tv Squawk Alley CNBC September 7, 2018 11:00am-12:00pm EDT
(colton) this technology is helping us integrate rooftop solar, which is a very important element of getting us to our renewable energy goals. ♪ (shelee) if we can create our own energy, we can take care of this beautiful place that i grew up in. ♪ good morning, welcome to "squawk alley. i am carl quintanilla with morgan brennan, jon fortt at post 9 of the new york stock exchange stra straight to tesla. worst day since july on news of top executive departures, including the chief accounting officer leaving a month after
one month on the job elon musk's appearance on joe rogue and's podcast, smoking pot, drinking whiskey, handling samurai swords got an apology after a contentious call and guys, happy friday appreciate you helping us make sense of all of this tony, let me start with you. all of the executive departures, obviously cash flow, and now this sort of extracurricular activity as he goes on this interview. does it effect your research or not? >> it doesn't ultimately object the value of the company, how
many they can make but it effects investor sentiment. everyone knows that elon is not your archetypal ceo for many of the reasons you cited. but he is a genius he has been a disruptive force in the global automotive market. and investors have to weigh that at some point some will say these are too distracting to us and the companies and we worry about that, they will sell their shares and i think that's what you've seen over the last month or so since the take private, between the accusations of the thai rescuer, continued tweeting, podcast last night, you know, the tweet while driving about take private privately investors say the risk reward with these distractions is not worth it. that's why you see the stock sell off ultimately the stock will be
measured less by elon's behavior and more on what are cash flows and delivery of the company going forward. as a financial analyst, that's what we look at most closely >> gene, one of the other things investors should be keeping an eye on are bond yields you saw the 2025 tesla bond spike to 8.89% convertible issue due in february which stock price has to hit 360 to not translate into more cash for the company. how closely should investors watch that side of the equation as well? >> i don't think they should be focused as much on that side, the bond yield side of the equation they should be hyper focused on demand for model three as tony talked about, this comes down to fundamentals of tesla. and if you boil it all together, look at all of the moving parts, it comes down to do they have enough demand to support 60,000 plus vehicles at 20% gross margin if they can do that the next few
quarters, they'll be profitable, yields on those bonds change, stock will be $360, they can replenish debt with equity and they're at what we call escape velocity but that's the critical question investors need to ask. as we think about that question and try to be measured around the circus and deserving circus, our conclusion the man from model 3 continues to be robust and they're making production and profitability. if you want to think about bond yields and think about the september quarter in context to that, i am reluctant to say this elon musk's seemingly relaxed behavior probably is a sign the september quarter will be fine that's not going to get investors comfortable. they will continue to have doubt, but i think that's a
positive sign. >> maybe it is irony for tesla investors. toni, the most concerning thing i saw as far as what tesla investors might be looking at, news about the mercedes-benz eqc due in 2020. the range seems competitive with tesla. if they can deliver that, doesn't that sort of competition perhaps brand wise, competition wise create more of a concern for tesla than elon musk's samurai sword handling skills? >> look, i think there are two schools of thought around competition and we may counter consensus in my view my belief is that we are in the early innings of the adoption, and additional entrance into the market will validate it, so we believe that electric vehicles will go from 1 million units sold to 60 million units sold
per year by 2050 over the next 18 or 20 years we think unit growth will be 20% a year tesla arguably only had 10% share today, tesla could maintain share or lose share and there's lots of room to grow i think ultimately it is better to have 10% share of a huge market or 5% share of a huge market than have 40% share of a market that doesn't have critical mass. so i ultimately believe that tesla has had a first mover advantage largely around brand, that they've become synonymous with the ev category and having the compelling, attractive product much like apple was with the iphone i worry less about competition i actually believe that it validates the markets and if i am a traditional bmw owner and walk into the dealership or mercedes owner and ultimately
they have an electric vehicle and i drive it and think wow, this is a totally different driving experience, you know, that may make me go look at other vendors that have electric vehicles, including tesla. and i think the challenge for the incumbents is the market is going to move to evs, and they need to have evs to hold customer base or the base will move and ultimately i'm not so sure competition will be what some proclaim for tesla now >> do you think just the sheer logistics of manufacturing, do you think they have any advantages over tesla in terms of the supply issues, getting a car to a driver that wants to buy one today? >> they manufacturer at a predictable rate, certainly
