tv Squawk Box CNBC November 16, 2018 6:00am-9:00am EST
>> he's in an odd position "new york times" is right. so i don't know what to say about all of this. they're denying a lot of that story. it's friday, november 16, 2018 "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box. all right. good morning welcome to "squawk box" on cnbc. we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. the u.s. equity futures on this cold and snowy morning here in times square are indicated lower. dow futures down by 71 points. that comes after a 208-point gain for the dow yesterday and a reversal of fortunes across the board. yesterday the s&p was up 28 points and the nasdaq was the best performer, it was up by 122 points this morning down across the board.
the dow futures down by 70 points s&p futures off by 10. nasdaq down by 62 as we slide into the end of this trading week look at what happened overnight in asia. the nikkei down by a half percent. stocks in china higher shanghai up by 0.4%. hang seng up by 0.3% and then in europe where you're seeing early trading activity taking place, things are flat to mixed. the cac and the ftse both relatively flat. dax is up by just over a tenth of a percentage point. italian stocks up by 0.25% the ibex in spain down by just over a tenth of a percent. if you look at what's happening with the treasury yields in the united states, the ten-yearnot yielding 3.116%. sheryl sandberg firing back at a bombshell report by the "new york times" that said the company ignored russian
interference in the 2016 election facebook spent much of yesterday trying to address what has now turned into a public relations crisis for the company including holding an hour-long conference call that mark zuckerberg had with journalists >> in general there are a lot of issues here that we were behind on i think a lot of the critique of the company is fair. a lot of the feedback has been important for us to take in order to learn and do better because we feel like we have a responsibility to do that. that's our primary goal here >> in another blog post sandberg said on a number o issues including spotting and understanding russian interference we saw in the 2016 election mark and i have said many times we were too slow. but to suggest that we weren't interested in knowing the truth or we wanted to hide what we knew, or that we tried to prevent investigations is simply untrue.
mark zuckerberg announcing yesterday that the company will create an independent body to oversee appeals about use ers ad removing content we will speak more about this with jeff sonnefeld. there's implications for the company in silicon valley. there's been a number of stories about employees or potential employees in the valley who say i don't want to work at facebook >> i can understand sheryl's statement. the idea they didn't want to know the truth or trying to tamp things down. i can understand her statement on that. that may well be the case. it may be true in all of these things so much is gradations of how you read some of these actions >> i think this is all about shades of gray and all about depending on -- >> shades of the gray lady >> and who is in the room and walks away with certain ideas. alex stamos, the former chief security officer was on twitter
last night with his own shades of dprgray >> if you're talking to 50 different people like "the times" did, not knowing exactly what level of input or insight each of them had, you will get a mixed picture. >> the larger story was how slow they moved, the board said they moved slowly they said they moved slowly. then some of the efforts which they have now also acknowledged hiring certain firms in washington to do relatively dirty work >> that was the most interesting part of this >> they certainly hired the firm and didn't get rid of them until wednesday night. i wonder if they knew exactly what the tactics were. >> that's a fair question. that's a fair question but then the other fair question is should you have known >> i've run through the same level of questions >> if you were to think of my
take on the irony of what's happening here, could you -- i don't want to upset you. >> no. no >> you understand how i -- it kind of feels like -- >> i try to understand how you feel >> but in the world of, you know, elitists and progressivism, isn't this like eating one of your own >> i don't think so. >> wait a second didn't palmer say you can be a conservative but you're fired because you gave money to trump? how about if you say you gave money to the independent guy but it's such a progressive -- zuckerberg admitted it now the "new york times" story, you think they felt bad about eating one of their own? >> no. no the reason i say that, i would say this multiple times until i'm blue in the face -- >> if there's a story, you're going to do it
>> probably the ultimate answer is hillary e-mails the public would have never known about that -- >> there's been other sexy things that you have not gone after. the times has not gone after with the same zeal it might go after somebody -- >> i think the times tries as i hope most news organizations try to go after big issues that matter facebook is a big issue. a big company that matters >> and you follow the story. >> i would even say -- >> that's the only north star in all of this. >> we knew fox would do the amicus brief for acosta. do you think fox goes after the right as hard as it goes after the left >> i think that fox goes after the right as hard as it goes after the left i generally don't. but that's my --
>> it's all relative we all see the world from our own prisms >> we do >> i'm glad we're talking this out. but i will just -- >> me, too. >> for me, this is when i really admire the reporting staff best paper in the country. >> because you like this coverage >> yeah. i do i like it a lot. >> are you renewing your subscription thfrnlt is whe >> this is where i think maybe i have not given enough credit to the "new york times. >> all right >> then you go over there, these are your colleagues. you're like walking around there with your headway up with deal book and everything else, right? >> no. but i try to keep my head down >> i'm complimenting him, the "new york times. >> i would started reading "the next thing" if it was mine to read >> oh. let me do this >> that was a nice note from both of you.
nice note to end it on >> okay. this is not so nice. nvidia shares plunging, the chip designer warning of disappointing sales. it's blaming a build up in unsold chips after the cryptocurrency mining craze started to slow things down. shares of nordstrom also coming under pressure the retailer posting weaker than expected same-store sales. nordstrom saying it had to refund some credit card customers after overcharging them a higher interest rate on their store credit cards >> you want me to read the stocks for you down 9%. >> yeah. i want to look over. i can't -- >> down 9% >> i can't see it. and williams-sonoma shares -- >> down 13%. >> -- awesome. can you get it deeper?
>> i'm trying. earnings beat the street estimates but revenues fell short of expectations. the retailer announcing plans to open stores in india i thought i was going to say one other thing. i forgot uk minister -- prime minister theresa may says she plans to appoint a new brexit minister within the coming days. willem marx joins us from london this is like the day after coverage i don't know where we stand. it's good that we get to talk to you. good day >> yeah, good day to you, joe. i'm not sure i have more answers for you. there's a lot of uncertainty here, not only as who will replace dominic raab but also about her future a number of mps within her own conservative party have publicly said she do not have confidence in her as prime minister if 48 of those mps decide to send letters to a party committee inside the house of
commons behind me, that will trigger a leadership contest there's no guarantee she would lose or win that contest, but if she were to lose that contest, all bets are off in terms of the brexit strategy. if she wins, she says she will push through this current proposal and then shiell hae'll the next challenge of a vote within the house of commons in december if that vote is defeated we could see a general election we could see a second referendum on eu -- british departure from the eu and the european side saying they're not willing to make more concessions at the moment a lot of challenges for theresa may right now. >> >> all right. thank you, willem marx we have about -- you know, i can see today why i would say the three big stories. what's happening with brexit is one of them. facebook, what if we had to pick, if we had to advise our
7:00 a.m. producer what are the three big stories? >> china trade situation >> that's always there facebook big >> i put facebook up there >> what is jeff sonnefeld going to say >> i know what he's going to say. i think we'll tease you and say he has something provocative to say. >> i get the e-mails >> then let's tease the viewer billionaire paul tutor jones raising a red flag about debt. yesterday he said the first signs of trouble are appearing in the corporate bond market >> we will probably on this run stress test our whole corporate credit market for the first time it's going to be really, really from a market perspective, it's going to be interesting. i think there will be -- there
probably will be some scary moments in corporate credit. and my guess is we'll see some instances where the stock market is responding to negative elements of certain holders of credit that can't get out, and/or bars of distress because the market is shut off to them >> the credit bubble will bring a major challenge. that's his judgment on things. that's somebody people listen to and it is causing concern. joining us right now is sr sri kumar and eric schiffer. sri, what do you think about what paul tudor jones just said, the idea that there will be some scary moments in corporate credit >> i think there are going to be lots of scary moments.
the debt has built up substantially since the financial crisis of 2008 we maintained ultra low interest rates for too long a period of time we have not just qe 1, but qe2, qe3. now we're trying to go to the other side and increase interest rates. so the fed by accessibly easing first and increasing it, causing debt to increase, which is paul tudor jones' point, it is increasing the risk to the global economy and markets so i think i'm very much in line that's what i've been saying repeatedly on your program that has implications for investors. it's not good for equities it also means that u.s. treasury yields are still too high compared with where they should be >> we always talk in times of excess from the fed, the excesses that build up during low rate structures. you think it's the corporate debt market that is going to be
the big bubble that bursts >> there's a bubble everywhere there's a bubble in corporate debt and in consumer debt. auto loans increased substantially. credit card debt is up mortgages are so high, that's why you see mortgage applications falling off we had a bad month in terms of home sales so it is becoming generalized, that's what you see in the stock market correcting and the bond yields refusing to go up >> eric, i know you think there's more volatility ahead when it comes to the equity markets. is there the underlying reason or other things that you're watching >> this is a big component of it certainly i think we're facing -- because of the slowing down certainly outside of the united states what could be a
pretty catastrophic thing for corporate debt and some other pretty large mammoth debt burdens that exist out there i think it will be very ugly much uglier than tudor jones is even talking about with respect to the markets, there's an underlying battle happening, and it's occurring between the fact that you have this slowdown outside of the u.s., you have the debt issue, you have the markets trying to wrestle with here what's going to happen with respect to the fed, the aggressive stance that the fed has. the market is trying to align perception there you contrast that with what's happening in terms of the public's perception in the u.s. of the economy, which is still very positive. and those factors, including the fact that we may get
infrastructure, that will create volatility i think this contrast of these forces so it's going to be an interesting time for investors >> sri, the question what i have is who is holding the bag? who do you think is the most exposed and how systemic is this >> it is systemic andrew in the sense that you're feeling it throughout as to who is holding the bag, who will be the one that is going to get burned, i think it's a repeat of what happened in 2008. you had equity holders who thought the economy was in good shape until september of 2008, the stock market was running up even after the bond market was giving danger signals. the same thing is happening again. the bag will be left in the hands of equity holders who still have a lot of optimism they'll be the big losers.
