23rd, 2016. today is the equinox. it's the official start to fall and squawk box begins right now. ♪ >> live from new york where business never sleeps, this is squawk box. >> good morning, everybody. welcome to squawk box here on cnbc. i'm becky quick with joe kernen. andrew is off today. our guest host is mike santoli. take a look at what's been happening. overnight we did see weakness after the weaker closes in asian markets but things have been picking up through the course of the overnight hours. the dow futures are higher by 40

points. s&p futures up by 3. the nasdaq up by 18. we'll have more on the markets in just a moment but first sad news this morning. legendary baseball catcher and new york yankee's icon yog icon yogi berra died at 90. he went on to coach and manage several teams including the yankees and mets. each of wch he took to the world series. he was well-known for his comments or quotes. things that were called yogisms. it ain't over until it's over. nobody goes there it's too crowded. >> i knew him. he was a sweet, gentle man. he was in his 80s when i finally met him. played golf with him. he had a tournament every year and i knew his wife pretty well too. carmen and she was a real sweetheart and a huge squawk box

fan and once she passed, she passed not that long ago and yogi, they were quite a couple. so he was a really good -- i didn't know him. i don't know anything about him being a yankee. that was before my time. before santoli's time but ten rings i think and said to be the greatest catcher of all time. >> i like him a lot. he's a friend of mine too. but he was a -- not a bad golfer in his -- >> really? >> yeah. >> did he shoot his age? >> i don't know. i don't think so. not quite that good of a -- played with phil out there too. and he was a jersey guy. >> yeah. they have a museum there for him

too. >> now to the big business stories that we are watching today. soft economic numbers out of china overnight. a key measure of factor sector, factory sector activity shrinking for a 7th month in a row dropping to the lowest level in 6.5 years and the shanghai composite as you can see. down a percent or so. and china's president is in seattle today. he'll attend a close down meeting. including the ceos of apple, microsoft and amazon and former treasury secretary, they say, good, keep saying that so no one moves you. >> when i have been out there in may that must be the nice time of the year. >> it's beautiful.

it's almost like san francisco or vancouver. >> it's great. seahawks love them. although they lost a couple of games. former treasury secretary hank paulson will be moderating that discussion. he's been calling for a treaty between the u.s. and china and that would give a frame work for broader investment in each others economy. >> the only way to have real competition that's going to benefit the chinese economy is to open up to foreign competition so you have the best businesses competing there. so that is the key. that is what the u.s. businesses will be pressing for. >> and we'll have more on the visit in just a few minutes. first corporate news, instagram announcing it now has more than 400 million users. that means that the facebook owned photo sharing app has 100

million more users than twitter. more than 75% of its users, in fact, are outside of the united states. >> let's get a check on the markets this morningful things have been improving slightly with the futures here. you're looking at green arrows when you check out what's been happening with the dow. the nasdaq up by close to 18. take a look at what's been happening in europe and some of the early trading there and again you're looking at green arrows. the dax is up by 1% as is the cac in france. the ftse is up by 1.3%. italy stocks are trading higher too but a lot of issues with european leaders trying to deal with the migrant crisis and we'll talk more about that this morning. check out asia, the nikkei closed for a holiday today. shanghai was down by over 2% and kospi down by 1.9%. crude oil settling down by 2%.

this morning picking up a little bit. gain of 32 cents to 46.69. plenty of volatility since the fed's decision not to move next week. bond market volatility yesterday we saw it move more than 8 basis points. yesterday settled down at 2.13% and it's sitting there this morning. take a look at what's been happening in the foreign exchange market. the dollar is down fweagainst t euro and gold prices, we wait with baited breath, yeah, are doing nothing once again today. $1,125.10 an ounce. >> over 5,000% price hike for a 60 year old drug. meg joins us with more. so many things when you look closely into it. hedge fund guy. a bit of a checkered past to

some extent and then you find out as we spoke yesterday, it costs a lot of money to introduce a generic for whatever reason so no one is going to to it. he's a speculator. he's not a drug company ceo and he saw a way to do it legally and try to make some money. but there's people involved that need the drug. >> scott said it's emotions ba failure. >> the drug is called daraprim. they raised the price from $13.50 a tablet to just over $750 overnight. and reversing course after the outcry. there were mistakes made with respect to helping people understand why they took this action. take a listen to what he said.

