Transcripts For CNBC Squawk 20240703

Chinas Foreign Ministry addressing the recent headlines about restricting foreign branded mobile devices. In a regular briefing she said, quote, we notice thereve been many media reports about concerns over the apple phones. She said they have not issues laws and regulations to ban the purchase of apple or foreign branded phones, but purchases are what people are focusing on. They have restricted the use of iphones in government offices and plan to expand restrictions to state owned companies. That comes a day after apple unveiled its latest iphone models. Were going to have a lot more on that in a couple of minutes. The difference between use and purchase is a big difference. If you cant use it. Yeah. I think this is why they call it news. New overnight the European Commission has launched an investigation into subsidies given to electric vehicle makers in china, right . Thats sort of what we do. The president of the ecb announced it at her annual address at the universal parliament. Meantime european auto stocks as you can see benefiting, in the green, to some extent. Renault up quite a bit. I did watch the some of the carlos ghosn thing. Do you remember it at the time . No. I didnt know nissan was in such horrible shape really. Did you get to the third episode . No. When hes in the box . Not in the box yet. Thats when it gets exciting. I didnt know he went from an average dude to a dashing figure in terms of his wardrobe. Success can do it to you. He did some weird stuff. Versailles, really . Ran in versailles to have the conquering hero . It was bold. A little bold. Trading in his wife. A lot went on, right . Very weird. I recommend it. The reason i watched it was because you recommended it. Well, thank you. Im surprised. Usually when i recommend something, you do the opposite. No, but youre obsessed with business. For me its sort of a side thing. Youre obsessed with business. I like did you see unbelievable . Its unbelievable. What is unbelievable . . Its on netflix. Its a crime thing. Its difficult to report certain crimes because the cops and everybody else, they judge you. So you might as well this poor woman finally said eff it, imnot going to do it, and this horrible crime continues. Watch it. Thats a good tease. Lets talk about Business News thats front and center this morning. The uaw plans to implement targeted strikes at certain plants if contracts arent reached with general motors, ford, and stellantis. Thats according to uaw officials. They say the plans could change depending on negotiations. Targeted strikes means work would stop only at certain plants as compared to a National Strike where workers exit everywhere. There will be an outline today at 5 00 p. M. Eastern time. Before that, shawn fain will be joining us. That interview will be coming up at 8 15 this morning. Theres been talk if they were to shut down all at the same time, it would be more than 5 billion and a hit to the gdp in the course of just ten days. Its pretty amazing. I cant believe theyre doing this to me so early in the morning. Do you want me to talk about it . Is it explain the story. Flonase does work. Okay. This is a wild story. I was shocked by this. Are you surprised it doesnt work . This is like explain to everybody else who doesnt know. Follow along. I didnt read . No. Read this first. Oh. People have no idea. What were talking about. Im going to try to read it. Mucinex ive got to say a lot of things. A key ingredient in many over the countercold and allergy medication does not work to get rid of nasal congestionlet thats according to an Fda Advisory Panel which in a unanimous vote said oral versions of it say benadryl, mucinex, even nyquil, studies say it was no more effective than a placebo. They peer going to look at whether to revoke the drugs or possibly even remove the product from the market. Were watching shares of the companies that make the medication. It fell below the 22 price yesterday after the fda announcement that could affect several of its brands which include sued fed, benadryl, i guess and tylenol. Its not the only ingredient. I cant believe this though. Why . Because youve been taking it for a while . Do you have flonase . Do you have the green its like 40 bucks. Very expensive. I know exactly what youre talking about. But it does work. Ive had claritin stops working sometimes and theres a couple other ones, but they eventually stop working. Thats because the pe, that stuff, the fda says it doesnt work because your body uses it up when you take it orally it uses it up before it makes its way to the nasal passages. If you shoot it in, it might very well work. I looked at thunderstorm allergies. Im like why am i its a real thing. Really . Yep. The dust kicks up ahead of it . Because the poll enkicks it up. Are they going to take it off the shelves . Its not harmful. The Drug Companies have been pushing back that it does work. This sounds scientific. If you take mucinexd, that use as different chemical in it. By the way different active ingredient. Different active ingredient whechbl you walk into a vvs or walgreen, the ones that are available that are usually not in the plastic boxes that you dont have to go talk to somebody else, this is not the overthecounter stuff. Its all over the counter, but now theres over the counter behind the counter, the behind the counter stuff, that works. Thats the one you have to show your driver ooh lice sense to prove youre not making meth. To get this stuff thats to unlock it so it doesnt get stolen. This is the stuff where you have to show your lie sense. They keep track of it so youre not buying too much because if you buy too much, you can make meth. Thats what you want if you have a cold in this environmental. Ive been in walgreens a couple of times recently. Do you remember the graduate . Mr. Gladstone . Mr. Gladstone . But its, hey, mr. Kernen. Im buying stuff but not crazy things. Fibercon and things for my hair which brings on other things you need to take because it causes certain things. Coming up, coming up, coming up hey, mr. Kernen, how are you doing . Havent seen you since this morning well get you ready for todays inflation data. Its barry knapp. Knapp. Then legendary investor ron baron joins us on set. We get reaction to walter isaacson. He made rounds about elon musk. You couldnt turn on the tv. Youre watching squawk box on cnbc. Announcer this cbc program is sponsored by ibm. Ibm, lets create introducing watsonx a platform designed to multiply output by training ai with your data. When you watsonx your business, you can build ai to help coders code faster, Customer Service respond quicker, and employees handle repetitive tasks in less time. Lets create ai that transforms business with watsonx. Ibm. Lets create. Every business thats why comcast business de is launching theal. Mobile made free event. With our business internet, new and existing customers can get one year of unlimited mobile for free. Its our best internet. Powered by the next generation 10g network and with 99. 9 reliability. Plus one line of free mobile for an entire year. Its the mobile made free eventhappening now. Get started for just 49. 99 a month. Plus, ask how to get one free line of unlimited mobile. Comcast business, powering possibilities. Inflation data, this is something you should be looking out for at 8 30 a. M. Eastern. Economists expect the cpi to rise by more than 3. 6 . To have risen by 3. 6 . That would be an increase from the 3. 2 increase in july. On a month over month basis its expected to rise. Our next guest says that Higher Energy costs will not trigger stricter monetary policy. Here with his take, barry knapp, director of research at ironside macroeconomics. You go into a lot of derivative stuff, what it means for exports, imports, and currency effects that will minimize the inflationary impact and maybe allow the fed to have stopped for good, which is what you say in your view. And then you see other disinflationary things like shelter and the labor market is peaking at this point. Correct. No more hikes is the bottom line. No more hikes. I think theres a good chance if we get a 0. 2 on core, the fed will drop the last rate hike dot in the dot plot in next weeks meeting. Its clear that a number of participants dont want to hike any further, goolsbee and others. Whats interesting about this whole Energy Dynamic is what made us first start running a current account deficit that pushed off off the Gold Standard in 71 was running big energy trade deficits. We first started consuming more than we produced in the late 60s. If you think about the subsequent five decades, the decades were oil prices were high, energy deficits went up a lot, those were weak dollar decades. Those were true in the 70s after we went off the Gold Standard. It with us true in the 2000s when Oil Prices Went to 150 a barrel. But in the periods where our production or supplies went up globally like the 80s, 90s, and 2010s, the dollar was strong. Thats because, again, it drove those big current account deficits. That all changed with shale. Now were back. Now that were an actual exporter of energy, the dollar goes up. This is a huge problem for china. Its a huge problem for japan, korea, germany because they used to get something of a buffer if the dollar went down because the oil is priced in dollars, it wasnt as painful as it is now. So now it goes up. So theres two big causes or events that happen as a consequence of that. One is because we still import a lot of goods, the fact ta the dollars gone up cheapens the goods and theres a big offset. Its bigger than our energy surplus. The second thing is because it puts all this pressure on the chinese r b, the yen, it makes them better sellers of treasuries, which makes our rate goes up. There are two tightening effects that happens when Energy Prices go up. The bottom line is for this morning the only element thats going to be going up with foorksd energy, nonhousing services, socalled super core shelter or core goods is energy. So its totally not a reason to worry about the fed tightening any further. It actually if anything will get them to go the other way. Did the last couple of hikes surprise you . I think its been a major mistake. Ive been describing it as an unstable equilibrium. You have the household sector thats turned out their mortgage debt. The effective rate is like 3. 25. The low end is starting to struggle. The large nonfinancial corporate sector has turned out their investment credit debt in good shape. The Banking System and Small Businesses are really struggling with the deeply inverted yield curve. The curves only been this deeply inverted three times, 70, 79, and 80. The market fed expects to cut 100 basis points next year. I think theyll have to. There are industries and tennis coaches who are struggling with these higher interest rates. Brad gilberting about it. We had to raise rates to bring down inflation, and were still not sure we have that completely under control. I dont think the fed looks at it the same way, or at least remembers it. I think that theres been a real everybody laugs of thought. For example, in Jerome Powells jackson hole speech he dropped the language about financials being strong and resilient and talking about credit and nonbank credit tightening and i think thats a big element of why theyre softening their stance. If you look, lending is down 2. 5 year on year. The trough in bank Credit Availability and Global Financial crisis is only 4. 5 . You is these new Capital Requirements youre going to have for banks that jamie dimon went on a rant about. Right. We did that in the 50s and 2010s, and in both cases we had very uneven growth, very weak Capital Investment because we didnt have that supply of credit from the Banking System. Do you think the fed is thing about cuts rates because thats not the impression i get. In some ways theyll need to. Let me rephrase that. Now, theres a huge dispersion of what they expect to do. Theyre playing music. All this makes you think the s p goes to 4800 by the end of the year . I do. Thats another 10 . Correct. This make yos u bullish. Correct. Okay, knapp. So you really think about these things deeply, i see. Is it like its got nothing to do on that list as youre going up and youre alone probably. Yeah. Announcer this cnbc program is sponsored by baird. Visit bairdifference. Com. Good night hey corporate types. Would you stop calling each other rock stars . Youre a rock star. You are a rock star. No more calling coworkers rock stars. Look, its great that you use workday to transform your business. But it still doesnt make you a rock star. So unless you work with an actual rock star. Hi, im ozwald. Hello ozwald. Pam, you are a rock i wasnt going to say it. Welcome back to squawk box. It announced the 15 iphones as well as apple watches and update airpod. Steve kovach joins us this morning from San Francisco with a breakdown of everything that he saw. Whats on tap . Yeah. Lets start with whats going on with the iphone 15, andrew. Now, the iphone 15 adopting many of the features from last years pro models. That means a screen with that whole punch cutout and the same processor from last year. The iphone 15 is going to start at 799 for the model with the smaller screen. The plus model with the larger screen, thats gung to be 8 99. Same price as last year. As for the iphone 15 pro, the casing is replaced with steel and has the newest and fastest chip. The camera can zoom up to five times and doubles the memory. It comes at a cost. The 15 pro max will be 100 more than last year. All these phones have a new port for charging thats called usbc and its the same standard plug used on Android Phone and other devices. Everything goes on sale on september 2nd along with the new apple watch and apple watch ultrathat got minor update this year. Well have to see if the new lineup is enough to return apple to the new topline growth after three starter quarters of declines. Steve, stick around. We want to get more on this. Are you excited about this stuff . Not excited about this stuff . Whats your take . Its hard to get excited for number 15, but, you know, we can get there. We can get there. Im excited about the new port. I really am excited about usbc given that weve seen ipads and gants go to it. I no longer have to carry around the lightning cord and usbc as well. Joanna, i can see it cut both ways, the uscb issue. One, i can see the wealthiest folks among us could say, i dont need a new phone, but im going to get a new phone so i dont have to hassle with the old plugs, the