>> you touched on this briefly, eric, but the idea that it's still a strong economy in the united states. job market looks unbelievable. if you talk to the ceos of any banks, generally they can see things in the 18-month horizon every one we've talked to said they don't see a downturn or recession in the next 18 months. how do you explain that given the huge concerns that people have and the slowing that we're seeing in some areas >> i think it's -- i don't disagree with that time horizon. what presents some concerns and serious concerns are, you know, these arguments that are put forth with respect to the debt market and some of the corporate debt that exists as you see slowing down outside the u.s whether the u.s. can continue in sort of a vacuum over this time
period we'll find out. we'll see what happens i'm optimistic over the next year i don't know that we'll see it extend all the way we'll find out we'll see. you know, i think investors need to recognize that there are some very serious riskstoday that didn't -- that just have not been in existence for some time. on the equity side i do think that there will be concerns when debt gets hit, the equity markets will have a similar impa impact, and there will be adjustments there as well. >> i don't think i'd be optimistic even in 2019. i think we have a lot to pay for and i think looking at the oil prices, looking at the 2 and
10-year bond yield flat being, it could be happening faster >> thank you very much >> thank you. coming up, british artist david hockney shattering the record for a piece of art sold by a living arrestedist. and later our newsmaker of the morning is federal reserve vice chairman richard clarida. as we go to break, here are the winners and losers in the dow. who says our bank isn't tech enough?
♪ all right. 81-year-old artist david hockney made history last night. portrait of an artist sold for $93 million breaking a record for a piece of work sold by a living artist. i thought that was david spade i thought that was chris farley. it had nothing to do with tommy boy? it may have helped >> i think that's peter
schlesinger. people say that may be david hockney in the pool. previously -- i've seen that when i like it -- >> the dog >> yeah, 50 million. it looked like -- >> too much or too little for you? >> i like it because it's shiny, but it looks like it's a balloon dog. i understand this more than the rothcos, with the line here and a different color. evan beard is rolling his eyes you have a lot of comments about parallels between where the art market is and where the economy is maybe where the stock market is? this is late cycle behavior for the art market >> this is the art market's golden week. $2 billion worth of work
hammered down this week in new york sales it's a prompter for not only the art world but the global luxeky goods market people were watching we saw softening in china. rise in interest rates a dip in commodity prices. people were asking, you know, is there enough liquidity at the high end to drive the market fur she further, the headline is there's a healthy market there's liquidity at the top and the market keeps rolling on. >> are you frothy? is it frothy >> there are parts of the market that are frothy. we saw weak bidding at the ultra high end this hockney work is an influential work it's one of the most iconic
works ever of a west coast -- perfectly l.a. multiple billionaire clients were bidding on this thing >> how do you think about art relative to ultra high-end real estate now ultra high-end real estate has come down. heart hasn't >> ultra high-end real estate does pay a dividend if you're renting it out art is a sentiment market, a cache market people buying this stuff, they have a lot of assets they're wealthy. they have the real estate. but here, this is the cultural capital. it's cache they want to own works of genius the mix of who's buying and selling, has it shifted? >> markedly. a generation or 10, 15 years ago they were multi generation families this was a hobby a lifestyle now it's the private equity hedge fund -- >> so oldversus new
money? >> yes, new money. >> you said there is frothiness, how do you determine where that is >> a sign of frothiness is not looking at icons or masterpieces it's looking at hyper young contemporary artists and people are buying it with solely the expectation that they might sell it next year >> and it might shred -- >> i thought that was great. >> i know. >> it's worth more now >> i know. i know that's the frothiness he's talking about. why is blockchain going to change the art market? >> it's not completely revolutionary, but it provides transactions now, a little more transparency, they're on a digital archive. so the hope is if your work coming to auction had sold before and it's not archived on
the blockchain, this will be questions. this will make banks and investors more comfortable >> does that change anything on the forgery side >> no. >> it's still a physical item. >> yes >> just because there's a record over here that says this thing over there -- it's not a digital item >> it does nothing for forgery or missed attribution or does nothing for -- >> every time someone comes in, i want a sutene. i'm willing to go 1500, 2,000 if you could -- if you see one and it's in that price range will you -- >> you can get a good one, 1 million, 2 million -- >> no, $1,500 s -- that's why nobody gets back to me on this stuff. evan beard from u.s. trust disappointing me it's not going to happen that's fine. >> thank you. when we return, gene therapy to treat disease has been decades in the making. now it's getting closer to
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♪ welcome back, you're watching "squawk box" live from the nasdaq market site from timing square. good morning among the stories front and center, brexit fallout the pound stabilizing following yesterday's massive drop uk prime minister theresa may says she plans to appointed a new brexit minister within the coming days. facebook's coo sheryl sandberg firing back at a bombshell report by the "new york times" that accuses the company as ignoring russian interference in the 2016 election the facebook executive is denying that she obstructed any early investigations into election meddling she also adds she was unaware that facebook was involved with the pr agency that ran anti-semitic campaigns it's hard to believe they got
away with deal book first, and zuckerberg is at harvard saying what might -- >> i think facebook got there first. >> you didn't know about him >> i didn't know about him >> facebook was named facebook after a facebook thing that was there for -- >> yeah. we don't want to -- okay >> i wouldn't -- >> yeah. no shares of nvidia deep in the red. the chipmaker's q3 revenue coming in below consensus. guidance for the next quarter also missed expectations it's a pullback. that's what we call a pullback u.s. equity futures have been in the red most of the premarket secondssion. down 97 now. s&p down 12. nasdaq giving back 73 this morning. >> you might be on to something, joseph >> i thought we already looked at this. >> i might have a copyright
infringement he was february of 2004. i was in october of 2001 >> wow >> way before. >> you know, they say who is wearing it better. i think he wore it better. >> he called it the facebook >> i didn't go with the deal book let's talk healthcare. multiple biotech companies are racing to bring hemophilia gene therapies to trial meg tirrell has the latest edition of modern medicine >> good morning. it's a major new technology with a massive market size. the technology is gene therapy and it aims to treat the underlying drivers of disease with one dose. there are a couple of gene therapies on the market that treat rare diseases, and now the first gene therapy for hemophilia is out. there are a lot of competitors
vying for dominance. because there is so much excitement there's a lot of stock volatility yesterday unicure gained 36% for its development of the hemophilia program a the next catalyst for this space could be a major medical conference in a couple weeks the american society of hematology meeting is happening. the sensitivity around this area can mean big stock moves can happen on any new information. most importantly it's exciting for patients today on "power lunch" we'll have the story of a grandfather with hemophilia who entered a gene therapy trial to try to find a cure for his baby grandson great story. >> it is a great story we'll talk more about healthcare now it was a key issue leading into election day. what can we expect for congress
to do as it tries to tackle these issues in january? let's welcome the pharma president and ceo. good morning to you. >> great to be with you again. >> the administration wants to do a number of things. for the most part i don't think you want to do many of them. where is there common ground is there >> i think the administration is taking a number of steps that the industry supports. if you look at what commissioner gottlieb is doing at fda to spur generic competition, if you look at what they've done on the trade front, for example, the new u.s., canada, mexico agreement where canada will go from eight years of int leblgt wa intellectual property agreement from 0 to 10, that's the way to get innovation there are some things going in the wrong direction, like taking reference prices from single european countries and applying
them here in the u.s if you look at those countries patients have reduced access to novel cancer treatments they wait two years longer on average than u.s. patients do >> what would you do >> if you ask patients what they're most focused on, during the election it was coverage issues, medicaid expansion when you ask them about drug prices they care about what they pay at pharmacy counter. one thing we should do is take the 1$150 billions that are sloshing around in the system in the form of rebates and discounts and pass them on to patients at the point of sale. i was with a senator the other day who ran a fortune 500 company who said my supply chain costs were 6%. why are yours 40% to 50% that's what rebates and discounts are >> why not just lower list prices instead of offering these rebates along the way? >> companies are the political debate is lagging the facts on the ground.
a few years ago drug spending was 13%. year-to-date drug spending and drug prices are up lower than inflation. >> that's because of direct pressure from pump >> that's part of it >> just getting rid of the rebates, you're right, that stuff gets misused and spread along the wrong ways just lower list prices entirely and do away with that process. >> we have a competitive market. if you look at it, we have three pbms that control 80% of the market, fewer and fewer health plans. they use that leverage effectively. that's why drug spending is rapidly decelerating >> what was that afraid? the actual reporting has kept up with the -- >> the political debate lags the fact on the ground >> you can say fake news is it fake news? is that true drug prices have moderated and we don't need to -- is it better the past
couple of years? if you look at it after the rebates, they do rise lore than lower than inflation >> but who is getting the rebates? >> that's the question one thing the trump administration said they would work on is changing that rebate system that's something the drug companies liked. do you expect them to make moves on the rebate area >> i do i'm hopeful. i think it's an area of bipartisan agreement we should have more efficient supply >> you mentioned the fda and that you like what scott gottlieb is doing. he's joining us in about ten minutes time he said that plan you talked bshg the europe about, the european plan, he thinks that's a good one he said the drug companies were in favor of it when it kept rates higher, they're not in favor of it now now that it is cutting rates. >> if you look at cancer medicines in the context of our medicare program, it's about 1%
of healthcare spending, about 3% of medicare spending we think it would be a step in the wrong direction to take single payer pricing in markets like greece, a fraction of our gdp and apply them in the u.s. >> the other big problem is just the transparency on pricing to the customer this goes to the advertising issue, this goes to the idea of when i go to a doctor and i get the script i have no idea what is about to happen until i show up at walgreens and they give me the price after i show my insurance card there's got to be a better way what would you actually do >> patients care most about -- it's like getting on an airplane do you care about the fuel costs, the labor costs or do you care about the ticket prices >> how can you do that >> one thing the industry is doing is voluntarily stepping up to provide information about list prices, what the average out of pocket costs would be for a patient. that's the type of information >> now you're starting to give us the different prices of
what's going on on the airline, which we don't want. we just want the number. the question is how you can get the true transparency on the number >> the problem is we have a complex system where our companies are not selling directly to consumers for the most part. it's going through intermediaries like pvms and health plans i agree we need more transparency because patients need to understand what their obligations will be out of pocket >> you don't think putting a number on a tv screen matters? >> i think it's misleading to just put the list price on a tv screen >> you don't think it would force everybody to lower it because it's on the tv screen? >> i think it's misleading i think it would deter patients from seeking care. you could see an expensive medicine and not understand that your insurance company will determine what your actual out of pocket costs are. it could be modest and you might say i will not
pursue care at all that would be a mistake. >> we will leave the conversation there. when we come back, we are expecting quarterly results from viacom at the top of the hour. we'll bring you those numbers and the latest drama in the redstone famfamily. then dr. scott gottlieb will be joining us to explain the new regulations on tobacco and e-cigarette companies causing a lot of controversy and then later facebook defendi ining itself after more press, this time over the aggressive tactics of a pr firm it deployed and the report that top leadership downplayed interference in the 2016 election you're watching "squawk box" on cnbc
retailers. bezos says amazon would one day fail and go bankrupt he said large companies life spans tend to be 30 plus years not 100 plus years, but bezos said to prolong that demise customers must look inward and not worry about himself. >> a very weird story. >> he's a humble guy >> motivational but weird motivation, i think. i guess if -- you know, we're all going to be dead, too. i guess that's what he's saying. >> no. he's saying -- >> we will be bankrupt one day >> history is littered with -- >> part of it is humbleness. >> you look at the companies that you always -- >> i know. it's a weird thing to say, we're going to go bankrupt, let's try to hold off of it as long as we can. >> i think it was more philosophical than that. >> we're all going to be dead.