>> it makes sense to lower the price in response to the anger that was felt by people but it's also important that there's an equal chance to explain. all of these very technical points that i think are glossed over. it's easy to see a large drug price increase and see those people must be gouging but when you find out that the company isn't making any money, what does that mean? it's hard stuff to understand and the society we live in today it's easy to want to villianize people and we're in an election cycle where this is a tough topic for people and really simple. >> this guy is well spoken but he's a liar. the reason this is expensive -- and he is price gouging by the way. he's a horrible example and it's going to taint the rest of the drug industry that's doing drug development. this guy is a liar. the reason he's not making any money is he paid too much because he was looking at a way to corner the market and be able

to raise prices as a result. he's not making any money not because he was doing drug development but because he paid too much to corner the market. >> if he was truly smart and a speculator he should have shorted the biotech index knowing the politicians on the left would immediately point to this ridiculous one off -- >> melissa lee asked him if he was short the biotech index and he didn't answer. >> drugs and keystone. bernie sanders doesn't have a chance but she can't run left fast enough. >> this guy ticks me off because he says things people say let's listen to that. can't make any money. he's a liar and a speculator and this is not indicative of what's really happening. >> he said it was to invest that money into developing a better version of the drug. >> he's a liar. it's because he can't cover what he paid to corner the market. >> the question i have is it

does not end with him lowering the price now. now there's attention on this entire area of the drug industry. is it a one off product or a whole corner of the game. >> for generics you need to get rid of some of the regulatory red tape for introducing a generic. >> what? $10 million. >> he formed another company called retrofin before this and they did the same thing at that company. there's other companies that do this. >> it's arbitrage. >> and it's orphan drugs. no one else is in the business because it serves such a small patient population. >> the drug industry has spoken out against it not wanting to be associated with this guy and it disgusts them and we'll have a ceo come on later to talk with us about that. >> thank you. let's switch gears to china. president xi is in seattle to visit with business leaders. at the start of his week long visit to the united states. eunice yoon has been following

reaction from beijing today and eunice what have you seen so far? >> well, global investors are probably seeking assurances about the economy here or market reforms, the way this is being played in china is that the chinese media is actually playing up the personality around president xi jingping. for the first time in seattle the president actually said that the anticorruption drive is not being used to root out his political enemies and he said, while he was joking, that the chinese communist party isn't like netflix's house of cards and the chinese media is playing it up saying he has a great sense of humor and they have been focused on his wife. the clothes she's wearing. the fact that he's carrying a chinese branded phone and also later in the week she'll be meeting with michelle obama to go to the zoo and see some pandas but what has been missing

from the coverage here is serious coverage of the core issues and that has been one of the big criticisms of the administration here. despite the problems in the market and the concerns about the economy that this administration including the president hasn't been willing to really take on a lot of the big challenges and be transparent. guys. >> all right. eunice, thank you. we're going to continue on this subject for more on the health of china's economy let's bring in frederick newman, co-head of asian economics research at hsbc. he joins us now from hong kong. we'll see how -- i don't know, satellites get effected by clouds. we'll see how long our delay is frederick. but what's the current state of the chinese economy? tried to figure this out yesterday. three or four years of deceleration. is it possible for us to know when we hit an inflection point

where it actually stabilizes and we can start watching the future of china that everyone talked about start being fulfilled again? when will that happen? >> well, in the data so far we haven't seen the inflection point just today we get the pmi out for china and again it's weakened and even new orders, new export orders down again. so it's still a bit waiting here. we do think that by early next year, some of the stimulus will gain traction. but generally speaking slower growth is still on the cards in china and it's not exactly collapsed but the challenges are still mounting. >> is the yuan still overvalued or, another way to put it, do we -- for china to rebound, do they have to admit that they're still kind of an export economy as they try to make the transition? they can't just go cold turkey