new plugs. I want to deal with one plug. I can see other families say, you know what . This is crazy. We have a mill upof these old lightning cords for our phones an were going to hold off year or two. Not only will we have to do this but suffer with the mixed situation through our house and in our car and this and that. So i cant tell which way that cuts meaning does it actually drive new sales because people say i want to get rid of the clutter and go down to one plug or others that say ill wait it out. Look. I think a lot of people already have this plug in their homes. My baby monitor uses it, my teeth whitening gadget uses this. Hots of gadgets have started using this over the last four to five years, so they probably already have this new plug. Im saying would you spend an additional 1,000 to plug into that network if you will . I dont think its a reason necessarily to upgrade. Youre not going to run out and go get this phone for the plug. As you say, yes, lots of people have this. This is my lightning connection. Youre still going to use the plulgs because youve got phones with this and kids who have things. Its going to be a good thing overall even on the lower end phones want to get that 700, 800 price point coming in, theyre going to be in this network of usbc plugs and no need to worry about carrying around the other ones. Steve, whats your take on the watch and the airpods . Really minor updates to the watches here. Thats been the story for the last few years. Were on the series 9 of the apple watch, and youd be hardpressed to find a difference at first glance from the series 9 and sears 1. It looks the same year over year. What apples been talking about is the internals of this new series 9 and how this processor can do a lot more Machine Learning and things like that on the device. This time now, for example, if you try to talk to siri on your watch, instead of going to the internet and kwiring siri, it can do it on your device like iphone. Its finally powerful enough to do that. Its a flexibility to mang really good processors using their own designs more than saying this watch is significantly better than next year. It sounds like theres early reports. Neck year will be the big year for the watch on the 10year anniversary, andrew. You didnt tell me about the airpods. I think they might be the single most magicalthing. Its basically the case. You can charge it with the usbc plug. Otherwise its the same. Joanna, you probably get a new phone each year, but what do you think the fair upgrade cycle should be . I think that should be the investors issue around the economics of apple. Every year we talk about the incremental updates. Slightly better cam rarks slightly better performance. But if you were updating in a threetofour or 4tofiveyear sickle, its a great upgrail many do that. I may go to the pro. Maybe the pro max. Well see this. There are those holding onto the 12, maybe the 11, maybe the 13. Maybe they go on to this and thats a significant upgrade to this. We talked yesterday. Now with a billion iphones out there, you get a couple million because of the people who break them or lose them. It kicks off incrementally. Right. I think it is true over the past couple of years that the window has really lengthened in terms of the upgrade cycle. Because the phones are really good. You see people upgrading every two years, three years. I have phone envy for people who have better phones. Youve got the 3, right . 3 what . Camera thing. I ontario have two. Yeah. This is last years. Well see. Maybe i have to i like to upgrade. I use so much of the battery. Thats the thing. You need it. Thats the thing. Is there anything that would cause apple to have a huge boom in iphones . Its aobsolescence. They could make better batteries. You think they could make better batteries . I think they could. Do they intentionally planned obsolescence. They have an issue here. When you hook at the length of the battery, its the size of the phone and thermals and heat in batteries is not good, so the phone etc. Is small and its hard to make batteries that last longer that dont get warm. But theres improved charging here, and if you go to the bigger ones, the bugger cells, bigger phones, better battery, but theres not significant Life Improvement from the battery of last year, which is disappointing. Joanna, steve, thanks. Appreciate it. When we come back, the top heads of a. I. Companies are meeting in washington to talk about the emerging ways in technology. Well tell you what to expect from the summit next. Right now take a look at yesterdays s p 500 winners and yesterdays s p 500 winners and losers sfx st. Announcer winner and losers is sponsored by state street global advisers. The biggest ideas inspire new ones. 30 years ago, state street created an etf that inspired the world to invest differently. It still does. What can you do with spy . Every day, businesses everywhere are asking what is it possible . Spy . With comcast business. It is. Is it possible to use predictive monitoring to address operations issues . We can help with that. Can we provide health care virtually anywhere . We can help with that, too. Is it possible to survey foot traffic across all of our locations . Yeah absolutely. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. Dad, we got this. We got this. We got this. We got this. Life is for living. We got this. Lets partner for all of it. Edward jones. Today heads of several Tech Companies including elon musk, metas Mark Zuckerberg and open a. I. Sam altman will meet behind closed doors with lawmakers about regulating and safeguarding a. I. Last night salesforce ceo had this to say. I unleashed all this productivity that i didnt have before in using a. I. Materials in sales, service, markets, and in all of my customer capabilities. Im going to achieve so much more because im able to use a. I. What to expect from the summit, lets bring in dan clinton, cofounder of deepwater asset management. You know gene munster. Its got a new loop. But hes your partner. Im not defining that by anything else. People on the show know gene. Theyll get to know you. The theyre going to be thinking about transparency and explainability. Explain transparency. Its what goes into the model. What goes into the day that ta theyre putting and putting into the models to train them to train intelligence. Right now we dont know what the data is that goes into the models and we also dont know expectly in every case whats coming out of the models. So that transparency is really understanding what goes into the models, having a watermark for the content. Depending on your point of view, we know what a lot of the point of views of say Mark Zuckerberg is. Ive got a pretty good idea about his point of view. You need to know if theyre gaming what goes in for what goes out. They want to know if theyre using copyrighted materials. Are you taking the rights that i own, and are you creating works off of them. Describe explainability. Its a harder one. If you talk to some of the ceos building these models, theyll say we dont know why a model might respond a certain way to a prompt, but in the long run i think the government and the public is going to want to know why do the models do what they do . Why do they say what they say . That goes beyond data. Data is the first part of it but processing the data and creating the output is ultimately what comes out of it. That gets a little dicey when the creator transcends what he or she was trying to do in the first place, and thats where you start wondering about means and consciousness. I mean this is way down the line. But nearer term, some things could come out that you had no idea are coming out and thats never happened before in human history, has it . I dont think it has. When you think of howl the models are created, theyre inspired by the human brain. It makes some sense. Just like we might not know how our brains are creating what were about to say. Right. But thats a problem, dont you think . I think its a problem in the long run if it gets out of control. Right now i think these models are very well contained in terms of any safety issues. Theyre red teamed which is a process where all these companies do it. They basically go and try to force the models to tell you things that they should do. How should i build a bomb, right . They go and push the models to limits. There is testing that goes on thats appropriate for now. As the models get smarter, i it could be an issue. What goes wrong . Weve got to study these viruses over in china p were going to make some that if they look at how to build a bomb, how do do a different thing, they then center it against those things popping up if you ask it that exactly that way . You might be able to gain the system . Its kind of like cybersecurity. We talk about it as a catandmouse battle. Red teaming is a constant interim process. We have to figure out how do you jail break these things. People will say this is how i get chatgpt to do things it should. Do and we go back to square one. Four lawmakers i met, jobs is one thing they want to talk about. Every time theres new technology, sometimes you get new jobs. They train people to fill those new jobs but many times initially you do lose a lot of jobs and we probably will. That will be a topic, wont it . I think theres a risk to that. One of the things we should talk about relative to that is maybe upscaling. Getting people replaced, well have to upskill them. A. I. Is years away. We can do basic tasks. Some of those jobs will go away. But if we find ways to continue to push things that make us uniquely human, things around creativity, community, those are two big things, those will create the jobs of the future. But you point out humans need to raise their game. Really . Thats a problem for some of us. So we really do to compete with a. I. , youve got to get better, all of us, really . I think it demands human excellence. Oh, my god. If you cant beat the machine were not going to get that. Hopefully we will. Creativity isnt something you think of, somebody put out by these things, you cant teach creativity after 30, 40, 50 years old. You encourage it. It comes in so many different forms. Creativity from somebody who might wroo it a book or post content, that might be one way. There are so many avenues for creativity. When people find niches theyre happy about, people naturally congregate to that who have similar passions. To me some of it is fostering human curiosity and with that comes creativity that forms value and ultimately economic benefit. And doug makes a. I. Indices for stocks and also some strategy, a. I. Strategy, which Sharon Epperson said a majority dont trust a. I. Generated. 51 dont trust a. I. Generated advisers. 61 trust human advisers. I do. I made that up. She didnt do. That i dont know. Id give each one im not sure which would be better at this point. Youd probably do both and do the opposite anyway. You could. Ore time, a. I. , think about where the internet was in 2000 and where it is today. A. I. Will follow the same path. Every year it will get better and better. Whos going to be the google . Whos going to to be who wins . With a. I. . I think its a race. Nvidia has already one. On the model side its either google or open a. I. Google is the dark horse. Open a. I. Feels like theyre so far ahead. We own google. His of theically Google Department do ibm. You think about the old tech. Never seems to be innovated enough to take on the 25yearold. Its the innovators dilemma. They dont want to crush the search. Google is one of the most profitable businesses. We dont even know how they do search in terms of what they put in there. I see it all the time. Thats what you came up with. Its totally unbiased. And is sponsored on top of it . Yeah. The things i look at say sponsored. Doug, thank you. Thank you. Weve got an iconic sandal Company Filing for an ipo. Were going to tell you what to expect from birkenstocks public debut. Later dont miss our exclusive with ron baron coming up. A reminder you can get the best of squawk box on our dlyai podcast. Follow on squawk pod and listen any time. Were coming right back. Rich, velvety coffee. Cafe quality espresso. One highpressure system that can do both. Brew to your Hearts Desire with the lor barista system. A masterpiece in taste. Explore endless design possibilities. To find your personal style. Endless hardie® siding colors. Textures and styles. Its possible. With james hardie™. Welcome back to squawk. Birkenstock files for an ipo under birk. More than 7 billion. There you have it. Birkenstocks. Do you wear them with socks or not. You cant do that. Some people do. Some people do. Now theyre the super most fashionable thing people are wearing. Its the footwear of choice for bernie bros. Its 20 to 30yearolds. Supposedly your toes sink into them. Its going to be called birkenstock stock. Did you think of that . No. The things you think about, i didnt get there. We knew this guy, didnt we. The birkenstock guy . No. The next guy. Bp Ceo Bernard Looney resigned yesterday. In may of last year the board reviewed allegations about the relationships, some of which looney had disclosed that occurred before he became ceo. At the time bp said it found no breach of company code but they received further allegations and the Company Reported yesterday he was not fully transparent in his previous disclosures. The stock up by 1. 