let's try to live as long as we can for the brief time we're on the planet >> this guy is also exploring space to make sure we can take care of this planet because he sees the end of that he thinks in long-term broad arcs of history. >> all right apple -- you see apple yesterday? >> yes >> it was um a little. i don't know draw a line underneath the two-year chart apple signed a deal with an oscar winning production company, a24 what are their films do you know? >> one of my favorite films "room. you remember that? >> what else, evans? it's in the copy >> keep reading. >> okay. a24 is the studio behind "room," lady bird, moonlight apple has been ramping up for an entry into original content. other deals include one with oprah and sesame workshop. coming up, brexit uncertainty driving big moves in the pound and the euro and european bonds that story next
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well, you might have expected this. a bit of a volatile week for the pound after key developments in brexit talks joining us is managing director head of currency strategy at wells fargo. it's not just brexit or no brexit or soft brexit and all these things have different implications for the pound itself do you know for sure which way the pound will react to all these different scenarios before we go into all the different scenarios? >> well, no one will know for sure what will happen. and what will be the reaction. having said that, you know, i think there's a reasonable degree of certainty about the reaction to certain outcomes i mean, the idea of brexit is canceled, it should be positive. maybe up 10% >> what are the chances of that happening? >> i think that's, you know,
pretty low region of 10%, 20% not that high. if there was no deal, it would be very negative >> just a hard break >> yeah, the hard break. you could see it go back to the 120 level. i think there's a reasonable degree of visibility about where the currency would go on certain outcomes there's not a visibility that -- >> what chance of a second re r referendum small. >> i wouldn't say small. maybe on the 25% region. >> really? 25%? >> there's so many different scenarios and outcomes at this point. and whether she would lose that confidence vote. i think one of the areas where there isn't a lot of different scenarios is we're likely to not see much movement from the european side. i don't think we'll see new deals or negotiations. they've been going through this for a good 80 months to two
years. >> when it happened it was 52.48. do you think it is anymore no one knows, do they. >> in terms of >> the referendum. that's a pretty good win that's pretty definitive first time around. do you think people rethought that now would there be a reason to -- what do you do best two out of three? how do you do it zm. >> that's the thing. i don't think you can be open ended on this. i think you're right i think no one knows i think it would be close again. maybe you'd be, you know, 52-48 the other way. i still think it's very close to 50%. to your point there's still going to be a lot of volatility. >> what's at 75% in terms of how it proceeds? what do you think is the most likely >> i think things will get a little worse before they get better probably the initial deal that's being posed by the europeans agreed a couple days ago will be defeated on the uk parliament. i don't think we'll see any movement from the european side
and eventually i think it is close to what we've got already on the table ultimate it'll be agreed with or the prime minister will look i think we'll go to 125, 124 but close to early next year, march will be above 130 again. >> do you think the dollar index is getting topee or does it have a long way to go >> it's topee. i would be more of the seller than a buyer i don't think it's going to go down super soon. >> i just think, you know, you're seeing some of the fed futures sort of go down. the rate, it looks like there's been an inflection point on whether we were way far away from neutral and now maybe i think there's a thinking -- we'll hear from clarida today.
>> the first time powell mentioned the global viernlt, maybe the fiscal stimulus will start to fade. for the first time they may be starting to think about maybe we won't go as fast as we are >> all right thank you. appreciate it. coming um when we return, the fda cracking down on menthol cigarettes dr. scott leeb wigottlieb will the break. check out the crude prices right now. we're back in just a moment. let's begin.
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>> the media giant reporting quarterly results this hour. we're going to break down the numbers and talk media stocks straight ahead capitalism for everyone. ♪ >> there you go. >> thank you, sir. >> there you go. >> thank you. >> we are live at the inclusive capitalism conference talking to some of the most influential leaders in business. plus, i like beer. i also like wine the executive editor of "wine spectator" reveals the best wine for 2018 we'll test the best and reveal the winner right here as the second hour of "squawk box" begins right now ♪ live from the beating heart of business, new york, this is "squawk box.
>> it's friday and it's our favorite song. good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with andrew ross sorkin and joe kernen who is bopping along to that song right now. >> yeah. i can't help myself. >> it's his favorite check out the equity futures at this hour. dow down about 70 points after an across the board up day yesterday. nasdaq which was the biggest percent gainer yesterday is indicated down by about 63 points this morning. last trading day of the week and we will see where we head as we get towards the opening bell. >> we are watching three big stories -- >> how many? >> three count them, three. the top one? the markets. investors awaiting fed speak in economic data. we will get you up to speed on what you need to know.
and three, chip check. shares of semiconductor stocks plunging on beats and misses we're going to try to figure it out and bring you answers. >> i think the chip stock plunge is part of the market focus. is that definitely ranked? or is the center one first what's the -- >> no. market focus is one. >> is that first >> brexit is two chip stocks three. in that order. >> i'm just -- are we sure okay >> anyway, the chip sector, that's where we begin this morning. nvidia shares are under pressure the chip designer warning of disappointing sales for the holiday quarter. it is blaming a buildup of unsold chips after the cryptocurrency mining craze slowed b. riley downgrading the stocks this morning on that
check it out nvidia shares down by more than 17% that's a decline of $35. amat is giving current guidance for the quarter. that stock is off by 7.5%. here's some music to investors' ears this morning shares of sonos, they are surging this morning maker of high end audio jumped 28%. sonos setting stronger than expected sales of its new beam sound bar. the ceo will be hanging out with the gang on "squawk on the street" at 10:00 a.m. eastern time other stocks to watch. william sonoma shares drop this morning. revenue missed bank of america downgrading home depot from buy to neutral. they said tail winds are slowing.
home appreciation is expected to decelerate in 2019 and improvement spending is also expected to slow facebook's sheryl sandberg firing back a bombshell report by "the new york times" that said the company ignored russian interference in the 2016 election sandberg denying the report that said she and zuckerberg down played the internal risks and they tried to deflect scrutiny onto competitors facebook held an hour-long conference call with mark zuckerberg on the line with journalists yesterday. >> in general, there are a lot of issues here that we were behind on. and i think a lot of the critique of the company is fair, and a lot of the feedback has been important for us to take in order to learn and do better because we feel like we have a responsibility to do that. and that's our primary goal here >> in a blog post late last
night, sandberg says on a number of issues including spotting and understanding the russian interference we saw in the 2016 election, mark and i have said many times we were too slow. but to suggest we weren't interested in knowing the truth or we wanted to hide what we knew or that we tried to prevent investigations is simply untrue. mark zuckerberg announcing yesterday that the company will create an independent body to oversee appeals. we're going to talk more about this story with jeff sonnenfeld. that's coming up in the 8:00 hour viacom out with quarterly results. earnings 99 cents shares topped consensus of 95 cents a share. bob is going to get a bit of a pat on the back this morning that stock up this morning as a result of that news just now in the premarket close to 3%. but it's a bit of a comeback story after a stock that was sort of left for dead. and we'll talk a lot more about that in a bit. the fda is moving to restrict sales of most flavored
e-cigarettes to stem a surge in use by teens for more let's welcome in fda commissioner dr. scott gottlieb. thanks for being here today. >> thanks. >> scott, i retweeted some of what you had tweeted yesterday talking about the actions the fda was taking and was shocked by the amount of -- i don't know what i could call it other than trolling that came up in the response to it. lots of people saying things like nanny state, stay away from it, don't restrict access to adults i think there's some misinformation on what people are seeing on all of this. let's back up a bit. i want you to explain why you're taking these "a"actions. >> we put out data showing between 2017 and 2018 a 50% of use among middle school students a sharp rise in the number of kids who were using it regularly, meaning 20 or more
days out of a month. you know, just overall increased utilization of the flavored products in particular where 70% of kids are using flavored products these are enormous numbers we can't sustain another year like this. we can't see these increases year over year we have data showing some proportion who get nicotine through e-cigarettes are going to reverse the amount of gains we made in years to reduce smoking rates. that's why we took the actions we took yesterday. >> in terms of the blowback from this, what are people even concerned about? this doesn't sound to me like it's going to restrict adult access it sounds like these are steps taken that are common sense steps to make sure it's not ending up in underage stands >> right it's going to restrict access to kids there's no way to completely prevent access to kids, but we're going to put speed bumps in the way particularly the flavored products, the fruity flavored
products we're going to put in age requirements in stores that's going to have the effect of putting a lot of the fruity flavors into the hands of adult-only stores where it's going to be harder for kids to access them. it is the case that, you know, it'll be harder for some adults to get access to the same flavors. they might have to go to different locations or buy them on websites that verify age. where you have adult signature on delivery and check the age of someone as they're making the purchase but i think a lot of people are going to be willing to put up a few conveniences in order to prevent these things from getting in the hands of kids the reality is if we don't prevent this level of youth use, this is a risk to the entire industry the alternative is pulling all the products off the market. which we don't want to do. >> that's what i want to ask about. take us inside your mind for a moment how you issued the way of taking them off the market entirely because there are some
that have a view that just having them on the market, they'll get into the hands of kids even if you try to put up barriers and other hurdles and what the public benefit is of having these things on the market in the first place. >> right we see an opportunity here to transition adult smokers off of adult combustibles the products are not risk free but they're less risky if you can convert an adult smoker off cigarettes to these, we can -- >> i'm talking about the flavored components. >> if you talk to adults, they are one component for some adults that are an important factor in way they would switch from a normal cigarette. but the alternative to the action we announced yesterday would be to pull in the compliance dates for all the products and could effectively take them off the market i inherited a policy that would have done that these products would have been off the market by next year.
