tv Squawk Box CNBC November 5, 2019 6:00am-9:00am EST
"squawk box" begins right now. >> good morning. welcome to "squawk box" on cnbc. we are live from the marketsite on times square. downing us is a cnbc contributor. good to see you today. a lot to talk about. we've been watching u.s. equity futures. this comes after the dow, s&p 500 and nasdaq set record levels the dow up about 68 points the first time since july the dow set a new record the s&p up about 8 points and the nasdaq up about 31 points. looking at treasury yields, the 10-year is yielding 1.81%.
>> yesterday, a headline said china planning to surprise trump and negotiators with a last minute plan for phase one to remove september tariffs this has never been talked about. delaying future tariffs was the most we were going to agree on trump was getting traction because of the bite. this has never been on the table. china will get it done then i read it today it said these are now part of the negotiation. the way it was cast is that it was almost like an appeasement or throwing in the hand. is it negotiations or are we backing down the deal is likely to get done
>> each side wants to say we got what we wanted now, if that happens, the markets will be like that. >> that's the big question, does the market care if it comes without any teeth. do they just want a truce and no more ramped up sort. >> for phase one, do they want to give up what they were working to force them out of the table. >> i think what the market is really looking foregoing forward is if you are going to continue conversations. that's what companies are looking for. so many companies are frozen in cap x. i wouldn't want the companies negotiating with china they'd fold. >> the markets in general think that they've got to make a three-month quarterly number these are the tariffs that were working and have china
wondering. >> companies impacted are saying, go hard. retailers are saying that. they are being affected. both sides want to say how are we going to say that the tariffs they are talking about. largely impacted clothing, large screen tvs that's the consumer spending part and the part keeping our economy spending at this point that thing we could see kcave a first. >> we'll get something else. >> if we take those off, supposedly the ip issue will get close on some of those things they said would never happen >> allergic to big losses. uber's loss widened to 1.1 billion. >> i don't think the market does
based on reaction. companies out spent rivals and dealt heavily on new ventures. revenues did rise above forecast gross bookings which include rides, freight and food deliveries costs rose even more up to nearly $5 billion. the company says it does see a path to profitability. >> it was significant beat on the top line in terms of growth accelerating and the bottom line we increased in 2019 the midpoint of our guidance by as much as $250 million i tell you while we haven't finalized our planning and it will take a lot of hard work from a lot of folks, we are actually targeting 2021 for
adjusted profitability full year >> uber is down more than 5% more than 35% since the ipo in may. the stock could be squeezed further tomorrow employees can then cash in their shares in a programming note, the ceo will join andrew live tomorrow bringing you the highlight throughout the day on cnbc look at that third guy muilenburg will be on. perhaps even more importantly, kim kardashian west. >> and i think her mom >> yes chris. i like friends i feel like we are friends >> reed hastings that will be interesting about netflix. >> and hillary rclinton. >> adjusted earnings before
everything >> and adjusted. and lyft said the same thing companies that are increasing price to sales and not earnings are getting killed by the market >> this is one of masuson's big investment >> this is happening to grubhub. they came out and the unicorn did really well. the street is looking for real growth and real earnings when you look at some of these, they are not getting positive. >> i don't even think we can use the headlines we used last adjusted before we take anything out of the cost that actually have to be paid. certain costs are included >> it is also two years out.
>> i think that's the thing. >> they've been received in a very different way. >> you can basically make anything >> what are you writing off in there? >> when the clarity comes to that, the street can give them some confidence. >> we should give you an update on the trade conflict. china is pushing the united states to move more tariffs. cnbc has learned that the deal was signed later this month is widely expected to include a u.s. pledge to get rid of the tariffs that had been scheduled to take place next month on about $156 billion worth of chinese imports. others say chinese negotiators want washington to drop the 15% tariffs on $150 billion of chinese goods that went into effect in september.
street seems to take out of this, there is progress being made >> how much is that? almost $300 million there. >> but it is not the end of tariffs. >> but the lion share. >> what's the maximum? >> 500 >> coming up, new interview new boeing chairman david calhoun will join us at 7:30 we'll outline the challenges he faces as he works to steer boeing through the 737 max crisis "squawk box" coming right back sundown vitamins are all non-gmo, made with naturally sourced colors and flavors and are gluten & dairy free. they're all clean all the time. even if sometimes we're not. sundown vitamins. all clean. all the time.
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>> the dow hitting a new high on monday up almost 18%. that's a banner year it was only a couple of months ago, we had no idea we'd be up one stock that has been lagging the rally but did okay with all that happened last week was with boeing with the max 737 fall out. about an hour from now, david calhoun will join us for an exclusive interview.
let's get to our next guest, ron epstein. analyst at bank of america and we visit with him frequency on this subject i don't know how you decide when things start to change, when it stops getting worse and starts getting less bad it seems like there was like a kre send owe of benefits a lot of what those gentleman and ladies were pointing to were valid criticisms but they do go over the top at times. was that the bottom of all of this >> we are probably getting close to it. what you'll probably see from here is the faa approving the airplane once then do, then the foreign
regulators will approve it there will be a couple of test flights. >> i think senior executives and journalists will take some of those. a lot of them. >> some of the big things they have to deal with is the brand you are seeing some flight attendants that came out that said they are not comfortable with the airplane. there will have to be brand repair that goes on. are they going to lose market share to the biggest competitor, airbus because of what has happened what is the impact going forward? developing the new 777, what does it mean for that? a lot of ripple affects. >> pilots aren't ready to sign on >> that's right. >> i saw southwest saying a
super majority of customers don't check or don't even know what plane they are flying on. i saw a poll in canada that 57% are uncomfortable if they were going to have to board a 737 max. do people know will they check? will it be hard to get customers back on these planes >> that's a great question my gut sense is probably not >> i think both polls are right. i think most don't know but if you tell them and ask if they are comfortable, they are not. >> what is the possibility of rebranding it? >> they could easily do that my sense this. when the airplane goes back into service, another event can't happen three strikes and you are out. however, if nothing happens and
the aircraft goes back into service in an uneventful way sooner or later, the public will forget >> sooner than later >> probably a year you can go back to the dc 10, the flying public eventually forgets. but it is key. the airplane will be under the microscope for a few years >> how much will they get squeezed by customers going forward? how much will affect the cash flow when you look at the reporting on this past quarter with american and southwest, both suggested the impact from the pretax urnings will be on the
order of $600 million. that's a big impact. the airlines will go to boeing and want some recoup operation for that when you look at what the airlines will want, it will be on the order for month month, the airline has been out of service, it's close to a billion. boeing has taken close to 10 billion in charges we expect that to rise until the plane is back in service >> this 10 billion and we are going into a late, great cycle their demand falls off tremendously >> it can. >> how is the balance sheet going to be prepared for that? is boeing going to be able to handle this? >> sure. they are one of the largest
defense contracts. we are not worried about boeing's balance sheet at all. in this last quarter, boeing took down the percentage rate. it went down to 12 a month and could it go to 10 or 8 >> thank you we'll keep your number you'll be back i can almost guarantee it. muilenburg survives for now. >> for now >> when we come back, the real real the world's largest marketplace says everything it sells is 100% authenticated. but cnbc finds a different reality. the real question. that's next.
real real. real selling luxury goods. julie's eight-year-old company went public in june. most of the business is on line with three retail stores to date growth has been rapid. merchandise volume up. company financials show it is not profit the real real's promise. >> authenticated by an expert. >> we ensure everything we sell is 100% real >> there is no fakes on our site that message is key to the appeal and has helped drive growth but has had grown so fast it can't deliver on the promise.
>> we are going to the gallery opening. just ask the celebrity designer. she recently called out a company for selling the fake version. >> hundredsof fired up customers. >> this looks like it was scratched by a cat >> after speaking with nearly three dozen former employees and these documents, our investigation uncovered a different reality inside the real real. >> did you actually see fakes make their way on to the site for sale >> yes >> a copywriter for nearly three and a half years says the team she managed did more than just write about consumer goods they authenticated them too? >> do you think they had enough training to authent gate these
bags >> i don't think anyone had training to authenticate anything >> that's been happening since i started with them. >> spending most days with consignors but says a 2015 tour left her questioning the business >> most pieces were being handled by the copyrighters. only very, very high value items were being authenticated by the lead it was very surprising because i was under the impression even as an employee was authenticated by an expert. >> hello, i'm graham the chief authent gator and public face of the real real cnbc obtained this internal chart spelling out what was to be processed and what
copywriters were to handle anything channel went to the authentification team. guc gucci belts and shoes, no. some of the most counterfeited items in the world are channel and gucci. they are trained to spot tiny details. like the number of stitches per panel. >> channel is suing the real real the real real says the suit amounts to harassing according to parchment when fakes and mistakes were found, they were added to a list to be
corrected. >> how much corrections were happening. >> did mistakes happen >> emily worked as a copywriter at the warehouse more than a year she was also tasked with authentification >> i had an idea i would go in and do it myself praying i knew enough. >> do you think you had enough training trying to figure out whether a bag is real or not is not top of your priority. it was just get as much out as you can. this is the quota saying copywriters are expected to reach their daily quota and subject to disciplinary actions. >> the way we were expected to
work was like a machine. from julie herself that we were to get in these numbers to please the investors >> she left after three years to work for a competitor. the real real sued for her taking her clients, which she denies the suit was settled we sifted through complaints the top three complaints were fakes, damage and customer service. this big name is now gone. chief authenticator. he tells cnbc, i won't discuss why i left the company when asked about his departure, he denies it was related to our story. when it comes to copywriters authenticating items, he would not comment. the company declined our request
to go on camera. we stand behind our progress and will always work to make things right. if there is a question, we refund the purchase price upon return the company refused to provide anymore details. only saying that this is our final statement. >> late yesterday, the ceo said for the first time that copywriters do take part in this process and only, quote, high risk items go to these experts this is what we've been asking for months if you go on the website, you won't see anything about copyrightersa tent indicating goods. you will see the team of experts, many of them in white lab coats looking very experty
>> authentic >> what could this mean for the company's growth >> as far as growth, ifs that put at risk, then growth and revenue could be at risk and it might not be as exciting for investors. >> if i go into a reputable place like neimans, is there a zero percent chance of getting a fake does neimans count the stitches? >> those are provided direct from the brand especially now with super fakes, the quality is so good it is tough for even the brands to know for sure. >> did you gain any experience
will you look at my airline. tell people once and for all >> it's real if i grab it, then i'll know for sure >> you've got some experience. can you put that to bed finally. it is perfect. do you want me to grab it on air? >> i think it looks great. you're authentic >> here's what i will say, it is real human hair. >> absolutely. i guarantee that >> now i'm going to get flack. you never can tell this is the rael rael. i don't know what p finally happens with this. maybe we can get the ceo back.
what do you think our chances are? >> it would be good for her. >> the market cap earlier this year did take off quickly. amazon is having the same issue. it is very important today >> seems like if it was a really good knock off >> and for high, value prices too. >> i thought about that with wine you give me some boons farm -- you really have to have a knowledgeable pallet to know >> do you think you'd know >> no. god no >> sothebys has that issue with wine i'd know if it was boons farm.
mb 2020. thank you. a great report coming up, getting ready for the trading day ahead. plus a run down of today's biggest movers we have a greater look at yesterday's winners and losers servicenow put our workflows in the cloud. this changes everything. you're right sir... everything. no not everything, i mean you're still blatantly sucking up to me gary. brilliantly observed, sir. always three steps ahead. six steps ahead. sixteen. so many steps. you done? a million steps ahead.