on the export economy. and is this a problem with overvaluation in the yuan? >> well, the yuan might not be as overvalued as it appears. in fact, we don't think china has a competitiveness problem. the reason why exports are not doing well is global demand is weak. not so much in the u.s. but europe for example still not pulling it's weight. the big challenge is domestic. it is big construction sector fuelled by debt and that debt continues to increase because china is so dependent on on going construction. weaning the economy off of that credit will be the challenge but we need reforms. now luckily the president today made reassuring noises. but it's a long road ahead. >> someone said that yesterday, if china has a cold it's not going to give the rest of the world a cold. the world is already slowing and what's happening in china is a

reflection of slower growth with it's trading partners in the rest of the world. so these are construction companies that can't fail either right? and none of the projects fail and everything keeps going up and there's all of this overcapacity. that sounds like it could take years to work through that. >> this is a problem we need to deal with over the coming five years or so. gradually getting the economy away from construction. by some measures construction in china could be 25% of gdp. this is a huge sector, both housing construction and infrastructure and you can't go cold turkey on that. even exports make up a smaller share of gdp today. it's about bringing that down and spurring consumption. debt will have to continue to climb at least for awhile just

to enable that transition process. >> all right, fredric thank you. i thought you were going to weigh in on this. you're here. you've been around a long time. you got no wrinkles. you're still like a pretty boy, isn't he? look at him, though. you are. it's kind of a blatant attempt at a certain demo we're trying to reach here. but having been around a long time, i'll tell you what i'm thinking. i'll tell you what i'm thinking. i wasn't supposed to do this but i wanted to talk to you about this. there's an emerging consensus that the market right now is going to have trouble moving higher and the reason is with global growth slowing and multiples are too high and there's a perception that multiples are too high and you're not going to see the earnings growth because of the

dollar or whatever and it's getting pretty negative. i wonder if that's how we make another bottom in october. >> the chatter you hear is give me a reason for buying stock. where's the catalyst. and he says this all the time. the main reason bullish styles is there's no good reason. we may be getting to that kind of a phase right now. could be october. >> you're suggesting there's a bigger dip before you get to that point. >> it's a scary month because it's always a bottom. >> the reason people feel like it's a close call is because all of this stuff is happening late in the cycle. the fed hike if it comes is very late in the cycle. the profit cycle is already mature and the multiples are up there as you said so it doesn't seem like much of a cushion but it's really hard to distinguish this unstable period. it's hard to say this is just a correction or this is to start up a 98 type thing, you can't make that call. >> the bull run might be over. >> and the longer this period goes on, that long-term trend is

totally in jeopardy. the averages start to rollover and all of a sudden people say -- >> death crosses -- >> all of that nonsense. it's getting too much focus right now. we went through a period where the market moved barely at all and now the market is manifesting all the volatility when the fundamentals haven't changed as much as a 12% drop. >> we feel very global but we're not doing that badly in the u.s. and if we're not as global as we think and the u. s. does pick up 2% growth that will be the reason. >> it would. the idea that we're already low enough for early next year, everyone is going to say we have this first quarter slow down so we have to get ready for that and now it's much more of a fed is trapped and that muddied psychology that much more. low nominal growth is the story. when inflation is nothing, 4%,

businesses live in a nominal growth world and not in a real growth world and that's why we haven't had as much kind of excitement in the business side investment that he we expect. >> if the fed raised rates do you think that would do it? >> i wish i would have. >> steady nerves and maybe see a rebound in the market as a result. >> in the context of the overall markets at least being a little more stable, yeah, potentially. >> when we come back this morning volkswagen board is meeting in germany as they try to survive a major emissions scandal. we have a live report from europe next. first, here's a look back at this date in history. ♪

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>> it's crunch time for volkswagen and it's leadership team. the board is meeting in germany today. nancy is there. >> hi, becky. that's right. what started as a concern over the cheating on emission standards has quickly turned into potential leadership crisis here at the headquaters and the ceo is taking perhaps the most crucial test of his tenure here.