we modified that policy, but that public health opportunity and i believe it's real cannot come from these products that's why we took the action we did. if this doesn't work, we're going to be back i'm hoping manufacturers also -- this is a wakeup call and they're going to step in and take their own actions >> i'm glad to hear you say that it sounds like you sound a little defensive my guess is you're getting a lot of blowback. i just want to say keep doing this i'm all in favor of what you've got happening here you just point out that juul is taking steps you raided their offices are you going to tell us what you found in any of the documents that happened there? >> we haven't gone through everything yet we were looking at past marketing practices and data related to the products they have on the market to make sure they were all legally on the market i'm encouraged by some of the signs i've seen from manufacturers taking steps on their own even in advance of us
fully implementing these measures we really need to see these rates come down. it's not just enough to slow the rate of growth in teen use we need to reverse the trends in recent years or really in the last year. this is a public health priority of ours right now. i do think the actions we took are robust enough that they're going to have an impact, but we may have to look at other things we also announced we're looking to advance the rule making process and also ban characterizing flavors we know that the flavors in those products as well are a leading reason why kids initiate on regular tobacco we still need to do more to prevent youth use of regular tampa b tobacco. >> what are the statistics >> if you look at kids that smoke between 12 and 17 who start smoking and smoke use menthol cigarettes the menthol masks the bitterness and some of the effects that
cause you to cough so it makes it easier for someone who's uninitiated to start smoking. i don't think the
manufacturers ought to be selling products that make it easy for kids to start smoking. that's why we took the actions we did >> scott, on a totally different subject, we're going to talk about the wine of the year and just in preparing for the interview, it's clear that every spirits and wine company sees a huge opportunity in cannabis i'm just trying to figure out the kind of world we're going to have i care about juul and stuff, but we really -- are we going to be okay if it's really that -- as common as alcohol? because it's a different high. it's a different feeling you know, you can have two drinks if you take two hits of the way pot is nowadays, you get all the way -- it's like terminal pricing. you get there right away is society going to survive okay, do you think >> well, the reason i'm smiling
is my communications folks told me be prepared for a question about pot. i get asked every time i come on the show >> i'm worried i'm scared as a parent you know and i'm no saint, believe me >> recreational marijuana doesn't fall within our purview right now. but we do regulate compounds that are making drug claims. we have approved compounds derived from marijuana but there is no medical use for derived marijuana. all the people making claims botanical marijuana -- >> then there's opiates. i care about juul, you know, and menthol. then there's opiates it seems -- we got to do all these things >> well, i think there's going to be a policy around this at some point in the future obviously it's happening at a state level. there's an inevitability it'll happen at a federal
level soon >> we were having a conversation in the last hour about drug pricing in particular.
and one of the folks representing the industry was saying, look, you know, by putting these prices out there the way it has been suggested or proposed, it's actually misleading ultimately to the consumer because all you're doing is getting the list price. i'm curious. is your goal ultimately to make it more transparent? is that part of it or do you think it is ultimately to bring down the price? meaning by forcing a company, a pharmaceutical company to put the list price on the screen, it may force them to push that down >> i think it's both of those things consumers certainly should have transparency around price and how much it's going to cost them when they go to the pharmacy counter. but we do want to take steps to compress this growth we have a high list price but the rebated price is much lower. the problem is now consumers who are out of pocket are more often paying that high list price and
the rebatining being paid to th company is not going back to the out of pocket. it's driving down premiums but we have a lot of healthy people who see their premiums coming down because of rebates paid on drugs bought by the sick people. that's not the way insurance ought to work. you would like to compress that growth versus net spread the difference between list price and the real price or at least make sure that spread is being paid back to the consumer who's actually using the drug >> commissioner gottlieb, thank you for your time. it's great to see you. >> thanks a lot. >> when you -- i haven't gotten any, but when you talk about concerns about stoner nation, i mean, do people get mad if you -- >> i know. >> why >> there is such a tide -- it goes back to some of the stocks you see where you have folks so out over the line on these things, they get furious about the idea if you raise any concerns about
smoking pot, anybody anywhere should be able to smoke anything they want at any time is basically -- like, if you even ask questions about what it will mean for brain development >> should we all try it one morning, see how the show goes >> people already think we do. >> we'll have elon musk join us as a guest host. coming up, market landscape is constantly changing and today political leaders and more gathering at the inclusive capital conference to discuss issues facing america's business community. we'll speak to the founder of the coalition for inclusive capitalism and ey global ceo check out the tus.fure you're watching "squawk box" on cnbc
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conference and its initiatives is lady lynn forester rothchild and mark weinberger as well the ceo of eny i'm actually going to be in d.c. and see both of you a little bit later. but lynn, tell us why you started this to begin with >> well, the reason we started it is because we know that every ceo knows that his or her workforce, innovation, trust in the community is vital to the value creation but there's no line item for those things and actually, there's no way to measure them so we were really fortunate in that mark weinberger and ey and a group of 30 ceos representing $30 trillion of assets under
ma management said let's find those metrics that can be measured so that investors can contrast and compare how companies are building value in those areas. >> hey, mark, you know, every time we either have a guest on the show or the question gets raised is capitalism broken in america, there's almost a religious response in terms of the feedback that goes on. what do you think about that very question right now? >> well, you and i have talked in the past. a lot of what's driving this is trust. trust is kind of broken. we've seen it in the reports that trust in government institutions, business institutions are down. and part of the reason is that we focus a lot in financial results. but there's so many other stake holders involved in business so whether it's your employees, whether it's your communities, those things are incredibly important. as lady lynn said, we've had no way to really value those or measure those before we fall back on those
financials and i think this effort is meant to broaden that out. >> the real question, though, is what are the other metrics let's talk about what the other metrics are and whether the metrics are performance based? whether ultimately they do create more value. that's always been one of the questions about all of these sort of broader esg efforts. >> it's true so that's why this was so important. what lady lynn has done, what we've done is pull together a group of market-based participants who these are investors, asset owners, asset managers, and corporates and they all say this is what we really think seeing this on the ground working on corporations and investment are going to be really important to try and measure. we weren't able to measure them in the past, andrew, because we didn't have the data and technology we do today to capture all the employee responses on structured data and look at innovation spending and the like they said we're going to focus on these four areas.
we all think every element of this investment value chain thinks these are important now it's about narrowing down the metrics out there to several all these in the chain will look at they're good metrics you've seen the report >> hey, mark -- oh, go ahead, lynn >> go ahead. >> no go ahead. >> i was just going to say there's a lot of data in the academic world creating a correlation between those companies that are more proactive with their workforce, with their supply chain, with their place in the community, and lower cost of capital and higher stock performance so that data is out there. but the problem is for the portfolio manager, how do you really measure this? they want something tangible, something comparable they know the difference and that's what the embankment project for inclusive capital which you can read about today
in "the wall street journal" is trying to address. >> let me ask you this, lynn especially when it comes to these metrics, there's two views about esg investing at the moment there are some investors that say i want to look at this more as a risk mitigation approach meaning i'll look at these factor to know if there's a problem down the road. but i'm really going to look at the bottom line. but maybe this will help me if i think there's some issues around the edges. there's others who think there's actually a true performance enhancing element to this. where do you land on that, both of you >> obviously we have quarterly financials to look at today. as we've talked about everybody looking at those know it's an incomplete measure of the value and risk mitigation of a company. basically only less than 20% of
the assets are on the balance sheet today. in the '70s it was 80%, 85%. all of those things aren't representing so what these players are saying, andrew, is we have to take those into account. as you point out, to understand future risk mitigation but also value creation what these assets really do, these strategic assets add more than looking at historical quarterly earnings so that's what this is about i think it's an imperfect science. it's always going to be, but we have to come up with metrics we can all agree on and this is a first shot at that >> it's a false choice to say you're either interested in shareholder value or esg factors or those factors that create a more inexclusive capitalism. that's just -- you don't have to choose between those two those two are intimately connected and related and what we're trying to do is to give portfolio managers a way to
measure those things so they can be more sure of the long-term value that they're creating. it's not a choice. >> okay. we're going to leave the conversation there we will -- i know you will continue that conversation in washington and i will see you in a bit. thank you for being with us. see you in a bit still to come on "squawk box," a check on the markets and what you need to know for the trading day ahead. but up next, have some wine with your stocks. >> yeah. >> joe, what do you have coming up >> i do have something coming up is capitalism broke and is socialism working if we do it right this time? it's the same answer figure it out. figure it out. i wasn't down there. i wouldn't leave if i knew -- anyway coming up, the executive editor of wine spectator joins us with the number one wine for 2018 it's right here. i'm not allowed to lift it up because this could come off.
that's it. i have a paper bag in case the first one rips so the holiday is fast approaching. you want to make sure you have a bottle ready to go we'll tell you what it is. do i have it pointed the right i don't know that either i know nothing we'll be back after the break. ca broke my personal record. aflac!? no-good break. gooood break. i'm so sorn we can't make your barbecue. i'm just sick about it. aflac!? different kind of sick. if i can't work after surgery, how am i gonna pay my rent? all thess? aflac! oh, aflac! and they pay you cash in just one day. see how aflac helps cover everyday expenses at aflac.com.
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pop the cork but i hear the grand pubaa of all this -- >> he loves your show so he says we can open the bottle >> it's great what he did, a cigar aficionado and wine spectator. it's unbelievable. you know more about wine, i think, than i do >> no, i don't >> you don't >> if that's two buck chuck under there -- >> it is not let's reveal it and try it once again, italy is the place, is it not? i can attest to that. >> let me set the stage. "wine spectator" rates more than 15,000 wines in blind tastings each year. from them we choose a hundred of the very best. not necessarily the highest scoring, but the most exciting value, quality, story. and we boil that down to a hundred wines and this is number one. you ready? >> okay. let's do it. >> all right number one wine of 2018 -- >> and it might be from italy.
