it's tuesday, september 8th. we get closer and closer to fed day. 2015. and squawk box begins right now. live from new york where business never sleeps, this is squawk box. >> good morning, everybody and welcome to squawk box here on cnbc. i'm becky quick with joe kernen and andrew ross sorkin. it's a big day here. we're kicking off our 20th anniversary celebration. for the next few months we'll be doing that here on squawk box. we'll be bringing you panel discussions with some of the best in the bisz. they'll help us celebrate our anniversary by making original smarter television and giving you our viewers an exclusive

look into the future. today kicks off with a focus on investing. our guest today is hedge fund legend leon cooperman and gabelli and rick rieder. we're excited to bring you this conversation all here at 8:00 eastern time and later this week, presidential candidate jeb bush and bill ackman but first let's get you up to speed on today's headlines. >> so that was the 20 year -- i thought it was 20 years since we had all been here at the same time. >> three months. >> no, three months. >> summer is up. >> beginning of game day. >> it's a feel good song. we are united.

we have not seen each other for weeks. let's get caught up this morning. u.s. he equity futures. here it s. we'll show you what's going on. we are rallying this morning. dow looks like it would open up much higher. s&p 500 looking higher as well. another volatile trading session but by the end of it things were looking up there as well. chinese stocks rallying into the close. the top economic planner approved railway projects worth nearly $11 billion. china's latest trade data showed drops in imports and exports last month and in japan stocks drop with the nikkei losing it's year to date gains but then in early trading so far in europe this morning stocks are higher looking off of that as well and you're looking at the dax and

just about everything at close to 2%. >> there are 1.4 million people and there's a lot of cities with over a million people and maybe it's a good idea but the chinese have been building a lot of stuff just to build it. i don't know. >> are they planning more stuff to dig holes and fill them back up again. >> that means they're more panicked. >> supposedly the factories are churning out -- everybody stays employed but they are turning out cement and concrete. they're not even using it. i don't know, maybe they can use it -- we almost built a lot of these things for awhile, right?

one in florida? one in california made sense, didn't it? you don't think they have shovel ready stuff. >> it pam very appropriate for that package. in way in corporate news antitrust regulators, are expected to give the green light, yes, yes, we should have a drum roll to the general electric alstom deal. made a lot of sense when oil was $100. i don't know. >> was that two years ago at this point? >> wasn't it? ge made a $15.9 billion bid for alstom's power business and the clearance is seen coming as we talked about all along, a lot of conditio conditions. u.s. authorities are expected to

give their go ahead to that deal today. >> and lufthansa cancelling it's long haul flights today. their pilot union went on strike. they missed a couple of months striking at germany's largest airline. i heard someone calling it uber the other day. >> where? >> is that somebody who is so cool or someone that just doesn't know. >> someone that was not a millennial. maybe it was me. uber plans to enter 100 more chinese cities over the next year and that doubles the previous goal set three months ago. the ceo says his company -- it's colonic. >> becky should have a middle name that should be full. his china unit raised 1.2 billion during on going fund-raising and he's a tough guy too, right? >> he can be a tough guy.

>> feel like he had a colonic after dealing with him. >> some people have said that. i have had better experiences than that. >> he shouldn't have a problem with you. he needs to be nice to you. you got to right your thing about him. >> i'm a heavy user. >> i'm a kline. >> uber user. let's tell people about the media technologies going on this morning. disney is expanding it's cloud based movies anywhere service adding more partners including amazon and microsoft and consumers will be able to buy a digital title once and access it on a device. free disney any where apps will launch in about a week. they sell them and they can and people are willing to pay because they're going to watch it over and over and over. >> you can't get all the films all the time. >> right. >> they go back in the vault.

>> yes, it's a very brilliant strategy. also verizon launching a free ad support mobile streaming service this week called go 90. it refers to people flipping phones 90 degrees to watch video in landscape mode. it will be available to all users even if they aren't verizon users. it will include live events, primetime tv and original web series. >> it was like blah blah. makes no sense to me. >> i don't know if this is a tim armstrong kind of deal now that aol is part of that and this is an advertisement play. that's what i'm assuming. and amazon reporting planning to sell a $50 tablet. that device will be ready for the holiday season just in time to compete with apple.

and other tv, a big ipad pro. and then the new phone. >> new phone. >> with an s. >> like a 9 operating system. >> os 9 is already out. >> ipads are getting smaller and smaller. >> there's speculation by the way also not only that there will be a new mini but that they got rid of the mini. >> because the phone keeps getting bigger. >> your newspaper had a lot on it yet. i know you probably saw that. >> i did. >> it's whether they can really do the gaming as well as the experts with the graphics and everything. like the sony playstation on the xbox. >> they're going to try to do it without games that might be fun to play that you don't need to be an expert in. >> gamer.

>> but i don't know, it's tough to break in. >> it's going to be $150. a lot more than the old apple tv. >> last time was $99. >> smart tv's already have that don't they? >> yeah but we'll see. >> if you're buying the disney movies on itunes and you want to watch them on your tv. >> this piece yesterday didn't assume that apple is going to take your living room by storm. it's tough. >> it is and it's questionable. we're going to watch -- i don't know about the watch. they're going to bring a new one out with a gold case that's not as expensive. >> that's stuff is not the

exciting. it's the phone. you have to believe in the phone or not. >> but for everybody that doubts it, i was in an apple store last week trying to get my laptop replaced. it was an hour and 45 minute wait for them to say the screen is cracked. >> that's not a good thing. it shows there's a lot of people. >> it's the only store that has something i would agree to wait that long for. >> and banana republic. >> no, no. >> you have to wait five days. >> no, they got it back in two but they wanted me to wait 3 to 5. >> i break screens all the time. >> you do? >> i got a cover. >> anyway, a sharply higher open today. the dow would open up 328 points. they're going to be looking at

this and scratching their heads. s&p futures up about 40 points. nasdaq is up about 87 points. it's all coming as we look at the strength in europe. we looked at that board earlier today too. a lot of volatility in the markets and this is roaring back after the lows you saw last week where the averages were down by as much as 3%. check out what's happening in oil prices this morning. right now wti is down by 2%. 4522. if you take a look at the bond market, the ten year note right now looks to be yielding 2.167%. right now most people asked on this, most analysts that have been issuing guesses on what the fed will do, only about a third of them think they'll raise rates next week when they meet. more than likely people at this point say that will happen in either october or december. check out the dollar this morning, it's up against both the euro and the dollar. euro at 11157 and finally gold

prices if you take a look at that this morning barely budged $1,119.80. >> was that the future indication? what was that? >> it was page a-2 in the wall street journal today. about 33% of analysts. >> analysts? >> i heard analysts on the radio. i'm assuming it's economists. >> they'll still do it. >> maybe, maybe but i think numbers like this this morning with the future's up 300 points may give them a little bit of pause. >> it has to stay above 1900. and we're well above -- we go up 38 or 40 today we'll be up at like 1950 almost. oil did it go to a different month? >> markets in the u.s. back open for business.

futures are surging. china didn't trade on friday and we didn't get a chance to see what was happening. >> the shanghai composite. >> it finally did open up about 90 points. which on a 3,000 index is like 3% so big move there and we're surging over 300. let's get a check on the week ahead with the chief u.s. equity strategist at deutsche bank and bill george is still with us. it's like we haven't even introduced you yet but someone is tired of you. they say still with us. this is the first time we said something. >> i think so. >> you have a book named after kanye's kid. what is their kid? is it northwest. >> northwest. >> true north. >> oh this is true north. it has nothing to do with kimye? >> not that i know of.

>> i would go with it because people said when kanye moves into the white house in 2020 they've already got a wing named after northwest. right. anyway, 50 basis points in september. >> everybody is offering their advice to the fed as to what to do. >> not that they will. that's your advice. >> they're not going to do that. >> what we would like to see them do is get this done and behind. it's appropriate to get a hike done but we don't want to have to see a hike coming every time they have a meeting over the next six months. >> were you more bearish than you are now earlier this year? >> yes from late last year we were cautious on the market. describing the market as likely to have a 5 to 10% decline rather than advance but we're taking a much more tactically bullish stance and it works it's way 5 to 10% higher. >> that gets us back to where we

were. >> that's exactly right. this market is being rightly pushed down because investors are not concerned about gdp. the concern is profits. this sabt china. not so much china's economy. this is about countries and companies that sell to china. that's where the profit pressure is. >> what about the profit pressure that comes from what we read about every day and that's stagnant wages although there's some hope that maybe you're starting to see 5.1%. that's lower than it was in any part of the last couple of administrations. so it should be at a point where you should start to see that. that doesn't necessarily help margins. >> it doesn't help margins however i think the bigger issues that you do see this disconnect between the economies profit drivers, investment spending, export activity, manufacturing activity. that's where the connections are to the global economy. that's where the additional pressures come from the stronger dollar. that's all very weak.

that's why profits are weak. not so much because wages are going up but the labor market is tightening. unemployment rate keeps falling. partly good job creation. still record low participation rate. that's something causing us to think the fed should hike. >> do you think the markets are too sensitive or the fed is too sensitive to what markets doing rather than making their call and moving out? they're seeing how the markets are going to respond. >> we like to think that the fed is bigger than market tantrums however if the market throws a massive tantrum and goes into nasty correction i'm sure the fed will put their plans on pause but a mere dip of 5 to 9%, we saw more than 9% decline. the fed should stick with their plan. we think they should get the first hike done. >> do you feel in your view -- you're retired now sort of. not retired but do you get the feeling that profit margins are

peaking or have -- >> solid. there's been huge expansion. >> can can they go higher? >> selective cases yes they'll go higher. >> but there's a major wall street firm that made a negative call on the averages overall. >> they have been very bullish, by the way. >> and part of that is because margins are peaking or have peaked. >> costs are in line. companies adapted the global market. they're very solid. a quarter of a point we need to bite the pull let and get on them. >> i agree with that. i'd like them to do 50 basis points. >> you saw in the interview that he did two weeks ago and he talks about volatility as something that they do consider but then the question is does it become a self-fulfilling prophesy, has that conversation

and all of a sudden september back on the move. >> they want to see what the fed does and they want to see how they are. it's the rate plateaus at a very low level. we need to see how the bond market reacts. and long-term yields barely go up. we need to see how the currency market reacts. we need to see how the dollar reacts and how the equity market reacts as well. >> do you think the equity market is because of the fed. >> ground zero is on interest rates. you see that in currency markets and it's the commodity uncertainty. china is the halarger issue. >> it actually takes some of the uncertainty out of the picture you think?