he came out apologizing for the second time in three days this time in a video message saying how sorry he was to the employees and customers and that such a level of manipulation never should have taken place. however he did not hint that he was ready to step down in anyway but if you look at the local newspapers here in germany listening to commentators on a local radio station they think that an exit is all but a conclusion at this stage. he will face a supervisory board. we're told that certain member of that board are due to meet for crisis talks on wednesday after talks were held last night but then the official meeting will take place on friday. now this was a meeting that was scheduled sometime before this scandal broke out and it was originally bended to hold a vote on a two year extension of the contract. now that's highly in doubt. >> right now joining us from london is the managing editor of

reuters. we heard a lot of different things about this but one called this the biggest auto scandal in history. would you agree with that? >> depends on how you look at it. it's a bad scandal for volume ks wag fwen. it's not like -- it went on for so long that it was remarkable. the amount of market capitalization that volkswagen shares have shed over the last couple of trading days alone is more than $30 billion is equal to the entire market capitalization of fiat chrysler combined and doesn't count the beginning of the class action lawsuits and everything else we're going to see. the magnitude of this can't be overstated but it's not a safety, life and death issue like some others.

>> it's such obvious and blatant attempts to lie and cheat that caught people off guard. this rocks people's confidence in business because you think things like this only happen in hollywood scripts. >> exactly. it is remarkable and for corporate germany this is another black eye. there's issues at deutsche bank and the german corporate establishment is really rocked by this and one of the other many ironies is over the last six years three different car companies have gone for the title of the number one auto producer in the world. that's general motors and then toyota which had it's own safety scandal with the floor pedals

and now volkswagen is right on the cusp of becoming none would be and this happens. it's almost like the curse of the sports illustrated cover story in america. >> i wondered if we can try to calculate it across the industry. people really thinking this is going to be a taint on the whole industry or volumes in a time perhaps when at least in developed markets we're not too far from peak volume levels at least in north america. >> good question, mike and what has to be factored into that calculation is a number of things. first of all, all of the infrastructure that goes to produce diesel engines is now sort of in question. the factories, the oil refineries and all of that sort of thing. the trend was going against diesels anyway before this happened and it's inclear whether this is a fundamental flaw with diesels or whether

engines can be tuned in a way that, you though, you'll sacrifice performance on the engine and gas mileage but get some of the clean diesel promises that are made. a lot of things aren't clear and it's hard to be certain about the total cost of this at all. >> thank you for joining us today. always great talking to you. >> okay, becky, mike, thanks. >> i should have talked to him. >> he didn't know you were here. >> i had a diesel once. once smelly, weird sound. >> coming up, jimmy cain is right in the middle of the story, next. first as we head to break a look

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welcome back to squawk box. pope francis is in washington d.c. he'll be having a meeting at the white house and then he'll go to st. matthew's cathedral where he'll meet with officials all across the united states. we have all kinds of indicators from the world series indicator to the hem line indicator. well maybe there's a papal indicator too. four popes visited the united states since 1965. three of those trips came before major downturns. john paul ii's visit came a month before the black market crash. then his january '99 visit was near the start of the tech bubble. pope ben dik was heedict was he. the early stages of the financial crisis. >> it's like pope benedict is still around. weird. switching gears, major scandal

in the world of high stakes bridge. jimmy cain is at the center of it. kate kelly joins us with more. what's happening. >> it's been awhile since you talked about bridge but i'm going to do it. last month two players he hired for his competitive team. you play in groups of six and often if you're a competitive player and you want good talent on your team you hire pros. so this was a fair of young israelis. they were accused by another player on another team of cheating. cain personally hasn't been ill mri ka -- implicated. they're denying the charges. he is out two top teammates and at this point in their season it could be hard to replace them and he may have to big back a big trophy he won in chicago in august. this isn't the first time he has run into trouble with bridge. this is a game he's been

passionate about for many, many years. in 2007 he stoked controversy by taking time off to play bridge tournaments and golf and indulge in other interests away from work. in 2008 he was forced to re-sign. to be fair though cayne isn't the only bridge enthusiast wrapped up. two other sets of players including the number one and number two ranked players in the world are caught up in these accusations as well. but it's all shaken up the bridge community in a big way ahead of a big tournament that starts saturday. this is the bermuda bowl. it's organized by country. you have to qualify and it's only held every two years. >> so you're going like this. >> one for good, two for bad. >> first of all i had dinner with my cousin the other week and he likes to play bridge. he said it is easy. scratch your ear or rub your nose.