within their own targets and elon has conceded multiple times it has been hell and very difficult. i think there's a real question downstream whether the cars will have sufficient quality. so you will have very credible manufacturing competition. that said, we're talking comparable cars only beginning to emerge in 2020, 2021, even the mercedes vehicle will be priced a lot higher than the model 3. there's very few announced model 3 competitors before 2021. tesla has a three year lead. they may have factories in china and other platplaces i am less worried competition will come in, have a better product and make it more reliably, we're talking three years from now until we have something that matches the performance, styling and most importantly price point. the announced vehicles to date,
including jaguar i pace and mercedes offered earlier this week, audi likely next week are higher price points than the model 3. >> gene, sort of get your thoughts on leadership and given some of the comments from musk last night as well around the fact that i think he considers himself more an engineering guy, more of his attention is spent there than the business side of the equation per se. to sort of use the word used before, the circus in terms of the latest round of news in general. does this contribute or add to the need for the company to hire a coo or another such person >> undeniably contributes to that as someone who has been a big proponent of elon measuring his behavior on social media and wanting him to do that and him not doing that, i am becoming more of the belief he is going to continue this unconventional
pr path, and i think the issue you have with that is it does de deepen some leadership question. i think we have to assume he is going to continue this behavior, and the risks and pros and cons of that. for this company to reach its full potential, which we think can be multiple times bigger in terms of valuation, the company needs to bring in some sort of a right hand person to be that steady hand. i think that kind of announcement would be a significant positive to the story. the question that i have, is elon at a point where he is ready to give up some of that control, and it seems like the more recent behavior, in particular the clear message from the board for him to be more measured and him going in a different direction would tell me else wise, that he in fact is not quite ready for that person. i'm optimistic they will eventually get that person and
that will be good for the story. >> probably more than any other ceo, can't get in his head, don't know what he is thinking at least now fascinating story today. appreciate it very much. talk to you soon when we come back, calls for social media regulation continue after facebook and twitter long week on the hill we'll take a look at the road ahead as some of those shares try to rebound today. dow down 107 at the lows, currently down 34. "squawk alley" back in a moment. what's the hesitation? eh, it just feels too complicated, you know? well sure, at first, but jj can help you with that. jj, will you break it down for this gentleman? hey, ian. you know, at td ameritrade, we can walk you through your options trades step by step until you're comfortable. i could be up for that. that's taking options trading from wall st. to main st. hey guys, wanna play some pool? eh, i'm not really a pool guy. what's the hesitation? it's just complicated. step-by-step options trading support from td ameritrade
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♪ ♪ ♪ welcome back to "squawk alley. nasdaq reversing course from yesterday's selloff that hit social media and chip stocks, still down for the week. facebook, twitter, snap all bouncing back after losses earlier in the week as well. google, parent alphabet off lows of the session and here with us, index adventure general partner on the board of fiat chrysler and others and mike santoli
happy friday >> happy friday. >> mike, i want to start with you. given what we have seen in terms of tech sell off, a lot of focus on social media stocks and potential regulation we have seen tech stocks slammed on worry about pricing on memory is this a signal more pain in tech to come or profit taking and temporary blip >> tech has been on a bull run a long time. it is an industry that experiences cycles at some point you experience cycles broadly speaking tends to trail nasdaq and the market. if you see the jobs numbers today, it is clear the economy is in a good spot. it is unlikely aside from volatility we see all the time because speculation of regulation and memory shortage and whatever, hard to imagine tech will go off a cliff while the rest of the economy is doing well >> what do you see in light of that as the biggest risk to the
tech story is it trade tensions and that ratcheting up with china >> i think probably the regulatory issues. historically if you look at silicon valley, we have not been active participants in the dialogue in washington, it hasn't been part of the story. these days with pervasiveness of social media that we use and depth to which which impacts everyday lives, hard to imagine we can't participate in that discourse any more issues are coming up issues of privacy versus convenience. issues of free speak and leaders of the larger social media platforms are beginning to deal with the reality, this is something that will happen in the future even younger companies think about an uber, airbnb or scooter company or self driving car companies like aurora will face some regulatory issues, and they're going to have a big impact in the future what it is, hard to say. no doubt that regulatory issues
will impact stocks >> bring us up to speed. facebook is trading below levels where mark zuckerberg was going to initially go before congress and people were sweating about the stock. twitter is not doing so hot. snap which has never done that great is doing about as bad as it ever has. where are we because at the same time you have other tech stocks, apple about to release iphones, amazon doing relatively a lot better. what does that hold for the rest of the year? >> a lot of valuation premium coming out of social media stocks in part because of all of the things we talked about, threat of regulation and public mood they have no incentive to put up great numbers right away what inflated the stocks for awhile, especially facebook, sense of in he have -- sense of how the profits were i think it makes sense looks like a modest valued