6 that it could be totally consensual. It doesnt matter. I was thinking of steve easte easterbrook. I never had this problem. Hes pretty good looking. Were fine, arent we . Me and you . Sure. I dont know. Awkward. Anyway, when we come back its good. That none of us are attracted to each other . I married my metoo problem. When we come back, we talk about Tractor Supply and the Consumer Brand and impact of inflation. A reminder you can watch or listen to us any time and watch cn a. Cpp well be right back. Announcer executive edge is sponsored by at t business. Next level moments need the next level network. Copy that. Make a hard left down the alley. Networks got you covered. [please confirm requesting backup. ] changing route. Go. Roadblock ahead. Back up, back up. Reverse reverse next level moments, were 30 seconds out. Need the next level network. [north corridor, hurry ] coming through or 3, lets go. The network more businesses choose. Transplant received. At t business. Old school wisdom, with a passion for whats possible. Thats what you get from the Morgan Stanley client experience. You get listening more than talking, and a personalized plan built on insights and innovative technology. You get grit, vision, and the creativity to guide you through a changing world. Sgsz in the first two years of the pandemic sfrz and another 20 in 2021, and hall, thanks for joining us. Weve had you on to talk about this from time to time, but there was a wall street journal story that was really interesting. It dug into some details i hadnt realized before, just how much you guys changed and overhauled and brought in new people to work there, brought in new products, all to cater to these kind of City Slickers who suddenly wanted to do things like farm and garden and do things during the pandemic that they hadnt been doing before. Hows that going . Hows it working out, just in terms of having the new customers there and the old customers. Do you ever hear pushback from the old customers like wait a second, things are a little too fancy here. Its one of the things weve been fortunate not to have heard as weve evolved our business over the last handful of years. Weve nearly doubled our sales over the last five years and kind of this new Customer Base that you referenced has been a big driver of that growth, and a big piece of that new Customer Base has been the millennial generation, and so to your point, as those as the millennials have adopted life out here, many of them moving out here, but theyre having to learn how to live life out here. Weve had to adapt our business and embrace some things that we havent done historically to welcome that new customer and kind of grow them into life out here, whether thats new assortment, changes in the ways we do marketing, changes in the way we hire what team members we hire and how we hire them and what training we do and also the look and feel of our stores. Weve modified pieces of all of that. As weve modified pieces of all of that, weve done a nice job of inviting that new customer, which is dominantly a millennial customer into our store, but also continuing to serve our longtime core customer, which is more of a gen x or baby boomer. How are these new shoppers different . How do they shop differently . What do they want differently . One of the things that caught me is they want prechopped wood. They dont want to chop it themselves. You know, the pandemic i think drove some significant behavioral change thats been structural and sustained, particularly in the millennial generation. You know, we would assert that they really were embracing historical, stereotypical generational norms. Things like household formation, pet adoption, having a child, buying a home and as theyve done that, theyve moved out maybe 45 minutes out of town or perhaps down to the sun belt, and theyre embracing life out here. The first year they do that, its about getting a dog, maybe a car heart hoodie. Second year might be planting a garden maybe starting to raise chickens and over time embracing life out here. Your point, in the shortterm theyre buying chopped wood. It might be year three or four until they get a log splitter and a chain saw as they just kind of grow into life out here. So youre getting them to the point where theyre going to look a lot like your older customers, you think, just the longer theyre there . Yeah, thats the you know, thats what our expectation is. Thats what were seeing in our kind of cohort data, and you know, i think thats as you think about life out here, thats you know, thats the next steps for that generation. Hall, there have been some studies that suggest some people are moving back to the cities. Some companies are forcing people back saying you cant live where you want anymore. Have you seen any impact of that yet . You know, certainly i think as Companies Start continue to reinforce and embrace return to work, youre going to see some shift in spend by hour and during the day, and i think there will be continued Behavioral Changes like that over the next 6, 12, 18 months as we kind of get back to a steady state on work and hybrid work and at home work. But are you losing customers as a result . Weve not seen a lot of movement in our Customer Base, pretty structural in nature. So youre not losing customers . Were not. In fact, in q2, we had our all time high active customer number. Our new customers have leveled out and kind of normalized postsurge in the opening in 2020 and 2021. Thanks for your time. Sfl thanks, becky. Coming up, legendary investor ron baron is going to join us to talk about his view on the economy, elon musk and a lot more and later shawn fain joins us to talk about the reports of the unions, a strike strategy and the way it stands right now. Tomorrow nights contract deadline is micong up. Squawk box will be right back. Announcer upbeat music awww. Awww. Awww. Nope. Constant Contact delivers the Marketing Tools your Small Business needs to keep up, excel, and grow. Constant contact. Helping the small stand tall. [soldier] take a look at this Constant Contact. Theyve left us a gift. [soldier] i think we misjudged them. I love horses. birds chirping [soldier] we should open the gate. Lets see what charlotte thinks. [narrator] at crowdstrike, we monitor trillions of cyber events to detect threats and prevent breaches before they happen to keep your business from becoming history. We stop cyberattacks. We stop breaches. We stop a lot of bad things from happening. Crowdstrike. Protection that powers you. Good morning, apple pulling back the curtain on a lineup of new products including its latest iphone, but can a new version of the popular device breathe fresh life into the stock . Plus, tesla bull and legendary investor ron baron is here with his latest market call and stocks that are on his radar. That special interview is just minutes away sh. And moderna is set to hold its r d day and update investors on its line of vaccines as we head into cold weather. The ceo will join us ahead of that meeting. The second hour of squawk box begins right now. Good morning, and welcome back to squawk box right here on cnbc live. Im Andrew Ross Sorkin along with becky quick and joe kernen. About 42 points down on the dow. Nads the s p 500 looking to open off about 4 points. Treasury yields, the tenyear and the twoyear. The twoyear now over 5. Were at 5. 028. Lets talk oil, wti crude, citi just at about 89. 47 and a quick look at crypto, and look at ether and bitcoin now back at 26,142, so thats up from the 25,000 level we were looking at before eth at basically 1,600 bucks. The latest with that group of individuals that are very vocal, i mean, we barely touched on it yesterday. It gets hundreds of thousands of views, and have laser eyes and all this stuff. But their latest thing is do not say crypto. If youre talking about bitcoin say bitcoin, if youre talking aid and abet crypto its like Everything Else. I dont know if they think ether should be mentioned in the same they want it to be ethereum. They think bitcoin is bitcoin and then theres all the rest. I kind of agree with that to a certain extent. I think brian said that too. I think i saw something on twitter too where brian said bitcoin. Bitcoins on the same board with dogecoin, give me a break. Theres bitcoin and all those other coins, which are called. Not bitcoin. Not going to say it. Counting down to the release almost got you, did you almost say it . No. No. Its cable, man. Loosen up. You say it. Stop trying to bait us into saying it. You knew i would, right . Just say the dog, you got cover. Oh, and dog coin is like what kind of dog is that . Its some kind of enu. All right, the release of the august Consumer Price index is less than 90 minutes from now, our senior economics reporter Steve Liesman whos still young to be called that. He joins us now with a preview. Hey, steve. Good morning, joe, yeah, todays cpi report should reinforce the markets expectation for a hold next week by the fed at their meeting in a possible hike at a future meeting because the forecast calls for a surge in the headline inflation index but some cooling in the core. Here are the numbers. 0. 6 up from 0. 2 expected on the headline. Bringing the yearoveryear rate up to 3. 6 after several months of improvement. The core up 0. 2 compared to 0. 2 in the prior it should come down on the core to 4. 3. Pardon me, from 4. 7 . Keys to the cpi include the surge in oil prices, not all of which, by the way, is going to be captured in this report. You have deflation in goods including used cars. Cooling and shelter costs but still strong core services, thats the gauge followed by fed chair jay powell. Economists over at city writing stronger core nonshelter Services Prices would be an important reminder that underlying inflationary pressures remain and should increase the chances of another rate hike from the fed, which we expect to come in november. The fed cant afford to look entirely through Higher Energy prices completely, in part because of what you see here. How much it influences americans Inflation Expectations. The recent rise in oil prices has not yet been fully reflected in those expectations. Look to the right of your chart there. That could happen in the months ahead if past is prologue. The feds going to watch the outcome of these Union Negotiations and overall whether wages are pushing up inflation. Pricing to see how that changes in the wake of the number, the current expectation, guys, a 41 probability of a hike that could go higher unless markets believe the fed is going to find comfort in the core. Joe. All right, steve, not allowed to talk to you, but well see you i understand that, joe. We should not talk. I dont know, the producers trying to produce the show. Why do they what are they qualifications been working with you for how many years. And here we are talking. Well see you in just a bit with the numbers, steve, and then maybe well talk. All right, weve got a couple other headlines for you this morning, the United Auto Workers union plans to implement targeted strikes at certain plants if the contracts arent reached with general motors, ford and stellantis. Thats according to Union Officials who did say those plans could change depending on negotiations. Remember, the deadlines coming up thursday night into friday morning. Targeted strikes would mean that work would only stop at certain plants compared to National Strikes where all Union Members would exit the plants. Uaw president shawn fain is expected to outline that strike strategy to Union Members today at 5 00 p. M. Eastern. But before that, he will join us live right here on squawk box. That interview is coming up at 8 15 a. M. Eastern time. Shares of apple looking to open higher this morning, this after the selloff during the companys launch event that happened yesterday. The Key Takeaways from that event, the iphone 15 and iphone 15 plus with usbc charging starting at 799 along with the iphone 15 pro and pro max which start at 999. That was actually less than people had expected. They thought they would actually push the price up. Apple also unveiling the new apple watch, new microprocessor, which will likely be manufactured by Taiwan Semiconductor and the latest air pods all which will now use usbc. Weve been talking about whether thats requgoing to be a forcin mechanism. I dont know. Is that a new watch face, the one that looked like a real watch. Youre looking at the ultra there, and that was launched last year. I think thats a higher price point. Its a beautiful watch. Thats prettier. Its a large face. Yeah, but i like the face design on it. Thats kind of pretty. Its digital. Yeah. So it can change. Thats kind of cool. It is set to be one of the largest Public Offerings of the year. Were talking about chip maker arm holdings, which is set to price its nasdaq lifting after the close today. Early reports suggest that it will go to the top of the range and fetch a valuation of more than 54 billion. Kristina partsinevelos joins us right now with more on this, and this is the ipo that has so many people excited, kristina. Yeah, thats because you have the word semiconductor, chip, and artificial intelligence, and those two together tend to fwrab headlines no matter what the context. The ai hype this time around may not be warranted for this upcoming ipo. Its a coding blueprint which Companies Like nvidia, Electronics Arts or apple use to design their own chips. The arm architecture is so popular it powers 99 of global smartphones. It was a stat in the prospectus, and at least 70 of the worlds population interacts with electronics built on arms architecture. It collects revenue on chip design and a royalty fee on device selling prices. Its a great achievement for one company to have such penetration, but where is future growth given its already high levels of penetration in a hand set market, for example, that is a very cyclical and exposed to long replacement cycles . Well, arm does specialize in coding for essential processing units as well and not those sought after ai graphic processing units, so arm even calls gpus its complementary business in its prospectus, make it more difficult to capitalize on that ai hype because it focuses on the cpus and not necessarily the gpus. Other risks include a total of its revenues come from arm china which operates in a black box as an independent entity. It derives 50 of revenue from five customers and 30 of its accounts receivable come from one customer only. A lot of concentration risk chblt t. For Retail Investors watching right now, its good to consider the pros and cons before getting in tomorrow. Kristina, thank you very much. Youre fgoing to be all over this. Tune in to cnbc tomorrow for coverage of arms ipo from the first trade all the way through to the close. When we return, billionaire and tesla bull, ron baron is going to join us with hit market calls, his thoughts on the ev car market, and so much more. Before we head to a break, though, well get a quick check on the markets right now. A little bit of red on the screen this morning. The dow looking like it would open down about 63 points. Nasdaq off about 27, 28 point, the s p 500 off about 7. 