>> good morning. welcome back to "squawk box. take a look at futures new highs. the s&p 500 and dow indicated higher the dow up about by 40 points. the s&p by about 20. we'll get enter national trade data and later this morning, we'll get services pmi and the september jolts report on the earnings front today,
we'll hear from tapestry which is formerly known as coach and also the company formerly known as weight watchers >> same store sales for shake shack the company cut its guidance on comp sales for the full year. the stock still up shares of myriad genetics. and weak guidance siting revenue struggles in the herreditar
cancer treatment and lowering out look for the key metric that would be revenue that says growth has mod rated and protests in hong kong have had an effect and hurt business. >> still to come, craig zuckerberg joins us to talk about his new book that's next. >> announcer: coming up, he's faced challenges at general electric and caterpillar and now finds himself at the center at one of the most critical crises in history boeing's david calhoun joins
i read the article, it was incredible >> it's a crazy thing. you would think the greatest modern day money maker would be someone with experience on wall street mathematician, a code breaker. for years struggled to find the formula to make it in the market finally turned the corner, the rest is history. less ones there for everybody. >> what kind of less ones. resilience you too often we get caught up in stories by using a model you look at the best companies today. amazon, netflix, tencent it is all models that's the simon solution by deferring tomodels and the scientific method, you don't
fall to things like behavior modifications. >> we move towards more passive vesting, has he talked about how to make better returns in exchange >> it is a great question, problem or challenge if the market is changing. the whole genius is that there are patterns what happens if the behavior of the market changes there are enough dentists and people like me trading they'll see the nature of the market could change. >> they find the information nobody else has. do they go back thousands of years. as far back as the 1700s
a lot of that is the curiosity >> commodities right. they are not the most liquid markets. it can help whether it is a curiosity. they had better, cleaner data more than anybody else it is a huge advantage they were paying attention the importance of big data years before mark zuckerberg was even finished with grade school >> is it hard tore compete now with everybody doing big data. big data is the code word we've heard tossed around. >> good question you think they would continue to outperform they've done better in the last few years. in the future, you wonder if they can keep it going >> the other side of it is the tax efficiency for the average
investor one of the things people don't understand the turnover is high it is all short term capital gains. >> don't try this at home. they are not high frequency. they are flash traders if you are tax advantage, that's okay they've done very creative things and i write about it in the books. irs will pay some questions they have to pay back to those profits. >> the whole idea of being able to gain the system again is for other people not to catch up he's amazing in that he's able to build the set up. we've talked about two and 20 and how that can't last but it can last for somebody getting massive outperformance >> they don't really gain the
system as much as they look for patterns in the market they can be shorter or longer. they are a medium term trading >> i think of that is gaining the system just because you are smarter. you are just getting smarter and finding a way to beat it >> sure. for the average traditional investor who used to use information advantage, one of the lessons is how difficult it is for the traditional investor to beat jim simons and guys like him with the intuition, looking at balance sheets competing with a guy like jim simons who is a step ahead with talent too it is a whole different way of organizing a firm and recruiting talent >> did he ever talk about where
he went wrong. >> yes. they usually go 5,000 or so stocks long and 5,000 short. relative to the market and other groups of stocks they've had a series of set backs. i write about them in the book especially 2007. >> do you ever see where they get all the numbers in, everything is figured out and all plugged in the model and somebody says, what do you think, jim is. >> they themselves have to fight that instinct. even last year, jim simons is worth $23 million. he's all quants. he's on vacation last year on vacation with his wife sees the market going down he calls his money manager
he's 81 years old. even he feels the kind of instincts. >> i wonder if that helps or hurts. >> they are trying to override the system they are scientists and mathematicians they don't feel emotion like you and i do >> i don't feel emotion i'm number >> renaissance technology. you do not worry about instinct and intuition. if you defer to models and scientific method. >> thank you for coming in the book is called, "the man who solved the market. and coming up, uber shares are sliding. saying that the company is targeting 2021 for
profitability. next, 40 minutes until our exclusive interview with david ca calhoun you are watching "squawk box" on cnbc >> announcer: don't forget to subscribe to our podcast look for us on apple podcast or your favorite podcast app and sub describe today through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business. from using feedback to innovate... to introducing products faster... to managing website inventory... and network bandwidth. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence.
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tapestry just out with quarterly numbers. the makers of coach and other luxury brands earned 40 cents. that was 5 cents better than expected revenue came in 3 cents lower. the stock is up by 6%. uber reporting third quarter results. the company reporting a loss of 68 cents a share that was better than
expectations but still comes out to a loss of over $1 billion for the quarter. uber also beat revenue of $3.8 billion. joining us to break down the company results, tom white, senior analyst at d.a. davidson. do you believe the forecast for 2021 is that doable >> look, i think it will be very interesting to see whether or not consensus estimates sort of honor this target. it's a very aggressive target. consensus heading into last night had been losing $1.3 billion in 2021. now the company's saying ebitda profitable not just for the quarter exiting 2021 but for the full year. they didn't really give a lot of color on the call about exactly how they're going to get there or what the business will sort of look like for example, that target doesn't necessarily mean that -- or predicate that eats has to be profitable or even break even, for example. >> if you factor out eats and the other businesses, is the ride hailing business at uber
profitable right now on ebitda. >> it looks to be ebitda positive they said ebitda margin was 22% which sounds great they talk about some markets having an ebitda markets having 60%. that excludes 620 million in unallocated gna and platform r&d which is a pretty big number for the quarter. they sort of set that aside, but they're just sort of covering that unallocated gna >> you like lyft more but lyft is not profitable. it's just ride hailing at lyft they don't expect profitability on an ebitda basis until 2021, is that correct? they're behind uber on profitability for ride hailing. >> yes lyft has said exiting 2021 they
expect to be profitable. >> uber is there already except for the 600 million definition >> exactly i think the market expects lyft is being a bit conservative with that time line and can actually beat it. look, the reason we prefer lyft is just visibility plain and simple if we had a super long-term time horizon, say three to five years, you know, wethink maybe uber's interesting for folks with that type of time horizon over the next 12 to 18 months, uber is fighting a lot of battles on a lot of fronts, particularly in eats they're flush with vc money. uber is having to react and respond to some pretty progressive promotional and competitive activity. >> would it make more sense for uber to potentially spin this off and then just kind of focus on the core business and get a better valuation >> i don't think spinning off would be the right strategy. i think over time the fact that you actually have ride sharing and eats on the same platform could be a real competitive differentiator versus some of
the pure play players in online food delivery. you will have more drivers in your marketplace because drivers know they can go to uber because if they can't find a ride sharing ride at a certain time of day, they might be able to make some money delivering eats. same thing on the consumer side. uber is now integrated both products into the same consumer facing app which hopefully should drive more habitual day in, day out usage for people drive more loyalty i don't think a spinout is the right answer uber did talk about last night how they're going to be, i think, more decisive in how they assess certain online food delivery markets and maybe exit them more quickly than they otherwise would have they just exited south korea. >> meaning they're going to focus on places where they can get to profitability, that's a message coming through loud and clear. the investment tenor has changed? people want to see the path to profitability? >> i think the time line that they're willing to look at for assessing whether they can be number one or number two in the
market is condensed. >> does it also mean that they will be less aggressive with trying to keep up with competition in the markets they try to stay up with in terms of price cutting or if they stay in a market they have to, you know, do what the airlines used to do, be as dumb as your worst competitor, right? >> so far the company line has been in the markets where they see a clear path number two, they're going to respond. it's probably good for the long-term health for the business but makes forecasting -- >> discounting at both companies start to diminish? that's the other race to the bottom as your dumbest competitor that's gotten a little better. >> certainly in the u.s. in ride share. >> in ride share okay you see, he -- you quoted in the journal, you stopped talking when you heard the music you're good at tv. you've got it all. right? that's why you stopped talking, right? you heard the music? >> yeah. he picked up on the cues. >> amazing >> i get it. that's what that means, we're supposed to go to break?
>> yes, tom. thank you for coming in. when we come back we'll take a look at what has fueled the record rally and which stocks could keep the party going >> huh look. only one thing's more exciting than getting a lexus... ahhhh! giving one. the lexus december to rembember sales event lease the 2020 nx 300 for $329 a month for 27 months. experience amazing at your lexus dealer.