stock, the way alphabet did. that's a matter of it no longer seems automatic to how fast they'll grow also in context of a tech sector, large cap tech in particular, got overheated, lost valuation support. i don't think it is a major inflection point in terms of the market appetite for tech you see the nasdaq 100 is up twice as much as the s & p but down twice as much off the high, only 2.5, 3% really it ran ahead, now you're getting some bled out of it. at the same time, a weird shuffle of the index that will redefine what technology is for index benchmarking purposes. >> how messy will that process be >> i don't think it is messy in terms of the mechanics i think it is a perception thing. you take the s & p technology sector down from 26.5% to 20%, are people psychologically going to say i own too much tech or is it about redefining three
different sectors, consumer discretionary tech as tech proxies, make it seem like you need to own. it will be a noisy rebalancing but i don't think because of money in motion, it is the perception. >> before i let you both go, given the fact the news of the day is tesla and what's going on with elon musk now, you said on quite a number of boards this whole situation, funding secured a month ago, everything that played out about the company going private, not shed a light on the board of the company as well if you were in that room having conversations, how would you guide those board members to deal with the situation like this >> broadly speaking we don't recommend our ceos get on podcasts and smoke weed. that's not kind of a core recommendation we provide. but look, tesla is a special company. if you look at the enormous
market that chased the dream of electric vehicles and automation and so forth, you can't deny that elon is doing some amazing things obviously the last six months has been a lot of stress on him. he is taking a company building less than 100,000 vehicles a year compared to fiat chrysler that does 5 million a year and ramping into a real company. in a sense tesla is an adolescent, and they sometimes do a little crazy things, so you have to be patient with it and see what happens look, the guy is an extraordinary guy. we'll see how this plays out he sure is doing something special. >> thank you both for joining us today. mike volpi, mike santoli twitter is banning conspiracy theorist, radio host ntvey.f es after weeks o corors "squawk alley" will be right back
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>> stocks are mixed to finish the week the banking sector getting attention, worst performing sector, down about 1%. shares of deutsche bank saying one of china's largest conglomerates exiting its stake after receiving growing pressure from beijing government officials. in addition to dropping 7.6% in deutsche bank, they're expected to unload the vast majority of overseas investments currently valued more than $10 billion another bank in focus, denmark's largest lender dropped more than 4% on fears of a money laundering scandal effecting the estonia branch could be larger than previously thought. on the currency front, keeping an eye on the turkish
lira getting relief, as we see dollar weakness in the market the etf tracking stocks down 5% from the 52 week high last september. looking ahead to this weekend, sweden facing what could be one of the most significant elections in decades, one group in focus, swedish democrats, far right party backed by steve bannon, which would make them the second biggest party in government that party campaigning on a platformto leave the european union. carl, populist fever is still very much in existence across europe >> big story on the continent there, thank you meanwhile, as you probably know, twitter announced it permanently banned info wars founder alex jones julia boorstin has a look. >> hey, carl
thaerlt. after sus -- that's right, after suspending alex jones, they permanently suspended alex jones from twitter and periscope we took this action based on new reports of tweets and videos posted yesterday twitter referencing videos wednesday that showed him berating a cnn journalist on capitol hill after a long history of offensive behavior, including saying the sandy hook mass shooting was fake now twitter citing policies that prohibit direct threats of violence is going a step further from banning jones, saying he cannot recreate presence under another account to circumvent the ban. twitter joins facebook, youtube, apple, spotify who all removed on limit him on their platforms. facebook deleted four pages run by jones a month ago jones is back posting on
facebook after that 30 days expired. he acknowledges the twitter suspension, directs people to his uncensored videos on his website using the facebook web page to do so. appears the ban of jones on various platforms are successfully limiting his reach. "new york times" reports in three weeks after facebook and youtube august 6 bans on his pages, his audience fell by roughly half back to you. >> julia, thank you. coming up, tesla shares are sharply lower, 5.5%, after a couple of executive departures and eyebrow raising interview from elon musk what does it say about his leadership and the future of the electric car company "squawk alley" bk teth this is a story about mail and packages. and it's also a story about people and while we make more e-commerce deliveries to homes than anyone else in the country, we never forget... that your business is our business the united states postal service. priority: you
good morning, i am sue herera here's your cnbc news update at this hour. the death toll rising to 22 in the earthquake that struck japan thursday morning 15,000 households in the capital city of without water supply power has been restored to a million and a half households, but complete restoration will take more than a week.