5 points. Were coming right back with ron baron at the table. Announcer this cnbc program is sponsored by baird, visit ba bairddifference. Com. when the day that lies ahead of me seems impossible to face a lovely day lovely day lovely day lovely day a bank that knows your business grows your business. Bmo. Power e trades easytouse tools make complex trading less complicated. Custom scans help you find new trading opportunities, while an earnings tool helps you plan your trades and stay on top of the market. E trade from Morgan Stanley. I may be known for my legendary football career, but truth is, i love a bunch of sports. And stay on top of the market. The only trouble is knowing where to find them. Thats why i got xfinity. So, i can easily find and watch whatever sport im into all in one place without missing a thing. Even if its football, australian football, or football football. In a word its fitzcredible. I got to trademark that one. This season, eligible xfinity rewards members can get up to 100 off nfl sunday ticket from youtube. Sign up for xfinity rewards now. Welcome back, everybody. We want to get straight to our big guest this hour, ron baron. He is the chairman and ceo of baron capital. We know him well here. Its great to see you. Thanks for coming in this morning. Thanks for inviting me. Weve got a lot to talk about. I think its hard to not start with elon musk because you have been a huge elon musk supporter and investor in his companies for a very long time, a booster of everything hes doing, and yesterday Walter Isaacsons book dropped on elon musk. Its been in the headlines. Its been something people have been focused on. Walter himself will say hes an incredible innovator, an incredible entrepreneur, but he has these demons that chase him. The book lays this out in great detail starting with his relationship with his father. What have you thought . I know p you havent had a chance to read it all. Its a big long book, you just got it yesterday. What do you think of the stories youve seen to this point that suggest elon even knows these issues, he struggles with it and quite get out of the way of being his own worst enemy. Youve said hes the key man. Hes the reason you invest in these companies and the biggest risk is if something were to happen to him. So i met him in 2010, and it took me four years before we began to invest in 2014 to 2016 is when we bought the stock. We made it out 20 times on our investment there, and then in spacex weve been investing in that since 2017, and were one of the largest investors in spacex. Its not a publicly traded com company. Have about a billion 7 invested. Cost is 700 million. 400 million of that is me on tesla. We have 17. 5 million shares, 4. 5 million shares is me. So weve been an investor for a long time, so i obviously believe. And initially when we invested it was making me crazy when i was seeing some of the things that he was doing, as much as i admired him. But i do think that and i calm myself down, and i say i really deserve to make a lot of money by investing in this and by staying with it. And we deserve, and what i thought was that the point that walter made yesterday was that untethered, these things can happen, and if he was conventional, they wouldnt ever happen. Hes the guy who got us electric cars. Hes the guy who got us he was in saturday night live, and he said, hey, dude, do you think im a normal person. I got you electric cars and im going to take you to mars. Seriously, am i going to be normal . And hes a very funny, engaging, smart, incredibly hardworking person, incredibly hardworking person, and so one story, when i went to a dinner in east hampton about two, three weeks ago, David Rubenstein was interviewing walter and they sat me at the table with walter right next to the stage, and then david interviewed him, and then they mentioned me three or four times in that, and then afterwards he said, you know, the guy knows more than anyone else about him. Why dont you Say Something . I cant Say Something. This is your show. Im not part of that. And but youre here now, so what would you say . Well, one fast story is i agree with walter. He has to be, you know, untethered, and in addition to that, when he was a child, he talked about all the problems he had with his dad, and he escaped from those. He would go home and he would read the encyclopedia. He would read the encyclopedia. That was his nickname from his mom, encyclopedia. He had a photographic memory. What amazes me about him now is every time you ask him that, how do you do that . How do you know that . He knows everything. He has a photographic memory. He remembers stuff, and so he just hes focused on cost, trying to drive costs out of everything, everyone else tries to make as much money as they can, hes focused on his mission longterm, which is to make the planet inhabitable and also something bad happens to be able to keep humanity alive. You know, so getting away from elon for just a moment, first of all i want to con fwrat late you and your firm for all the things you do for people and making them understand why stocks go up and down every day. You know, all the news, number one, and number two how to invest and how to invest for the longterm, and thats how you really make the most money whether its index funds or on occasion in mutual funds and to be a little selfpromotional, there was an article last week on bloomberg, and the article on bloomberg talked about how Warren Buffett had made a bet with a group of hedge funds 15 years ago, and he said that he thought that net of fees that an investment in an index fund would do better than an investment in a group of hedge funds, and bet a million dollars, which would go to charity, and he won the bet five years ago, and then bloomberg was writing about that, and then he said, oh, by the way, to show how right buffett was theres one index better and harder to beat than others, its called the qqq. Theres only one mutual fund in the United States in the past five years, ten years, thats Baron Partners fund. Thats me. You are a longterm investor. You do look at things over the long haul one more thing about that congratulations. An index is a great way for people to invest. If you had invested in 1992 when we started Baron Partners fund, 10,000 in the index in the s p 500, itd now be worth 200,000, 10,000 to 200,000 invested in the index. Of course invested in Baron Partners fund it would be 900,000. How do you know youre going to find someone like me as opposed to a firm like ours which is better than any other mutual fund company. Lets just get back to some of these questions with elon because i was there at the baron conference last year, Baron Partners conference where you interviewed elon and you asked him on the spot, you said, hey, what are you going to do with twitter to make sure you dont get offended by some of the not offended i shouldnt say, everyone gets offended on twitter, and thats fair game, but you were concerned about antisemitic and hate issues that you thought were being amplified at the time. His answer to you i think satisfied you at that point. Do you still feel satisfied with that, especially given some of the stuff hes kind of dipped his toe into recently, or you just think this is who he is, take the good with the bad . I think social media, hes probably finding it more difficult to manage than maybe even going to mars. I mean, to deal with all the people and all what they think is hate speech and they think is anti this guy, no way hes antisemitic. Im jewish. The largest investor, Larry Ellison in his firm happens to be he says hes the wealthiest jew in the world. Hes jewish. Hes surrounded by advisers that are jewish. That doesnt make you a antisemitic. Ive never seen anything that hes pro people who are talented and religion is not one thing that enters into it, not reas religion, not race, people work hard and people can achieve. Thats interesting, you think twitter in dealing with people and questions of free speech may be more complicated than trying to figure out how to go to mars and put rockets into space. Obviously no one can figure out getting to mars except for him because he can reuse these rockets over and over again. No one else has been able to do that, no one, not china, not nasa, not russia, not bezos, no one. He does. Its remarkable. When other people cost to get to space for 100 million, and we can get there for a fraction of that, because you can use a rocket over and over again instead of going to london and getting on a 747 and throwing it away one time. Use this over and over again, and its amazing what hes done. Hes good at rockets. Good at rockets. Someone said that to me in an interview. What do you make of what the adl said though . We had Jonathan Green blat on the program. He said he didnt believe hes antisemitic. Nor do i, im jewish. I know youre jewish. There are things on twitter that both of us would look at and not just find offensive but would clearly be in the category of hate speech and things that should not be there. Look, im not an expert in that. Im an expert on companies, and what i do, we happen to have a small investment in twitter, now x, 100 million. Its 65 million for fund and 35 million for me personally, and hes made us so much money and he told me we can make a lot in this. Maybe we will, maybe we wont, i think its a really laudable thing that hes trying to do to give a forum where people can Exchange Ideas and realtime and get the news realtime, and he is being attacked mercilessly over and over again, and i think unfairly. Im not an expert, but i will be when i get interviewed another time here, i dont want to talk about x now, but i think theres a Good Opportunity for that company. Well see how hard it is to achieve, but i think the more interesting things right now are tesla and spacex, and tesla, so weve been an investor in, so tesla is now at a similar stage where it was in 2014, 2015 when i was investing, 16, and they were doing 40,000 cars a year. Theyre now doing a million 8 on their way to 20 million, and have been growing 50 a year, and this year theyll probably be up, you know, 25, 30 . Next year same, about the same. But theres a new car coming 25, 30 revenue . No, units. Units, okay. And theyve got the battery business, which is 6 billion a year, and thats going to be up triple over the next three years, and thats going to go up 30 times. Theres been a lot made over the uaw and the potential strike that is facing the big three automakers here, and whats been brought up is they have all of these evs that they have to deal with, their cost base is kwquita bit higher than teslas. Way higher. So every time they sell an ev, they sell one fewer gasoline car. And the gasoline car they make money on and the evs they lose money on. The traditional oems are troubled right now, and i think ultimately, you know, theyre going to make metal. Theyre going to make the units, and ultimately theyre going to buy software from tesla. Tesla is going to be like the like intel inside of a microsoft computer. Teslas going to be everything that makes a car, you know, all the inside is going to be tesla. Thats whats ultimately going to be licensed. Are you buying any additional tesla or spacex, or have you kind of maxed out where you feel comfortable with your fund, which is a diversified fund . In the funds that i manage, ive been maxed out. We had when the stock went up 20 times after we bought it. You sold. We sold for clients about a quarter of the shares, i didnt sell a share personally. I only invest in mutual funds normally, i made an exception in this instance. I was the last in, the last out, and i wont sell a single share for myself until we sell all of our clients stock. And as far as buying more, i would buy more if i could, but i cant, and other guys at our firm think this is a great price. When they introduced this model 2, theyre going to have the cost half of what it is right now, and theyre going to sell the car for, i dont know, maybe a third less than what it is right now, and theres credits. So this is toyota almost bankrupted the whole Automobile Industry 20 years ago. Ron, do you at the same time think that the big threeing have th their work cut out for them . Were going to have shawn fain on today, and what the rank and file are asking for given the uncertain future of whether americans ever embrace nontesla evs, i mean, would you think that the big three are have their work cut out for them . Would you at least acknowledge that . I havent studied the big three, relationships with unions. You dont own them. I dont own them, although i really like mary barra. Would you like to compete against tesla . I would hate to compete against tesla. Warren buffett said 20 years ago, 15 years ago, he said he wouldnt invest in tesla, and now he says he would hate to compete against tesla. To go on to this, the model 2, this is coming within, you know, by 2025. When that comes, thats going to be exactly the same thing as what happened when tesla introduced the model s. Yur youre going to see this tremendous change going on there. The software, core competency, and then dojo. So dojo is a training. What that is, they have this massive amount of data for all these cars theyve been driving around for millions and millions of miles, and that keeps growing expon exponentially. No one has that. To crunch the data, you need compute, and compute is what nvidia has and nvidia has compute chip, which is for everyone to use. They have all these different, you know, device all these different, you know, opportunities that this company has, what our company has is theyre making their own compute, and in 18 months theyre going to have more compute than anyone in the world, tesla, and compute in your basement as opposed to the chip thats in your car. What theyre going to have is they will have so much massive capacity to provide services to cars and to be able to train this to train your car on this data. So with the competitive advantage is the data and the training is going to be provided by this compute, and theyre going to have more of it than anyone. Nobody can catch them. Last year, by the way, you read about the number of people that are seeking jobs, and theyre saying that theres, you know, theres too many people seeking the jobs or whatever they say it is. And what tesla has is last year or this year, i think they have 3. 