>> that's obvious. >> to be fair in competitive bridge they have a board that's supposed to conceal your view of your partner at these foursome tables. so i'd be facing you and we'd have people on the two other sides but what you can do, there's a tray in the middle of the table that gets moved around a little bit and allegedly the two israelis were moving it in different directions. >> two degrees to the left. >> exact ly or coughing or loudy drinking water. >> is there big money involved or is it just bragging rights. >> i don't think there's a lot of winning money. it's really just pride. but cayne left under not great circumstances. this is a game he's passionate about. this was a big win in august. it was the knockout tournament. >> i didn't know it was six per team but only four at a table but six per team. >> you can play with four or

play with five but typically you do six. >> four at a time. >> someone sits in. >> and when you're done with your game you take your hand and your other teammates play it. >> but if you're already hiring ringers why are people complainicomplai complaining about cheating? >> it's like any of these cheating sports scandals. like lance armstrong, if you're not playing fairly when you get to those top ranks. >> you're already not playing fairly by being able to hire ringers. >> i guess so, but you would be steamed. >> there's four guys and one of them says i need to come out. like, really? >> there's more to it. there's a whistleblower in norway that's a professional bridge player. he accused them of cheating. he was sort of the niche yone t startered this. the rumor is he had gone into hiding for his own protection. he did say the norwegian police

advised him and his young children and wife to move around a little bit and not be at their own address all the time. it's serious business. the bridge community is torn asunder. >> we'll have to see what buffet thinks about this. >> i know. i reached out to him through becky and he wasn't following it. >> buffet and gates these guys all play bridge. big in the industry. >> einhorn used to play but isn't competitive at this point. >> wouldn't help to count cards. one for good and two for bad but you can't count cards. >> i don't want to play the game because i don't want to misspeak but i don't think that would be effective here. >> dustin hoffman going -- >> it's interesting. i asked what are the skills that it takes to be a great bridge player and it's really good logic and deductive reasoning and apparently one thing that

tipped off the whistleblower to what may have been going on is it was just illogical the way they have played in the past. there's video of them and, you know, based on his analysis he said they made nonlogical but accurate after nonlogical and nonlogical play and if you're playing correct hi you only have so much knowledge and there's only so many things you would do. >> thank you. >> you're welcome. >> when we come back this morning, the harvard endowment warning of market fraud. should we be worried? we have that debate next. first we'll take a quick check on what's happening in the european markets right now. the ftse is the bigger winner. the dax and cac are still up.

>> harvard's endowment is becoming more cautious about the outlook for financial markets. managers started to increased cash holdings and feared some markets were frothy. they're looking at expertise as short sellers. >> we've had competition already about the markets and we want to bring someone else in to shoot the stuff around. with mike santoli and by that i mean -- dan, which i would know if you moved the prompter up. from morgan stanley. head of equity portfolio solutions at morgan stanley wealth management. when we were talking earlier i just had this real wish if i was king, i would make stocks move

purely based on what you were watching and earnings would be going up and interest rates would be low and i would say market absolutely has to go up. prospects are improving and market should go higher. what we talked about was that so many people are negative and there's so few reasons for stocks to go up they probably go up. it always seems to try to fool you one way or another. where are you right now? >> absolutely. i realize you had a recent birthday so congratulations on the 20th squawk box anniversary. i haven't seen you since. one thing i will say is everyone is focused on nonfundamental factors and politics as well. china's political situation. the pending potential u.s. government shutdown so what we need over the next couple of weeks and months is more fundamental clarity and we're going to get that. over the next couple of weeks we'll enter q-3 earnings season. they have been trending positively for the last couple of months.