>> it's a step along the bullish path. as long as the dollar depreciates a little bit and not a lot i think we'll do well. >> as a board member of goldman and exxon you're watching energy prices which is another piece of this puzzle in a big way, what do you want to happen? >> on behalf of those -- >> andrew, i'm going to say let's get it back up and get on with it and start focussing on the real economy. >> what does it do to those two businesses in the short-term and then 12 months out. >> i think for goldman, these are all tuns, the way they look at it. they present opportunities. as far as exxon goes you'll have low oil prices for awhile. it will come out but it will be awhile. >> so we just kind of -- the

great squawk on the street. >> squawk alley. >> underwait equities. too late to see update on the profit markets and the m&a. >> what do you say? >> lots of mergers still going on. >> topping or no? >> i think there's more opportunity for expansion. i'm not goldman sachs. i believe there's more opportunity for expansion. it's going to be selective. >> the energy and probably increasingly at industrials that's where the distress is. that's where all the markets hit because of the slow down in emerging economies but health care, technology, parts of consumer and even parts of financials the earnings growth is okay. you'll be surprised how low they stay. pe multiples take the market higher at those select sectors but we do see earnings risk because of the dollar but this is shaving off of earnings. if there's any distress out there it stays contained to

energy. >> but those industries you favor aren't really influenced by quarter or half point. >> that's why we like them. there is exposure to foreign currency earnings of technology and some health care companies but i think we have a little bit more dollar appreciation ahead and that's it. >> great. i think andrew loves books. >> loves books. >> he writes them. >> great author. >> loves them and helps people sell books. >> it's a good book. worth selling. >> when we come back we'll try to sell his book plus where mastercard wants you to start taking selfies after clicking buy. we have that story next but first as we head to a break. here's a look back at this date in history. ♪

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it to mastercard for identification. they're also trying out fingerprint and voice recognition methods for verification as well. >> our guest host is bill george and he is the author of a new book that has nothing to do with kanye west. it's called discover your true north. he takes a look at what he considers great leaders of the decade. so what's the common thread among these leaders? that's the question this morning. >> authenticity. today's leaders changed dramatically. it used to be about charisma and style. now it's about real people. admit their mistakes. they're transparent and open. they have much more of a global mind set. >> but why is that different than the charismatic leader of the past? >> they were top down, aloof, very differ. today's leaders are very enga d engaged. they're willing to be

vulnerable. they're willing to be real. >> let me ask you about a question of this generation of management. more diverse. people want different types of people around them. they have a more diverse board in terms of race, gender and those things. >> when you go back and you look at apple and that company and it's success, at least early on, there's no diversity around them. they didn't spend any time thinking about those issues. steve jobs thought of product, product, product. was that the wrong way to approach the world. >> certainly today. they're a lot more diverse today. they have to be. all of those companies have to. >> do they have to for the business or do they have to for the sort of political correctness of the moment. >> i hate political correctionness.

they have to have a diverse set of life experiences sitting around the table. if you're selling consumers and you have a bunch of guys picking out dresses for women get over it. if you're at a global business, and you have no one around the table that's ever lived outside of the united states you're going to make bad decisions: look at the last two big appointmen appointments. you have both more diverse people coming up to the top. i think it's good. you want a diverse set of life experiences around to make inputs to your decision making. >> do you think that's happening easier? just naturally. >> it's not as natural as it should be. i'd like to see a lot more and i think the barriers are coming down and the millennials. they celebrate diversity. they don't care. they're having a dramatic impact. they will not work in a bureaucratic company. you can't run a bureaucratic

company and be successful. >> what's an example of an old company that used to do that and stumbled as a result. a company that used to be run that way. an organization that would not survive in this time? >> well i think a lot of companies have made dramatic changes. certainly the retailers have like home depot and target has gotten much more diverse in it's operations, becky. so those companies clearly stumbled but they came back from that and it was clearly a tops down classical hierarchy. >> you said that the baby boomers should get out of the way. that the millennials have to rise. should you be getting off the boards of all of these companies? >> i think so. why not. bring more young people. a lot of people are looking for that today. a lot of the people on boards don't understand. it's influencing everything. you need people that understand that. >> we joke but not so joke about

the millennial generation and the entitlement generation. what do you think of the stereotype. >> do you want a self-absorbed board? do you think that's the way to go? >> people want to have action right now and they don't want to wait until they're 40. hi an opportunity to run a business at 27 years old. somebody gave me that opportunity. that was not the norm in those days and it was the best experience i've ever had. look how zuckerberg has grown. he has great mentors. it's the importance of having mentors and a support team. >> is there an unknown ceo -- somebody that you think -- >> i'll tell you somebody i look at is ken frazier. you know his grandfather was a slave. i didn't know that. it is amazing. ken frazier is one of the great leaders, ceo of merck fantastic.

very authentic and very real. great leader. >> you're going to be sticking around for the rest of the hour. continue this competition. >> coming up a new reading on the state of the housing market. it's a sentiment indicator that many on wall street are waiting for. >> later our anniversary special gets started for the next 20 years. today's focus is on investing and our guests mario gabelli and rick rieder. takes us back to 1995. here's the biggest company by revenue at that time. maybe play some songs from '95. they seem new a lot of those songs. general motors, ford, exxon

mobil, walmart, general electric and ibm. it was a great time because most millennials were 3 and they couldn't talk.

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that's a slight decline from july but since it's inception four years ago the index is higher. joining us is doug duncan. he's the chief economist at fannie mae. >> good morning. glad to be here. we have been doing a survey of a thousand households a month for 4.5 years so we were trying to boil all of that sentiment about housing down into one indicator to give people a collective view looking forward about how people are feeling about the housing market so as you have watched over the last four years the gradual improvement in housing, this index prefigured that. one of the questions we ask is is it a good time to sell a house. we saw that portion which is one of the key questions in this jump about 20 points. so we put our release out saying housing is now on a firm track.

so it's that kind of thinking forward. >> a lot of times consumer sentiment is a lagging indicator. what do you think this is? >> we asked them what do you expect your mechanic to be 12 months out? what do you expect interest rates to do 12 months out. what do you expect house prices to do 12 months out and also what has happened in your income in the last 12 months so get a measure of the base from which they're thinking about it but also how confident are you of your employment over the next 12 months. it's really to look forward. it's odd, though, to try to find a base number or a baseline for this given the last four years how chaotic it's been in the housing industry. >> absolutely true and we're telling people, look, you have to be realistic. this is based on four years of data. it's not a full housing cycle. don't make it the key forecast variable in your forecasting process today but we compared it to the same set of questions out

of the michigan consumer sentiment survey and it actually performs better over the test time period. >> what are people feeling better about? what are they telling you? >> we're significantly up from a year ago. it slowed the last couple of months. when we look at the questions we ask in the overall survey the sentiment about the economy has a whole has taken a significant downturn in the last two months so we're looking at that. at househoelds watching the volatility coming back in the market with the fed potentially making their interest rate move. it seems as though households are more conservative the last couple of months. >> i was reading stuff this morning and it said that americans haven't felt the economy was headed in the right direction or the country in the right direction since january of 2004. that's serious and been cast over how people are feeling about things.

>> it's reflected in our sy have a: where the share people are thinking the economy is on the right track and then the last couple of months that wrong track widened out again. >> should we be looking in the last month or should we will looking more by the move in your index? maybe the long cycle and it's finally coming out of the dull drums and we're into a strong cycle like automobiles did about three or four years ago. >> yeah, that's more the cast or the way that we think about this. we do watch the month to month changes but in terms of statistical significance they're not as powerful as the longer term trend line so that's why i reference the year over year level is actually up several points from where we were. >> could we be in for a really strong long cycle. not just in san francisco bay area but around the country?

>> that's our outlook. the thing that i watch is single family housing starts and we're well short of what our demographic profile would suggest and in some markets the lack of supply in the new home space is the constraining factor. >> thank you for coming in today. >> glad to be here, thanks. >> coming up, a new and exclusive look inside uber. getting months long access as the multibillion dollar start up deals with everything from expansion to regulation and later squawk box kicks off our conversations for the next 20 years series. our special guest omega advisors leon cooperman and mario gabelli and blackrock's rick rieder. stay tuned. you're watching squawk box on cnbc first in news worldwide. ♪

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take a look everybody. if you're just waking up this is something to see. dow futures higher. right now if we were to open here the s&p would open up about 40 points. this is a continuation of the big volatility and big point swings we've seen over the last couple of weeks. >> uber the on demand car service topping the list of the most valuable start ups worth $50 plus million. the october cover story posting online today with an indepth look at the uber founder and ceo. joe mentioned before you got here that travis is a tough guy.