>> it's a cabernet based red from cust tuscany. costs $245 now i'm going to do the operation. >> anything you consider is over 90, is that correct? >> that's correct. that's about the third of the wines. >> does it go across the board it could be a sparkling one? >> we have a sparkling in the top ten. >> rose's are hot, aren't they >> we have a john bon jovi one this year. >> is that a coincidence or is it him >> it's really him >> i'm kidding >> the reason we chose this is it has the soul of an aristocrat and soul of a pioneer. >> is the number one always red? >> no. >> what was that again >> the pedigree of an aristocrat and the soul of a pioneer. >> that's me no >> this began in 1940.
they moved to their estate on the tuscany hills. at that point it was rustic. this was different and better. in 1968 the great vintner convinced him -- >> how hard is it going to be to make this? >> they made 17,000 cases. so there's a lot it'll be on restaurant wine lists. >> so what does this decision do for their business >> not just this year but the next five years. >> this is only the fourth italian wine to be named number one. >> do they know in advance >> no. >> so they're watching now and finding out? >> could be. >> you bought one of these things for me -- >> a breather. >> a long time ago it wasn't a fair trade
>> $245 might sound like a lot of money but for a 97-point wine -- >> we don't need to let it breathe? >> no. is $350. so this is a value. >> are you supposed to slosh it around like that >> yes it releases the aromas >> we're toasting marvin south all right. yes. here we go >> here we go. >> that's very smooth. i don't usually drink red win. >> 2015, a great vintage in italy. especially in tuscany. and the great thing about this wine, it'll be even better in 20 or 30 years. and it'll be more valuable 1985 was released at $48 currently sells at auction for over $1,800. >> so we should buy cases of this as an investment. >> if you'd done it yesterday. >> too late. >> is there insider information on this? do you think anybody knew? do you think anybody knew yesterday that bought cases?
>> not that we know of. >> did you buy any >> no, no, no. >> so spirits, again, the biggest market share gains this year versus wine you went up a little >> 25 years of increase in wine market >> but not as much as spirits are going up >> spirits, up bigger. we estimate by 2020, spirits will overtake wine and beer in value. >> wow but still, how many million cases sold in the u.s. >> 325 for wine. 240 for spirits. by the way, there's just for a plug, there's a lot more information about this wine and all on winespectator.com >> can you talk about cork versus screw i think so they should all be screw. do you agree with that >> yes >> a cork is very difficult to get. it comes from sicily, doesn't it at least it comes from the cork tree you need a certain kind. but it works
it breathes. why do you think screw is the way to go? >> it can go bad. >> the cork producers have made extreme efforts to improve the quality and reduce the incidents of faulty closure. the competition has forced them to respond >> it isn't anymore. tell them i'm right on this one. you can make an amazing wine without cork, correct? >> the current governor of california puts his $75 cabernet under -- >> gavin newsom is the authority? cork is the most important thing, right >> it's a prestige and history thing. >> snooty. >> thank you it was great having you on cheers for "wine pectator. when we come back, dom chu with a look at what's moving markets this morning we'll be talking media stocks and the sector plus facebook versus "the new
york times." sheryl sandberg responding to a report that facebook ignored russian activity on its sight. full reaction straight ahead each day our planet awakens with signs of opportunity. but with opportunity comes risk. and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes
good morning welcome back to "squawk box" right here on cnbc i'm dominic chu. among the stories front and center today, t-moblie says it could close its acquisition of sprint as early as the first quarter. the company's cfo made the comments based on indications t-moblie is getting from regulators european central bank president mario draghi says they plan to pull back at the end of the year he suggested inflation may rise more slowly than earlier expected astrazeneca says the drug
did not improve the most advanced version of lung cancer. the shares fell on that news back over to you >> thank you very much let's look at the futures thorngs. now at their lows of the session. joining us to talk about this is jim iuorio of tjm institutional services he's also a cnbc contributor here you go. it's a friday. got a lot of people wondering what to make yesterday you did see the markets pick up. what do you think is happening into the weekend >> i expect weakness today if you would have asked me yesterday, i would have said the technical picture looks bad, but the fundamental picture is still fairly positive. i've even changed my mind on the fundamental picture. in the brexit deal, although that's not the biggest driver, it is the most immediate driver right now. you can see the stock market even reacts to the british pound as it ticks up and lower i think that's the biggest deal. i think we're still -- this volatility we've been in for a month to me is not over yet. to me, the only way it's going
to be over is if the fed acknowledges they still have our back i know that's sad, but when we think of eight to ten years of zero rates and them trying to extricate us from that situation, we have to think there's going to be times and smoothness this is one of those times >> you think ultimately what's the most important thing investors should be paying attention to this wall of worry, all the issues out there >> rates >> what'd you say? >> i think it's rates. it's the balance against -- we went from you buy stocks because there's zero rates then all of a sudden you buy stocks even though rates are higher but we had regulation, we had tax incentives and all of a sudden you buy stocks because it's a good place to be. the overall picture seems to be faltering a little bit the fed acknowledged it mildly last week when they said it seems like investors are moderating a little bit.
we'll have to wait and see more instead of this nonsense we're hiking in december we're hiking whatever times in '20. that's just nonsense nobody has a crystal ball that looks out that far >> having said that, what you heard from them earlier, would you tell people this is a better time to buy because the fed is going to look at it more realistically from what you see? >> i think personally i'm looking for slots to buy i think we're going to go back to that low we visited about a week or so ago i don't think it's going to go beyond that. in august of 2015, the stock market broke 8% and they trotted somebody out the only thing that changed is the weaker asset prices. i think volatility is going to be here for awhile
>> which means what? >> which means you got to get used to it >> but what you're describing, if we're talking volatility but you think the fed is going to pay more attention, that is back to the buy on the dip strategy, not sell every rally is that correct? >> here's what i think i'm saying for the next week or so, it's probably a sell the rally. but i think what's lower than here, i think the fed, they've started to move in the way i think they should be moving. i think they'll hasten that a little bit and talk a little more dovish at that point in time >> okay. in the near term, what do we need to be on the lookout for? there these other issues that -- >> tech. >> all right >> technology. nvidia bombing yesterday i know they didn't draw too many connections to the tariffs, but you know this is in the back of everybody's mind so that's not -- that didn't help at all. so i think people are going to be watching tech and watching
for any news on the tariffs. we've had conflicting reports from several different officials. i think people want to know that's moving in the right direction. if not i think tech will lead the way lower. >> what about apple? is ate proxy for the markets or the technology shares at this point? >> it's a proxy for the broader market when app sl trading at this attractive pe, it's a time -- apple's not -- amazon, netflix, those things trade on a promise. they're all about what's going to happen in the future. apple getting grouped in with those has always been somewhat ridiculous to me in that apple makes tons of money. they're a very profitable company. i'm looking at buying more apple right now. >> all right great to have you. have a great weekend coming up, viacom results out earlier this hour. we'll run to the numbers after the break. in the next hour, it has been
mission impossible for the fed vice chairman richard clarida is going to join us it's at 8:30 eastern time. steve liesman is going to bring us that intervw. ckn montie alpha seems more elusive today. is it because so many go after it the same way, chasing after short-term returns? instead if getting caught up with the crowd, the investment managers at pgim take a long term view.
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viacom results out just moments ago. the company posted a beat on the top and bottom line. returned a profitability in the quarter thanks to nearly $800 million in global sales from the latest mission impossible movie. joining us now to break down the numbers, james goss. i've got your pre-release comments, james. and now that we know what's out, it seems like the stuff you were focusing on was the most important. is this how you expect the improving trends in the domestic media network? and continuing progress around paramount pictures you can see that in this report? >> i think absolutely. in fact, you led with "mission
impossible." paramount has struggled for years except for a few key franchises like that one, that that really led the way. the $800 million you mentioned created profitability that was about double what we were looking for. importantly, it's the third quarter in a row that paramount has been profitable. while they weren't for the full year, i think they're definitely heading in the right direction this time. they have this comprehensive strategy of using the other brands like mtv and nickelodeon with the content creation. and i think they've tried that before a numb of years ago it seems to be taking hold a lot better right now >> they're spending money, too, right? on programming that's pressure profitability. but is it paying off where do you see evidence of that >> well, again, they did have a hit earlier this year that was "a quiet place" that was more of
a new venture. they also have some key franchises but i think the -- if they can spend money on programming with content that already has a definable audience like mtv whether it's for the big screen or netflix or whatever else, i think that will be a much better way to introduce the product paramount's struggled for a long tile it still has some brand equity itself and they renamed one of the main networks, paramount. i think that's an important recognition of that. >> is there still any -- is there premium still in this stock? or have the fundamentals approved to where the price is now supported by just a stand alone viacom >> you know, i think it's -- i don't know that there's a lot of premium in the stock right now it's been a struggle for a number of years, but it seems like it's a little safer than it
had been i don't see the downside mr. beckish has done a great job in trying to define the four major categories of the network. and to get a team in place with the studio so those are the steps they needed to take and i think now they have to build on that. and i think this quarter and the way the year finished was a great start. >> i can't believe mtv is back are you sure with people 18 to 34, huh? are you watching, andrew are you mtv? what's on m the rkstv >> vh1 i've graduated >> mtv is bringing back some of the old franchises again >> like "jersey shore. >> really? i didn't -- okay i didn't realize we missed any of those. >> the paramount network has done well with that kevin costner program.