residents in syria holding mass rallies in the last bastion, protesting an imminent government offensive as the presidents of iran, russia, turkey meet in tehran to determine whether diplomacy can halt any military action. six foreign divers that helped rescue the soccer team from a flooded cave in july receiving royal honors in bangkok. the prime minister presenting the award to divers from the u.s., finland, belgium, and japan. here at home, colin kaepernick visiting nike headquarters in oregon thursday, taking part in the celebration of the 30th anniversary of its just do it campaign. he spoke to employees thanking them for believing in him. you're up to date. that's the news update this hour jon, i'll send it back to you. >> thank you, sue. take a look at shares of tesla right now. the stock is slumping as the ceo elon musk joined comedian,
podcaster joe rogue and in a two and a half hour interview that involved smoking some weed, a samurai sword and flamethrower they talked about electric vehicles and sustainability. kara swisher joining us. good morning i'm not sure it is a surprise a free thinker in california smoked weed or how big a deal this is in the grand seem of this elon musk saga. what did we learn from this wide ranging podcast interview? >> well, he talked about a lot of stuff that he talked about before, his various things about cars and things like that. i think it is just that, you know, again weed is legal in california, that's the way it is, but he has so many things going on right now, i think probably doing that was sort of a big red look at me sign, probably problematic more importantly, think of recent departures of the
company, head of accounting, head of hr announced today there's a lot of executive turmoil in the company and i think that's something that's probably more important than him lighting up i suppose still not a good look for the company, the board will have a real issue here with trying to understand how to deal with how he wants to present himself in public >> what do you make of the way so many people seem to leave tesla, i love the company, absolutely believe in the mission, but i'm out of here what should we read into that? >> well, i talked to a lot of people head of pr left or is leaving. i think they all have the same thing. they think a lot of the product, they think a lot of the product, but it is relentless, it is a relentless place, he is not an easy person to work for. has a lot of difficulties in the personality, and the focus he gets is exhausting
you can't do your work because of everything else i think that's what most of them complain about, they love what's being done and at the same time all of the different things that happen from the pot to the tweets to everything else, just what the accounting person said, too much focus that's not what i signed on for. >> people are looking back into his past and other chapters where he has been equally sort of rambunctious. paypal is one chapter where at some point the board had sort of had enough, and i wonder if there's any way we approach that dynamic at tesla >> you know, i don't know, this board is an interesting one, seem supportive of him despite this it is hard to -- he had more
egregious problems, wasn't so colorful it is hard to support a founder like this one and one in a company that's very complex and it is not easy to replace him in terms of visionary, in terms of energy and things like that. >> do you think he is more indispensable than he was at paypal >> oh, yeah, definitely. but at the same time there's an expression that the graves are full of indispensable people it is hard to imagine tesla without elon musk. i think the board have to bring in a number two which has been talked about, elon talked about that and they talked about that, which i think who would take that job at this point, i don't know, i can't think of anybody, and he allowing the number two to work and operate the company or get him to say clean it up,
put your head down, focus only on the company this doesn't help. just doesn't it's not good. >> isn't that really the board's main job at this point seems to me so many people are saying tesla seems to need stability, needs operational efficiency, needs a number two elon musk even seems to be saying boy, i love this mission but i don't necessarily love what the job is doing to me. if tesla 's board can't deal wih that, what are they there for. >> the job of the board is only to hire and fire the ceo that searching choice, you know what i mean, i don't know what i would do if i were them. they must be pulling their hair out now. they've got all of the shareholders, all this money, a lot of money at stake, it is not just a game. they have to do something, and i don't know which one of them has power.