>> he can be a tough guy. >> is he a tough guy? >> he can be a tough guy. i read somewhere that a lot of leaders are complicated and difficult. somebody wrote something about that recently as i understand. >> but then there's the question. do you have to be a difficult person, a jerk, if you will, to succeed? >> i think if i read your story right, i think some people look at people as jerks. the same attributes can also be things that make them very effective leaders and he is that kind of leader. the way we thought about it at fast company is this. if you look at every decade there's a company that animates innovation. that comes to life and animates it. in the 70s and 80s it was microsoft and apple. what is the company that defines that for the time period we're in right now? we're only halfway through this decade but certainly uber stands the leading role in that position and if you want to

understand uber, if it was important to understand steve jobs it was important to understand mark zuckerberg it's important to understand him. >> is it worth that. >> it's in 359 countries. growing faster than any start up in history. will it be worth $51 billion? it will be. there's a lot of hurdles through them. >> he's going on colbert this week? what is that about? >> i think for colbert, i think he's trying to reach a different kind of audience and bring in a broader and more serious audience and for travis and uber they're trying to soften what has historically been a very harsh view of uber as a capitalist endeavor as if

capitalism is such a bad thing. >> regulators cracking down? >> they've had issues with regulators from the beginning. i think what happens with a start up is being an underdog is a good thing and getting a lot of attention has helped uber get to where it is. suddenly the same kind of behaviors start to undercut your brand instead of helping it. they recognized they crossed the threshold and they have to operate themselves in a different way. >> i met with travis back in june and he strikes me -- you got him right. it was a great story. a brilliant systems mind. he's not in the taxi business. he's going to transform all of the transportation business. but unlike a jobs or a zuckerberg, some of these people, he's not dealing with consumers. he has to deal with municipal authorities all over the world and having such a disruptive

effect: underneath that is he going to be able to personally deal with that and make those adjustments to have to deal with those figures because it's almost seething. >> it does seem like it's a very complicated business. >> there's always risks in these things. but he has had this challenge from the very beginning. they pushed back in almost every market they move into and they're in 330 markets so they have figure t out a way to convince a lot of different entities to play along and embrace this vision of the future. >> they've had the biggest challenge which is china. >> china they're in 15 markets already. it's a very fast growing area for them. they're targeting to be in 50 different cities by the end of the year. >> but you have to almost become the market leader to win the game. so you go into china and other

copy cats got there looking into what's going on here. >> remember the number of cities and the number of people maybe don't have to be the number one in china to be able to be successful. we don't know yet and that's one of the risks they're facing. >> are they going to win in china and india? >> it's way too early to know. they're investing a lot of money and resources in those places. >> thank you. >> i appreciate it. >> coming up, much more including his take on the ripple effects of the health care law. and then later this morning the official nick cough of the 20th anniversary celebration. that's a good one. three power players in the world of investing join forces on set. omega's leon cooperman and rick rieder. their mission paving a path for

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welcome back, everybody. it's a big week here on "squawk box." it is the start of our 20th anniversary celebration for "squawk." there are a lot of surprises in

store including a new billboard coming up on new york's highway. but here's a preview. much more to come. >> wow. >> i'm looking at you admiringly. >> i like that. i don't know how they took like 10,000 shots and they found that one. >> i don't know what gave that look of love. look at you right there. >> yeah. i know it. >> is that the same person? >> it is. i'm telling you, i saw that and it's like when did i become, like, a person of -- distinguished. i don't want to be distinguished. i don't know. i still feel -- you never -- >> are you uncomfortable when you get stopped on the street? >> no. i'm happy when anyone does. i'm very grateful. with men -- with boys there's no guarantee that you achieve manhood. you think it's a temporal thing.

it is not. it may never happen. and it hasn't. that's why i'm -- i work out every day. time to talk politics with our guest bill george and how the future of health care will play into the presidential election. i had three things if we talk health care. number one is that we are starting to see a pushback for some of the mergers that were actually sort of -- obamacare greased the skids for these mergers. they almost have to do it. i love this piece in andrew's newspaper now. what our hospitals cost. they have no idea. it's a question that's never been asked. they know what insurance companies pay them, but they have no idea what their costs are. >> and the staff laughed when they asked the question. >> so the combination -- we haven't fixed health care either. costs are starting to accelerate again. the health care inflation again.

so those things were expensive. that's the other thing "the new york times" has a piece on the cholesterol drugs. they could break the bank. what do we do? >> we're headed for a day of reckoning in health care. somebody's going to have to face the music. now the big merger i'm concerned about the anthem/cigna merger. >> you are too? >> yeah. they've already raised rates this year 25% to 38%. that's going to play out. i see it sitting on the board of mayo. the new round of pharma drugs are incredible but the price, $100,000 for a drug? >> if you don't increase the infrastructure for health care and you add 50 million new people, what do you expect insurance companies to do? and a lot of young people don't sign up because -- and that hasn't worked because they're

healthy. so you've got all these sick people. what do you expect insurance companies to do other than raise rates? >> exactly. the other thing we're seeing is a significant shift in payer mix. shift away from commercial pay where people have to have copays, shared pays. they are using health care less. but big increase on medicare and medicaid. everyone is losing money on medicare and medicaid. huge losses. so you have to offset these. this is a big concern. and i think you're heading like i say for a reckoning coming. i think the government -- look. every time you've run into pressure at the government level, they make concessions to consumers. and you got to pay for that. so somehow this is all going to accumulate and we're going to have to face that and it's going to be significant increase. >> write a book on that. >> it worries me. >> for your next book. >> we've got to deal with the health issues otherwise you're going to see exploding cost. >> great to have you on.

>> congratulations on the book. >> thank you very much. when we come back this morning, lee cooperman ready to take on the global markets. stick around. we will be right back. hey! hi! our cloud - it's a platform based on awesome-ization! really? can it keep our data where it needs to be no matter what country we're in? integrate with our systems to help keep transactions secure? combine customer data with likes, tweets, the weather,

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market alert. futures sharply higher ahead of the shortened trading week. lee cooperman will tell where omega is putting their money to

work. rise of the machines. high frequency trading changing the game for investors, but is that game rigged? why your investments could be at risk. and disney wants to make it easier for your kids to watch "frozen" over and over and over again. ♪ let it go we have details straight ahead as the second hour of "squawk box" begins right now. ♪ live from the beating heart of business, new york city, this is "squawk box." >> welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen alongside -- no kidding. we're here. becky quick and andrew ross sorkin are here. we'll be together for awhile. >> another 20 years? >> and we booked buffett for the 40-year -- he said he wanted to be a guest on the 40-year

anniversary. >> i think it's a tuesday, 7:00 a.m. maybe. >> it is. our top story this morning, the u.s. equity futures are sharply higher this morning. europe's better. shanghai was up as i said the composite rose nearly 3% overnight and close to those gains between 2% and 3%. even though imports weren't great in china. it was much worse than expected. japan's nikkei fell nearly 2.5%. hang seng rose more than 3%. other stories we're watching at this hour, european union expecting the green light to the alstom deal today. ge made the bid for alstom's power business. that was about a year ago. coming with some conditions. u.s. authorities are also expected to give their go ahead to that deal today as well. then uber planning to enter a hundred more chinese cities over the next year.

we're going to talk about what's going to happen to uber in china. that doubles the set. says his company's china unit had raised $1.2 billion during ongoing fund raising. and he will be on one of colb t colbert's shows this week. and apple seeking experts in machine learning which helps devices learn what users are likely to want next. apple will have to compete with google, amazon and others. apple making a lot of announcements about new devices tomorrow. our guest host this morning is one of wall street's top value investors. joining us now is lee cooperman. he is chairman and ceo of omega advisers. also the former chairman of goldman. we've been watching the futures this morning up over 300 points for the dow.

these have gotten typical in the last few weeks. what do you think is happening? >> well, the machines seem to be taking over which i have a negative view of. 1937 they enacted the uptick rule and that rule served us very well and then for unexplained reason in 2007 they removed it which has given rise to a lot of quantitative type trading which i think has created a tremendous volatility in the market and is creating a disservice to the public in my opinion, scaring the public. if the public gets scared, they leave the market. it's going to raise the capital to business. i would suggest -- happy anniversary by the way. mary joe white to explain what it is and not reinstituting the uptick rule. >> when you say machines, you think it's the risk parity funds out there, the commodity trading

advisers. >> just in the real world, the s&p isn't worth 5300 points more or less in five minutes. there's artificial trading ta taking place. i'm a professional investor and i get destabilized by it. i don't think it's necessary and i think they should deal with it. the machines are overwhelming the ability to deal with it. don't get me wrong. at the beginning of the year, i said the market was in a zone of valuation. i don't think it's undervalued. i think it's fairly valued. b but these moves are enormous. they should look at the reasons behind it and try to deal with it in an intelligent manner. >> what percentage of the moves do you think are buy computer and what by person? >> about 75% of daily trading today has no terms with investing. it's tied to high frequency trading, slicing and dicing of

etfs. not analyzing fundamentals. in the world i grew up in, if something went down you wanted to own more. the world we're in now you want to own more if it goes up. if it goes down, you want to own less. it lacks common sense. >> you and warren buffett aside, crowd mentality hasn't always been the sanest of things. >> no. but i've never seen moves like we've seen. it accentuates everything. you know, a year ago -- almost a year ago what was already worried about ebola. are you hearing about today? nothing about ebola. >> but hearing about china and a potential slowdown there. >> i understand. but china will be what ebola was a year ago. you don't read about it. a month ago, i walked in one morning because what was going on in greece, global markets went down $1 trillion in value. the entire greek economy is $45 billion.

in the last 150 years, they've been restructured or in default. 92 out of 150 years. it's not a new phenomenon. china is dealing with serious issues. they've not been unreflected in the market. china as a whole is not all that relevant for the united states. extraordinarily relevant for materials, commodities, energy, et cetera. but those industries have been decimated. >> you have to tread lightly if you decide you're going to somehow try to stop algorithm -- >> i'm not trying to stop it. >> you want people to do algorithm trade. they've got to do that. it provides a service. you want people to try to non-correlate a portfolio to normal risk. and doing it through mathematics. you don't need to just investment to buy and hold for 20 years to be a -- you know, a positive member of society. and there could be a lot of liquidity, too. >> that's not quality liquidity.