"yellowstone." have you seen that >> no. >> that's one to go watch. >> is it episodic? >> episodic on paramount it's great >> what's it about camping in the park? >> no. think of a -- >> what's the name of it >> i'll tell you in the commercial break >> james goss, thank you coming up, what jeff bezos is saying about the future of amazon that story is next then richard clarida is our special guest. "squawk box" coming right back who says our bank isn't tech enough?
welcome back to "squawk box" this morning jeff bezos told his employees that amazon, quote, is not too big to fail. cnbc had heard a recording of their meeting. an employee asked be cease about amazon's future. specifically what he learned of the recent bankruptcies of sears and other retailers. bezos actually predicted that amazon one day would fail and go bankrupt he said large companies' life spans tend to be 30-plus years but he said to prolong that demise, amazon must obsess over customers and avoid looking inward and worrying about itself so trying to inspire his people with a little bit of fear of failure. coming up when we return, federal reserve vice chairman richard clarida is going to join us for his first television
interview since being named to that position. a key player in interest rates you can't afford to miss it. here are the futures right now as we head to a break. back in a moment ♪ a moment of joy. a source of inspiration. an act of kindness. an old friend. a new beginning. some welcome relief... or a cause for celebration. ♪ what's inside? ♪ [laughter] possibilities. what we deliver by delivering.
our news maker of the morning, federal reserve vice chairman richard clarida joins us live in a cnbc exclusive. facebook under fire. mark zuckerberg and sheryl sandberg are fighting back this morning denying allegations of how they handled the russians. well known investors fear the answer is yes. they wave the red flag as the final hour of "squawk box" begins right now ♪ live from the most powerful city in the world, new york, this is "squawk box. >> good morning and welcome back to "squawk box" here on cnbc i'm joe kernen along with becky quick and andrew ross sorkin the dow now down 104 nasdaq giving back 57.
that's not as bad as it was earlier. s&p down 12. treasury yields last i looked on the 10-year were about 3.1% or so 3.107% making headlines right now, oil prices are firming up a little bit crude still set for its sixth straight weekly loss also expectations that opec will agree to some supply cuts at its meeting in early december. you can buy a barrel of crude right now at $57.38 wti. goldman sachs saying the recent drop in stock is investors expect a bigger global slowdown the firm's bear market indicate ser now at 73% which is the highest level since the late 1960s and early 70s. they've been talking about this now for quite some time. and speaking of worries, jim cramer saying ceos are telling him off the record the economy has quickly cooled here's what jim tells us >> so many ceos have told me how
quickly things that cooled so many are baffled how we could find ourself here. they come on to tell me that, to say something. please warn. like we got yesterday from kb homes where the ceo said home sales slowed dramatically. let me go back 11 years for one moment 11 years ago i began hearing the same talk about how the fed seemed to be out of touch, out of safe with what happened this time with wall street. my sources were so darn good back then. it was part of the alums who had sources everywhere i'd grown up with people who were now running the very joints we started at 20 years before. they came to me one after another to say something, to warn i did. unfortunately, it meant nothing. i was laughed at for being a lunatic. it was mortifying. but i was right. i did my best and at that time i made a resolution. if i thought we would ever get back into one of these situations again, i promised myself i would be vocal about what could go wrong even though
i knew it wouldn't be as serious as the great recession there are a series of slowdowns that can cost a lot of jobs. that's what we're on the verge of here. that's what the markets are saying that's what the ceos are worried about. >> we're going to hear more from jim. i want to talk more about that i was going to say, you know, we talk to people off the record. you and i and jim were at dinner with somebody semirecently, past two months there was a remarkable amount of optimism >> i would say -- this is a bifurcated place depending which ceo you're talking to, you'll hear a different story. that's why it makes it so hard people are hearing different sort of versions of it we'll have jim on later and get to talk to him about that. meantime, some stocks to watch this morning nvidia shares dropping on a disappointing sales forecast the chip designer blamed a
buildup in inventory and a slowdown in cryptocurrency mining applied materials also under pressure this morning on weak guidance the company said near term headlines were down by about 9%. nvidia now down by more than 18%. intel's board improving a stock buyback. the company says its returned about $177 billion to investors through buybacks and dividends in the last two decades. that stock now down by 1.25% there are also a few consumer names to watch today nordstrom posting weaker than expected same store sales. the department store also telling investors it had to refund some customers after they were incorrectly charged a higher interest rate on their credit cards that stock off by 10%. and william sonoma shares also in the red this morning. earnings beating the street but revenue missing estimates. and william sonoma shares down by 12.5% also check out home depot.
bank of america merrill lynch cutting the stock from neutral to buy that stock also off on the down market this morning. let's get back to the broader markets. the 11 s&p sectors remain positive joining us now eric knutsson, and cnbc's mike santelli just like jan. what's her name? >> his is kniffen. >> got to pronounce the "k." >> you know, santoli, coincidence and causation are two different things this what jim just said has nothing to do with the dems taking over the house, does it >> the mood of ceos and what
they're willing to 2focus on, it could. >> here's another thing. powell two months ago, this would have -- >> six weeks ago >> theoretically some of the things jim was talking about with ceos coup before in the works. which makes me re-evaluate not only are we two or three hikes away from neutral and maybe more after that but it makes it sound like maybe we're closer to that than maybe we thought or maybe it's not about the fed and maybe it doesn't matter what they do. >> i think all of it shows that all the concerns that we were looking at the market and trying to say is the market hinting at something here we haven't been able to get any momentum housing and auto stocks are declining. this is months ago now i think are all surfaced now everybody looks around and everybody has a reason to worry about the slowdown, to worry about indigestion in the
corporate market all these things are now foreground i think the market is more grappling with it all. i don't know that it means that the fed all of a sudden was right and now it's suddenly wrong. >> like a good way to validate the correction and make people that were too complacent think, wow, this isn't just a correction >> in a stressed market where it reaches for things to worry about, right now, in that environment, what interests me is when you see the counterintuitive moves when nvidia has an awful quarter and it's going to fall apart today and see what the rest of tech does. that's what you're looking for in this environment. when not everything seems to go in one direction the corporate debt thing is fascinating. you might have this huge chunk of ge debt the market is overanticipating it gets downgraded maybe it gets downgraded above investment grade in which case the high yield -- nobody's talking about -- >> 10% of the junk bond market.
>> but nobody's talking about that shows that there's a solvency problem in corporate america. because we have no maturities coming up. nobody has to refinance yet. so we're overanticipating these things i think >> you're ready. you can give us answers to all these questions. >> i can tell you how we're looking at the world it's really about the fed -- it can be about the fed if they overshoot. we don't believe they have to raise once this year and three times next year. they can raise in december they can raise once or twice next year and pause. when you think about -- so the first half of october, that drawdown was associated with concerns that rates were rising and we're a long way from neutral and the term premium is correcting most recently it's about growth concerns problems in the housing market, people aren't buying enough. those are the concerns associated with slower growth which gives the fed the kind of latitude to move once, twice, pause. take a look.
that actually is taking some of the excesses out of the system that could potentially extend this cycle so the big question is this about a growth slowdown normalization really or is this a growth crash? and that's the big critical question. >> what do you think the answer is >> you know, we're leaning towards and leaning into this that it's a slowdown and normalization opposed to an all-out crash. but it is time to be cautious. there's no doubt about that. because what's going on in china is critical. you know, are they going to pivot towards enough stimulus to avoid a hard landing there and is the fed going to make a policy mistake sni mean, those are two very critical variables. and at the same time, you're in an environment where you're not getting the kind of benefit from traditional diversification you used to get. in february and october of this year, not only did stocks sell off, but bonds sold off. as an investor you have fewer degrees of freedom so i think it is a good time to be cautious with the portfolio
even on the margin you may be looking to buy to add to some equities and some other portions of the risky margins. >> it's weird to be talking slowdown with all the anecdotal evidence maybe that catches up later. and maybe corporate confidence, maybe reflected next month or something. >> right corporate confidence also, by the way, with all these corporate debt fears, you have these incentives being created to pay down debt to show they're not over-investing that can work against future growth expectations. >> i hadn't thought about that about ceos starting to save for a rainy day. >> with repatriation, a lot did get paid down. >> yeah. so sad if it's true. >> right >> it's all you've been hoping for. >> it's not what i've been hoping for no unfortunately it's what i've been expecting, but not hoping for. >> well, yeah. that's true.
anyway, mike santoli, thank you. erik knutzen, embrace the "k." >> thank you facebook are under fire again. mark zuckerberg and sheryl sandberg trying to fight back this morning denying reports how they handled some of these russia issues in terms of how their social network was used. and we're going to talk in a minute after this break to jeff sonnenfeld, our management guru. next he's got some provocative thoughts about those at the top of facebook. back in a moment sfx: [phone ringing]
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welcome back to "squawk box. let's show you the markets they look like they're going to open down this morning triple digits on the dow dow would open off 130 points. nasdaq looking to open down 70 points and the s&p about 16 points. sheryl sandberg firing back last night at a bombshell report by "the new york times" saying the company ignored russian interference in the 2016 election earlier yesterday, facebook ceo mark zuckerberg hosted a media conference call in which he
discussed the mismanagement. >> i've said many times before that we were too slow to spot russian interference too slow to get on top of it we certainly stumbled along the way. but to suggest we weren't interested in knowing the truth or that we wanted to hide what we knew or that we tried to prevent investigations is untrue >> joining us now is jeff sonnenfeld, the senior society dean at the yale school of management jeff, your take on all of this >> my take on that is if mark zuckerberg has now joined the posse of charging "the new york times" as fake news, he's done himself a major disservice it's hard to imagine somebody could create a worse headlines for "the new york times" than what they had yesterday. but his performance and sheryl sandberg's performance yesterday actually beats the babd. they actually did worse in their respond. i don't know if they were coached, if it's just temper tantrums, but that's outrageous.
they've told us what meetings happened where and when. this is overt deception. the board was deceived for over a year the board didn't have the facts sop many tech ceos not to mention ceos in other industries were taken out of office in that alone. we have the promotion of hate speech with a lot of the use of the russian trolls it looks like they knew about and suppressed and when investigations were done, they tried to hush it up. then on top of that, we have the repeat private equations which has been happening since at least 2011. this has had a huge impact on the brand. frankly this is the high-tech holliganism. >> just to slow it down just a little bit for anybody who didn't read the story yesterday from "the new york times," that times story was based on interviews with just over 50 people many of whom spoke off the record because they were worried about retaliation or they had signed nondisclosure agreements.
i think it's a pretty complicated picture. while they may be right in the overall tone of what happened with it, i think it's difficult to say either knew specifically about some of the things that people have kind of made the jump even from what the times was reporting to say that they knew obviously they had hired this organize in washington that did a lot of dirty tricks. the question was, did either sheryl or mark know about the things they were doing i'm not clear -- i don't think the times even laid out a direct line of contact between those things just showed you some things that were happening you could ask should they have known, but it's a rd to know if they actually did. >> i think if you want to call this a criminal enterprise bb that might be going too far. however, it's not too far to say, the one complaint you could make against "the new york times" is there was so much information in there, nay needed a graphic chart.