5 Million People seeking 30,000 jobs. Last year they had 3 Million People seeking 20,000 jobs. So theres 130,000 people. Ron, lets jump to another stock. Id ask you about spacex, but its privately traded so its privately held, so its not something people can get into. I do want to ask you about moderna. Lets talk about moderna and what you think because this is one of the stocks you hold, and i didnt realize that before. We have a very small investment in it right now, and hes coming to my office actually, im speaking with him on friday. He said were spending the morning together. But we why did you get into it . Well, i think its interesting technology. We have a very small, very small, and the stock had gone from 300 to 100, and we had owned it i guess about three years ago and made a double or triple or quadruple and i thought that the opportunity was for them to be able to design to make your body fight cancer. I thought that was really interesting. But it was the price drop that really got you the stock went up a lot on the basis they were going to make a lot of money on covid. So we sold. Longterm the opportunity that they were going to have all this cash coming in, which they will do research to develop new drugs, which is whats happening now. Thats why i think its interesting. I will tell you more about it after i speak to him. In the case of spacex, you can invest in it. Basically we have different mutual funds own it, baron funds own it, 8 of their portfolio. But whats really ti this is going to be the Largest Company in the whole world. So i think tesla in the next seven years will be about four or five times as big as it is right now in the stock market. And this company, over the next and that will be worth, you know, trillions, and this company spacex is going to be worth 500 billion, 600 billion. Its 150 billion addressing a market capability of according to Goldman Sachs and Morgan Stanley annual revenues. And basically, theyre going to get hundreds of billions of dollars of revenues for a company right now valued in the stock market for 150 billion and nobody can compete because nobody can make these rockets go up and come down and land again. And in addition to that, what is threatened here is cargo. Theyre going to have rockets to go from nevada to australia, you can move coordinates. You can move air freight, anything you want, 35 minutes, anywhere in the world. So basically thats whats going to happen for longterm in this company, but they have all these in spacex, the competitive advantage, the railroad to space next. Finish your thought. The railroad to space is one, and then the second thing is the satellites, and so railroad to space is the rockets and the satellites are how they get there cheap. Elon is an innovator, a dreamer, a believer, and you are too, and youve made a lot of money along the way being with him. Ron, i want to thank you very much for being here with us today. And i didnt get my other that joe always likes to hear about. Which one was that . I was going to talk about msci. Can i do msci for a second . Henry hernandez escapes from nicaragua, his fathers a general. Theyre overthrow un. He comes to america, he starts a business for Morgan Stanley, which is Risk Management and climate and all the things that you love, esg, and then he wants to bring it public, and hes not able to bring it public. Its 2008, 2009, and now its 2008, and he and i are on television. Hes an immigrant, and hes about to go public, and he cant go public. He says the reason he was able to go public is because of me because we were a keystone investor when it came public at 18 a share, its now 540. So its now 18. Were on squawk that morning, the market cant open. Its limit down, cant open. So henry, its pandemonium all over the place, so henry and i are standing there. And i say henry you are he looks nervous, youre the american dream. We got to be optimistic here, and hes going crazy. We got to be optimistic, so he says, im telling you, be positive. So we do that, and then hes the first speaker at our conference and he talks, and then he walks out and then he tells me later he walked out to the plaza around where the fountain is and hes trying to figure out he wants to figure out how he can buy stock for his child and he cant hes frozen. He cant say a word. No words come out of his mouth. Anyway, tits unbelievable, frozen. He ultimately figured out, he said if it was before the conference, i wouldnt have been able to speak. The competitive advantage they have indexing is great, Risk Management is great, all of the countries around the world want to know about climate. They want to know about esg, and so whether we like it in this country or not politically, this is a great company, cant be competed against. Ron, i want to thank you. Thank you for inviting me. Thank you for coming in again, ron baron. Big tech leaders heading to capitol hill today to educate legislators on ai. Were going to talk to senator mike rounds on what to expect from the meeting. Plus, the fda approving updated covid vaccines. The ceo of moderna joins us for his latest on the rollout. Stay tuned youre watching squawk box, and this is cnbc. Announcer time now for todays aflac trivia question. Autoworkers at gm last went on strike in 2019 costing the company how much money . Xonnuua r when cnbc sqwk bo cties. Took over our office. And hes using it to send out medical bills. Good hands hospital bill for prime . gaaaaap did you just say gap . hes talking about Expenses Health insurance doesnt cover. Good thing coach prime knows about. Say it one time aflac because aflac gets you money to help close that gap now how do we get this goat outta here . whistles aflac meet one of my new homies gaaaaap get help with Expenses Health insurance doesnt cover at aflac. Com. Elephant wouldve been scarier. Pano ai chooses tmobile for business for 5g solutions. Because tmobile helps pano ai innovate, so they can stop the spread of wildfires. Nows the time to see what americas largest 5g network can do for your business. Morgan Stanley is partnering with the Womens Tennis Association to remove boundaries. because this game is for everyone. The notsosecret to our success . Earn and keep trust. Build and maintain financial strength and stability. Deliver solutions that meet complex needs. Do right by customers, clients, and policyholders, always. Repeat daily for over one hundred and seventy years. Massmutual. Partnering with financial professionals, benefits brokers, and institutions. Announcer autoworkers at gm last went on strike in 2019 costing the company how much money . The answer 3. 6 billion. The ristke lasted 40 days. Networks got you covered. [please confirm requesting backup. ] changing route. Go. Roadblock ahead. Back up, back up. Reverse reverse next level moments, were 30 seconds out. Need the next level network. [north corridor, hurry ] coming through or 3, lets go. The network more businesses choose. Transplant received. At t business. Power e trades easytouse tools make complex trading less complicated. Custom scans help you find new trading opportunities, while an earnings tool helps you plan your trades and stay on top of the market. E trade from Morgan Stanley. Welcome back, squawk box the biggest names gathering in washington this morning to discuss the future of ai. Good morning, andrew. Theres lots of meetings that happen on capitol hill, but the one today is truly unique. All 100 senators are going to be invited to an all hands on deck forum on ai with tech giants including elon musk, Mark Zuckerberg, sam altman, and other leaders both in ai and in civil Rights Groups and unions. While the forum is meant to educator senators on ai, the real legislative work is actually being done in committees like the Senate Judiciary committee on tech. Yesterday senators Richard Blumenthal and josh hawley led a hearing on their recently released framework for ai legislation. But while hau lee wants to see regulations around ai he told me yesterday he wasnt sure if he would attend today. Hes not happy with the format of the meeting, which will be closed to the public and will limit questions from senators to accommodate the 20 some panelists. I just think that this needs to be done in public. And im not interested in being a cheerleader directly or indirectly for the tech industry. I mean, they can cheerlead for themselves. I think this idea that we should privilege somehow their views, i just dont buy that at all. So i dont like this whole sort of cocktail hour behind closed doors, lets all be buddies. Hawley isnt the only senator with concerns about format, but many lawmakers are still expected to attend. Its just another sign of the priority that ai is being given on capitol hill. Okay, emily, thank you for that report. Joining us right now republican senator mike rounds, hes going to be moderating the forum today with leader schumer. Good morning to you. Try to understand what you are hoping to get out of this and also what you make of some of the criticism and critiques from folks like hawley . Well, i think that other members of the senate have a real desire to learn as much as possible about it. Theyve all got different ideas about how it should be tdone, ad we simply wanted to bring in these individuals who are d directly related with ai on all sides of the issue and to have them speak directly and candidly with as many members of the senate as we could possibly get in one room. Were not going to get all 100 members there for a sevenhour session, but we hope that between them and a number of members of their staff that we would get a pretty good showing. In the meantime, the individuals that are there can share on a candid basis what they see moving forward, and we knew that if we opened it up to begin with, they would all start out with a canned opening statement. We want to be candid, well have other educational seminars like this and the vast majority of those will all be open with cameras allowed, but on this particular one, we thought we wanted to start out with Something Special for the members to try to draw their attention and have them be actively engaged. Very unusually, folks like sam altman whos behind open ai and so many others in this space have talked quite publicly already about what they think of as the need for regulation of their own industry. Its a unique scenario and situation because typically leaders of industry dont call for regulations of themselves. What do you make of that . Do you think that that is genuine . And if so, what does that mean or do you think thats an effort actually to stall regulation . No, i think it is genuine. I think, first of all, youve got lots of different opinions about how much regulation, and who should regulate. We wanted to start out by making sure that youall of these individuals and folks in the ai industry recognize that the United States is the place to develop ai. We dont want it being developed elsewhere. We want it being developed here. We think the benefits of that are substantial for our citizens and longterm its the right thing to do. But with that comes a responsibility to do it in such a fashion that Everybody Knows the Playing Field and what the rules are on the Playing Field. We decided in many cases that a lot of the committees that weve got have particular expertise in specific areas. Judiciary committee, the commerce committee, the Armed Services committee, and we wanted them to also feel that theyre playing a major role in looking at whether or not or what type of regulatory response they would be responsible for. So rather than trying to do a single committee out there, i think the vast majority of us would like to have the individual committees themselves actually participate in looking committee by committee basis what the regulations are in their particular areas and how they should be adopted. Theres a sense among those who are skeptical about meetings like this that this is all theater and that, in fact, given all the conversations that have been taking place in washington for more than a decade now around regulating social media, which really deals with First Amendment issues in so many respects, which are similar, i think, though different to some degree as it relates to ai, that if government couldnt come to a conclusion around social media, how in the worl are they going to come to a conclusion around ai . Its the reason that we wanted to join together in a bipartisan fashion to start this out and to keep it bipartisan, not just bicker back and forth. I think senator schumer, senator hinrich, senator young and i have tried to make this as bipartisan as possible. We dont want politics to get in the way of it. We want to get as much education for our members as possible, and then to share with them not just the opportunities, but the threats as well. And if we can to that, then i think the members will rise to the occasion. Winston churchill said america will always do the right thing after theyve tried Everything Else first. In this particular case, wed like to try to get there a little bit quicker. Hasnt this already been politicized the promise is really special. The reason i asked about whether its politicized is you have a number of the Large Companies behind ai that have already made pledges to the Biden Administration around rails and sort of safeguards, and then you have, we were just talking about elon musk in the last segment, his efforts around ai are to have a more open system so you can say and write and the ai can do effectively whatever you want in different ways. Facebook or now meta is planning not just to have its own ai but to make their ai open so that others that may not be Big Companies can go off and do things. How to you think about those sort of two dynamics . The more we educate our members, the better opportunity we have to make the right decision on those opportunities. Thats part of the discussion that were having. Were not doing this to try to promote a particular approach but rather to get everybodys interest in it and to get as many of the members up to speed as possible. Then we make better legislation. If we didnt do it this way, if we didnt take the time to educate, then were doing it in the dark, and then theres more outside influences that can have an impact on individual members. But if they get that background and they have the ability to ask good questions and background understand that there are multiple approaches that might be considered, weve got a better chance of actually doing good legislation that stands the test of time. And once again, on a bipartisan basis to get this education in front of a lot of members, its a step in the right direction. First step only by a step in the right direction. Senator rounds, thank you. Good luck today. We look forward to hearing what takes place. Thank you. Coming up on the other side of this break, were going to talk to modernas ceo stephane bancel, hes going to be with us. Got a lot to talk about as covids ramping back up. Dear moms and dads, what you have achieved here today is going to help us and our futures. It is why were coming up on stage to collect your diplomas. Mom, love you always. Vo when you graduate, they graduate. Visit finishyourdiploma. Org to find free and supportive Adult Education centers near you. Moderna announcing several clinical