>> but you got to figure out a way to do it that doesn't cut these guys off at the knees that are doing effective things for their the clients. >> they put the uptick rule in in 1937 or '38 for a reason. it worked for effectively. in 2007 when they removed it, that's when all these new strategies -- >> i don't understand -- >> why wouldn't you want to help? china's doing a lot of stuff like that. >> that's artificial stuff. >> aye got one. larry fink and hillary clinton have come up with plans that would create tax structures to disincentivize -- how you think about the world. >> look. i think that hillary clinton proposed what amounts to about a 50% increase in the capital gains tax rate. it makes no sense at all. makes no sense at all. makes no sense the way she's attacked hedge funds despite

having all her buddies in the hamptons and martha's vineyard, what have you. when i became part of goldman sachs, my wife introduced me as a goldman sachs hedge fund. and she stopped introducing me in 2008. what can i tell you. it is what it is. >> you said these volatile moves have unnerved you. have you been buying or selling? >> we've been buying. when i go through my list -- my checklist, even though i think the market is in fair valuation, i think the market is not in a position in my opinion to go down a lot. i think the path is still upward. i'd rather come on in a day when the market isn't up 2% or 3% so i can lean into the wund. basically i have seven reasons that make me optimistic.

reason number one basically is if this bull market is over, it's the first that ended in history without one fed tightening. we're sitting here worrying about a fed tightening. let me give you the historical statistics. there have been eight interest rate cycles since the mid-50s. on average after the first fed hike, the market went up for 30 months. two and a half years. because rising rates are indicative of rising profits and dividends. the shortest time was ten months. take the average of the eight cycles since the mid-'50s on average the market was up 9.5%. this fixation on if the fed is going to do it, i think the fed has been somewhat irresponsible. i see automobile sales at 17.7 million. i see increasing employment by 200,000 a month. there's no basis for zero rates. stock market isn't discounting zero rates.

>> but if there's no harm, what's the problem? >> there is harm. >> where is it? >> you work all your life and -- >> things we don't know about. dislocation. you know, moving people off the risk curve. >> probably part of the volatility that people basically got leveraged up, taken advantage of short rates. we're going to go through a process of normalization. my second observation is, you know, bear markets don't materialize out of conception. and the stock market declines anticipation of recession. you know, byron, our friend, he has these in long island, the hamptons, luncheons where he attracts a lot of interesting and intelligent people. and i went to one about three weeks ago. we had 21 distinguished guests. not one saw a recession coming.

the one after which i was not present but got a report on. there was a gentleman there that i won't mention his name from a major private ek with ity firm. his responsibility was to oversee what the firm had. all of them were doing well. no problems in their performance. i have an indicator, my friend in new jersey said business is off the charges. back to school. i had to buy some paper for my printer, yesterday went over to staples. i didn't buy anything because there were 50 people in line. i guess it's back to school. >> i had the same experience. there's a jpmorgan note out today saying they are underweight u.s. equities even though they think a recession is not in the cards in the immediate future. >> i think the u.s. market is reasonably fairly valued. i think the other markets are behind the united states. we see europe being more interesting than the united states. we see japan with qe infinity

being interesting. so that's a relative waiting. would we expect europe to out-perform the u.s.? probably. but i don't think the u.s. will decline. the first reason basically is the market is inexpensive relative to interest rating. might say interest rates are a bubble. secondly, to get the market down a lot you need a recession. there's nothing i'm seeing that spells recession. thirdly, if you -- what do you do with money today. in terms of financial assets, what are your alternatives. if you keep it in cash, you can earn zero. you can put it in u.s. government bonds which are 2.2%. i wouldn't tough them. not because i don't think the credit is good but i think the return is unattractive. even high yield is not particularly interesting now. getting a little more interesting. then you're left with common

stocks. they're in line with historical norms. you can find so many attractively priced stocks. but, you know, i think just stocks are still the most attractive house in the financial asset neighborhood. but they're not cheap. i think the market's priced to give you return in line with growth and earnings. if earnings don't grow, the market is not going up. we've had -- what's happened the last several years is the valuation is removed. let's take 2012, '13, and '14, what do you find? economy grew 2.8%. profits grew about 6%. if you stayed in cash because you were scared about what happened to you in '08, you earned zero for that three years. but you were in bonds, you made about 2.3 in government bonds. and the s&p 500 in those three years each year on average returned 21.5%. so in an environment of 6%

profit growth, made 21% appreciation. that game is over. the market's at a reasonable level of valuation. the debate and i said this two years ago on your program, with profits growing slowly the entire debate is what is the proper multiple for the s&p. i'll tell you range of 15 to 16. if you take that against next year's earnings, you could get back in 2100. so it's not egregiously mispriced. it's in a zone valuation. but it makes the most sense. >> excellent. >> and one of your seven points is bull markets don't die of old age. they die for a reason. >> the recession which we don't see. we could be wrong, but we don't see it. and as i mentioned -- >> in terms of murphy's law which is the eighth law, because the fed has no ammo, you figure

there would be a recession. because murphy's law would mean they got nothing. >> i wouldn't underestimate the tools. right now the economy is growing fine. what are we worried about? we're singed by what happened in 2008. year to date the public is taking out $100 billion of equity funds. you normally see that at the bottom, not at the top. >> but a thousand points in five minutes bothers you. that bothers me. >> the concept bothers me. >> 304 points is only 2%. on a percentage basis. app thousand points on the open when stocks -- you could see weird bids. >> and the swings. you know, if people perceive the risk investing in stocks is greater, risk premium goes up, multiple goes down. multiple goes down, cost of capital to business goes up. you know, looks like a duck,

walks like a duck, talks like a duck, it's a duck. there's something wrong with the system. the regulators have to pay attention to it. i know there's something wrong in the system. i don't blame is that, you know, any one individual, any one company. but i think it's a problem that we have to focus on and deal with. i think it's negative for the investing public. >> we have lee with us for the rest of the program. we've got a lot more to talk about. thank you. >> coming up when we return, futures rising ahead of the short trading week. dom chu has a look at the markets. then how high frequency trading has changed. and disney expanding video service. we've got julia boorstin with details at the bottom of the hour. we're back with more in just a moment. daughter: do you and mom still have money with that broker? dad: yeah, 20 something years now. thinking about what you want to do with your money?

daughter: looking at options. what do you guys pay in fees? dad: i don't know exactly. daughter: if you're not happy do they have to pay you back? dad: it doesn't really work that way. daughter: you sure? vo: are you asking enough questions about the way your wealth is managed? wealth management at charles schwab.

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>> but next week -- the week after you've got to work five days. it's like a harsh re-entry. >> you forget there's rosh hashanah coming up, yom kippur is coming up. >> it's tomato/toe-ma-toe. >> i like that one. >> that's a bad one. >> all right. so as we talk about this short week that we have, remember, we came off a volatile one. look at this. remember the dow last week. it was volatile. down 415, up 23, down 222. it was volatile but not nearly as the week before that. and then arguably part of the week before that. if you look what's happening in asia, the nikkei down 2.5%.

the hang seng and shanghai composite up. in europe, by the way the nikkei down about 16% from its recent intra-day highs. the dax as well down 16% since its highs over this past years as well. the cac, the fse 100, italy green across the board in european markets. then when it comes to what happens here in the u.s., we've got a number of different things to keep an eye on this week. economic data, it still will be out. you will see, we've got that earlier today. jobs data on wednesday and thursday. then friday inflation data on the wholesale level. that's the ppi. and then earnings season, it's pretty much over but still a few out. barnes and noble on wednesday. lululemon on thursday and kroger for consumer staples on friday. there's still stuff to watch.

we'll see if any of those provide a catalyst. over to you. >> dom, thank you. when we come back this morning, top media headlines including a weak box office take. and a streaming announcement from verizon. and today we are kicking off our celebration of the 20th anniversary of "squawk box." ahead we're looking at the next 20 years of investing with lee cooperman and mario gabelli. plus the man who's been called the new bond king. rick rieder. right now as we head to a break, look at the companies that were founded the same year that "squawk box" started. we'll be back. two streetlights. the only difference: that little blue thingy. you see it? that's a sensor. using ge software, the light can react to its environment- getting brighter only when it's needed. in a night, it saves a little energy. but, in a year it saves a lot. and the other street? it's been burning energy all night. for frank. frank's a cat. now, two things that are exactly the same,

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welcome back to "squawk box." it was a slow holiday weekend at the box office. "war room" brings the movie's total to $28 million. the good news for those producers, it cost only $3 million to make. then there's "straight outta compton." it's shaping up to be the worst labor day weekend in box office history in about 15 years. should be said "straight outta compton" now up about $150 million total which is a huge

take for that film. then in other media news, verizon is launching a free ad-supported mobile streaming service this week. it's called go 90. flipping 90 degrees turning it, watching the video in landscape mode. services those 18 to 34 years old. will include live events, primetime tv, and original web series. coming up, the story of the past month is volatility. some people are blaming the machines and the rise of high-frequency trading. next we're going to ask joe sulusi -- he's not a 20th anniversary guest, but joe's going to be on. i looked it up. i still have his phone number. i think it's like 1994.