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deal that trend looks to continue this morning the names you should be 5di iadg to your portfolio straight ahead. plus, boeing chairman, david calhoun. his comments on the 737 max and the criticism of boeing is straight a hid as the second hour of "squawk box" begins right now. good morning and welcome back to "squawk box" here on cnbc i'm joe kernen along with becky quick. in studio. we are here with boeing chairman david calhoun. u.s. equities moderated a
little let's get you caught up with headlines. tapestry out with quarterly earnings the company formerly known as coach had better than expected profit of 40 cents a share comparable store sales were stronger than expected tapestry says the international business was strong while north america was impacted by what it called continued industry headwinds. strong dollar doesn't help and tourist issues don't help. some of their big customers were coming from asia before here in the united states. former mcdonald's ceo steve easterbrook has stepped down from walmart he was fired from mcdonald's over the weekend over what the company said he had violated company policy by engaging in a
consensual relationship with an employee in an sec filing walmart did not mention the firing saying only that easterbrook's resignation was not related to any disagreement with walmart. xerox is selling the 25% stake in fuji xerox. for 2 point be point $3 billion. that ends a 57-year partnership. xerox had planned to merge with the joint venture last year but abandoned that plan after it was opposed by investors including carl icahn dow hit a new high yesterday. joining the s&p 500 and nasdaq in record territory. the dow's year to date gain now stands at around 18% while the s&p 500 up more than 22%, nasdaq more than 27%. dom chu joins us with a look at which stocks are behind the momentum i guess some are the same and the dow and the s&p and others may have more of an impact i'm sure the faang have helped. >> they've helped certainly with
the s&p 500. with the dow it's a little bit more nuanced we have to talk about not just the price performance about what happens with the dow but some stocks that are more heavily weighted because they are higher priced stocks carry more weight. we have to balance that out. as you can see here, you mentioned dow industrial's high reclaiming record levels going back to the summer that move here driven in part by a nice move higher over the course of the last month or so in the dow industrials like you pointed out, 18% gains for the dow overall. if you take a look at the last month, where we have seen some of the most movement in terms of contribution to that move to the up side have been more heavily weighted companies, those with higher stock prices than the dow. on a one-month business says, caterpillar up 1.2%. more optimism there carries through to caterpillar apple part of that as well 15% up side. united health group, more
heavily weighted stocks in the dow. have contributed double digit percentages. they have done really well for the dow driving the gains to the record levels. if you want to see where the most up side will be, according to data from fact set, they took a look at the average analyst target price for some of the more heavily weighted dow components boeing has had some troubles as of late has an implied up side of around 13%. the most heavily weighted stock on the dow united health group up 14% goldman sachs would rise by 7% and mcdonald's, because of that big drop over the last couple of months, has 19 potential percent up side if analysts keep their target prices as they are. becky, that's what could drive the dow heavily weighted stocks, some up side here. we'll see if that happens. i'll send things back over to you. >> thank you very much for more on the markets we're joined by mandy zsu. and serat sefi
serat is a cnbc contributor. folks, let's just talk about where the markets stand right now and where we've been expecting them to be cnbc took a look at 17 strategists and what their equity calls were for the full year and of those 17, 14 of them have numbers that's below where the market is right now. >> what? >> 14 of them have numbers that are below. >> can't believe that. >> we've got almost two months left. >> the experts >> the experts does that mean stocks come down from here to meet their expectations or does that mean the strategists have to raise their numbers? what do you think? >> i think this is all going to be predicated on the trade talk. if things go as planned and there is an agreement, i think they have to raise their numbers. a lot of what's not built in is earnings that can change because of all of the costs we expect will get taken away. then you get some revenue up side too the market is pretty fairly valued if you look at certain sectors like financials, industrials,
health care, they're cheaper than the market. that's where the opportunity is. yes, tech is doing well. the tech that have real earnings around cash flow are doing well. i think the market's bifurcating saying, look, there's value out there. there's rotation and momentum is the companies doing well and will continue to do well. >> we'll talk about some of the stocks that you like in a moment mandy, overall what do you think the direction of the market is as we head into the end of the year. >> in the option market the positioning has turned very, very constructive especially into year end. a sharp turn a month ago when i was on the show and i was talking about a lot of demand for hedges, everyone is very cautious. to the degree if historically when you see that much pessimism in the options market, it actually risks the up side that's exactly what we saw over the last month now what we're seeing is the opposite the demand for up side calls went from a one year low at the beginning of october to a one year high. most of the bullish bets are concentrated into year end where people are playing for
continuation of this rally. >> that's where momentum is headed. >> certainly. >> what do you think is driving it >> i think part of it is fundamentally driven stabilization, economic data, earnings coming in better than feared trade deal making progress there. part of it i think is also poging driven. because everyone has been so defensively positioned across hedge funds, retail, every client base has been so defensive. you talked about -- >> expecting recession potentially to hit us. >> exactly exactly. >> i think no one was positioned for the up side, therefore, they're getting squeezed on the up side. on our prime platform what we're seeing is a lot of short covering over the past month i think positioning is part of it, but i do think the majority of it is fundamentally driven. >> why don't i just go home if we're up 22%, take everything off the table, getting bullish that's usually a contrarian indicator. recommend people doing that? >> so s&p is up 22%. >> at 18 on the dow. >> yeah.
most clients are not so hedge fund -- average return whether you're looking at macro, equity, low ng, short, et cetera, average hedge fund return high single, low double digit. >> they're not going to meet the s&p. >> they're trailing significantly. that's what i'm saying, going into year end. if this rally continues you'll see up side chasing from that investor base. >> you will see people selling down because there is still a lot of nervousness in the market people who have made 22%, 25%, it's meeting investor objectives most professional managers will say when i've hit my targets or my client's objectives, i'll take the money off the table one side of institutions are chasing this rally to year end because they don't want to be out of it. then you'll see individuals kind of saying, hey, maybe i'll take some -- >> is that 17, is that a mix of sell side and buy side >> the 17 that cnbc follows. 17 forecasters follow. i'm not sure who they are. >> whether they're buy side or sell side? >> i can look into it, find more information. >> so much better to be sell side >> well, there's not much down
side you say-- >> that's what i mean. >> but our side -- >> they aren't any less shy -- >> your clients will come after you. >> no, they don't. they come after their brokers and then the guy goes and moves to another firm, starts, you know, talking out of both sides of his mouth there usually i'm surprised we've got them -- >> 17 that wetrack. >> 14 are wrong. >> well, 14 are now below -- their price targets are below their price targets. >> they're wrong >> yes, if you want to put a fine point on it, they're wrong. >> they're not right. >> not bullish enough. >> right you've still got seven weeks left. >> could be a big 2500. >> look -- >> that's what they -- but then they'll say -- >> at this point last year you had the fed kind of raising rates. >> right. >> then you had the market selloff. people are still fearful of that. >> let's talk about this weird construct of everybody chasing this idea that they have to beat the markets by the end of the year, which is why you're going to see the momentum moving
towards the end of the year. what happens january 1st when everybody resets the clock on this dumb construct of a window that we've set up? >> then i think earnings are going to drive the market again. right now you might see more momentum at that point the s&p 17 times earnings, if you do get 18 times you will see a little pull back. >> so to that point, i say there's a very interesting bifurcation. i talk about a bullish sentiment. that's going into year end we are still seeing hedging. it's not that people aren't hedging. they're hedging further out. to your point, there's a lot of longer term risks, whether it's recession risks, trade deal, whether it's earnings. of course with an election coming up next year. there are still a lot of longer term risks out there, that's what we're seeing hedging going into year end. there's a little bit of a sweep going on. >> what are some of the names that you do like what are your favorite >> in the financials which are the most under valued, i like jpmorgan morgan stanley it's trading over book value
blackstone i think is a place a lot of people are investing in as an owner of that stock i think you want to be there united health we mentioned on the health care side some of the multi-nationals. like honeywell, microsoft, i think you're not going to go wrong owning those companies especially if you see global growth coming back. >> what do we need to watch for? what are the risks that you have out there on the table trade war is front and center? that's number one. >> i think certainly if the manufacturing weakness spills into the consumer sector you'll see a resurgence of recession fears, recession talk. on the up side, i would keep an eye on europe and potential for fiscal stimulus. very much a tail risk. there are political problems coming up in germany we see a coalition with the green party which is pro stimulus, pro government spending that could be a big tailwind for that region. >> there are zero options for that right now this has happened so often in europe, we've had so many years.
if that does happen, hence the multi-national exposure. corp rates that have global exposure will do well. >> mandy, thanks for coming in. >> always great to be here. >> sarat will be sticking with us for the rest of the hour. >> coming up, our big interview of the morning, boeing chairman david calhoun will join us starting at 7:30 eastern later co-founder carlyle group co-founder david rubenstein. "squawk box" coming right back i'm 52. but in my mind i'm still 25. that's why i take osteo bi-flex, to keep me moving the way i was made to. it nourishes and strengthens my joints for the long term. osteo bi-flex - now in triple strength plus magnesium. you should be mad they gave this guy a promotion. you should be mad at forced camaraderie. and you should be mad at tech that makes things worse.
at xfinity, we're here to make life simple. easy. awesome. so come ask, shop, discover at your xfinity store today. british prime minister boris johnson has found himself in a new war of words with labor leader jeremy corbin calling on voters to back him with a pledge to get brexit sorted in six months if he becomes prime minister cnbc's wilfred frost joins us now from london. you spoke with former prime minister tony blaire about brexit he is a big remainor, i know, but what did he say, will? >> reporter: i did, indeed, joe. good morning to you. just last week president trump weighed in to the upcoming u.k. election expressing clear
preference for boris johnson >> i should imagine jeremy corbin was probably pleased because if you're looking at this from a labor party perspective or an anti-conservative perspective, you know, donald trumpobviousl is quite a divisive figure here as well as back in the u.s you know, his attack on jeremy corbin i should think will not trouble jeremy corbin very much. >> you built a very close relationship with both presidents and stuck through president clinton through thick and thin as impeachment proceedings loom large, should that have any influence on the british prime minister >> no. wherever you go in the world the leaders start talking to each other, you get into a competition as to who's politics are crazier. i say to people, i think we're
ahead. a lot of people are competing to catch up with us you know, no whatever happens in u.s. politics, leave that to the u.s. the relationship between the u.k. prime minister and the u.s. should be strong one thing i will never criticize boris johnson for even though i disagree with him passionately about brexit is having a good relationship it's necessary for both our countries. >> tony blaire there and coming up at 10:30 a.m., jamie dimon and later on closing bell melody hodgson. guys, back to you. >> wilf, we can't wait to see it what else did you ask the former prime minister about that really caught your attention? >> well, he had a very, very clear view that negative rates were a bad idea. in terms of how brexit may or may not play out, he admitted that if boris johnson wins a majority in the upcoming election, then brexit would indeed be carried out. there might be some kind of
route towards a second referendum he didn't sound that confident of getting that outcome which of course is his desired outcome. >> wilf, thank you we look forward to the other interviews you have coming up later today. in the meantime when "squawk box" returns, bruins sports capital announcing a new product. george pyne will join us after this break. coming up, he's faced challenges at general electric and caterpillar. and now finds himself at the center of one of the most critickri critical crisises in the country. his thoughts on the company's grounding of the 737 max and what he's hearing from executives at major airlines that interview is straight ahead right here on "squawk box.
bruins sports capital announcing a partnership with cvc capital partners and the jordan company the megainvestment in sports business news is george pyne, founder and ceo of bruin sports capital. these partnerships will provide you with more money to do whatever it is you're going to do with it, $600 million but what's on the plate? what do you not have that you want to do >> we're investing behind the change in media consumption in sports so everything we do is behind that chain. >> not gambling. >> not gallon being in gambling. that can be design, activation, streaming, technology. that's what we've done and that's what we're going to continue to do. >> what would it take for you to tap into the new environment in this country with gambling. >> gambling is an interesting category very competitive a lot of capital sloshing around i have the investment threshold of a 100-year-old man.