trials, expanding medicine beyond what we think beyond of covid and a new boost are just approved by the fda and cdc. A first on cnbc interview, ive always wanted to talk about covid last because of everything that i find exciting about the technology and the promise of what we dont know yet. But it possible it can be very, very powerful in a lot of different areas. I guess well talk about covid quickly, its around, ceveryone knows someone who has it. So you get a booster. For moderna shareholders, they need to put covid in the back ground. Thats not whats going to make them a billion dollar company. First talk about the booster. The booster was approved by the fda in the u. S. On monday. The cdc recommended it for everybody and its im going to get mine on monday. So were thinking 6 billion to 8 billion sales in this year. That would be pretty good if that was recurring hopefully its not recurring. You think its going to be like a flu shot . Its definitely going to be like a flu shot. Its not going away. Were going to have a product. When does Everything Else ex exceed the covid numbers. In a couple of years. I want to talk about cans are vaccines which arent what we think of when we say vaccines but we call them that. I want to know where you stand and how youve come along and quickly say all cancers are different and they have different types of genetic makeups. Its difficult until messenger Rna Technology to distinguish an individuals tumor as opposed to just cancer in general and you can do that quickly in a cost efficient way now, which does open up avenues the treatment for it. In a nut shell thats what youre going to do . Exactly. We are designing products that are different for every human being. Every individual . Individual. Individual tumor . Correct. If you got prostate cannercer ai get prostate cancer, we do a biopsy and genetic sequence. And messenger rna, its a complementary copy. Exactly. We teach your immune system to look for the limitation that you have because cancer is a factor of dna. Thats amazing. How long does it take and how much does it cost in. How expensive is it for each person . We think we can do it around 30 days from the biopsy to get the product in your arm. How long before that is available . A few years. Its quite stunning. If you look at the big drug on the market, we reduced death and recurrence of the disease by 44 . Here were 44 progression. If you look at the survival curve, i cannot wait. We think by the end. Year we should have the next inter interim data. On what . On melanoma. How does it cost, though . Its immunotherapy. It not like we have to make it in a factory. Its in your body. We make it based on the sequence of your cancer sell and we make that molecule and send it to a hospital or maybe down the road to the pharmacy and they just inject it. When you have the covid vacci vaccine, you have it in a lipid. Its the same lipid. If you think about the safety of the product for cancer, it same used in billions for covid. And you dont use chemotherapy, radiation or is this instead of . Right now we its 44 times better than kitroda . Its 44 better. Were announcing well be in a phase three lung cancer. Given the phase one data, we believe this should be additive like we saw with melanoma. What comes next. Its melanoma, then lung cancer and then what . We have not announced yet. The teams are still discussing the process. So nothing changes with all these different cells . What about sarcoma, things that arent solid tumor . Were not working yet on solid tumor. There are more products were working on but they are still early stages. That could work now, too . Not this approach, maybe different approaches. And theres another use that you think messenger rna can help with . The third one is rare genetic disease. If you look at the mma types of rare genetic disease, we have three in a row shrank but a marker or clinical outcome. If you think about the platform as a home, we have three covid, rsv and three in a row. And next is going to be lung. So the platform is really coming together. Very good. Thank you. I understood everything. I can understand you much better in person. I dont know why. Maybe it the audio. But, i mean, youre a little bit hard to hear every word but i understood everything you said. Thank you. Squawk box will be back. Cpi is coming. [soldier] take a look at this theyve left us a gift. [soldier] i think we misjudged them. I love horses. birds chirping [soldier] we should open the gate. Lets see what charlotte thinks. [narrator] at crowdstrike, we monitor trillions of cyber events to detect threats and prevent breaches before they happen to keep your business from becoming history. We stop cyberattacks. We stop breaches. We stop a lot of bad things from happening. Crowdstrike. Protection that powers you. Rich, velvety coffee. Cafe quality espresso. One highpressure system that can do both. Brew to your Hearts Desire with the lor barista system. A masterpiece in taste. Good morning. 30 minutes and counting, todays big number. Investors and fed policy numbers will be watching august cpi data very closely. Did apples moch move thing for investors . Yes. And time growing short for automakers to reach new employment contracts. Otherwise we may see a strike. Well speak with the president of the uaw as the final hour of squawk box begins right now. Good morning. Welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square. Im joe concernian along with becky quick and Andrew Ross Sorkin. Treasuries over by about 3 on the 10year. Lets get over to our senior markets commentator. Maybe one of us is younger than the other but we dont have to talk about that just now. S p 500 not doing a whole lot today. It is kind of stuck in this zone, a little bit indecisive so far in september. Right now its actually just about halfway between the late summer highs, around 4,600 and the lows from mid august, which were just above 4,300. We still have this up trend obviously. Thats the october lows of last year. The majority of stocks starting to struggle, watching the treasury yelds, watching oil. Kind of a little bit of waiting for these cast a lists to pass and see if it can give us any redirection in here. Of course the seasonal headwinds remain to some degree. Take a look at the tech sector, the various components of it after jeds apple event. This is the software etf against semiconductors. Up see it fall by the wayside, up on a oneyear basis but apple has fallen below and yesterdays drop in oracle. Weve had a shift away from more the cyclical and directly a. I. Geared semiconductor areas. Tech obviously a big leadership group. So ahead of the cpi. What does the market actually expect over the coming years from inflation in this is the inflation break even implied in bond market pricing. Its right around 234. Now, this is not to say this is a perfect view of exactly what inflation is going to be over the next ten years, but you see its almost back to where we were, sort of back in the 2010s before we had the deflationary undertow happening in the market. 230 is not too far from the feds target. When you have the nominal 10year yield at around 4. 3, it means real yields and inflation adjusted yields around 2 and it acts as a restraint on the economy or at least suggests the economy should have to grow faster to justify yields at those levels, joe. Yup. All right. So anything else going on today, mike, that youre watching . Beyond the cpi . No, thats what i was talking about. Thats on your radar screen, too . It is. Its a matter of i think the people are tensed up ahead of it, a little more than they had about the last couple of months. We are going to see probably that headline tick higher, see how it translate to the cpx index. I think the market wants to get through it. I think it encouraging the cpi numbers have been not too far from forecast over the last several months. If seems like we have a better handle. Well see. 25 minutes to go, 25 minutes, 10 seconds before we get the answer to this. Everybody tense, clenched up. Times moving faster. For some of us. Apple one of the key stocks to watch this morning, basically flat after the unveiling of the iphone 15. Pricing mostly stayed the same in the United States. The higher end model is a bit more expensive than yesterday. Apple also unveiling some new watches. Ing us is the Bernstein Senior Research Analyst and hes got a rating of a market perform on apple with a 195 price target. Tony, you said most of these changes were evolutionary, not revolutionary. No huge prizes . Good morning, becky. No, no surprises at all. Through information about apple and leaks about its products have become more and more efficient overtime. Not only were the products almost exactly in line with what people thought but even the distinctive features and capabilities from the processors and the cameras were largely anticipated. And there was no form actor change on any product. The iphones are still the same size, a little faster, brighter, they have better cameras and ditto for the watches. That was largely anticipated but there was no unique breakthrough in any of the products and, again, that was largely anticipated. One thing you did say that was a little contrary to expectations is that they didnt raise prices in china where you might have anticipated it just because of the weaker there was some expectations that apple might raise price across the world. Theres titanium casing that costs more and you have an effectively telephoto camera built in. I think there was some expectation that apple may raise price and it did not domestically. Internationally apple typically raises or changing its price to reflect currency and and that would sort of had pointed that apple would have likely raised prices in china, in japan. It did not. That might be a reflection that the Chinese Market is pretty how much right now and obviously there have been recent reports that have stated that the Chinese Government may prevent i phones and Government Agencies going toward. Apple may have also been sensitive to the fact that they didnt really want to be in the news for having raised prices. And you think thats because of the pressure theyve faced recently over china and political backlash, where you cant bring them into the office if you work for a Government Agency there, other potential places, too . Yeah, i think it probably a function of that and also a function of the fact that the Smartphone Market in china in particular has been quite weak own of last year. We now also have huawei resenor terring the market in china and i think its a weak smart phone market, incremental competition from huawei and the fact that there has been, you know, these potential orders that iphones will not be allowed in Government Agencies and apple may be fearful about contagion to that to the Broader Consumer base in china. Tony, where do you land on the seoul usbc switch . Theres some information that people will buy new phones because ne want to get rid of these old plugs and others say we have all these plugs lying around, lets wait this out and amortize what wee got as long as we can . I think at the margin it might be a modest negative. Consumers tend to be pretty inertial and i think many consumers have tons of lightning cables for their iphones in their offices or in their cars, by their bedside. So collectively changing all of those may be, you know, just one small hesitancy for iphone buyers. I think at the end of the day its not a big deal either way but i put myself in my shoes as a consumer. Ultimately i feel that i got a lot of these cables lying around and theyre in many different places and do i really want to change them all . When you get the new iphone, you get a cable but you dont get a brick associated with it. Have you done any research of loss of revenue as it relates to the cable themselves . Even though theyre third parties who sell lightning cables and the like, a lot of people still buy apple cables for this. You may not buy wires from apple the same way you did before. Its a great question. I think the impact is pretty modest. As you stated, there are lots of third parties and theyre re transparent utlet like and that i, hey, this really so certainly the Accessories Industry for ap certainly a multibillion dollar business. I think the cable business is a relatively small portion of that, you know, probably in the tens or hundreds of millions of dollars, which in context of apple at 400 billion in sales is pretty small. All right, tony, thank you for joining us this morning. Thank you for having me. When we come back, were going to bring you that breaking inflation data. It all on the way. It happens at 8 30 eastern time. The market has been relatively sane when pit as the clock ticks down to a possible strike tomorrow knew were coming back with so much more on squawk box after this. sirens [due at target in 5 ] copy that. Make a hard left down the alley. Networks got you covered. [please confirm requesting backup. ] changing route. Go. Roadblock ahead. Back up, back up. Reverse reverse next level moments, were 30 seconds out. Need the next level network. [north corridor, hurry ] coming through or 3, lets go. The network more businesses choose. Transplant received. At t business. Loving this pay bump on our allowance. Wonder where mom and dad got the extra money . Maybe they won the lottery . Maybe they inherited a fortune . Maybe buried treasure . Maybe it fell off a truck . Or maybe they switched to Xfinity Mobile the fastest mobile service. Save hundreds a year over tmobile, at t and verizon. Now i can buy that electric scooter. Im starting a private equity fund that specializes in midcap. You do you. Switch to Xfinity Mobile today. Nice footwork. Man, youre lucky, watching live sports never used to be this easy. Now you can stream all your games like its nothing. Yes [ cheers ] yeah woho running up and down that field looks tough. Its a pitch. Get way more into what youre into when you stream on the xfinity 10g network. Less than 48 hours away from potential auto workers strikes. It could affect close to 150,000 u. S. Workers. And phil lebeau joins us as a special guest. Hello, phil. Hi, joe. Lets bring in the president of the United Auto Workers joining us from detroit. Thanks for joining us this morning. Lets start first with where negotiations stand right now less than 48 hours until the deadline. Is the union coming off of its request or demand, i should say, for a pay hike of 36 over the next four and a half years . Were asking for double digit pay increases. We have been. Weve