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welcome back to "squawk box" on cnbc first in business worldwide. among the stories that are front and center this morning, congress returns from recess today. legislators face a september 30th deadline to fund the government. if a temporary plan can't be reached, government operations could be suspended starting october 1st. in corporate news this morning, wells fargo upgraded. if you look at that stock over the last month, it's gone from 58 down to about 52 and change over the last month. let's look at the futures quickly this morning. they are up sharply. dow futures indicated to open up by about 300 points. s&p futures up by 36 and the nasdaq by 83. check this out. an investigation underway in texas after two high school football players appeared to intentionally hit an official during a game. the players involved have been suspended from the team. while school officials -- >> wow. >> -- look at the hit --

>> i saw this over the weekend. >> -- which was all caught on tape, the hit comes with a minute left on the clock. one tackled the ref to the ground and a second player dove into him helmet first. there were several penalties against jon jay for unsportsmanlike behavior. players and students have tweeted the official used racial slurs. >> the play was about 15 yards in front of him. he was watching that play and they definitely came at him from behind. >> you don't have to go to texas to figure out. look what happened at rutgers with the football players there. terrible. >> right. i just never forget woody hayes -- piece of work. he got so mad at a player, like, went after the player. tripped him as he was running by. >> oh, from the sideline. i do remember that. >> get into it so much but you can't hit a player from the

other team. >> and you can't tackle a ref. >> no. talking about rules, over the past two weeks we've seen wild swings in the markets with the dow moving on average 450 points per day. there's a growing course of investors blaming the machines. in a letter obtained by the ft -- do we have toe give the ft credit? market fundamentals like chinese currency moves over fed rate hikes cannot fully explain the magnitude of velocity of the decline in equity markets last month. >> with your permission, technological innovation, overwhelming markets and having a negative effect in excess of the benefits. >> let me tell everybody, joe is here we should say. i know he's a friend of yours. >> he's a good man. >> listen. i think lee is spot on with the liquidity vacuum that exists. why did the market move a

thousand points? why did etfs go down? you had a liquidity vacuum. we have a market design problem. we kcatered to the high speed. there's no limit orders anymore. you have a fragmented mess of 11 stock exchanges and over 40 dark -- they don't. that's where the failure was. >> but is it a function of high frequency liquidity trading or etfs which are connected to some degree? >> if it wasn't for high frequency trading. some of them do wind the two together. in other words, if you're going to trade an etf, you have that. that's a valuable pricing function that some market makers do that supply. someone has to do that. if no one's willing to do that, you won't have it.

when i look at high frequency trading i'm looking at the guys looking to take advantage of the situation. a dark pool that's off. that's considered latentcy out there. it's often that they get picked off during the day because the broker they're routing through may not necessarily be going to the best spot which means a guy can pick that off. it's all intertwined. it's not just high frequency trading. it's the entire structure and design. >> let me ask you this. shouldn't a guy like lee who arguably sees through the noise isn't necessarily focused on every last headline who's a value guy. he should look at all this and say this is great. i'm able to -- >> keep your orders down.

you want the bids out there. but in the extent, yes. but for the most part lee's got to buy and sell stocks. and the predators are circling him all day long. >> it's not about lee. i think it's what's beneficial to the public as a whole. >> and in general, exactly. we're talking about institutions here. what about retail? what about the retail investor who had a stop loss order kick out on etf because it went that morning and it hunted down for a bid 30% below? how is that a market? how is ge trading down 20%. why is ge "x" amount of -- did they go into the cfo that morning saying we're down 20%. >> you're arguing that the market, you know, trades on fundamentals and historically at any one given time you could say it never has. >> not to this effect. not to a thousand-point decline in minutes. >> just out of total departure

from historical patterns. you know it makes no sense. the the market isn't worth the difference in five minutes time. you know it's wrong. when something is wrong, you have to deal with it. i think and joe, correct me if you disagree or i'm wrong, but a lot of this stuff gave rise after they eliminated the uptick rule. and the uptick rule served us well to 2007. >> i think partially that and also the obligations of a market maker. some people had a problem with the -- where markets were made. but you don't have that now. you have prop traders. >> explain the uptick rule for those unfamiliar. >> you can't short on a down. basically there is a function of an uptick rule that still exists when a stock is to a certain level then you can't short on the bid. but otherwise you can short wherever you want. >> the vockler rule, dodd-frank,

there's no incentive to carry inventory. all these factors come together to -- >> in terms of the commission structure collapsing, i mean for years people were saying this opening it up. saying they aren't getting the short trip. they don't have to pay for every stock they create along the way. >> some amount of commissions are -- well, i say the reduction commission on balance is positive but if you take all these factors together, dodd-frank, vockler rule, carrying of risk inventory. i was a person against that. i was with goldman sachs for many years. they made great deals of money in higher risk areas which should have risk-based capital standards. or require more capital. forced them out of biss that have been profitable would be a

mistake. whether the strength would have to defy profit centers. they forced a lot of business. the brokers aren't going to stand there making markets. they can't legally anymore because of all these rules. the commission structure does not reward them. in the old days, they make a bid on the block. had some commission to -- >> it was different. it was an ecosystem of trading. >> but to address this, what's the way you can do it without unintended consequences? like we say, innovation, guys that do al gor rit ims, you don't want that to go away. what's the one thing you do that would prevent that? >> if the government comes in and puts a whole mess of regulations in, that will mess things up. >> that's what i mean. so what's the one thing that would work? >> there's two things i think. free markets.

gaining a substantial amount of market share because it's a fair venu venue. so one, make a free market based solution. but there are some tweaks that the regulators can do. in fact, they just approved something called a wide tick size pilot. they've got to increase the size of the tick. particularly small and mid-caps by saying we need to build liquidity. regulator have recognized there is a market design problem right now. that they failed and now they're trying to tweak it. at least they've made one step. they think they'll figure this out. it's taken too much time and enfortunately events will continue to occur and will continue to occur in more rapid terms and more volatile terms. that's the way it is. that's the system that's been built. >> which i think explains in part why the public is leaving the market. they don't understand the game.

okay? they've taken $100 billion out of equities year to date. where are they putting that money? >> again, i'm playing devil's advocate. hasn't that always been the case? sheepish approach of the world that's gone on for years when things have gone down, people have gotten scared and taken money out of the market. >> had it in 1987 with portfolio insurance of the variation of what's going on now. that 22% drop, everyone called for recession. nothing ever happened. i think it's gotten worse. that's all. gotten worse. it's something they should deal with. >> it's a feedback loop. on days like that, you get into the loops and it starts a cycle you can't stop. it's not a healthy market. price discovery function broke down that day. that's really bad. >> let me say this. i say the same thing on the upside. up and down markets, up is better. but it's a problem on both sides of the market. not just the downside. >> absolutely.

this morning we're up 35, right? but still have liquidity issues already. it doesn't matter which side you're on. >> we'll leave the conversation there. joe, thank you. we'll talk about buybacks at some point. >> my pleasure. when we come back, disney expanding their streaming service launching a doiz knee app for roku. julia boorstin will join us with details. coming up at top of the hour, we're kicking off our 20th anniversary celebration. we'll have an in-depth conversation of investing over the next 20 years. ♪

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welcome back to "squawk box" on cnbc, first in business worldwide. lee cooperman is here. take a look at u.s. equity futures at this hour. they're up in a big way. a little less, though, than the big way they were. dow would open up 295 points higher. s&p 500 looking to open about 35 points higher. mr. kernen? let's take a look at some

stocks to watch this morning. yum brands upgraded from outperform. jd.com announcing plans to buy back up to a billion dollars' worth of shares. the stock rising on that news. and procter & gamble was upgraded at suntrust. the target price remained $80, but it was upgraded. it will soon be easier for your kids to stream "frozen" over and over and over and over and over again. disney announcing an expansion of its streaming service. julia boorstin joins us now with more. good morning. >> good morning to you, becky. disney expanding disney movies service. so they are available anywhere on any device through the cloud. it's their plan to sell more movies in this age of lower cost of video on demand rentals and streaming through netflix.

beginning today, they will be available on amazon vid owe and microsoft tv. it rolled out last year. next month they will launch for roku and android tv. any pixar or marvel movie you purchase through the service will be automatically added to an account that lives in the cloud. no disney shares were up nearly 14% over the past year but down since august. disney is uniquely positioned among the studios to have a branded app to sell its films. its kids' films like "frozen" parents tend to want to buy so kids can watch them over and over and over. and disney has been very cautious about how it's offered its videos to streaming video making many very hard to find. disney did ink a deal with netflix. but it doesn't start until next

year. and it's only for the studio's new feature films. since digital has overtaken sales, consumers have been reluctant to buy because it's been so hard to access them on any device. streaming services have seemed like a smart alternative. here they are trying to make access through the cloud to change consumer behavior at least for its own films. >> julia, thank you. julia boorstin. >> all right. thinking about the song we're going to play. coming up, u.s. equity futures up sharply higher. and we're celebrating the 20th anniversary of "squawk box." back then mtv showed videos. the way we got started, the top was waterfalls. left eye left us at one point i

know. so that was big back then. and we'll be right back.

i'm watson. and today hundreds of companies are putting me to work. i'm teaching watson to help your vet speak dog. you're a dog, right? i'm teaching watson to help you make healthy choices. i'm teaching watson to help design a vacation around your personality. don't judge. i'm teaching watson to answer endless questions. how big is infinity? where do babies come from? why can't i have chocolate for breakfast? i'm watson and i'm ready to work with you.

i was going to the library to do my homework. it was a little bit of a walk to get to the bus stop. i had to wait in line to use the computer. took a lot of juggling to keep it all together. what's possible when you have high-speed internet at home? the library never closes. it makes it so much better to do homework when you're at home. internet essentials from comcast. helping to bridge the digital divide. let's get back to our guest host this morning, lee cooperman is chairman and ceo of the $9 billion hedge fund o mega advisers. you're saying you're having an okay year. >> a poor year. >> a poor year. energy was a problem to some extent. >> no, that was last year.