>> on saturday how many games did i bet on >> a lot. >> nine games. who bets on -- why would i bet on nine games? i was 5-4. >> because you're an avid sports fan. >> i've gotten more avid from this. >> exactly that's great for sports. you're 19 times more likely to watch a game if you bet on it. that makes every game more relevant. >> it does >> a boring game is exciting because you can bet on a quarter, a half, how a player does it connects people to sports better than before. >> six nfl games. >> i even had the ravens. >> i tell my kids, never see a casino go broke. >> i know. after three months i'm down $100. >> i can think of a couple. >> people are saying that that's great, to still be in the game every week. >> that's right. >> so what -- explain exactly what are the most exciting things that bruin is doing right now? >> we're streaming, as an example, nfl games in 181 countries. we work with fifa, uefa, all in
digital and social media we're in the midst of the change and we're investing behind the change it's an exciting time to be in sports because people are consuming content so much differently. that's becoming more, not less going forward. >> is the opportunity bigger globally >> it is a big opportunity globally we right now do business in 18 countries and with cvc and a global track record, what today's announcement means in addition to having more capital, we have global capability. it enhances our chops and we'll accelerate our growth. >> did mcaa go far enough? as an aside. >> it's going to be a challenge. there are new categories that are going dormant. it will make a narrow group of players that will generate and get the money. >> right >> it will create more challenges in basketball think about zion he had a $2 million a year deal endorsement.
what about lebron? basketball where one or two players can have a big impact it will make a change lastly, you're recruiting. what's an endorsement and a recruiting stipend that alabama car dealer when they're talking to that young man, is it an endorsement or is it recruiting? what do the rules do to change the competitive balance and separate the -- there's a gap between the haves and have notes increase there's a lot of work that needs to be done it remains to be seen. >> so don't -- i mean, you have a big responsibility to do this right. you must think about that. unbelievable opportunity. >> the competitive balance in college and what these rules changes mean to me is a $64 question. >> is that it for you? >> that's a big issue. it's a challenge. >> we've got the chairman of boeing coming up so we'll have you back i love talking about this. i would like to talk to you about, you know, alabama/lsu.
>> big game. >> don't you think alabama is going to win that game >> i don't know. alabama is very good so isn't lsu. >> didn't cover the spread when i had lsu. against auburn i'm tainted. >> that quarterback at lsu is very good. >> possible heisman. >> i think they should give it to a defensive guy. >> we'll see >> george, thank you okay, matt, okay take it easy when we return, the interview of the morning. boeing chairman david calhoun and phil lebeau. we'll get some answers. >> five minutes. >> we'll get some answers on the 737 max, what 'she hearing about the future of dennis muilenburg. stay with us
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welcome back to "squawk box. it's time for our newsmaker of the morning. boeing chairman dave calhoun the dow component separated the ceo and chairman roles amid the 737 max crisis naming calhoun chairman on october 11th been relatively quiet in terms of on camera interviews. this morning he has a "squawk box" exclusive he joins us with phil lebeau good morning good morning, mr. calhoun. >> reporter: good morning, joe. >> good morning, joe. >> reporter: i know you have a number of questions for dave
you and i were talking before you came out here. >> yes. >> big question right off the bat is the compensation for dennis muilenburg. you have some news about how that's going to be changing, correct? >> yeah, i do. of course, it was sort of obvious to everyone that was an uncomfortable question for dennis dennis doesn't like to speak on behalf of board activities anyway, dennis called me saturday morning, 10:00, with the purpose of suggesting that he not take any compensation for 2019 in the form of bonuses, which is of course most of your compensation it came in two fronts. one, no short, no long-term bonus and, three, no consideration for equity grants until the max in its entirety is back in the air and flying safely as you know, max in its entirety takes us through all of the next calendar year and probably into
the beginning of 2021. so it was a significant move on his part nothing surprising about that for me, nothing. dennis's character always does the right thing. dennis was very uncomfortable in that situation, and dennis more than anything walked out of the evening in between the two hearings where he listened for several hours to every story, every story that the victim's families presented to him. changed him for life he was doing all the right things, but now he's gotten it in his core, in his bones, it had an enormous impact. >> enormous impact you know people are watching saying why is dennis muilenburg still ceo of boeing? >> from the vantage point of our board, dennis has done everything right from the beginning, from the beginning. remember, dennis didn't create
this problem, but from the beginning he knew that mcas should and could be done better, and he has led a program to rewrite mcas to alleviate all of those conditions, ultimately beset two unfortunate crews and the families and victims, and he's done that incredibly well he manages it every single day he keeps the board abreast of everything that happens every day. and he's done that well, and he has set us up for a return to service because i will remind everybody, return to service starts the day it's certified. it's not over when it's certified. there's no victory in that, right? we have to get the airplanes that our customers have put on the ground, we have to put them back in the air. we have to assist them every step of the way, and we have to get the airplanes that we built and are ready for delivery to customers back in the air as well that's a long program.
it's at least a year, and it's a tough, important task. and we believe he's up to it. >> joe, i know you have a question for dave. >> yeah. going back to the compensation issue, david so that takes care of this last incident, but is there anything being changed by the board about clawback provisions for something other than fraud or whatever you normally put in the bylaws there which would cover reputational damage or which would then cover safety issues safety issues are notoriously hard to have a clawback provision for because it's unintentional and we know things happen this is a high risk business and everything else, but if it was reputational, i think that would be a way of making that permanent for the next situation, god forbid if there is one at boeing. >> so, joe, the provisions around clawback -- first of all, we're not looking for a clawback on dennis. >> right okay. >> there is nothing at any stage anywhere that suggests there's
culpability involved in any of that with respect to those provisions, there's no doubt we'll take a look at that. no question. everything related to safety and its impact on compensation and many other facets of the operations of our company will be turned over, looked at hard and many revisions will be made. so i don't want to predict the outcome, but you can be sure we'll look at it. >> it's been reported that -- i don't know how many engineers are on the board of airbus but i know there's fewer at boeing right now. your career, you're all over the place at ge. i don't know whether you need an engineering degree, but you've got a lot of manufacturing expertise obviously. muilenburg is an aerospace engineer that's one which makes me think maybe this is a guy that you want here right now in spite of everything that happened last week, in spite of what happened in the last -- in the last eight, ten months, whatever it is this is a guy you want do you need more engineers on the board at a company like boeing >> i don't believe we do i think we are -- we have an
incredibly diverse board it's very strong everybody has a view and an opinion. we tap into it i personally tap into it on a very, very frequent basis. not just in board meetings but individually the safety committee chair admiral gene bastiani, one of the really terrific leaders, he has led an effort to study, look at, bring outside experts in to look at all of our safety practices across the boeing commercial and broadly across the whole company, and we have embarked on a program that will make significant changes to all of that. and i think he's doing it the right way. just one last comment, joe you may recall, you may recall in my life and leadership in the aviation business at ge and where we built the engines on the airplane, i joined that business ten years after a horrific accident in sioux city in 1989. that accident, all of the major changes that occurred inside ge
and the way we stood up safety practices ultimately created independence with our engineer organization and visibility right down to the nooks and crannies of the company. all of that was present when i joined ten years later and everybody referred to it that's what's going to happen in this company that's exactly the path we're going to have to take. >> but muilenburg, that is an asset. >> he is an asset. >> so he -- you think he'll be here in a year, dave, or -- i've seen people say once it's back in the air, six months later maybe there's a change. >> and why speculate on that you know how difficult and how big the program is and remains through the course of the next year, right? if we successfully get from where he started to where we need to end up, i would view that as a very significant milestone and something that speaks to his leadership and his courage and his ability to execute and get us through this and, yes, the board deliberates every single meeting on the subject of our leaders and
how well they're doing and do they have our confidence to date, and as recently as sunday or monday evening -- sunday evening, he has our confidence >> dave, there had been a lot of news reports in the last month that said that you were brought in to kind of manage strained relationships between dennis muilenburg and the board how would you react to that characterization >> yeah, i don't -- that's a false characterization dennis has a relationship with all of our board members he talks to them they each bring sort of a special skill to him my appointment is very much in the division. create more independent.
>> around the kbloeb. are you still going to act as a board. this is one very active board. so between indonesia and ethiopia, roughly four months. very tough time. just trying to get everything we can out of the ntsb investigation or the indonesian equivalent of that learn the facts. understand what has to get done. fairly early on that assumption,
that deadly assumption around what a pilot would do in that circumstance when that boundary condition was tested, that started to come to light there's no question about that ethiopia happens, everything changes and our board is in full gear and me included we went down to the engineerin organizations with a new safety committee that at that time was -- we didn't know if it was permanent, temporary, we were on with it. what we learned in that committee is the process they undertook to make the decisions and ultimately surfacing that flawed assumption. and, anyway, it was sort of clear to us, no one was hiding anything it was a set of engineering decisions that ended up being wrong and our job now is to make
sure that whatever processes we had, whatever process our regulator has, that those processes never allow for this to ever happen again that that assumption, just because history suggested it was a great assumption, just because history and the record suggested that, turned out it wasn't right and we had to test that every day. >> but you know representative defazio last week, you were watching the hearings. he said, look, there was an email that was sent from a boeing chief technical pilot that dennis muilenburg and some of the executives were aware of. that essentially brought to light this question of whether or not executives were aware of concerns with mcas was the board aware of that before the ethiopia crash? >> let me separate the im. it was discovered and turned over to the authorities that we were meant to turn it over to. the question you're asking is when it was written. was it surfaced then as a concern, was it fleshed
out? is there a broad culture question the answer is, it wasn't do we wish it had? yes. would it have resulted in something different around that assumption that went wrong i'm not so sure of that. i would hope that it would, but none of that happened so our job is to make sure that it will happen i do not believe that instance, that isolated instance is indicative of a cultural problem. i have not seen that in the many touches that i have. >> and because you know that yesterday representative defazio and representative larson sent a letter to the rest of the committee and they essentially said there's a culture of concealment, of not being 100% up front when it comes to safety. >> yeah, and i just don't see that i don't believe it i have many touch points inside boeing i always have. that question of culture and anybody's willingness to trade safety against anything else, never seen it, never touched it.