the u.s. dollar head wind which was a major impact in the first half of the year won't be as big of a deal and then energy revisions which were super negative in the first half as well down 60% is also coming off so we think earnings over the october earnings season is going to be a big catalyst for the market. >> but the dollar is still as strong as it was but we're used to it and oil is still down and hasn't gone back up but we're used to it so it's not shocking to see the revisions. >> that's right and the other thing to consider is the dollar had a massive move starting in june of '14. when you go back 40 years you only had that magnitude of the dollar 4 times in 40 years. so again the share of that impact was in the first half of the year. the dollar is still strong but the second derivative or the rate of change of impact is slowing. >> you believe fundamentals. it's just that it might take awhile for the fundamentals to be born out. >> you need to see a couple of

key things. number one is earnings and number two is holiday spending in the consumer. we've seen a strengthening trend of the last couple of months. that's played out via housing and retail sales. you need to see that period as well and the u.s. economy is still in good shape boosted by 70% of growth which is the consumer. >> if you say if i give you 220% upside in 5.5 years or 6 years and then you go back 12% of that, how much more do you have to give back for that to seem like a reasonable pricing in of a descent economy? that's what people are trying to struggle with. if it's one last push higher in this bull market, let's say a lot of people think that, is it worth it? is it worth sticking around for it i guess? >> sure. you make a good move. the markets had a phenomenal move amid a lackluster economy. the reverse is playing out where the economy is strengthening in the u.s. 3.5% growth in q-2.

2.5 or 3% growth for the rest of the year and the market has pulled back focused on nonu. s. factors so to your point you have to think about the earnings recovery as well. the price movement in the market wasn't driven out of thin air. the earnings recovery was massive in the u.s. and the key point related to that is where are valuations today. after this 12% move we're sitting around 15 times forward earnings on the s&p 500. the median multiple, 14 times. so back in 2000 you were trading at 30 times earnings. we don't have that same type of valuation bubble we did back then. >> i wonder if we really -- if earnings are going to be what people say. you seem to think that they won't disappoint. what's the s&p number? 125 or something? people are saying 110 or something will be the real number which puts us at 18 times or 19 times. >> right. i think that when you look at earnings expectations they have

continued to be lowered. we heard from a bunch of company updates at our industrials and health care conference and industrials which has been a weak area for the market, a lot of pain in that space up about 30 or 35 companies that presented only one or two walked down explicitly their 2016 numbers. a lot of that pain has been felt. >> another thing i've been struck by in recent weeks has been you almost have a split on people that are more worried about inflation and i've got other people that say deflation, scare signs are everywhere of deflation. how can you have half the world totally worried -- if you look at real, they have like rigged the cpi so it's not real anymore. that we're actually right around 2% or so and then others think that we're headed like for another 20 years in japan. which is it? >> it's a tough question. i personally think that we're moving toward higher inflation overtime and that's going to be

drich off driven off -- >> 5.1% unemployment. >> taking the other side of that, the one positive side you are seeing is on the price of imported goods and that's been positive for u. s. corporate margins. as everyone is very concerned about china deflation nary effect the positive effect is continued margin strength for u.s. corporate which is is a positive for u.s. multiples and valuations as well. >> all right. >> thanks joe. >> you're going to stay, right? >> stay for a few more minutes. >> do you have work to do, though. >> eventually. >> what do you really have to do? >> we'll see what happens. if it strikes me. >> anyway, coming up, the clock ticking on a possible government shutdown. squawk box comes right back. ♪jake reese, "day to feel alive"♪

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welcome back, everybody. congress racing against the clock to avoid a government shut down. >> good morning, becky, a week away from the september 30th deadline to fine the federal government, and there's no clear solution to the budget impasse.

senate mcconnell had a plan for a continuing resolution, a stopgap bill to fund the federal government through december 30th, but that bill will have a writer on it to defund planned parenthood, a no go with most democrats on capitol hill. a vote on that measure tomorrow that's expected to fail. after that, they bring up what they call a clean cr, a bill to fund the federal government at current levels with no measure to defund planned parenthood, we'll see where that goes, if the senate passes through through until monday. looking at a really absolute brinksmanship here in washington like we saw back in 2013, and we wanted to highlight for you guys a couple stats we saw back in 2013 that show what the impact is of a government shutdown throughout various aspects of the economy. a couple key stats here. if there's a shutdown in 013, banks could not access the social security verification services they rely on in 2013. irs had a backlog of 1.2 million