>> that was last year? >> solar energy this year. >> solar this year? >> we had a big part of sun energy which has not done well for us. >> would you be taking positions now in any area of energy, oil and gas? >> yeah. stock market is very different than bond market. the s&p might be 1900 and change now but there are a lot of stocks that are 1700 wbz some 2100. i'm trying to find things to buy that are cheap and get rid of things that are expensive. >> would you say -- no one really, perhaps, thought about oil and what happened? was that a shocker to you about how that works? >> yeah. the beginning of last year we thought it made sense. turned out to be very wrong. if you step back and look, there's no question in my mind that looking at two or three years from now oil prices will be higher than now. let's go through the numbers. at the present price of oil and

gas, the major u.s. oil companies revenues minus their capex and dividend is short. you know they're not going to cut the dividends. if you do the same analysis for opec and take the revenues minus their social cost, their deficit is $500 billion a year. you can't go on with hundred-billion dollar deficits. ultimately they lay down rigs, cut capex and supply and demand tightens up. >> the problem to this point is saudi arabia is willing to keep pumping, that russia says forget it. we're not going to cooperate with opec. >> that will ultimately change. i say in three years' time -- i think the one conclusion you can probably make is the triple digit oil prices are gone for five years. i'll let boone pickens address that one. but i think we're in a bottoming

zone for now. if the global economy moves ahead to 3%, they're going to be increased demand. and ultimately supply and demand will tighten up. because you cannot continue to run the deficits in cash flow we're running. u.s. and oil i mentioned is $100 billion a year negative free cash flow. and $500 billion opec. ultimately that self-corrects. you know, go back 20 years ago. the price was $18 a barrel. when you started your show "squawk box." now $45. my guess is -- i don't want to make a 20-year prediction -- but in three or four years from now it will be higher because of the tightening of supply and demand. it depends on social issues. >> might not be $150. >> no. >> like tripled. >> gone for the foreseeable future. >> but it's a great business. obviously we're going to keep using hydrocarbon.

so there must be a way to play this. >> oh yeah. well, there are things. gulfport, we own a large position. we think not necessarily natural gas sensitive. >> you're going to dabble in renewables again. >> yeah. we didn't sell sun edison. there's a growth area of the economy. >> tough business, though, if oil stays down. >> there's no question that the growth in solar is there. the problem for them is these yield vehicles they created, they sell off the plans of the cash flow of the plants collapsed raising the cost to capital and everybody is worried we're going to get stuck with the balance sheet. i think the answer is no. there are legitimate buyers where you can buy 7.5% returns for 20 years. there's a market for it. and so the market we think is overreacted and we'll have to wait for things to settle out. but we feel pretty comfortable with the name.

>> those are omega cuff links? >> no. i've had them since 197837. >> they're probably worth now since when my neighbor gave them. >> i'm 72. i've got a lot of things that are more than 40 years. i've got two kids over 40 years old. i've got a granddaughter that's 17. >> wow. >> and he'll be here for the 40th too. >> i hope so. i emulate warren buffett. they asked what he wanted on his tombstone, he said gee he was old. >> that's a good one. >> lee will be here the next hour as well. coming up, the 20th anniversary celebration kicks off next. mario gabelli and rick rieder will join us. we will have a conversation of investing over the next 20 years.

in 1995, you might have been listening to seal's "kiss from a rose." we're coming right back in just a minute. ♪ big day? ah, the usual. moved some new cars. hauled a bunch of steel. kept the supermarket shelves stocked. made sure everyone got their latest gadgets. what's up for the next shift? ah, nothing much. just keeping the lights on.

(laugh) nice. doing the big things that move an economy. see you tomorrow, mac. see you tomorrow, sam. just another day at norfolk southern. at ally bank no branches equals great rates. it's a fact. kind of like shopping hungry equals overshopping. can a a subconscious. mind?

a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive? ♪

20 years of power, money, and mayhem. >> it's not about me. it's about the hair. >> 20 years of unprecedented access. >> we keep going for the next 20 years, i hope you're here to interview me in 20 years from now. >> and bringing wall street to main street. now it's time for the next 20. >> today we kick things off with the future of investing. what are the top stocks of tomorrow? how will wall street work for the next generation? and can investors trust their money will be safe in the markets. >> two money-making legends are here to discuss it all. lee cooperman and mario gabelli. conversations for the next 20 years starts right now. ♪

live from the most powerful city in the world, new york, this is "squawk box." >> welcome back, everybody, to this special edition of "squawk box." i'm becky quick with joe kernen and andrew ross sorkin. we have do legends with decades of wall street wisdom waiting in the wings is rick rieder. a lot of people on the street are now calling him the new bond king. he will join us in a bit. we'll be kicking off that conversation in just a bit. but let's check the headlines. >> good morning, everybody. here's what's happening at this hour. let's tell you what's going on. eu antitrust regulators expected to give the green light to ge's bid for alstom's power business today the clearance seen coming with conditions. that deal announced over a year ago. verizon announcing a mobile

streaming service this week it's called go 90 which refers to people flipping their phones 90 degrees to watch in landscape mode. and look at equity futures right now. they're at a positive start this morning. you're looking at green if we open right now s&p 500 up about 31 points. joe, over to you. >> sthanks. let's begin our first "squawk box" conversation for the next 20 years and it's a perfect time with the markets in turmoil to focus on the future of investing. and still with us is leon cooperman. lee is chairman and ceo of omega advisers. lee spent over 25 years at goldman sachs and was named one of institutional investor's top strategists. and also with us mario gabelli. chairman and ceo of gamco investors. this is a fun fact.

this is mario's 96th appearance right here on "squawk box." that's amazing. no wonder we're like this. 96 -- except for that crumpy bag. >> somebody calculated you have 15,000 hours on "squawk box." and i calculated 150 hours. so i'm a one percenter. >> were you on the first week? or close to it? >> was it fnn or something? probably. >> here you are still. you're a survivor. there's a reason for that. >> he's thrived. >> he's had a lot of success. >> look. because we basically have a philosophy, we're buying a piece of a business. so those change very slowly. in an earlier session, kind of a

wild occasion. >> you know each other well. what's different? is there anything different in the way you two individuals approach the market, do you think? >> the only thing that's changed about him is he had a full head of red hair when i met him. now it's white hair. >> the markets beat you up a little. >> we met at a phone booth at columbia school. we used to battle to get into the phone booth. >> few people realize that when they can go online instantly today. you had to have a pay phone. >> the approach i take as a weakness is the more things change, the more they stay the same. and oftentimes you have a great opportunity. >> but rarely do you end up buying the same things, do you? sometimes maybe. >> maybe. but probably in the '70s i may

have bought of teledine. >> specifically you don't -- there's nothing glaringly different about the approach. >> no. basically compounded knowledge of select industries that we edged out into different industries over the years. i started doing auto equipment. on a friday i'd join on a monday. and then in the late '60s i picked up the entertainment industry. it was broadcasters at the time. and the content providers which was hollywood. >> you speak to macro stuff more. even though you -- >> i have to worry about a lot of things. >> it's tough for us to get mario to ever talk about whether the market is overvalues, undervalued, headed higher or lower. because you're so specific to situations. now, you can find anything in any market that you think should be bought. >> yeah. but on the other side of the coin, we're not looking for the next six weeks, twelve weeks, we're looking for the next three

to five years. it takes that long to learn about a company if it's new. if it's outside of your core competen competency, you have to work out all the dots. >> would you ever sell something based on the overall stock market being too high? >> we will sell based on relative to its cash rates. >> probably not. we would look for stocks that earn a return. if we were uncomfortable with the market or what we already own. that's a way to put money to work and earn a return that's an absolute return but not necessarily that would do well substantially in the market. >> do you want to talk about -- were you jonesing to talk about individual names? >> i find a lot of things. the average common stock is down by over 20% from its high. i think the market is creating a

loot of opportunity. one area i'm perplexed about because i can't quite figure it out is a lot of the specialty finance companies. if you ask me in the last 20 years you made 28.5% in the stock market. go back beginning of 1995. over the next 20 years, make maybe 7%. >> i'm in that camp as well. unless inflation picks up. >> i have four or five stocks yielding between there that are trading at 80% of book value. each one but one has a purchase program in place. if i could buy an 11% to 15% dividend return which i think is reasonably secure, and a discount to book value where the companies are buying back stock, you're buying stock back at 20% of book value at a high yield. so companies like chimera, penny

mack. yielded 16 prths. book value is 20%. they announced a buyback which 11% of capitalization. even if they reduce modestly, i'm getting a 12% yield which is twice the return in the s&p. >> lee, you love buybacks. and there's a big controversy, though, about whether the buybacks right now are a good thing. if they're down 20%, a better deal today. but terrible a year ago. >> this is a complex subject which in a sense is simple. buy back your stock only when your stock is significantly undervalued. the trouble is a lot of companies have made a mistake about what their business is really worth. i got spoiled by a genius. for 25 years i visited henry singleton, the founder of teledine. on eight occasions he made an offer and bought back cumulatively 90% of the stock.