but it's all there i would disagree with you. i think the times was clear in the spring of 2016, engineers of 2016 before the general election had even launched during the end of the primaries, we started to see that there were russian interference in the elections and facebook engineers knew that alex stamos who is the head of the chief information security officer told senior people by september of 2016 when we just still in the general election right now, they knew about this. and they were investigating it and discourageaged from investigating it this is all in the timeline when mark denied there was any russian interference in january 2017, they issued a misleading understated memo. >> jeff, let's just sort of cut to the quick, though, and try to move this story forward. you are -- we always call you the management guru.
you think about governance issues mark zuckerberg owns and controls this company lock stock and barrel there is no -- he's not going anywhere should sheryl sandberg go anywhere what should the board do what should happen here? >> sure. great question you know, we saw a reprimand of elon musk, perhaps not quite enough, but more than at one point the s.e.c. was going to extract from tesla as another emperor for life model who controls his business because of the allocation of shares we've seen, you know, at uber, we saw travis kalanick basically forced off where he didn't personally own all the shares, 60% control -- >> so what would you be calling for? >> he should no longer be
chairman somebody else who was outraged over this, somebody like that off the board should be made chairman mark seker man should be ceo, no longer chairman. some of the company's founders are the smartest people. when michael dell each time transformed dell, nobody else could do what he could sheryl sandberg is completely dispensable. >> dispensable >> can i just say one thing? >> absolutely dispensable. >> i understand the need for criticism and i do understand the lean in and all of the stuff that came with that, but you're also talking about a timeline that came a year after her husband passed away and she had her two children to deal with too. people say she was just focused on the book. there were a lot of things happening at that point. >> i've known her for 25 years i don't know her well, but i've known since she was larry summers' teaching assistant. i've known dave goldberg a little bit a wonderful guy, her husband
however, since then -- and i don't want to say that that isn't a horrible cloud overhead. however, it did not take her off the trail of relentless self-promotion she wasn't doing the job other than to suppress these investigations when the chief information security officer tried to get the truth out, she attacked him. >> so what are you saying should happen to sheryl sandberg? >> sheryl sandberg should at a minimum be put on probation. but she should probably be replaced why is it okay for mark have misconduct at hp and be punished but her not? mark deserved another chance to lead again somewhere else as he does at oracle sheryl sandberg and mark zuckerberg, harder to remove
him. this company right now is standing for smearing instead of bringing the world together as they argue and making us closer. it's open with campaigns of smearing their opponents attacking u.s. senators. look what they did on the chart of the privacy of who's using facebook, making public how u.s. senators are -- >> but you're comparing what sheryl did to a sex scandal with mark hurd? >> oh, i think it's much worse this is far worse. what mark hurd did, supposedly he was pursuing. i don't know whatever happened there. but it was a misuse of company resources. i think it was wrong anybody else in the company would have been fired. this company has no legislatimay in the eyes of their employees this is why they don't enforce their own rules. this was misconduct. they need to be accountable for
this and not doing this i'm so sorry since they've been doing since 2011 ignoring -- >> if you're going to replace sheryl sandberg and i'm suggesting i'm in agreement with that, but let's suggest you are. who would you want to put around mark zuckerberg right now? >> again, i think this board has been kicked in the face enough there's some sophisticated people on this board i would bring don graham back in and not in a coo capacity. he was a great mane tr to mark zuckerberg's misconduct when he was hiding under the hoodie. these folks need to be accountable. this is not happening here privacy invasions, the smear campaigns against google and apple and their top leaders. instead of fixing the problem, they're more interested in attacking the legitimacy of the critics. if they put 1/10 the energy into fixing the problem, the whole
world would be better off. india and myanmar say their tools are being used for ethnic cleansing. smearing competitors we're seeing all the feedback from recruiters out there. saying we've had enough, we won't invest in platforms like this that promote divisivenesses huge international add agency. they've got to pay attention this is going to have blowback. >> this story is not going away. jeff, thank you for your time today. >> sure. thanks >> jeff sonnenfeld from yale coming up, the fda and big tobacco once again on a collision course we're going to hear from the top regulator dr. scott gottlieb
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good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. among the stories front and center, futures pointing to a lower open own wall street after a big day yesterday. the dow down by 156 points nasdaq down by 54. shares of pg&e are jumping this morning this on a report that california state regulators do not want the company to go bankrupt even if it's found responsible for the california wildfires p grg&e downgraded at maher gone stanley. the fda is looking to ban menthol cigarettes big tobacco companies are fighting back and threatening legal action fda commissioner scott gottlieb joined us on "squawk box" in the last hour. >> 54% of kids between ages 12 to 17 who start smoking and
smoke use menthol cigarettes the reason is the mon thol masks some of the effects of the smoking. it masks some of the bitterness and the effects that cause you to cough so it makes it easier for someone to start smoking i don't think the manufacturers should be selling products that make it easier for kids to start smoking. >> the fda will also start restricting sale of flavors to shops that prohibit minors richard clarida is joining steve liesman live from washington this morning. take it away, steve. we're looking forward to it. >> joe, thanks very much i am here live from the federal reserve with newly installed vice chairman richard clarida. took office in mid-september thanks for joining us. >> thank you. >> i think the place to start is what's going on in markets these days it seems like it's been down a
lot. maybe 4%, 5% off the highs what kind of signal do you get economically from these gyrations in the market? >> so far, steve, i don't think there's any clear signal you know, it's hard even after the fact sometimes to attribute any given move in markets. year to date, the stock market is up. there's some volatility. so i think right now there's no clear signal that i would take from it. >> we have several people who are coming on our air these days saying that these is the result of the market thinking the fed the going too far too fast >> the fed began raising rates three years ago. it's been a very gradual cycle the economy is growing north of 3% unemployment is at a 50-year low almost and so i think also right now i think at the policy rate we set, the federal funds rate a above the inflation rate for the first
time in a decade i wouldn't agree with that >> do you see any signs the economy is slowing you've been raising interest rates for three years. is it having an effect in slowing the economy? >> the economy this year as i said is going to be growing at a pace we haven't seen in a decade going forward, you have to look at a lot of trends including the global economy, i think, is something they have to pay attention to some evidence that it's slowing. so i don't see that now, but i think broadly we're going to set a policy that we think will help us achieve the mandate given to us by congress had a strong labor market. we want to keep that and keep inflation around 2%. >> november is right around the time you start thinking about forecasts for next year. could you give us your outlook next year when it comes to interest rates and growth? >> thank you, steve. you know, the fed will be going through our forecasting round at the december meeting i don't want to front run that but in terms of rates, i think
it's important to note as i said that this process has been gradu gradual. i think that serves the fed well if you look at the s.e.p. projections rereleased in september, they show a range for continued projection next year some officials seeing two or three hikes. what i want to emphasize, steve, to you and your viewers is at least from my perspective we're at a point now we need to be data dependent the economy's doing well we're looking for signals from the labor market, from inflation to get a sense of both pace and the destination for policy so this is very much in data dependent mode right now >> is that a shift from where we were were we at a place where it was kind of like we needed to get rates. have we now reached a point where we could -- i guess the best thing is take a look around now? >> i think you said that very well i wasn't here three years ago,
but under yellen's leadership, it was time to get away from zero and i have to imagine that everyone around that table agreed that ultimately rates needed to be above zero. and i think in that point data dependence was perhaps a little bit less relevant because there was full agreement to get the policy rate up towards a more normal level as you move into the range of policy that by some estimates. it is probably to shift the emphasis towards being more data dependent. i think chair powell the other day made the analogy in dallas about, you know, if you're in a darkroom, especially without your shoes on, you want to go slow so you don't stub your toe. i think data dependence makes sense right here >> you said move into the range. are we at neutral now? how far from neutral are we? >> well, as you know as a student of the fed, we plot our
long-run policy rate projections four times a year. as of september, the long run neutral policy by members of the committee was in a range of 2.5% and 3.5% currently the policy rate is below that range as you can tell. it's getting closer towards the vicinity of that range >> you believe we need to at least get to that neutral rate >> i do. i think certainly where the economy is today and my projection for -- and the fed's projection of where it's going to be i think being at neutral would make sense >> we had mark zandi on the other day. >> right mark's a good fellow >> i hope you still think that after i say this he said the federal reserve has never engineered a soft landing for the economy once we've gone below the neutral rate of unemployment is that -- it possible -- is there any history on your side that you could engineer this soft landing >> i would argue that there is
if you go back to the rate hike cycle, very aggressive and the economy continued to expand for another five-plus years. so that's an example of a cycle where you had a normalization of policy and the economy continued to expand for a number of years. i would point out another thing we've never seen which we've never seen an expansion that lasts as long as this one likely will if it continues through next summer. so history's useful, but you can't be handcuffed to it. >> you talked earlier about global weakness. how much of a threat is that >> it's important for your viewers to understand although our mandate is -- to achieve that we have to factor in the global economy there is some evidence of global slowing. i think it's early days. you know, the imf has marked down the global outlook a bit. at least speaking for myself,
that's something that is going to be relevant as i think about the outlook for the u.s. economy. it impacts parts of the economy through trade and through capital markets and the like >> two other issues that are out there. taxes and trade. or tariffs how are you factors in what it will do the u.s. economy >> well, i believe that we have seen the bottom in productivity and growth we've had some pickup in productivity it's hard right now, steve, to see how much of this is going to be sustained, but sort of put me in the camp of being an optimist on this. i think the legislation is one piece of that by lowering the cost of ka al i think there's innovation in the economy that's beginning to be adopted so productivity is important, but it's very notoriously difficult to make forecast about inflection points. but put me in the optimistic camp on that
>> so do you have another number for potential growth that's above the 2% that everybody else has? >> i'm in the camp that believes we have seen a rebound of productivity growth. i'm going to look at the evidence to see how i revise up my forecast. also near term, another important factor is growth in our labor force and employment and we've had a pickup in labor force participation which is now boosting the supply side of the economy. >> are there going to be enough workers to fuel higher potential growth in the economy? >> i think for several years there could be participation rates are still a point or two below where they were years ago demographic factors will kick in and labor force growth is going to fall to about 0.5% a year for example this year labor force growth -- at least i should say ours workhours woshlh labor force is up.