verification requests. you can see the faa aircraft registry closing in 2013, an industry group estimated the shutdown delayed 156 deliveries valued at $1.9 billion. the federal statistics we rely on to engage the economy are delayed or passed up all together. the jobs report, cpi, eia storage reports delayed. all stats come from a report that the white house did after the 2013 government shutdown. they, obviously, trying to make the point that a government shutdown hurts the economy. you'll see some republicans argue, however, that all of this does not matter in contrast to, you know, doing what they can to prevent funding for planned parenthood. ted cruz argued that yesterday, guys. >> thank you very much. our guest host this morning for this hour is mike santolli. what would a government shutdown

do? >> i think a selloff in response to government shutdown if you figure on that's going on, that's a gift. the market correctly put, you know, fiscal issues in that we don't have to worry about it file for a couple years now. i do think it would probably, you know, regenerate chatter they can't move this year, but's excuse for no action. for better or worse, the market is, you know, captivated by the fed debate and whatever inputs go into it. >> we talked about government shutdowns in the past really affecting the economy making it harder for businesses to know what's coming for any sort of -- i mean, it's hard to put arms around what it means and measure it, but it's not good. >> bad for business mood, and issue obviously, it's one marginal thing that slows growth next year, but i think it is to be prolonged to adjust people's view of the underlying economy. >> the people that see things that happen are democrats. >> yeah. >> because it's wishful thinking. it's -- i don't see mainstream

republicans saying that they've -- >> they are not -- >> you learned a lesson. >> can boehner control the house republicans? >> you hit your head against a wall, feels good when you stop. >> no onements to menwants to the leadership side. >> you wonder how much the public kind of, you know, reaction to that would be, right? democrats hope for it, but people are just numb to it to a large degree. >> hey, mike, thank you this morning, great to see you. when we come back this morning, more of today's top stories including a big meeting between china ease president and u.s. business leaders. first, though, as we head to break, check out the futures. in the green this morning, dow up by 45 points, s&p indicated to open up by 3.5. you're watching "squawk box" on cnbc, first in business worldwide. this just in: 50 million customers' data was not compromised this morning in a security breach that didn't happen. wall street. not rattled. at all.

no. not at all. not at all. i mean, look at the day. sir. sir. what went right? what went right? everything. thank you. with threat intelligence, behavioral analytics, and 6000 experts, ibm security will help keep you out of the news. my dad's company wasn't hacked today. cool. (vo) wit runs on optimism.un on? it's what sparks ideas.

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two visitors taking the spotlight this morning. china's president working in seattle working to reassure government and business leaders about his country's commitment to economic reform in cyber security, and his comments straight ahead. pope francis kicking off the washington leg of the u.s. tour. we'll tell you what to expect p when the pope and president obama speak later this morning. plus, presidential candidate, hillary clinton, taking a stand against the keystone xl pipeline, and ben white has a run down of today's top political headlines as the second hour of "squawk box" begins right now. ♪

live from the 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 with becky quick. breaking overnight, new data, drop in demand dragging china's factory sector into the sharpest contraction, the purchasing managers index short of expectations, and stock there fell, and the shanghai and hangseng down 2%, and japan's nikkei may have been down today too, but it was closed today so it was unchanged. >> for two days running. >> yeah, no movement whatsoever. here the dow jones is indicated to rebound a little bit. thanks for that not raising rates last week, working out well for us with what we saw on

thursday, friday, and yesterday. >> yeah. the top stories at this hour. chinese president xi spoke to leaders in seattleast night, and he said china would not manipulate exports or discriminate against foreign businesses and would speed efforts to open markets and improve human rights. we'll get a live report from seattle at 8:00 a.m. eastern time. instagram announced they passed the 400 million user mark, 100 million more users than twitter. the growth markets are europe and asia, and 75% of the users are outside the united states. remember, facebook bought instagram for $1 billion in 2012. look at twitter's market cap today, it's $18 billn, and, again, it's 100 million less users than instagram. research firm, e-marketer expects instagram to generate $3 billion in ad revenue in 20 17 p