and he wasn't born on second base -- >> third base. >> he was born poor. he had died a billionaire because of what he did for the shareholders. >> lee, how many ceos have that ability? i would say few are actually gurus. >> they're practicing their game. so what i say to me, to myself basically is stock repurchasing decisions should be evaluated no differently than plant equipment decisions, acquisition decisions. >> wouldn't you just prefer a dividend? >> no. >> it depends. no. >> because of the taxability? taxable nature of it? >> no, no. depends how capital is allocated. >> there's four kinds of buybacks i've observed over the yeeshs years. there's only one i like. type one has nothing to do with valuation. companies want to deflect the shareholder complaints about

option issuance. being on the line in sun valley and andy grove was stangding behind 43. he said i'm not looking to make any statement. i'm looking to offset the complaints about options. second kind of buyback, companies announce to create impression stock is undervalued. while buying back stock, they're looking. countrywide, bought $2 billion back at 40. the ceo sold 200 million at 40. and were they happy about that acquisition, they say absolutely not. third kind of buyback which is prevalent today, companies have excess cash flow. they convinced themselves dividends are forever. they didn't want to cut a dividend. they said we'll have a difr

dend. saying we can cut it off. so every share you're buying back, you're buying back a years of dividends. if it turns out to be a mistake, it's going to be a disaster. we all know what happened in 2008. the final buyback is the one singleton understood. companies understand their business value. they think the stock market is making a mistake in valuing their business and they leverage by shrinking the capitalization. >> i'm going to add one more. we have companies basically buying 1% of stock because they have a 6% revenue growth. they get 9% growth and earnings and want 11% and 12% earnings per share growth. >> that's okay. >> just allocation. >> but i want it to be where they're buying back something undervalued. when a management buys back stock for a company, if you're not selling, you're enlarging

your ownership of that business. whether you're an unaffiliated, it's to your advantage. >> a lot of times ceos in that are going to say -- for a ceo to admit that the stock is overvalued, they think they're going to do the right things to make value go up. if you give them a carte blanche to do buybacks, they'll do them all the time. >> four tests that i would use in judging my buyback. 90% of companies have two values. and mario is pioneer in this area. a price you and i pay for one share or a thousand shars, the private market value. would pay for the entire company. test number one is if you picked up your phone and called your investment banker saying i want to retire, the board wants to sell the company. what can i fetch. if i can fetch 20% more than the

stock is trading for, a buyback makes sense. >> i've got to break in for a second. we have news that crossed the tape while you were speaking. media general has just bought meredith for $2.4 billion in cash and stock. meredith shareholders going to be receiving -- >> another consolidation. >> you're looking at that stock up 53% right now. >> no, no, no. meredith was closed -- >> i'm sorry. >> it's about 15%. this is a stock i own. media general for long period of time. whether the raccoon river in des moines is merging into the james river in richmond. it's another consolidation in the broadcasting area. the guys that have created media general bought lynn broadcasting. now they're merging and steve lacy is going to be the ceo. this is a terrific deal for

everyone. in addition to that, the next step is going to be they're going to sell off the publishing business. i'm not announcing it. >> you're predicting it. >> yes. clearly. >> the only point i make is when you buy a share of the business, you're buying your share of earning power. you see a transaction like this as a premium part of the market. in financial assets, what are you going to do with your money? you can stay in a fox hole and be scared because of what happened in 2008. keep it in cash. m you can put it in u.s. government bonds. that makes no sense to me because they're going to go up. you can buy your favorite common stock where you can get terrific opportunities today. >> before i forget, meredith -- wasn't meredith in talks at one point with time warner? >> there was a time where they were going to take people and other magazines and put them together because they have a

wonderful array. in the publishing area and the balances in broadcasting. this is a consolidation of broadcasting for a variety of reasons. it will continue. >> do you think the fed has made it easier to do buybacks? >> unequivocally. >> and they shouldn't be. they should be doing long-term stuff. >> well, it depends. you know, it's no one size fits all. you know, the management in my view should build an enterprise that secures the investment. once that's done, they should pursue what makes the most sense. it would be repurchasing equipment. >> should ibm be buying back stock? >> i'm not an expert in ibm. >> they buy it back, run the stock. >> they should be investing more in the cloud than they have.

had breakfast with john chambers about nine months ago. five years from today you will not recognize a top company. >> 50 years ago you would have argued the 15i78 thing about putting back in capex and somebody would have built a huge steel furnace. you know, the world changes. it's the efficiency of the allocation of capital whether it's rnd or capex. >> then you shouldn't do it. >> there are four kinds of buybacks. four tests that i said. the first i mentioned, prooif market value versus public market value. are you going to discount the private market value efficient to make it make sense. the second test is most have five year budgets. plug that five year budget, it spits out a value of "x." if you're comfortable that your business is going to be worth more, earnings is going to grow

and you're undervalued. that's the second test. the third test which gets to the point you raised a moment ago, today's level of interest rates, it's virtually a no brainer. because you go out, borrow money of 5% and tax that. 60% of that number. then you're buying your stock back at 14 times earnings. and the fourth thing i say when you're doing a buyback is let's face it, buying back stock weakens a company. you have more debt relative to equity. you have less cash. don't buy back so much stock as to change the profile of the corporation. on balance, i like it but only from companies that understand the proposition they offer. in the media area, so many seem mispriced. we think the assets are probably worth 50% more than they're trading for. they're sitting on real estate

values that don't owe them a lot of money. swap that for repurchasing stock, that makes sense. but there's a lot that make no sense. you have to be careful. and the analysts get lulled into buying back stock. first of all, they buy back. doesn't mean anything. singleton bought back a one shot, one deal in 1984. i'm getting dated here. 1984 he bought back 43% of his company in one shot. brilliant. the record is better than it looks. three of the times he offered you bonds in exchange for stock. if you look what happened after, interest rates went up. so the bonds he gave you were less. and then bought them for the company's pension plan. but you can write a whole study. >> the water pick. >> oh, that was a spinoff. i'm glad you got a memory. >> at least i remember, exactly. when we return, we've got more on this morning's headlines

including this meredith transaction at $2.4 billion. and later he overseas $700 billion in assets and says the longer the fed waits to raise rates, the chance of a bubble that could burst. rick rieder is going to join us. here are the futures before we go to break. back in a moment. so you're a small business expert from at&t? yeah, give me a problem and i've got the solution. well, we have 30 years of customer records.

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♪ welcome back to "squawk box," everybody. we've been watching futures this morning and they have been significantly higher all morning long. earlier today we saw the dow futures up. right now up 277 above fair value. s&p looks like they'll end up 32 higher. and the nasdaq looks to open up 75 points higher. when we return this morning, we have more from our guests lee cooperman and mario gabelli. plus rick rieder will be joining

us. and join us tomorrow. jim chanos will join us. stick around. "squawk box" will be right back.

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♪ feels a little bit like 1995. welcome back to "squawk box." here's headlines at this hour. disney expanding their movies

anywhere. also uber planning to enter hundreds or more chinese cities over the next year. that doubles the goal set three monthing ago. saying the company had raised enough to do all that. u.s. equity futures are looking up in a big way. dow looks to open up 284 points higher. nasdaq 76 points and the s&p 500 up about 34 points. >> i stayed up and watched andy murray and he finally lost. ohio state buckeyes playing in virginia. with revenge on their minds. and it happened. the buckeyes did boo et the hokies this year after being upset last year in columbus 35-21. ohio state wins 42-24. and buckeyes quarterback cardale

jones -- carried the ball for a touchdown. and it's sister showdown cometing up in arthur ashe today. serena leads the head to head series 15-11 including six of the last seven matches. serena looking to win the grand slam. not since stephy graph in 1988 has a tennis player male or female won the calendar slam. >> i heard something from serena last night saying that nobody knows her flaws better than her sister, her weaknesses better. >> talks about how tough it is to watch. >> it is. you think about your own kids. would you want them playing against each other? >> it's cool but someone's got to lose. i think it's probably going to be -- well.

in recent years. >> sure. we're going to bring another voice into our conversation this morning. this is the man many people on wall street are calling the new bond king. rick rieder is blackrock's fixed inco income. he's also a member of the fixed income society hall of fame. >> thanks for having me. >> you're here at a propitious time. we're all trying to figure out what the fed is doing next week. you're concerned that maybe they've held rates low too long. the longer this goes on, the more bubbles it can build. >> yeah. people talk of the fed tightening. we're starting at excessive. can the fed move? wenk they can move. we think they could have moved three, six months ago. you have a level today not only a 0% funds rate, you have

below -- that's not the right level given where we're going. do we think they could go? arguably it should be -- >> says you got to be smoking something to think about raising rates here. he supposedly knows what's going on. how do you have so much completely opposite opinion? >> so it's hard to assess. i will say we're talking about historically low interest rates. when people talk about the world's going to come to an end if we get rates up, it's very important to think about people compare this to different cycles. you're talking about a fed that's going to -- if growth doesn't keep up, they're going to slow down the process. that's scary. >> zero rates implies an emergency condition. automobile sales of running 17.7 million adjusted rate back to where they were in 2005. we're getting 200,000 more people on payrolls every month.

where's the crisis? rates don't belong at zero. >> people would say look at europe's sovereigns and it's not even that. it's japan, it's germany, a global phenomenon. not here. >> they are behind us in the business cycle. we're well into recovery. >> but we've never been this connected globally. >> one wild card in my opinion and that is the dollar. >> that too. >> and we -- >> multinationals are already hurt. >> okay. but at the end of the day they've got to bite the bullet. they're creating a bubble. rates don't belong at zero. and what the hell is the difference if they go to 20 basis points? in the last 50 years when the s&p mumt pl average 15 -- we're at that now, a bit higher -- average 6.67, currently 2.2 and the treasury bill currently zero. who's expecting rates to remain at these levels? >> the point is the entire left

of the political spectrum is just as dogmatic. t if one person wants a job, you can't raise rates here. it's not 5.1%. you hear all these things. >> where's your -- what's your duration now? >> couple things. first of all, if we were creating more jobs because we're sitting at 0% funds rate, then we should -- i'm not sure there's any transition mechanism. if you start to move rates sitting moderately higher. and you kept the moniker of it's going to be gradual. i don't think it has any impact today. by the way, one critical point as you stated with europe and japan from a growth perspective, it keeps the back end of the curve down for the u.s. which is hugely important. the fact of the matter is the 10-year sitting at the yield, are we going to back up? i think so.