as you know from covering these things, the boards have a lot less control than you think. they may make statements but usually inside it is hair on fire in a lot of the places, you know from covering uber, that was the thing. who is the leader on the group, how can they convince elon, get the buy from shareholders, it is an enormous problem. and by the way, they need to make cars, really. that's their job is making cars. and that's real hard from what i can understand >> kara, there can be a lot of distractions, especially with moments like this, but investors probably need to focus on fundamental things what do you think are the next milestones that really matter, whether they're production targets, whether they are board actions, what should we do with tesla? >> i think selling these cars, making money at it what he talked about, getting
production going there's definitely interest in it this can't help interest in the product either it is going to effect how people feel about the tesla product so just like uber and other places they have to make the cars, make them at a price they can make money at again, it is not that hard, and they have to have a ceo that's visionary to focus and stop doing these antics like writing e-mail, smoking pot on a podcast. it is great for us in the media, like what did he do today, but it is not good for shareholders of tesla in the end. and that's where it has to focus, how do you make this car company profitable, make a great product, keep a great executive team in place. these are critically important things the rest of it is just noise, but it is real noisy noise. >> are you going to start having guests light up on recode
decode >> no, i am such a prude, carl if you want to, you can do whatever you want. you're an adult. >> i knew you would put that back in my court, kara thanks talking tesla today. thanks very much. when we come back, comcast's brian roberts sat down with cramer to talk growth, details and aftermath of the bidding war for fox assets dow is green after 100 point loss rick santelli, what are you watching >> i'm watching interest rates go up. the last time we had a report that generated this much wage pressure was early in the year, and revised away this one may not go away we talk about that with the former chair of w's uncocil of economic advisers after the break. to my parents.
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revealing their ultimate portfolios today at noon that means we are a touch more than 15 away see you then. >> that's close. looking forward to it, scott. the tit for tat trade war continues between the u.s. and china. we have a gathering of leaders from around the globe. he spoke with the former chinese central bank governor and joins us now steve? >> thanks very much indeed you have to remember the chap i spoke to was the key liberalizer of the chinese economy december 2002 to march '18. he was the governor of the central bank, one of the key lieutenants of xi jinping when he took over we talked trade and currency first of all, about trade wars and impact on the chinese economy. he says it is very limited listen in. >> the negative impact of trade war for the chinese economy
actually is not -- less than a half percent impact of the chinese economy. >> very illuminating, saying less than half of 1% i said what about longevity of a deeper trade war, more tariffs on both sides. he said hard to put calculations into the mathematical models, and pboc has been making calculations for the government on what worst case scenarios are. stock market was a large part of negative sentiment yes, only half percent off the gdp, but impact on the chinese stock markets is having an effect and i talked about currency, one of the accusations of mr. trump and the administration many politicians in the united states over the years is that chinese policy makers are
manipulating currency to keep it low, to make themselves more competitive on global markets. listen in whether he believes there's a case to answer >> i don't think this is time for them to charge that china has currency manipulators. i think that the u.s. treasury department also has very good observation of rate movement in china. they should know this. tlas there's no manipulation. >> no manipulation you expected the former governor to say that as well. i talked about levels as well, everyone is watching where does it go, do they lessen the value of the yuan because of concern over the economy, about what happens next in the trade war,
keep exports rolling, i said is seven the magic number he said there is no magic number it has been seven, it should lessen impact from the market if we get to that level as well clearly there are big concerns in china, concerns about leverage as much as anything else that's one of the things he didn't manage to sort out, getting the leverage down in the chinese economy. interesting comments coming out from the former governor back to you. >> fascinating, steve. the journal does a piece today looking at whether or not the chinese can afford to wait for midterms in the united states at which point the president may be more consumed with domestic policies china has the patience and can afford to let the bullets fly for awhile any idea what the pboc might say
about that >> i think the pboc would almost certainly say along the lines of the comments i just had. i was asking about comment about the chinese economy from u.s. politicians and u.s. economy and china as well. we don't get involved in other people's economies, it is not our part to tell you about the economy. you mentioned longevity of time. one of the quotes about china is they were asked a long time ago what do they think of the french revolution, someone said it was too early to tell. it was 1789 if my history is correct. we had amazing comments from neil ferguson, sanford as well, saying china has some really big problems and the president was right to put the pressure on them as well it will be disproportionate, the economic impact of any trade war. he believed the president was doing the right thing and that the chinese would ultimately suffer way more from the impact
of elongated trade war than the united states economy would. some people saying the president is doing the right thing i heard jacob frankel chairman questioning them on issues, one of those intellectual property the chinese may have a case on that, as yet haven't come up with an answer back to you. >> thank you you expect him to jump on a boat after this like james bond >> i think he did that after we cut away from the shot steve sedgwick shares of mondelez make a move lower, almost 3%. announcing new strategic vision. sara eisen sat down with the ceo dirk van de put in a cnbc exclusive earlier this morning, asked him about amazon and what it means for his business.
