying securities. I think the shock to the repo market, people think about whether or not there are bankers there in the system. Why the banks come into the market, lend to the market directly, in reality they have regulatory constraints that keep them from doing that but i think it did start the perception, heard from some fed officials already that maybe were close to being scarce and maybe want to move up the regulations. In the end, the funding issue is a direct result of some regulations in doddfrank, is it not . It is liquidity coverage ratio, global systemic bank surcharge. Alex, theyre giving me the shuffle. We could talk quite awhile thank you for talking to me about plumbing rick, back to you. Thanks very much. Jon fortt has whats coming up on squawk alley. Mitch mcconnell joins us on the heels of an oped he wrote, pushing democrats to go ahead and clear the reboot to nafta, usmca. Talk to hiabm out that trade, impeachment, a lot coming up squawk alley. Welcome back to squawk on the street. I am dominic chu stocks are mostly higher on the final day of september, led by health care and Consumer Staples from a sector standpoint, but one of the key underperforming sectors is energy. Even as it looks for the first positive month since june, dragged lower by names like occidental and devin energy. New data put into continued weakness in the chinese economy, and muted supply concerns that saudi arabia was returning to full export operations after bombings from the last few weeks. Keep an eye on oil prices. Back to you. Thanks very much. When we come back, a cnbc exclusive with Senate Majority leader Mitch Mcconnell squawk alley starts in a few minutes. Dont go away. Make fitness routine with pure protein. High protein. Low sugar. Tastes great high protein. Low sugar. So good high protein. Low sugar. Mmmm, birthday cake pure protein. Find our coupons in sundays paper. Pure protein. Tell him were flexible. Dont worry. My dutch is ok. 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