>> i want to talk about something in your speech we're going to continue in 2019 and be covered by material rise in actual and inspected inflation. an additional policy normalization might be required. so what is it you expect when it comes to a policy and what would cause you to do more, cause you to do less it's a little hard without some of the numbers >> understood. well, i don't want to specifically get into my individual dot on the dot plot but what i was trying to do in that speech and talking to you and others is to give a sense about my own function. i don't expect right now to be a big pickup in inflation next year certainly inflation expectations would that to happen, i would think of policy even more. if we get a slowdown, i'd have
to calibrate the other way. >> so you're not among those who see the need to go above neutral. >> we're not at neutral yet. again, my view is in this range of the uncertainty of neutral. i don't think it's particularly for my individual perspective to think so much about overshooting something that i'm trying to estimate right now. >> apologies to the producer i have one more question before you go >> yes, please >> it's an unusual situation now in the years i've been not having an economist in the chairman position. and you're a kind of pretty well known monetary policy expert how does that dynamic work with the chairman and you being the guy who sort of knows all the equations and the stuff and the formulas >> thank you for asking that chair powell and vi an excellent working relationship you know, monetary policy is really about the practice. my work was in economic theory that's one input you know, chair powell's
background as a policy maker also has been a fed governor since 2012 has more experience than i do. we work very well together i have things i bring to the discussion you know, governors kwaquarrels it's a wonderful group of colleagues to work with. we all bring things to the discussion >> richard clarida, thanks for joining us >> thank you. >> back to you >> you might even have one more question, steve. can you listen to -- can i ask you something to ask richard since he doesn't have an ifb i asked the producer to do this. >> sure. that's okay, i think >> yeah, it is i asked. >> joe wants to ask you a question i'll tell you in a second. >> on the wires it says that the treasury yields are -- i just lost -- >> you don't have me >> i literally lost ifb, joe >> you're kidding. oh, hello? this is a way -- so they say yes but they really mean no. are we going to get him back or not? maybe we'll go to break and come
back because the wires are now that fed's clarida says that we're getting close to neutral and that rates are moderating at 3.09% on the 10-year >> which is a huge change. >> my question is going to be isn't it -- does it seem odd to anyone else that 3% -- because that's what he's saying sort of. 2.5% to 3.5% it sounds like he's saying about 3% isn't it weird that suddenly in this world, that's enough of an interest rate to actually cause an economy to break a little bit? it just -- what's different about the world now that -- is it my fault? boomers? is there too many boomers? or is it we stayed slow for so long we damaged something? >> there could have been bubbles built up like the next story we're going to talk about. >> how can 3% choke off an economy?
>> do wow wayou want rates to g higher or lower? >> i'm not sure. i'm not sure it's rates that are causing the economy to slow right now. there may be a lot of -- that's what i said. it's a long cycle. we've been in a long cycle. >> do you agree with the president then >> no. 50i no i'm saying because your people got in the house. >> interesting we got a lot more when we come back is there a ticking corporate debt bomb about to put all of our money at risk? at least one well-known investor thinks the answer is yes and says there are warning signs. this guest is going to come on and explain in just a minute take a quick look at futures we are in the red this morning dow off triple digits. 10-year note, why don't we show you as we speak. that's now at 3.092% stay tuned you're watching "squawk box" on cnbc when bob barnett made the first commercial wireless phone call in 1983. yes, this is bob barnett in chicago. (john) we were both working on that first network
that would eventually become verizon's. back then, the idea of a nationwide wireless network was completely unreasonable. but think about how important that first call was to our lives. it opened the door to the billions of mobile calls that we've all made in the last 34 years. sometimes being first means being unreasonable. i'm proud i was part of that first call, and i'm proud that i'm here now as we build america's first and only 5g ultra wideband network with unprecedented wireless capacity that will not only allow for phones to be connected, but almost everything-- transforming how we all live, once again. (bob barnett) as you know, this call today is the first call that we've made on the cellular system.
welcome back to "squawk box. paul tudor jones says there is just too much debt and that could mean trouble for investors. >> we're going to probably on this run stress test our whole corporate credit market for the first time it's going to be really, really -- from a market perspective, it's going to be interesting. they're definitely going to be -- not definitely there probably will be some really scary moments in corporate credit and my guess is we'll see some
instances where the stock market's responding to really negative elements of certain holders of credit that can't get out. and/or bars in distress because the market's shut off to them. >> joining us now to talk more about the corporate market debt, tom jesoras is here. >> good morning. >> you heard what paul tudor jones had is a to say you heard the interview with the vice chair of the fed. who do you agree with? >> probably neither. this is a bigger promise than growing debt the market is also very much concerned. we might take issue with some of the previous comments from the fed vice chair the market is very concerned that the fed is going too fast or will go too fast. so you combine the two and you've got a bigger problem than by itself, either one would add up to. here's the real problem when it comes to debt. 50% of the investable corporate bond space, investment grade is
bbb rated. that is every business cycle gets downgraded to junk. well, that means this cycle, if 50% is bbb rated and that's 2$25 trilli trillion, 10% of that gets downgraded to junk you're talking a $2 billion increase in junk float just from concession alone, that means they have to widen a hundred basis points and also means investment grade needs to be ten basis points higher those are levels the market can handle assuming the fed doesn't overtighten. if they overtighten, then it's a problem. so they're related and i don't think you can separate the two this is why it's bigger than just ge. >> tom, joe had a really interesting point. >> can't believe we can choke off an economy with 3% i just don't know what's different about it >> i don't think we can choke off the economy at 3%. i think the market is concerned the fed is going to go to 3.5%
>> okay, 3.5%. >> you think 3.5% chokes the market >> what's the difference i was saying and maybe someone's making sense here. and that is -- see, the roach motel, we stayed at sezero so long we're never going to check out now we're to 3 did too much debt get built up globally gloch >> it's the pace at which you get there. that matters for two reasons one for main street there's an adjustme adjustment wall street is not priced correctly. bonds and stocks are not priced correctly if you have a volatile move in-year-oldin yields. >> i understand that for corporations and consumers if you look at government debt, you face a big problem no matter how slowly you get to those interest levels. if we suddenly have to pay back
3.5%, 4% on what we have borrowed, we're in big trouble as a nation. >> that's true that's more of a problem for the municipal space than federal government space what's likely to happen is if the fed going to 3.5%, the ten-year will go to 2.5% it will invert that's another important point the fed is missing this flattening curve is not the result of qe >> we keep talking about ge. i'm curious about the oil companies and what's happening with the price of oil. >> i think if you look at the spread widening, i a lot over the past week and a half has been the result of oil it's not as big of an impact, energy space is widening out >> go back to what you were saying off camera. inflation right now doesn't warrant rates going up much more i said this, we're going to
import disinflation from around the world. it's because of a lack of demand >> i wouldn't say it's -- >> what's the -- it is global now. even when rates are at half a percent over there -- we do look high >> i think growth potential in the u.s. has shifted higher to maybe 2.75% to 3%. >> i thought that was impossible with the population and productivity. >> productivity has shown -- >> sorry go ahead >> if you assume productivity is more like 2% right now and is going to find a home around 1.5% and you have a population growth 1%, you can get to 2.5% to 3%. >> and >> the problem is you can't bring feds fund rate to 3.5% when your growth potential is 3% and you have 2% inflation in the system if you do that, the curve is going to flatten. >> i want to know if there's high yield debt you like right now. >> not right now i think the space is probably
about 40 basis points too rich i think that's -- theoretically it's optimal you will see spreads widen out by 100 we have been pulling back in our asset allocation we are down to 1% high yield as a sector, i really would not like high yield. i wouldn't like higher duration lower quality high yield >> thank you appreciate it. >> jim brought up a lot of this stuff. let's get down to the new york stock exchange given all of your comments, hopefully people are watching. they should be it's incumbent upon them to know what we're talking about if they want to watch. hopefully, they saw your comments if the fed stopped right now, are we already in a position where a slowdown seems to be happening? how can we slow down where rates
are? or has nothing to do with rates? >> it's the speed catching people unprepared. >> is it to late to stop >> they have to put the december in or they lose all credibility. chairman powell and others are trying with kaplan to say, we now understand that there's two sides to the equation. he is wrong when he says things are strong i say that because i have better information than he does i'm closer to the situation than he is. i don't mind saying that in 2007 i said it and nobody listened he has to do more homework he has to be more in touch he has to start speaking to some of the ceos that i do. it's okay to say these guys are wrong. they're not elected officials that are deacons of genius he is wrong. it's okay.
if he does more homework, he will be more up to speed if he's insulted, i don't care i mean it respectfully with all due respect, please do more homework. check in with k.b. holmes, with wells fargo, with home depot, with the nordstrom, with most of the companies that i deal with that are involved with retail apparel, home building, auto, chemical, paper, wood products. >> why is it happening why is it happening now? >> things are moving very fast the world is slow. tariffs are killing us it's okay. i believe in the tariffs i believe in a containment policy in china. i accept we have to do that. i'm a bear because guys that come on and say, listen, things are good he is talking about the past he has to do more homework it's just like if i were a teacher and he is the student. he hands in his paper. half your paper is good. the other half is not good because you are not current. you are not making enough calls. make a lot of calls.
speak to the ceos and you will be better. it's okay. these people are people. just because they are vice-chairman does not mean you can't say, come on, man, do a little more work, make some calls. it's okay. go back. look, if this were any other business, we would say, you know what, you are not current. he is a nice man it's irrelevant. i'm trying do something that i couldn't do in 2007 where they laughed at me. i'm telling him, do more work. jay is starting to get there the interview with kaplan was good his october comments were so ill-informed that it's a shame he is such a good guy. it's okay. it's okay for me to get agitated about this, because i was agitated in 2007 and nobody listened they ought to listen now i have done better homework. i know more than they do it's okay. i'm older and i got the better information than he does that's all right belichick knows more than the guy he plays this weekend.
okay it's all right >> this is going to be big >> there's no harm in saying that. >> it's worth tuning in at 9:00. >> i like to be right. let him do homework. when they do homework -- talk to nordstrom. i have a lot of guys they should talk to. it's not about pride >> we will see you we'll be right back. for each job exxonmobil creates, many more are created in the community.
consumer discretionary was the worst performing in the past week after similar drops, the sector tends to rebound, outperforming a month later. check out the yield on the ten-year 3.07%, coming down dramatically after the comments we heard. you will hear more about that right now. see you back here monday bye. ♪ good friday morning. welcome to ""squawk on the stree street". futures back in the red. investors wonder now whether a case i