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welcome back to "squawk alley. rick santelli here we're going to have the former chairman of the counsel advisers under george w. bush on the phone. thanks for joining me. >> how are you >> good. listen, i want to cover the meat and potatoes what did you cthink of today's numbers? >> right on target
consistent with where we've been in the past. the if you remembnumber i look e month job growth, 185,000, that's still above what we need to keep up with population growth tells us we're still in recovery mode, but we're getting close to the top now. the other quick thing, the only negative i was going to say is that the employment rate you know which i love has dropped a couple of percentage points. we'll follow that over the next month or two >> now i was excited at over the wage pops. year over year, month over month. the discussion really seems to beam down on the notion that deficits are rising. taxes are lower. and this is a prb problem. if you want a good economy, do what makes it run best generate the most money then spend it any way you want. i think right now, we have this really crazy debate if taxes make the economy hum better, i don't have a problem with where the money is spent, but i don't like deficits.
>> well, i don't like them either, but you know, i saw your earlier discussion and the one thing i would comment on, i had done somewhat i think is serious research on this and what one finds is that spending rather than deficit, it's actually the spending level that's the negative effect on growth. i think that's what you were talk iing about this morning but if we keep spending, keep increasing our spending, no matter how we finance it, if we raise taxes or put it off then borrow then raise taxes later, it's still going to hurt growth. so spending is really the issue and that's true across a large number of countries, developed countries in the world over a long period of time. >> now, pursuant to that, i look at interest rates today on the move and i remember clearly on february 2nd, you and i talking about the same 2.9 that was revised w e ed away the world really paid attention to that.
put inflation break events on center stage rates are moving up today. if this doesn't get revised, i think it could be a big catalyst for rates to cross 3%. your thoughts. >> right well, you know, we were worried about that we talked about yield curves and different things most things in the economy are still looking strong the gdp growth was a good number labor market is still good >> atlanta, atlanta is like at 4.4 now, the fed st. louis fed is around 4.3 and this isn't like the first month of the quarter third quarter, we have three weeks left these are solid numbers. continue >> that's right. that's right and actually, if you look at it for a longer period of time, not just next quarter, but the next year, the market's basically forecasting about 3.5% growth right now. >> how much money we talking everybody i was debating this
morning wants to mix their metaphors. you talk b about spending and deficits and benefits of tax reform, but say you spent all this on defense. i wasn't talking about defense how much extra money between a two and a quarter percent and 3.5% gdp economy we talking, ed? >> well, the economy is $20 trillion, so take 2.5, 3.5% of that and that's your number. these are big numbers. but the main -- >> we're out of time, ed my moain point is generate more money in congress, spend more, but do the right thing to make the economy hum along. carl, back the to you. >> all right rick, thank you. what a day as we go through those jobs numbers. not to mention tesla, which we talked about this hour the thing we missed the rmt today has been any developments on trade we talked to larry about it in the 9:00 a.m. hour, but whether or not canadian negotiators can get b somewhere with u.s. negotiators today remains a
committee then steve a moment ago agree to which maybe the u.s. confronts china with some partners down the road we don't know. >> it sounds like china can hold their eyes open for a long time. so this staring match, not ending anytime soon. dow's down 32. over to scott. >> dpood afternoon good afternoon if the economy continues to boom, why have stocked this ws continued to swoon it's 12:00 noon and this is the jobs report. >> wage growth kicks in. will this be the ticket to lift stocks higher? a big call on a key airline. jim and sarat unleash their ultimate portfolio >> tobacco and marijuana in there? it's all it is >> and next chapter for tesla up in smoke the halftime report starts now >> here to debat