don't believe it don't confuse that our culture on this subject can get better we can do more with visibility, everybody knows that we can strengthen all the independent arms that are meant to put judgment against every decision in favor of safety. we can strengthen those. we can increase sort of the authority across the company and those are the steps that we are going to take. >> joe >> dave, in your view what's the right balance between a company and its employees and the cooperation with regulators and the faa? obviously i can't imagine the faa trying to certify something without a close working relationship with the company and yet if it's too close, then, you know, you figure that maybe the faa is doing boeing's bidding for it so how do you get that balance right from here on out because that's going to be something that people look at closely? >> that's a great question that definitely came up in the
hearings i just don't want anybody to be confused reform will happen reform has to happen the system let everybody down. i totally understand that. delegation of authority over a fairly lengthy period of time has delivered incredibly strong results. the safety record demonstrates that and the involvement of the most technical of the team at boeing, their involvement in that process is a good one if a rebalancing has to happen by way of reform, so be it so be it i get that i think both the faa and ourselves will look hard at these -- look hard at all of these practices when we'll attempt to improve them on our own and we'll encourage reform at every turn all in the name of safety. >> dave, we have had people, analysts and others who have come on the show, and defended boeing saying that, look, they think a big part of the problem
with this was a lack of pilot training in some of these instances. do you think this was a situation where pilot training wasn't up to snuff or was this an actual problem with the mcas system and design? >> becky, there were a lot of contributing causes. our job is to fix mcas and make sure whatever inputs ultimately come about in that cockpit at that moment do not create pandemonium. there is no question the fundamental assumption we designed around was flawed with respect to how a pilot would react, and that's our job is to fix that assumption and work with that man/machine interface with all of our customers and all of the regulatory authorities around the world if you ask me, that is the center of the issue that has to be addressed as we go forward and develop every next new airplane >> i know the censors were -- you had to trust that the mcas
was reading. people are saying pilots aren't even flying planes anymore is there too much automation at this point if a pilot was actually more involved with the takeoff than just relying on software and automated systems, would the same thing have happened do these guys fly planes anymore? >> i can't answer the second part because it's speculative in nature pilots do fly airplanes less and less in terms of controlling them in flight, but i do think we're past sort of that moment we are going to have to deploy automation we are going to have to ultimately almost -- almost make these airplanes fly on their own. make no mistake, i wouldn't want to get on an airplane without that pilot their judgment, their behavior at moments of critical importance is -- that's why i get on an airplane so forget my life at boeing so we're going to do everything
in our power to make their job easier and it will likely increase the level of automation in the cockpit >> what's boeing's relationship with the new head of the faa he seemed like he was irritated with the company, at least in recent weeks, based on some of the release of some of the information that had gone to the criminal investigation but not necessarily the faa. can you tell us what the latest development is in that and your latest conversations >> well, i -- dennis appropriately apologized for that situation nobody's happy about that. he's exercising his independence as a regulator so i don't even want to suggest there is a relationship our respect for the role he is in and our respect for the judgments he has to make over the next month or two, again, i don't want to -- i don't want to suggest we have one. he's doing his work.
he's doing it the right way. and he's going to listen to everybody inside his regulatory authority and make sure that everyone is comfortable that this airplane is in fact as safe as we believe it is. >> dave, let me ask you about the airlines, your customers gary kelly, ceo of southwest was on our air not long ago, and he's very upset. he came out and said, i'm not happy with boeing at all and they are going to consider looking at airbus as a possibility to fly in the future you guys have been two peas in a pod since they started in 1967 when he said that, what did you think? >> i said sort of good for gary. gary i've known for a very long time he is a fantastic ceo. he is objective about everything we have let him down there's no question we have let him down he was entirely dependent on the boeing company and the 737 fleet. he has confidence in that fleet, he does. he knows it has served him well
and he knows it has served him safely, but this gap where he needs capacity and it's not there is a real problem for him. anybody at that moment in time has to make the decision that we're going to consider other alternatives i get that so we're going to have to step up to the plate if and when that day happens and put our best foot forward and we're going to have to have a max back in the air that's flying safely, maybe safer than it's ever flown >> does that mean compensation, in other words, cutting the price on the plane >> compensation is a decision way long out from now. right now we are focused on getting this airplane back in the air. we price airplanes against our competition. we always intend to win and we always sell value in the process. i don't think anything will change about that. >> becky >> dave, do you still anticipate that the 737 max program will be approved, the new program
approved by at least one regulator and it will be back in the air by the end of the year at least somewhere in the world? >> so i'll reiterate a very important point and a ground rule that everyone set very early on inside of boeing. the regulator will make that decision i want to state that up front. we are going to support everything they do we are going to cross every t and dot every i in the process right now the schedule suggests what you said will happen, that, in fact, our airplane will get certified and as we turn the year we can begin to move forward on getting these back in the air. but, again, subject always to the faa's schedule >> did you want to cut production any further there's been reports that you have been an advocate for saying either shut down production altogether on the max or bring it down even lower than 42 per month. have you been an advocate for that >> i've been an advocate for stability and so the planned
increases -- now if you'll recall back when these accidents happened and immediately following ethiopia i had an objective to take the pressure off the company in every way i could think of, and one of them was to create some stability on the 737 max. at that time we were running at a fairly low rate, 42 relative to what we were predicting, but my advice -- and by the way, this wasn't a debate, accepted read deli by the team, was, yes, we're going to stay at 42. why stay at 42 why not drop to 30 there's stability involved in our work force skills and knowledge that we want to stay stayed the course we don't want to hurt those folks. we don't want to bump through the union lines. none of that works for us or works for the airplane or works for the name of safety so we have worked very hard to keep that stable and steady for as long as we can, and we have looked at our balance sheet, all
the credit issues that you face in doing so every step of the way. every month there's a rigor around evaluating that, and our hope, our desire is that we get the certification, we get return to service and we never have to move off that number >> joe >> hey, dave the 737 max is so important to boeing, i can't imagine that there would be a successor airline in the works any time really, really soon. this needs to be salvaged and saved obviously. will people a year or two from now say, yeah, i'm flying on a 737 max and it will be called a 737 max? there's no plans to change the name of it and it will be a proud brand for boeing eventually reputationly is that possible >> yeah, i think it's possible the entire company is dedicated to that. your question started with a phrase i would never use, which is salvage that's not what this is. >> okay. >> this airplane has been
updated several times over the course of its tenure out there always with the latest technology and safety requirements in mind so it is a modern airplane, and this control system will be fixed and it will be safe and it will have been tested like no other control system at least in my history in the aviation industry and this airplane will fly it will be safe. and i'll fly it, my family will fly it and there's-- the only way to win a brand back is not to advertise it or to talk about it but to win it with every next flight and every next touch. >> it will be called the max. >> it will be called the max. >> no plans to change the name >> no. >> jim cramer is tweeting, dave. he points out something doug parker told him recently, that boeing he thinks owes his company hundreds of millions of dollars. also says that those costs should be borne by boeing shareholders, not by americans what's your response to that >> well, there's no question
there will be settlements. doug's right doug's been very clear with me on that front as well, as every other ceo that's been affected there's no question there will be fair number settlements yes, our company and our balance sheet has provided for what we think that resolution will be. so there's a lot of work between here and there to resolve that, but, yeah, we understand that. doug's right we intend to satisfy him. >> do you think your company is getting drawn into the trade talks and now potentially used as a pawn between what's happening between the united states and china right now >> i certainly hope not. i'm going to operate under the premise that it will not trade is a completely separate discussion it's big and it's important to the boeing company long term but in no way, shape or form should anything get in the way of the subject of safety and the recertification effort. >> dave, we don't have much time left, but one last question we have for you is i think there is
a perception that the board, you talk to every once in a while, not every month, every couple of days, how often does the board talk how often are you guys saying, here's where we stand on the max? here's what needs to be done >> i -- i don't think a week goes by where i haven't talked to at least two or three board members, at least. to gain perspectives, to inform them, to make sure that we are up to date on everything reminder, every day we get an update, a complete update on the status of the max and what's happening with the software development release approval certification, et cetera so this is a very involved board. admiral gianbasiani led our safety efforts and drive deep into the company he's done an amazing job you think he's working full time on this. most of our team believe he is we thank him for that service. this is a very involved board. it's doing its very best to cope
with a very difficult situation. we are not trying to rewrite history. we are simply trying to take every next half step forward the right way. >> joe >> dave, boeing for years, one of the most respected names in the world, respected companies, and you work with jim mcnerney for a long time. those, i don't know whether i would call them the glory years at boeing, but obviously he had a very successful tenure is muilenburg capable of, do you think, returning boeing to those days did boeing lose a step when it lost mcnerney? i know that's a tough thing to ask but -- go ahead. >> yeah. let's just talk. there were two very different eras you may remember that when jim came in as ceo, he came in under dire circumstance -- >> yes. >> -- based on a serious compliance issue in the defense side of our business and he brought our company back from that. and he did it really, really well this situation's very different.
dennis came to us highly qualified. he is an engineer. that is helpful, but he also ran big businesses inside boeing he knows how to design airplanes. he delivers airplanes and he has provided them safely to his customers and he responds to them when he's asked questions so he came in qualified and now he is going to experience in his first period one of the most difficult situations any ceo that i've ever known has lived through. so if he can get us from here to the end point, the end point being a max that's flying in service and accepted by the flying public and begins to restore our brand, i might argue he's just about the most qualified executive in the world to be running a company like boeing so all of us have been through that ceo chair know how tough and gritty these experiences are. we're going to support dennis through this process and i hope when we get to the end of this
we're not going to project when we get, how we get, but if we get there the way i think we will, dennis will be one highly qualified ceo. >> we're going to life it there. dave calhoun, chairman of boeing thank you very much for the extended interview phil lebeau, thank you very much for bringing it to us from cnbc headquarters appreciate that very much. >> thank you coming up, reaction to that interview and mr. calhoun's comments check out the futures at this hour now up 63 points or so thank you, too >> i'm sorry >> "squawk box" will be right back still to come, co-founder david reuben stein talks corporate leadership, private equity and activist investing. he's our special guest at the top of the hour. "squawk box" will be right back. hi. this is the man that's going to check your eyes grandma.