been very up front about that from the getgo. You know, whats good for the ceos is good for the members. Our members help generate those massive profits theyve recognized in the last decade,o the country where you updated them on the negotiations and you said, look, at this point were probably going to do targeted strikes if there are strikes that start after 11 59 on thursday night and instead of saying were striking of where all at once. And in the call it was portrayed by more than a few people that you weo see targeted strikes at all three of the auto makers. Is that a fair characterization . Um, not really. We can get a until the final few weeks. We gave them those demands five weeks ago. We told the companies from the onset of bargaining that we expect to bargain now, not delay till the very end and expect everything to fall off the table. If they chose that path, it wouldnt be good. Weve been very consistent in our message that september 14th is a dead deadline, not a Reference Point and we expect all three companies to have that agreement. If they dont, there will be action. So we can get there but the Companies Need to get serious and buckle down. Were 48 hours away. We have a lot of work to do in 48 hours. Joe has a question. Go ahead. Weve seen the big three over the years, there have been good times and bad times. Sometimes the bad times get really bad. I know that every worker at the big three wants a strong and vibrant domestic auto industry. It a good sound bite about ceos and we w side by side. Call it tens of millions of dollars, thats fine. I understand that. But to give all the hourly workers, a 40 or 36 increase, youre talking about more money that the Car Companies would have to spend and thats going to come right out of wherever they get their money. Theyre try now trying to an ev standard thats tough to meet and tough competition. If you want the patient to survive and be very healthy, it might not be possible if you were to get the same pay increases that these nasty ceos got. It just doesnt make nick sense. Maybe not to you. Up know, labor equates to did just normal math. No, its not. Normal math tells you that labor equates to 58 of the cost of the vehicle. These companies could double wages and not raise prices and still make billions in profits. This goes back to the postwar boom in the 19 40z, 1945. Inflation rose 45 at that time. Even the Government Back then was saying that Companies Back then could raise prices 50 raise wages 50 and still not have to raise prices. Its a choice. These companies raised prices 30 in the last four years. Ceo went up 40 , worker pay went up 6 . Theyre making billions in profits off the backs of the work of the members. Our members deserve better than that. Elon musk is trying to cut cost. Hes already got a huge competitive advantage at tesla in terms of making the evs. You know what the sales of the big three evs are right now so were just talking about relative whether youre going to be able to compete on a relative basis when youre asking for a 40 increase in wages. Well, competition is code word for ris to the bottom. Im not concerned about elon musk building more rocketships. Our case is working class people need their share of Economic Justice in this world. Peep want to talk and say this is class warfare. It gp going on in this country for the and the working class is scraping by, working paycheck to paycheck. Its time that changes. Hundreds of billions of our taxpayer dollars are helping fund this transition. Workers deserve their share of equity in this economy. You mentioned labor makes up 5 to 10 of the car of a car. If you increase your costs, you it goes up on a bigger portion. The other issue u dealing with is youre starting with a shorter work week. I understand would you be satisfied if they take an increase . Not at all. Its a shell game. Let me be clear as i can about this. Our wages went backwards. 16 years ago when a worker was hired in and promoted to full time, they are 10 an hour todays wages in 2023 when you hire full time, youre making 10 an hour less than you were making in 2007. Its unsearchable. Inflation hasnt slowed down. The price of everything is going up astronomically since 2007. Our purchasing power has been severely weakened. So not at all. And thats really not what this is all about. At the end of the day im go back to this. They could double our wages, not raise the price of vehicles and still make billions in profits. Its phil again. Bark clays put out a note yesterday saying you you are less likely to strike forward and maybe further along with the negotiations, probably have the weakest of the big three Balance Sheets out there and because they employ the most uaw members, youare less likely to strike them and last night jim farley said theres a limit, we will make offers but there is a limit to how far we can go. Is it accurate to say ford is least likely to be struck by the uaw . As it stands right now, all three are most likely to be struck until we get a deal by september at midnight. No one there is no lead company. All three are expected to deliver for their workers. And if they dont, there will be action. So there is an elite company, as we said from the outset, we expect all three have an agreement. And well see where that ends. I know well hear more from you later today. Youre going to give an update on strike strategies and where situations stand at 5 00. Well talk with you then. Thank you for joining us this morning. Joe, becky, andrew, back to you. Thank you. When we come back, august Consumer Price data. Economists expecting a big jump month over month of 0. 6 . Stay tuned, squawk box will be right back. I remember when i first started flying, and we would experience turbulence. I would watch the Flight Attendants. If theyre not nervous, then im not going to be nervous. Financially, im the Flight Attendant in that situation. The relief that comes over people once they know theyve got a guide to help them through, i definitely feel privileged to be in that position. Welcome back to squawk. When we come back, we have august cpi inflation data right after this. Were going to break it down with our big panel. It all happens in just moments when squawk box returns. 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The main event, the Consumer Price index for the month of august, headline expected up an aggressive 0. 6 and economists and analysts delivereds are up 0. 6. Last time we had up 0. 6 on a month over month was going way back, you have to go all the way back to february, february of 2022 to found a big are number when it was up 0. 7 in march it was up as well. So now if we consider that the High Water Mark here in 20051. 2, weve made progress. But this follows up 0. 2 of 1 , food and energy up 0. 3 year over year, up 3. 7 . That is hotter than expected, hotter than the rear view mirror and 3. 7, last time we were anywhere near there was up 4 in may and if we look at year over year, or which in my opinion is probably the most important, 4. 3 . Now, this is interesting. Its down from 4. 7 exactly as expected at 4. 3 but once again lets go through the litany here. We havent been below 4 in this metric going all the way back to may of 2021. Last year over half were above 5 . So this is still quite sticky. What has the market done . Weve gone from a 431 yield in 10s to a 433 yield. At 4. 33 were up a handful on the session. Currently the high yield closures are important equity levels. Its gone from, as joe pointed out to 13, 14 in futures to down 75. If we consider the yearoveryear numbers the 3. 7 especially is something to pay close attention to. That includes food and energy but no matter how you slice it, whether you separate those out or not, the fed committee is certainly not in singe with most persons or even other economies that dont separate those out, especially at a time where the transition is ugly as it may get with regard to ev is one of the sticking points that could keep not only energy and electricity costs higher but all the Cottage Industries associated with the transitioning and the auto history. Joe and the panel, back to you. All right, rick. Stay with us for more on the new data, let bring in the director of economic studies at the American Enterprise since tight. What did you say . Im sorry . Emily, Senior Vice President for inclusive growth and our own senior economics reporter Steve Liesman. Well go to the first. Weird. Economists did a pretty good job of forecasting but still it doesnt cause a little agita. Yeah. I mean, look, i kind of see good news in this, crow. You know, people can throw things at me if they like but the thing that stands out to me, i just want to doublecheck this. Owners equivalent rent came down again. Just doublechecking that. Just want to get the number right. But we were at i think 04 is the number we have. So thats a help. And when i look outside of the energy come plekts, joe, it looks like prices are pretty well contained across the board. And by that i mean you did have a pop in airline and Motor Vehicle insurance, which raised transportation it was 2 , but medical Care Services up 0. 1 . Some of the other elements in here, used cars fell again 1. 2 percentage point so rick can go out and get himself nor jelopy if he likes and food at home was contained at 0. 2 , food away from home 0. 3 . So were not, as yet, and this is why you got to be careful here, seeing a bleed from Higher Energy services into other prices immediately. There may be other issues down the road, there could be some popup Inflation Expectations to worry about, but for the moment the surge we got here is in Energy Services and the question becomes whether the fed finds comfort in the core, which has been coming down. It is a little harder than expected, as rick said, but the yearoveryear rate has been coming down. Emily, we just had sean on and weve been talking about where some of the inflation, whats the root cause for a lot of it and some of it is still labor. At the centers for american progress, i wonder what you think about the summer strikes. Are these going to be the low numbers when some of this filters through, some of the increasing wages . The uaw is asking for either 40 or 36 . Is that a good thing do you think . So i think we have to look at the big picture. We do expect some monthtomonth increases or decries, just like the stock market. The overall trend does show a set that inflation remains moderate. Last year at this time, we were at the annual inflation right and were seeing prices for chick i dont know and eggs and used cars have come down in july. But i do think that is important that we keep watching the unemployment numbers as as well. Were seeing steady and growth in jobs but also, you know, we think that the fed should proceed with caution as it considers future rate hikes to make sure that we arent, you know, raising rates too high and possibly sending the economy into recession could be the worst thing. The labor market remains pretty tight. I guess my question was do you think were in danger of having this turn into inflation is here, i make this, i want this so i can deal with inflation and that causes prices to go up, the classic wage price spiral. My question was about 40 wage increases for all the hourly workers at the big three. Is that inflationary in your view . So we do think that its important for uaw to find Common Ground and to avert a strike. Getting auto workers, you know, working is a key part of our transition to clean energy and we want to adjust transition to clean energy. Okay. You can talk about whatever you want to talk about. How are these numbers . Are we in danger of a wage price spiral in your view, smiek snell. I agree with steve. Im not overly concerned about the big monthly spike in the headline number. I think we will see some kind of bleed from energy price noose core prices. That takes some time. But again, im not intensively concerned about it. If i were the fed, i would be worried about the core number. If we keep having 0. 3 monthly fwroet in the core cpi, then were not going to be on a path back to the feds target and thats just not acceptable. Weep need to be at a minimum, we need to be on a path back to the target. I dont think we need to be at the target but we need to be on a path back to the target. If this had come in at 0. 2, that would be kind of a long path. We would hit the target sometime in the spring or summer of 2024, but at 0. 