but those are historically low rates. and we benefit that you have qe in the rest of the world today. >> what's the biggest thing that the other side also says, hey, it's not hurting. why not keep it where it is? is it hurting? what's the thing we're not looking at? where's the negative consequences coming from? >> it's what is the benefit? now let's look at what is the cost? if you distort too long, i don't think we're in a bubble. i don't think we're a bubble in many markets today. but you are starting to see lench bill. you're seeing underwriting deteriorate. you look at the market supply coming in. to fund m&a, to fund capex. there's a tremendous amount of gearing going on. >> you know, you made the point earlier that you like stocks and like them because they're the best asset class you can find in the neighborhood. if rates start to rise, do you

change your opinion? >> no. i mentioned earlier on average since the mid-'50s there's been eight interest rate cycles. on average the market didn't peak until 30 months after the first rate hike. so who's thinking that the -- i'll go back to your 20 anniversary. 1995, went back and 4.5, currently zero. 16.3, currently 2.2. the s&p multiple in 1995 was 15. it's now about 15 or 16. we have a similar multiple 20 years later, yet the t-bill has gone up from 5.5 to zero. stock market is allowing for higher interest rates or slower economic growth. the market understands that. let's give the saver some return. maybe there's an offsetting benefit to rising rates.

i feel sorry for the working man. got to keep working. >> what about asset inflation? what about companies using zero to avoid making long-term decisions and moving a bunch of money around? >> i think two forms of policy or facts. one is what it does to the financial economy, one to the true economy. much of where they're going is what you described is into the financial economy 37 it does allow for -- i would argue if you thought rates were going to rise and if you thought that you're seeing some of that today as people anticipate, they are moving. all of a sudden you're starting to take on some of that debt and maybe start to spend that. anyway, the point being is i think what we're doing tad getting trapped in the financial economy. and fiscal policy will get it

into the fundamental kp economy. >> glen corps is in big trouble because of commodity prices. they're going to sell more stock. they're selling assets. is this reflective of what you think is really happening in the global economy? >> i think when you take the global economy, it's difficult to describe it without looking at component parts. you have the global outside the u.s. that is slow today. china's slowing has created a tricky dynamic for trade, manufacturing growth around the world, to asia to emerging markets. u.s. economy is in good shape. we think the last four quarters are growing at 2.7%. that's higher than it's grown for the last 15 years. dramatically higher than the last years. as lee said, auto sales, home sales, job openings, look at all the metrics you can count. u.s. economy is operating at a pretty good level. the problem is the rest of the world is clearly slowing.

global growth is not impressive. >> suspect there a lot of green starting in europe? >> europe is a bit better. japan the a bit better. the base you're operating from is low. >> glen corps was exposed to china. so china's had a devastating effect on the sector. whether it's oil, steel, aluminum, you name it. that area is all down. the economy's been growing. >> it's not just the krugman's of the world worried about higher rates. it's those like jack welch. how do you see that playing out if we raise rates? >> the true challenge is iffed the dollar moves. we think it will strengthen for a variety of reasons. including you're talking about different trade dynamic than the last decade driven by oil.

we think the dollar will migrate higher. the challenge is you think about what happened the first quarter, you had a 20% spike in terms of where the dollar moved. we can't have that. it's why it becomes a bit trickier. that's one on the fed's being able to move is you can't drive the dollar too high. >> euro is 112. you start seeing the impact flatten out unless there's a major change. and sthast an important element and way to look at things. from our point of view, the export markets are being crimped. we all know that. and the question is are we offsetting that with domestic growth? and domestic growth has been driven by monetary policy and we need to get our act together on a fiscal policy to provide extra juice. that's not going to happen. >> the hall of fame. fixed income hall. when you got the call, what did you do? who else is in the -- >> had to figure out where it was.

i knew canton was taken. >> cooperstown. who decides? who else is in it? >> wait, wait. the basketball hall of fame is where, again? >> springfield. >> yeah. >> and cooperstown. >> larry fink's in it. >> do they nominate you? >> his mom and dad mom nated him. >> it worked. >> is there a different dinner? >> how many can get in a year? >> one or two a year. i think that's the number. >> all right. >> thanks for answering. >> thanks for coming. >> thanks. still to come, a look at stocks on the move this morning. as we head to break, a quick trivia question for you. how much was a gallon of gasoline in 1995? >> oil was $18.

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♪ welcome back to "squawk box" right now. the futures looking up in a big way. right now you can see dow looks like it would open up about 300 points higher.

check this out, when "squawk box" launched 20 years ago, postage stamp was 32 cents. today it's 49 cents. the average rate of a 30-year mortgage, 7.64%. gasoline was $1.11 a gallon. and in september of 1995, the dow was trading at around 4,620 and would finish the year 33% higher. when we return, a look at what to watch when the markets open. we're back in just a moment. care of my heart.

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welcome back to "squawk box" on cnbc, first in business worldwide. i'm dominic chu with your market flash. a number of upgrades this morning. procter & gamble upgraded at suntrust. they are the fourth worth performing dow stock down about 24%. and shares of fitbit up about 8% in the premarket. lighter trading after morgan stanley analysts upgraded from an equal weight rating. there's been a demand and high

shore interest a short squeeze there. shares up about 70% year to date. and of course in deal news. late breaking right now blackstone is acquiring strategic hotels. the total deal volume including debt is about $6 billion. total $6 billion. this is the hotel behind a lot of mar can i hotels. back over to you guys. >> thank you. again, when we come back this morning, our conversation with a special guest continuing. this is part of the "squawk box" special 20-year anniversary series. the party will continue this week with guests and special interviews. big names this week. and then later this morning don't miss warren buffett. we'll be sitting down with him to talk about the economy. fed expectations and much more. stay tuned. "squawk box" will be right back.

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♪ >> welcome back to "squawk box."

we're wrapping up today's conversation on the future of investing with two special guests. we haven't talked about the future of my favorite topic, given the media business. we haven't talked about some of the stocks that you own in the media business. >> i'm going to give you three ideas that worked extremely well for the last 20 years. one of which is o'reilly. one was precision cast parts. for the next ten years i'm going to give you one which i brought in props. i'm sure i can can do it here. euro sport. discovery owns it. it's $26. it has 645 million shares and the earnings are going to go straight up. not right away because they have currency. they have euro sport. they'll pull it off. there's other dynamics. you need to own it.

if you don't, i'm glad you don't. i like the company. i like anything john malone has fingerprints on. we've made a ton of money with him, and we continue to look at ways to participate with proven ceos. >> and now another ceo. >> he will do extremely well. >> what about the other part? >> the $43 stock will do well. you have to own cbs. i know you try to divert the attention from what i'm trying to recommend for you. i have no problem with viacom at $43. you know that alibaba has been putting money into movies and that their favorite show was mission impossible 4 and that what they did with that is they got close to paramount. >> is philip the right guy to run that company? >> i think it's a great guy.

>> a politician here. >> just like josh sapan who is great at amc and is instinctive at making movies and creating talent like "the walking dead". if you want to know about viacom -- >> disney changed the whole view of media when they made the announcement they were losing subscribers at espn. there's a general view now there's going to be a lot of disconnected. we think it's exaggerated in the marketplace. here's the expert. >> i'm not an expert. but in canada they've gone ala cart. we have to unbundle the bundle. the cable industry is consolidating. even the new york times caught up with an article saying i want to buy more cable assets. consolidation is going on there, and chuck dolan, whehave to go

cart. >> who's the winner and loser? >> the winners are those that don't change quickly, and to the degree that viacom has not changed to create content that is current and fresh and hot, and they have some, but it's not the scale. they've created some distribution overseas, and they, you know, that's a challenge. >> if i can make one point before the program ends. it's very important. we've talked about bonds and stocks. what your viewers should understand is the way a bond adjusts to higher inflation is there's no question over the next five or ten years that interest rates are likely to be higher. so you'll have losses on the coupon. the way companies adjust to higher inflation is they take the inflation in their cost, incorporate in their selling prices which lift the nominal

level of earnings. inflation is only a problem for the stock market when the central bank is moving to curb inflation. they think it's the same thing as curbing growth. right now the central bank wants more to deal with income disparity, but the best way to do that is to grow. >> and the ebb tide. the tide is going out and the other tide is coming in. that's the most dangerous part. >> you mean that's where we are now, at the most dangerous part? >> i didn't say that. i'm echoing his ideas. i have to give you a stock that's going to double before i get off the show. >> how many years have taken double? >> this one, earnings will grow at 10%. so 7.2 years, and the stock is selling reasonably. short-term head winds. >> for those on radio who didn't see it.

tell us about it. >> this is an auto part company. napa. 150 million share stocks. 80, new york stock exchange. litt limited debt. and then a stock that will double called prediger. this pull back in the market creates lots of yummys. that will take three years. >> navient, assets of student loans. the stock closed -- >> missed two points on friday. >> the company spent hundreds of millions of dollars buying stock you should 20. it's now under 12. yielding 5%, six times earnings. you can find a lot of things like that in the market. >> andrew, the question at viacom is what happens when

sumner goes to heaven, what's the trust going to do. >> what's the answer? >> it ain't going lower. >> thank you. happy anniversary. >> congratulations. >> a lot of fun. >> as warren said to you guys, another 20. >> it's the first show of the rest of our life. >> right now it's time for "squawk on the street." >> good tuesday morning. hope you had a great labor day weekend. i'm carl quintanilla with sara eisen and david faber. premarket is up big after the second worst week of the year for u.s. stocks. china trade data was this line. europe is looking at nice gains this morning.