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good morning and welcome back to "squawk box. times square becky quick. the deal book. >> that's tomorrow >> and what a lineup we'll probably show you a little bit later. u.s. equity futures at this hour are indicated higher and we've actually gotten a little better. boeing shares in the dow up about 3.5 points now we're watching that after the extended interview with new chairman david calhoun i don't know if you -- it's a high priced stock. market check on it right now given the interview up 1%. >> as joe mentioned, we just heard from boeing's chairman
dave calhoun in an exclusive interview here on "squawk box. phil lebeau is here. he has the highlights. there were many highlights probably the most important news coming out of this that calhoun and the board are standing by ceo dennis muilenburg and talking a little bit about what muilenburg himself asked the board to do in terms of compensation. >> reporter: right, becky. dave calhoun was emphatic that the board is behind dennis muilenburg remaining as ceo of boeing last week when mr. muilenburg was on capitol hill there were more than a few senators and representatives saying why are you being paid why are you still ceo? we asked dave calhoun right off the bat what is going to happen with the future of dennis muilenburg at boeing here's what he had to say about dennis's compensation. >> dennis called me saturday morning, 10:00, with the purpose of suggesting that he not take any compensation for 2019 as in the form of bonuses, which is of course most of your
compensation it came in two fronts. one, no short, no long-term bonus and, three, no consideration for equity grants until the max in its entirety is back in the air and flying safely as you know, max in its entirety takes us through all of the next calendar year. >> now i don't have all of dennis muilenburg's compensation information from last year, but i know, becky, we looked into this last week i believe he was compensated to the tune of about $23 million last year. about 13 or 14 million of that, if i'm not mistaken, was in the form of long-term compensation, stock grants, et cetera. so if you listen to what dave calhoun is saying here, dennis muilenburg said no stock grants for me for 2019. none until this plane is back in full service, which is, as he mentioned, likely not going to happen until the end of 2020 so there will be a substantial pay cut for dennis muilenburg as
long as he remains ceo of boeing, at least through the end of next year >> all right phil, stay right there we're going to continue to discuss this joining us for more on that is josh sullivan, who's analyst at seaport global securities. seth kaplan who's aviation journalist at kaplan research. josh, let's start with you what did you think of what calhoun had to say >> you know, i mean, the reality is with some of the delays and the starts with the max returning to service here over the last year, you know, stakeholders in boeing, be it shareholders, airlines, you know, eventual passengers needed to see a change and calhoun brings that. you know, i think you saw on display there, you know, an effective tool kit of public relations taking on a lot of these complex issues, breaking them down item by item while instilling confidence in the existing boeing engineering and infrastructure getting people to and from space on a regular basis i think, you know, showing that
separation, allowing dennis to do what he needs to do on the engineering side, focusing on working with the regulators, calhoun provides that separation and, you know, i think he did an effective job there. >> seth, what did you think? i mean, the narrative kind of got away from the company last week with the hearings in front of congress. what do you think of what calhoun just did does it turn the focus back or is this a train that's going to keep on running? >> i thought he did a great job, by the way, by telling you to -- made news by not only standing behind dennis muilenburg but by talking about what's going to happen with his compensation i think boeing at every step of the way has been a little bit behind you just wish that they could sort of see where things are going and get ahead of something in terms of news cycle the whole -- the question about compensation, i don't know how they couldn't imagine that that was going to come out last week and how much better would it have been for him to answer the question, yes, i've given up
something than to stumble like he did so, yeah, great job this morning. i just hope that, you know, they're working with everybody there, you know, in terms of communications teams as well to sort of envision the next thing like that and get ahead of it because they haven't done a very good job of that. >> phil, what are the next steps? what do we watch from this point? >> a lot of this now is coming down to the certification process, becky there are a number of software validation stepgs that need to take place i would say over the next three to four weeks, including having line pilots from a number of airlines around the world get in the simulator with the new mcas software they're basically going to validate that this system is working the way that boeing believes it will effectively work in the future now that the fixes have been made after that is a certification flight, likely either the end of november, might even slip into early december, and then you've
got the head of the faa, steve dixon, has said i'm going to fly this plane remember, he's a certified pilot. i want to fly this plane before i sign off on this that will likely happen sometime in early to mid december and it's possible we could see the faa sign off on this by december 31st it's a small and tight window, but there are many,including those within the faa who say, look, boeing can make it depending on what happens with each of these steps. >> phil, the software fix. mcas is still going to be part of the -- >> yes. >> -- navigation system, correct? >>ing correct. >> you still -- is it easier to disengage? does the software do that for you? >> there's a number of steps that they've made. we won't get too technical a number of steps. one of the big issues that was at the heart of the two accidents is that mcas was originally designed to take information from one angle of a tech sensor, instead of two, remember, it was a flawed sensor for both of these crashes that led to the pilots saying, why is
the plane continually pitching lower. second, the new mcas will fire once where it lowers the nose just once. previously it was going off every 10 to 15 seconds imagine if you were the pilot of either the lion air or the ethiopian airlines and you didn't realize this system was going to fire every, what, 30 seconds, however long it is, that is not going to happen in the future >> right >> so the sensor was indicating it needed to fire. >> correct >> it was a faulty sensor. >> they only took data from one sensor, joe. that is going to change. >> if it needs to be pushed down you'd want it to fire more than once, wouldn't you >> now you're getting into a different scenario. >> okay. >> look, the problem is the sensor kept on telling mcas system the wrong information. >> even though it wasn't. >> so mcas kept pushing it down. the pilots are going, wait a second, we're trying to pull it up, the system is pulling it down. >> you still need mcas.
>> which gets back to the core problem which is pilot training. >> correct. >> let's talk a little bit about pilot training and what that may mean part of the advantage to the 737 max was even though this was a differently designed airplane, had moved the engines, they were selling you something that didn't need to be -- that didn't need to come along with a lot of pilot training or any pilot training because it was still the same 737 program what happens in the future >> yeah. that was the whole point of mcas was to make this plane feel like the old plane, you're right. you know, this is an airplane, let's face it, that boeing didn't really want to build. it preferred to wait and do a clean sheet aircraft several years later. felt compelled for competitive reason bes to do this after airbus had basically slapped new engines on its a320. so boeing needed to slap new engines on the 737 as a320s were selling by the thousands after airbus did that.
boeing got unlucky airbus could put the engines on the plane, everything worked the same, boeing the engines didn't fit. they had to move the engines that kind of threw things out of balance. that's what mcas was for to make the plane feel like the old plane. that was important because then pilots could move between the older 737s and this one without having to transition as they would to an entirely different kind of aircraft boeing promised these lower training costs obviously we all know how that ended, but that's the big question here. boeing has remained confident, publicly at least, that there wouldn't be any big new training costs. a lot of simulator time, for example, required. if that changes, you know, if the faa says this is a different plane and you need simulator time, that's very expensive over the life of an aircraft and i think one of the biggest long-term worries here, other than just the existence of the program, but if you accept that this plane is going to be back in the air flying safely at some
point here, big long-term question, training costs because if it's going to cost millions of dollars more over the life of an aircraft, big if, but if that happens then it could put downward pressure on the pricing here because it's just a less competitive aircraft against airbus. >> seth and josh, want to thank you both for joining us. phil, thank you for bringing us that interview. >> thank you. a programming note, folks. boeing ceo dennis muilenburg will be joining andrew live tomorrow make sure to watch cnbc for all of the headlines. >> big lineup. >> big lineup. gathering to some of the highest profile names in finance taking place a bit north of here. anyway, the biggest financial opportunities and challenges one year out from the 2020 election. i think there might be an election today. >> there is? >> yeah. that's -- that's next when "squawk box" returns
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now with the presidential election just one year away, it's safe to assume politics will be on the agenda. dow is up 50% since donald trump was elected in november of 2016. it also attracts the high profile journalists. our own leslie picker joins us now. how is that, leslie? that was pretty good >> that was pretty good. >> pretty good >> reporter: special guest >> you owe me. >> reporter: thank you, joe. >> good morning. >> reporter: good morning. good morning no, i am actually here with david reubueubereubenstein withe speaking of politics, the biggest piece of news new to the markets in the last year and a half or so is that of the trade war. this morning there was news out that china may roll back some of the tariffs. you said you think there will be a resolution to the trade war by
the end of the year. it is november is this it >> i do think that they're close to an agreement. i believe had they had the apex summit in chile, they probably would have signed something that might be postponed a little bit now, but i do think they have reached conceptual agreement on the key things on phase one. phase onr copyrights, patents, forth. i don't think all of the issues are resolved the key thing resolved are china 2025 those are the issues of china trying to develop its technology in artificial intelligence, semiconductor design, things we are really competitive with them on they are trying to do much more than we would like them to do using government resources to make themselves a bigger player in that area that's what they have not resolved they won't resolve that before the end of the year. >> reporter: the market, all they need to see in essence is a phase one deal >> the market would love a comprehensive deal you don't get everything you want in life, right? a phase one deal, i think the expectation has been lowered
will be enough to make the markets think we don't have to worry about a china trade war over the next year or so. >> calm the markets maybe up until the 2020 election then >> it should do enough for a year or so, i think. >> reporter: speaking about the stock markets again, hit a record high. appearing to open in the green again today. when you see this tape, does it make you nervous that the markets are over bought relative to fundamentals or do you think it is potentially gearing up for a breakout even higher from here especially given what you're looking at >> i don't get nervous when my own stock is going up. that's a good thing. my own stock, carlyle is under valued we've been at a peak i don't know how long this can continue we've been saying it's at a peak and we've been wrong because it keeps going higher right now the economy is in reasonable shape not heroic growth. 2% is likely next year. >> reporter: do you still think we're due for a recession? >> there will be a recession at some point but i don't know when we have them, i don't know when it's going to happen
i don't think today it looks like there will be a recession in 2020. i think there's enough strength in the economy to go past 2020 i can't go past that i don't think there's a recession in 2020 unless there's some exogenous event that happens. >> reporter: joe mentioned politics, 2020, one year out from now one of the big topics on the campaign trail has been this idea of wealth redistribution. yesterday on cnbc leon cooper told scott wapner he called you a philanthropist with an example of a billionaire, wealthy individual who should not have to pay more in taxes because of all the money you give back to society. do you agree with the dog in the fight? >> i signed a giving pledge. i was one of the first 40 to do so i am going to give away basically all of my money. i think taxes are a different issue than philanthropy. i think the taxes in the united
states are not completely fair for everybody. i think there could be improvements i'm not sure everything done in the last tax act was perfect no tax act is perfect. i think tax inequality is an issue. i don't know one solution will solve everything i don't think a wealth tax will solve society's problems if one could ever be implemented. >> reporter: do you think there are improvements that need to be made in terms of the taxation of the super wealthy? >> you can always make improvements in taxes but i'm not sure there's any one thing that will solve our problem. if you tax the upper people, there aren't enough to make a wealth distribution effect sufficient there aren't enough highly wealthy people you have to do something with the middle class the problem is the middle class is roughly $65,000 for a family of four. people don't like to get taxed at that level. there aren't enough people at 200,000, 300,000, 400,000 and above to make that gigantic wealth redistribution. i think taxes will be a big issue in the campaign.