3, just the way the math works, thats just too high. So the question then becomes a question of balance of risks not, you know, not a balance of risks between do we, you know, tighten in november, do we tighten it in 2024 and shorten the path down the target, thats kind of what i think we were expecting the question to be before these numbers. Now i think the question is kind of back to where we were several months ago, do we risk a recession just to put inflation on a path back to the target . That question i think has a pretty easy answer and the apes is yes. The fed needs to get inflation back on a path to its 2 target. Hichlt rick, we said that the hard lifting might be ahead of us in terms of getting down to 2 inflation. Do you think that it seems like in real estate theres a sellers market and theres a buyers market. Do you think were in an employee market versus an Employer Market with that interview that we just had . Is that going to make it even harder to get down to 2 . I mean, 40 s a pretty big hike in wages. Oh, yeah, wages are guns hot, no doubt about it. I think the uaw president today was very enlightening. Theres going to be very little negotiation most likely below the 30 , maybe more negotiations on the fourday work week but no matter how you slice it, theres upwards pressure there. We see all the issues with regard to diesel fuel and issues with gasoline and future issues, procuring enough to keep all the logistics running efficiently. These costs are going up, joe. You nailed it. And as far as the fed goes, i think that many of the issues postcovid are doing exactly as logic would expect. Its the things that weve changed during killer, to deal with covid and postcovid, the spending, the programs with the fancy names like inflation reduction that doesnt reduce inflation. Its the o b having so many numbers wrong, the budget deficit moving from 1 trillion to 2 trillion. These issues are all big. The market initially moves up to 434 and then back to 428, 429. We see the equity markets after being down 14, they moved down to 75 and they moved up for a while. It demonstrates investor are a little confused here. Theyre getting mixed numbers and they seem to be pleased here. They dont really seem to ton want to raise rates more. I understand higher for longer going to do its work. And the oddest part of all is i dont know that the fed can do anything to stop the encroachment of inflation that we are experiencing, especially in the energy sector. So to summarize, the think it price of poker, the ante has gone up and i dont think the fed will be able to bring it back town and boast meth ods of inflation year over year was in february of 2020. Steve, you you like that. And actually the yields did, they ran up and came back down pretty quick. I think they were yeah. I think that i think the initial trade, joe, is the black boxes get involved and then human might take over and say, you know, what, this is not for now. Thats right. This is not a dramatic change in what we thought. I want to just point out some work that alan blinder did which suggests that Service Inflation always comes down more slowly and that the current design in Service Inflation is equivalent to theity sign in Service Inflation under volcker. Not in theearly part but in the latter part, the 83 onward portion. He looked at the decline in Service Inflation back then and found it is coming down. It always comes down moe are slowly because of a stickiness in prices. I want to point out one other thing that im thinking about and done a little pit of work on but still working on it, which is its not clear to me that union prices or union wages really set private sector wages. As much as i looked and staired and turned side ways all the charts, it looks like union wages go up along with private sector wages and dont particularly lead it. I this i what we might be seeing in the Union Negotiations is emblematic of whats going on in the labor market but not necessarily the cause of whats going on or cause for future inflation concerns. I dont know if michael has a thought on that. Just seems to me we want to be careful with the chicken or egg things here. Union members up 7 . It sets wages expectations rather. It may not be a cause but certainly a symptom archvery strong labor market. Theyre wrapping me. Thanks to michael, emily, rick and steve. Appreciate it. Good to have you all on today. Thanks. When we come back, were going to talk about the state of m a, a top voice of Goldman Sachs. And shares of orkol, that stock coming off its first day in 20 years. It fell 12 yesterday. That slump followed an oracle First Quarter revenue miss and current First Quarter guidance that came in under expectations. Quk xnded, youre watching sawbo a this is cnbc. Dicks Sporting Goods has everything you need to upgrade both. Find toprated drivers and irons from callaway, taylormade, titleist and ping. Tour balls from your favorite brands. And the most dapper styles from travismathew and walter hagen to calia and lady hagen. You handsome devil. Select the best golf shoes like footjoy, nike and more. And get back on the course with onehour pick up. 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Switch now and theyll give you nfl sunday ticket from youtubetv, on them. hero fan this plan is amazing josh allen another amazing plan, backing away from here very slowly. fan 1 that was josh allen. fan 2 mmhm. vo football season is here. Get nfl sunday ticket from youtubetv on us. A 449 value. Plus, get a free 5g phone. Only on verizon. Check it out. Dow futures down by about 48 points, the nasdaq indicated off by 33. Our next guest is here to talk m a. He said june and july activity levels have been encouraging and its a big year for activism campaigns with activists sometimes warming target companies. Joining us for more on the m a landscape, the cochairman of goebbels and active defense. Good morning to you. Good morning. It doesnt seem like were seeing headline grabbing yields like we used to. Youre right. Two areas give us optimism. One is the data. The other is just ent sentiment with our clients, right . When we talk to to boards, they are ready to move forward, theyre ready to dust off maybe some of the things they had put on hold some time ago. So that gives us some optimism. When you also think about the fact that we started the year in a massive trough on the m a side, recovery has been slow but nonetheless steady. When youre saying youre seeing confidence, often times its alagging barometer because you sort of see the market move before the ceos do. But sometimes it reverses. In what spaces do you specifically see people thinking, okay, i can move now. If you look at the activity that weve already seen, Natural Resources has been a source of reresilience and strength apnd think around the lagging, the tmt space is probably going to be a little pit slower in its recovery and the other place where i think we need a little bit more time is the private equity area. It has slowed down quite a bit. Were optimistic at that take privates are going to continue to come back. Were Spring Loaded with the amount of dry powder the private equity has on the sidelines. If you look at the merger business and how much cash is sitting on corporate Balance Sheets, those are all signs that can provide good tail winds as we go forward. How much is the regulatory landscape. Goodle case just began yesterday. Theres been lots of deals that have been that ftc and d. O. J. Has sought to lock has that been a damper on things . Used to think about antitrust and regular paradigm is something you would i this maybe mid deal, toward the end of the deal. Its completely front loaded right now and were in an environment buyers and sellers are selfselecting, and as you think about who could be a buyer for our business, if you think the antitrust risk is relatively high, if you think the runway on getting clearance is going to be a year, year and a half, i think people are selfselecting and saying, maybe thats not a deal we want to do. What has historically happened to deal making in an Election Year . Were about to hit an Election Year. And there is some sense among and this goes to the regulatory scheme of it. Theres also the confidence scheme and Everything Else, but if you believe that theres going to be a change of administrations, you know, in 24 or really 25, you might decide youre waiting. If you dont, maybe youre not. I dont know. Thats one way to look at it, and i do think the election bears some on what happens, but i think more fundamentally, its the economic outlook. We have really seen an improvement, a reduction of uncertainty, the recession risk, if you think about that, those probabilities have been consistently coming down in spite of the cpi data just a few minutes ago. Weve seen a stabilization on the inflation front. I think all of those are good macroeconomic indicators and i think they drive the thinking a little bit more than what might happen, lets say, 12 months from now in kind of the election. And by the way, if youre a ceo or sitting in the csuite right now, what youre contending with is that in this transition point in m a that we sit in right now, do you want to take advantage of the first mover position and take and, you know, kind of move first and kind of go after an asset that might be available before some of your competitors do that, or do you want to wait and see . Do you want to wait and see because youre worried that prices are distorted because of what happened with the pandemic and we havent gone back to normal yet, and youre worried youre going to overpay . Its possible, but weve got an equal number of clients and boards, saying, lets look at it the other way. If you look at large deals that have happened in the second quarter, weve seen a resurgence. Our sense is that there is cautious optimism out there and not just necessarily a waitandsee attitude. If you look at youve seen the private equity folks have effectively i dont want to say stopped buying, but its slowed materially. Yeah. If you speak to them, the reason it slowed materially is because theyre waiting. Theyre waiting for things to come down. Theyve represented how big a part of the market or have they been in the past several years . In the past, they have been 35 of the market, approaching 40 of the market. Right now, theyre 25 of the market. I think in order to have a healthy m a market, you do need some participation from the private equity folks, but i think the private Equity Industry is also looking at this and saying, its been some time since weve returned capital to our lps. Its part and parcel of their business to do deals and to make exits, and the exits have been a little bit slow, so i think your private equity player, youre looking for an opportunity right now, and the activity has slowed down dramatically. Its down close to 50 , but at the same time, i dont think its stopped altogether. Real quick. You do a lot of defense work against activists. Activists have often worked in tandem, even though they say they dont, with private equity. They try to tee up transactions so the Companies Get sold. That kind of practice seems to have stopped or at least slowed down. Why do you think that is . I think that private equity and activism are really separate pools of capital where they start becoming sort of cosymbiotic is they get into a place where if youre an activist and you want to get a company sold, you want to get a change of control, if theres a private equity buyer thats ready to do that, i think theyre both going for the same things but theyre approaching it largely very differently, and i would say that while m a, weve talked about, has been relatively slow and its starting its recovery, the activism business for us has been on a tear. Were coming off 2022, which was a record year. Were probably on track for the second or third best activist year right now. And i think the nature of that activity is actually going to spur m a as well. Okay. Thank you for coming in. Appreciate it. Nice to see you. Kochling up, the a. I. Event thats luring tech royalty to washington, d. C. , today. Were going to run down the list of ceos attending and talk about whats at stake for that evolving technology. Stay tuned. Well be right back. With comcast business. It is. Is it possible to use predictive monitoring to address operations issues . We can help with that. Can we provide health care virtually anywhere . We can help with that, too. Is it possible to survey foot traffic across all of our locations . Yeah absolutely. With the advanced connectivity and intelligence of global secure networking from comcast business. Its not just possible. Its happening. You got this. Lets go. Gobble gobble. Ive seen bigger legs on a turkey rude. Who are you . Im an investor in a fund that helps advance innovative sports tech like this Smart Fitness mirror. Im also mr. Leg day. 1989 anyone can become an agent of innovation with invesco qqq, a fund that gives you access to nasdaq100 innovations. I go through a lot of pants. 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Plus, ask how to get one free line of unlimited mobile. Comcast business, powering possibilities. Tech are set to gather in washington today, and it is all about a. I. Eamon javers joins us. You are watching for the tech superstars to hit the town. Thats right, becky. Im standing in front of the Russell Senate Office Building on capitol hill. This piece of sidewalk is about to see some of the biggest names in technology from elon musk to Mark Zuckerberg, all arriving here for the a. I. Insight forum. This is something thats a little bit different from what they do normally on capitol hill. Its not a typical hearing that you have seen in the past. Were going to see the top tech ceos meeting with a group of four senators, two democrats and two republicans, behind closed doors here, so not available on cspan, not available on cnbc. Theyre talking a. I. Policy, trying to get some sense of how to guide potential a. I. Legislation up on capitol hill in the years to come or so, depending on how quickly they can pull this off. Well see some of the biggest names here, but theres some controversy around this because its not going through regular order on capitol hill. Its not an open committee process. Other senators are invited to attend, but theyre not allowed to necessarily participate in all this. The public wont see it. And some people have called this the mother of all lobbying meetings up on capitol hill, but we will see those ceos arriving in a short time here. Well try to speak to them as they go in. Well see what they have to say. I guess the reason they dont want it on public display for everybody to see is they figure theyll be getting some pretty Sensitive Information that might give you a headsup about this competition really with china too. Sure, absolutely. And i think the key is that they want this to be sort of an openended backandforth discussion about what the key Priority Areas are for potential a. I. Legislation, how to regulate this industry, and i think the controversy comes in because you have the ceos of some of these big a. I. Companies who will be here, and naturally, theyre going to argue for the type of regulation that makes their businesses the most profitable. Thats what you would do if you were in their chairs. Presumably, the senate will also hear from other people who want to put more limit on a. I. Development, a. I. Safety, factoring in all the economic effects of a. I. And all that as well, but this is a first step organized by Chuck Schumer on capitol hill. Well see big names shortly, guys. Eamon, thank you very much. We will be watching. See you in a bit. We will. Quick final check on the markets after getting that news from mr. Santelli. Little hotter than expected. Lets show you futures right now before we hand it over to our friends on squawk on the street. Dow up, nasdaq looking to open higher as well. The s p up a little over a point. Lets look at the tenyear note. Right now, the tenyear up at 4. 288 and the twoyear basically where we started. 5 . Well call it right there. Make sure you join us tomorrow. You want to show oil . 89. 30. Make sure you join us tomorrow. Squawk on the street begins right now. Good wednesday morning, welcome to squawk on the street, im Carl Quintanilla with david faber at post nine of the new york stock exchange. Cramers at one market in San Francisco, fresh from his exclusive with marc benioff at dreamforce last night. Futures are trying to bounce, couldnt get that 0. 2 on core. Tenyear yield briefly pops to 4. 35 , close to the august highs. Our road map is going to begin with cpi, giving the fed more to consider ahead o