i don't expect to see a tax bill we haven't had one for many years. we had one in 2017 it takes four, five, six years before you get another tax bill. it has to be a lot of political support. there's not one for a major overhaul. >> even if there's a change in party and -- >> well, you have to change both houses as well because presidents talk about taxes. when they get in office they realize the house ways and means committee writes the tax laws and there's a conference committee. presidents have some impact on taxes but not as much as they might think when they're campaigning. >> reporter: speaking of changes under a potential new leadership, senator elizabeth warren has proposed a set of sweeping changes for the private equity industry looking at gps responsible for the debt and pension obligations. people i've spoken with in the industry said this would be a nail in the coffin for private equity is that something you think is realistic? >> i don't think it's likely going to happen.
i think when you run for president you say many things that you think are going to get you votes. you realize when you become president some of those things aren't going to happen i think it would be a daze disaster for the industry and the economy. private equity creates jobs and preserves jobs and pays taxes. we are the center of the world in private equity. if we are going to hurt the industry it will hurt the u.s. economy. >> reporter: i have to wrap here you had a new book that came out last week. >> thank you for this. >> reporter: interviewing historians. >> my effort to educate members of congress. i interviewed them once a month and this is asummary of it. >> reporter: it will be interesting how the next chapter of this book, next edition of this book looks upon this time in history. >> thank you very much for the time and congratulations on your baby to come. >> reporter: thank you so much, david. i'll send it back over to you guys. >> thank you our thanks to david as well. a programming note for you, don't miss an exclusive
interview on "squawk on the street" with ray dalio that will be coming from the greenwich economic forum that's coming at 10 a.m. eastern time. coming up next, top stocks making moves ahead of the opening bell. we will be right back. coming up, more reaction to our exclusive interview with boeing chairman david calhoun. are investors satisfied the company's on the right track fresh sit inghand analysis is straight ahead when "squawk box" returns. with every attempt to free itself, it only becomes more entangled. unaware that an exhilarating escape is just within reach. defy the laws of human nature. at the season of audi sales event.
welcome back to "squawk box," everyone we've been watching the futures. even after setting records for the s&p, dow and nasdaq, all three major indexes are indicated higher this morning. dow looks like it would open up by 62 points in part because of boeing shares a little higher. that stock is up by $4 after chairman dave calhoun spoke with us exclusively in the last hour. s&p up by another 5.5 points and
nasdaq up by 20. more than an hour until the actual opening bell on wall street dom chu joins us with a look at the morning stock movers hi, dom. >> we'll start our look with some earnings reports and analyst calls. we'll start with shares of rejennrege n rejenner -- regeneron. eye diseases, high cholesterol and other serious medical conditions posted better than expected profits and sales thanks in part to the eczema drug the shares have lost 17% of its value year to date through yesterday's close. next up we have shares of peloton up north of 6%, now about 5% on 300,000 shares of premarket volume they posted a quarterly loss in the first report as a public company. revenues better than expected thanks to a doubling of subscribers for its connected fitness product. those shares showing some gains. we're going to end p shares of
beyond meat which are higher to 3% the maker plant-based meat alternatives groups gets an upgrade. it was amarket perform they keep the price target at 106. they like better risk-reward also some of the better results from its canadian tests at mcdonald's locations, guys >> dom, thank you. great to see you. folks, coming up, we have some breaking economic news in a couple of minutes. the latestra tde deficit data minutes away we'll have that for you when we come right back. ♪ i can shine, i can shine, ♪
welcome back to "squawk box. rick santelli here live on the cme floor with breaking news our september read on the trade balance which i'm sure will be a trade deficit, expected 52 billion plus that's what we received, 52.5 billion. does have a minus sign it is red, it is a deficit but it is the smallest deficit going back to april when we were a whisker under 52 billion of course, trade deficits have taken on outside meaning in the trade negotiations the chinese currency has been doing better of late that seems to be a sign that things may be progressing. interest rates are back above 1.80 1.84 close has been the cycle high we will continue to monitor if interest rates and stocks will continue to go up hand in hand
becky, back to you. >> rick, thank you stick around for a minute. steve liesman is here and he's got more reaction on these numbers, too what do you think, steve >> reading trade data on the fly is the hardest thing i do if you really want to know. >> do it faster. >> do it faster? look, it's in line in general we look for this thing to be -- to reflect what's been going on with the trade war. what's interesting is you have the trade balance getting worse, which i can't tell on the fly here, but one of the things we've talked about is the stuff that may not be coming from china. could be coming from elsewhere it hasn't improved the trade balance. that said, i don't think improving the trade balance is something that matters i think it's something you call a red herring, white elephant. >> probably red herring. >> white elephant doesn't matter red herring is almost misleading probably a red herring. >> the president described this as stealing. they may be stealing our intellectual property.
the balance of trade is in line. exports are down that's a big issue in services they are about the same. that's another thing that the president doesn't really talk about, which is the services thing has kept up. it's the goods one that's been down. >> what about boeing that's going to be a factor. let's see if i can get you the transportation thing i hate reading these on the fly. >> let me ask rick a question while you're digging. >> yeah, go ahead. >> rick, this is a number that's so hard to read anything because of boeing and what's been happening with that what sort of -- it's heightened interest on this number but what faith does the trading community put into it at this point? >> reporter: they still go it pretty simple and straight it's smaller, it's better. if it's bigger, it's not all the rest of it has too many political side bars for traders. the closer it gets for minus 50, the happier they are we haven't had a 40 handle in front of that since, when? i have to go back all the way to last summer, june of '18 when it
was minus 47 traders like to keep it simple it can be a red herring, political red herring. at the end of the day we're coming towards the final chapters of trade and let's move on and see what phase one brings one thing i can tell you traders are paying closer attention to, rising rates and record equity prices. >> having said all of that, steve, what is the boeing input? >> it's interesting. boeing is up month to month. but it's substantially down year to date compared to last year. 41 billion versus 33 billion that's down a lot. other things that are down year to date compare rativelily agriculture is down. manufacturing is down. every aspect is down rick is right, hopefully we're over the hill on that, but there may be some recity sid dual to pay on this. one of the things that i looked at was the year over year change in exports and their contribution to gdp. exports have continuously added
to gdp over the past year or so they have had this steady decline which means as rick suggests there is up side if we can solve this trade issue and get back to where we are. >> hey, rick, you eluded to this what traders want to see is getting some phase one agreement put in place that's why yesterday you saw the futures picking up or you saw futures picking up as it looked like even if we undo some of those tariffs put on in september, the good news is that means we're more likely to get some sort of at least detante? >> reporter: yeah, i'll tell you what we all have our opinions of this administration, but one thing that i think is hard to dispute, they understand the word compromise this president and his men out in the field and women out in the field that are trying to put this whole deal together do understand compromise may be coming and i do think that some of these little parachuted kind of floating ideas that we're going to ultimately see that will chew
back some of the tariffs in lieu of maybe a bigger set of phase one issues seems to be what everybody is focused on. and i would also point out that globally interest rates have started to move up once again negative securities with regard to what proportion they play in the global scheme of things continues to move down a bit. and i want list eners and viewers to look at it from this perspective. when that exodus of what was deemed the biggest bubble ever, every institution and every bank and every investor of large size seems to be holding, for example, sovereign debt, is that reverses, where is all of that money going to go? i personally think it's going to go into what in many parts of the globe is under weight and global stock, not necessarily the u.s. but all boats will float on that global in flow that could be at the other end of this interest rate trade.
>> maybe it goes to money heaven when they sell for less than they pay no >> reporter: well, i'll tell you what, those negative rates have never made sense butwhat will make sense is the exodus out of them >> all right >> between you, i'm going to come back. >> yeah, when? >> we're goingto take a look at -- >> today >> 20 minutes or so. i'm going to do some calculations. >> on this trade data. >> who's winning and who's losing the u.s.-china trade war more or less i think a lot of economists say who's losing let's see who's losing more exports versus imports. >> i remember. >> we'll update the -- >> isn't that the one president trump retweeted. >> president trump retweeted half of what we did. the part that was better for him. >> we need to look back and see who wins eventually. >> why don't we make a date. we'll have a beer. i'll buy you a burger. >> it has to be resolved >> how long from now the fed thing. >> hope springs eternal.
>> no more i.p. theft, no more -- >> amazing story in "the new york times", did you see about the i.p. theft at universities it's really quite widespread. >> is that tie green or blue >> blue. >> you are color blind. >> he told me to stop wearing green and then he started wearing green. >> a mind trick. >> head fake. >> what am i thinking now? >> we're calling this a panel. can you hang out and be part of this panel for boeing? >> i don't think you need -- i have to do my calculations thank you. >> thanks but no thanks. keep your dumb air time. >> boeing chairman dave calhoun joined us a short time ago on "squawk box" speaking about the still grounded 737 max talk about dennis muilenburg as well here's what calhoun had to say on the max >> return to service starts the day it's certified it's not over when it's certified. there's no victory in that, right? we have to get the airplanes that our customers have put on the ground we have to get them back in the
air. we have to assist them every step of the way and we have to get the airplanes that we built and are ready for delivery to customers back in the air as well that's a long program. it's at least a year and it's a tough, important task and we believe he's up to it. >> some reaction let's bring in our guest, dennis tanger, allied pilot's spokesman and american airlines pilot for more than ten years. dennis, how much of the interview did you see? did you see the complete interview? >> i absolutely did. complements to your team for getting that guest on. >> okay. there are a lot of things that you wanted to hear and that you wanted to see some clarity on. i think the key question is whether boeing and other manufacturers for competitive reasons and for lack of a better word don't rush things out without the pilots or engineers or faa, just don't try to cut any corners whatsoever in the
interest of safety do you think that that happened this last time do you think it will not happen again based on what the chairman said, dave calhoun >> clearly using the chairman's words, reform must happen. the system failed everyone in relationship to the certification process. it was good to hear him come on record and not conditionalize that we're with him on that we need to see that change it did fail. everyone's acting on their best behavior now, we like what we're seeing, but we're very aware particularly after the hearings that there was more information that was new to us last week so we're going to keep focused on this, but last week didn't help >> so simulator training pilot training, it's all expensive. if it had been done even with faulty single sensors could these have been -- these incidents -- these tragic incidents, could that have been
averted? >> we'll never know. boeing in clear evidence in the emails, they requested the faa take all of the information out of pilot manuals and pilot training even an mcas like was disclosed last week that was new to us was removed from the aircraft. we have a lot of questions as to why it was removed and what the intent was the chairman mentioned there isn't a culture problem. there certainly was the results of a culture problem with this decision on this as you had even asked, what does the mcas do? we have questions like why is the mcas on the aircraft is it for pilot preferences or is it for a safety issue that they found those questions are being answered, but they're a little bit slow in the stream >> okay. so new software, two sensors, additional pilot training. you put all of that together and should every flyer that walks on a -- when it's finally in the air again, every flyer that walks on should have no
recriminations whatsoever about getting on that plane at this point? >> well, that's all going to happen at the cockpit door eye to eye, soul to soul contact with our passengers. they're going to look to me and say, captain, are we good to go? my crew, we will not say that unless we are convinced, appropriately trained for this mcas fix as it would be. >> what's your time line on this unfortunately there is a bit of a -- of an urgency among carriers, boeing, and everyone involved to get this happening as quickly as possible should we hope it takes longer just to make sure? should we hope that, you know, we can, you know, face this even sooner rather than later >> well, that's a toxic thing in the cockpit. rush to comply is something that usually leads to some very dark results. so pilots are trained in that and we encourage everyone to not rush to comply that doesn't mean that you take
a vacation, but it means that you are diligent and focused at the task at hand that's what our passengers deserve. that's what the new administrator at the faa seems to be telegraphing very strongly we stand with them on that >> are there pilot trainings that you are aware of to get more familiar with the 737 max any members? >> that's a great point? our safety experts have already been in the simulator down in miami to experience some of boeing's modules and they go beyond just the mcas they go into the flight control computer and what they want to demonstrate there. some manual trimming challenges that we brought up that challenge the ethiopian crew so that our pilots are aware of the challenges that boeing says one way in one manual and another way in a different manual. all of these loose ends need to
be brought together. the pilots, the chairman mentioned that our job is to fix the mcas our job is to see that mcas fixed and you need to help ensure that the pilots are trained across the globe it's not just up to your customers, the airlines, it's derisking of your enterprise to ensure that the operators protect that asset and the passengers that are on board nkts all right, captain. thank you. captain dennis tazer, allied pilots association american airlines pilot. still to come, how did stocks find themselves at record levels again and what will be higher from here keith meister is going to be joining us on set with some of his theories about what's happening right now. stay tuned, you're watching "squawk box" on cnbc don't forget to subscribe to our podcast. you'll get interviews, original content and behind the scenes access look for us on apple podcasts or
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tonight's all new season of "the profit" here at 10 p.m. >> the dow joining the s&p 500 and the nasdaq in record territory. by the way, check out the 2019 returns. with less than 2 months to go in the year you have the dow up by 18%. the s&p is up by about 23% the nasdaq is up by 23%. joining us for a look at the markets, the fed, what's working, where he expects to see the rest of the year headed is hedge fund manager keith meister. he is founding and managing partner. keith, thanks for being here. >> thanks, becky great to be here >> little bit of a surprise market we're not seeing a replay at least of what we saw last year the momentum seems to be to the up side. what do you think is happening >> i think that's right. you began by defining the market as being up 22, 23% year to date, but if we look at it over the last 12 months -- >> right. >> it's up 6 to 8%. >> if you look at the december
24th lows. >> correct >> so i think the market narrative for this year has been defined by two trends that you talk about every single day on your show, the fed and china trade. and right now on both issues i think we're in a happy lull for the markets. we began the year with a concern that the fed was going to, in joe's words i remember, end our economic expansion and why was that part of the mandate investors thought the fed had touched reality and raised rails. subsequently we've had three rate cuts. the fed has overcome some training wheels associated with communication and they've given the market today the message the market wants to hear, which is we're in the right place for now. so ghusd can be good news. i thought friday's jobs report was really important we had a good jobs report and the market went up so the fed said we're going to be patient so as a fundamental investor i like hearing that because the
narrative can now switch to which of my companies are doing the right things and not with regard to the fed. >> so we're not necessarily looking for the fed's next move. we don't expect them to do anything they are telling us they are on pause for a long time to come unless the situation changes drastically. >> yes now the narrative can change i think there's a similar backdrop vis-a-vis china we've all been conditioned for this trade war now i don't think any of us think it's going away any time soon. there's not going to be a magic bullet, but i think guardrails have been established. neither the trump administration or the chinese established administration want to see this cause their plans to be interfered with. they want to fight their positions but we've seen they're going to do it in a way where they're going to find -- it's going to escalate and de-escalate and i think investors see guardrails and this two-phased solution is a great example.
it gives everyone a win, but solve the problem. and punts and defers the issue as a market participant as you head into the end of the year, you don't need to worry in the short-term about china and don't need to worry in the short-term about the fed so relative to a ten-year below 2% or fed funds rate of 1.5 to 1.75, equity today can look reasonably valued and hospitable for investment. >> we had a conversation earlier this morning about how a lot of the hedge funds were running behind the market. we have seen this big pickup toward the end of the year i'm told you're long only fund is outperforming the market, 30% plus up, but that your hedge fund may be running a little bit below that how difficult is it to try and look at a hedge fund in particular in markets like these? >> investors don't expect a hedged equity product to outperform a market. >> on a good year. >> on a good year. what a investor would look like
is understand what your data is and how your performance has been to that beta and that outperformance, referred to as alpha, is what investors want to pay for. so hopefully we can get a lot of the market performance in up years and a lot less in the down years. >> my next question, we had a lot of people think momentum is going to continue through the end of the year, if nothing changes on the trade talks and it proceeds at this pace especially because you have a lot of shorts trying to cover at this point what happens when the calendar resets january 1 >> so there has been two pain trades for hedge funds one has been markets just going up and the other recently over the last three months has been the unwind of the momentum versus value trade the real question that we're wrestling with, most or many market investors, is can we continue to be carried up without the growth and momentum stocks working
i'm of the view that we're not going to be continue -- we're not going to continue to go up led by cyclicals and financials and attritional value stocks there is a reason why investors were crowded into growth stocks, the economic environment for the world hasn't changed still lots of negative yielding debt and global growth will be lower than average for a longer period of time in that world, i think investors want to own companies that have real growth and they're going to want to come back to businesses that will grow at 20 plus percentregardless of whether gdp is zero or 3 that's where everyone crowded. the stories were easy. valuation may have gotten ahead of itself. the great news is they grow in their value, and on pullbacks, you can buy these really high quality franchises because you know they're going to grow and relative to other assets, they traded at a reasonable rate. one example quickly, adobe last night, phenomenal business, updated investors on its outlook
at an analyst day this is 130 odd billion company and it told the world because every business is investing and digitizing their enterprise, it will grow at 20 plus percent for next handful of years, ref now, have positive operating leverage and have essentially no debt and generate a 4% or 5% cash flow yield on the current valuation that, to me, over the long-term is a much more attractive asset to own than a fixed income security that guarantees you a 2% return. >> wish we had more time want to thank you for being here today. great to see you. >> thank you. >> down to the new york stock exchange, jim cramer joins us now. you are watching as a discriminating and -- i'm sure you're listening to every word as someone that not just, you know, looks at the stock of boeing, but someone who cares about the flying public and someone who cares about a great -- what is one of the great american companies like me, you're probably pulling for them to get this right
in the future. did what you hear make you feel better that they're on the right track with calhoun and mullenberg >> it was a great interview with the guy you need to talk about because he's the ultimate boss these days and i did feel better but as you mentioned, i am completely rooting for them. i just believe that they are going to get past this, when i heard about calhoun, really talking about the big issues, southwest, yeah, okay, they're angry, they're right to be angry. american, yeah, we're going to give them some money the pilots, yeah, we're going to do what's right for them every box was checked. it was not by rote we got that dennis is going to give up the salary that's what we wanted to hear on capitol hill what a great interview if you don't feel better about boeing after that interview, i guess you have it in for boeing. this was really -- he's an exceptional man. you know that. phil lebeau did a great job too. i just felt like, you know what,
a lot of my worries were put to rest >> well, i would like -- because muilenburg is an aerospace engineer andlearning curve for a replacement, and there is overhang from what happened and people looking for him, they're not going to be satisfied until he's gone. if i knew you had someone like calhoun and the combination of those two, you got calhoun with all the experience at ge and just a solid guy in general, and then muilenburg is an aerospace engineer that knows everything going on, maybe the combination of those two should assuage some of the concerns about getting this plane back up in the air. >> you can't change horses midstream. that would be a mistake. the cfo, greg smith, he's fabulous look, they have a big bench too. you and i both know, this is just something -- this is a tragic thing how about the fact that calhoun said we made mistakes. he didn't say there were mistakes made. we made mistakes and that is the kind of thing
you and i want to hear from ceos, chairman, it is something we did wrong and i welcome that i think that calhoun is a -- was, we both know, a very tough guy. he is -- if he felt that muilenburg had to be out, he would say we'll get this problem fixed and we'll see. he did not say that. >> thanks, jim thanks for the kind words and thanks for watching and i tried to, you know, watching what you were saying, trying to answer your questions as well has.preciate it, tnk we'll see you in a couple of minutes. "squawk box" will be right back. driverless cars,
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steve liesman has been doing some calculations, he's ready to tell us what it means for the u.s./china trade wars. this is the chart that president trump did not tweet out, the u.s. hurting more in the trade battle in percentage terms u.s. exports are down 15.5% year to date through september. from china, they're down 13.5% but china hurting a lot more when you look at in dollar terms. this is the chart that president did tweet out. you can see we're down 14.5 billion, the chinese down 53 billion. so in percentage terms, it is a lot more painful -- i'm sorry, on the u.s., in dollar terms, more on china. >> that does it for us today join us tomorrow right now time for "squawk on the street." ♪ move on up move on up ♪
♪ move on up good tuesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. tide of record highs and trade optimism rolls on today. dow futures up 80 points, amid reports the white house is considering to cut some tariffs. europe is mixed in the ten year, approaching 1.84 ism services and jolts in an hour road map begins with wall street's record rally, stocks point to a third straight day of gains, fueled by increasing china tr