37. in political news, hillary clinton breaks silence on the keystone xl oil pipeline, and this is her response to the pipeline in iowa. >> i think it is imperative that we look at the keystone pipeline as what i believe it is, a distraction from the important work we have to do to combat climate change and, unfortunately, from my perspective, one that interferes with our ability to move forward to deal with all the other issues, therefore, i oppose it. >> more on the story from "politico's" ben white at the bottom of the hour. >> we have the under performing stocks now. >> joe, is it a stock market or a market of stocks? it's both. right now, there's a number of stocks out there that have been dragging things down on the overall indexes and pulling more

than their fair share or look at it from a market cap perspective, their fair share. in the s&p 500, right now, we have got to a point where about four out of every five stocks in the s&p 500 has pulled back by at least 10% from its recent 52-week highs. some people call that correction territory, others don't, but, still, these are big pullbacks. look at those. again, 400 members, nearly that amount, pulled back from the highs, and 30 have market cap of at least 100 billion. they carry a lot of weight in the overall market. let's look at the top five because it is interesting here. no surprise that exxon mobile is part of the group here, the slide in oil and gas prices took its toll, and, again, exxon down 25% from the 52-week high. procter & gamble, saying it's a play now, a big dividend, down ibm losing a quarter of the

value from recent 52 week highs. interesting on the tech side. walmart and chevron round out the top five. remember, all dow components, and these large cap stocks carry weight because market caps mean, yes, when they go down, they drag the market down by their fair share, but the win up here now that's not up here rather is apple. it is down about 15% from its recent 52 week highs. not like the rest of them, but it is worth more than they are, but, againings y, marginal year date, as you see, joe, a sliver of green in the market, no one's saying it holds, but if it does, the bargains they showed before apple all carry dividends, joe, of 3%. back to you. >> thanks. more on the market action this morning. head of u.s. equity and quantitative strategy of bank of america, and our guest host for the next two hours is rebecca patterson, chief investment

officer of trust, and cnbc contributor. do either one of you changed the notion that the dip should be bought instead that rally should be sold, or is that still -- >> i'm still holding on. it's not fun. >> dip should be bought? that's not -- >> why do you that? dip should be bought. >> yep. >> every day, there's something new, vw, fed, china, emerging markets, there's oil. our philosophy of investing because we are medium term investors is you invest with the cycle. if we don't think we're on the verge of a recession, the vast, vast majority of sustained declines in equity markets, 20% or more come alongside recessions. it's very rare to get a sustained decline outside recession. we look at the european data this morning, european business sentiment is improving. new orders are improving. the u.s., i think, you've got by forkags with manufacturing against the consumer, but the consumer drives us holding up

well. >> can you get 19% without recession? >> can i get a 19% fall? so it's not official? >> that would hurt and scare you. >> i'm not having fun now. >> you'd like -- >> whiter. >> yes. you would be pale. >> yes. >> i think we all would be. >> yes. >> no one likes losing money. >> you'd hold up well. >> i'd have a ways to go. >> you'd hold up well. >> would that shake your confidence? >> a 19% correction? >> yes. >> i think 10% corrections are normal, average on once a year, actually, so i was not worried about what we saw in the market. i think anything beyond that would prestage something really bad happening in the economy, and, you know, to me, so i think the dip should be bought. i said that very carefully, but i do think that there is a warning sign here which is that the fed did not tighten, so a lot of our cause were, you know, think about buying cyclicals.

if the fed is not ready to raise rates from 0 to 25, what are they seeing that we're not, or, you know, is it just a policy misstep, a tactical delay, and -- >> could a global slow down, whether it's china or whether china responds to just everybody else slowing down, could that ever cause a recession in the united states, or are we so big it's just us? >> well, absolutely. i think china -- >> it could? >> i think china could take the u.s. off the rails. i do think that over the last 10-20 years, china has been the major engine of growth. it's the second largest economy. i think a lot of stocks with china exposure look fairly inexpensive, but the idea that the biggest driver of growth over the last two decades is going negative. i think that would be -- >> it's been on the margin, hasn't it? if we do well, nice china does well, but if housing continues to do well, cars, consumers. >> we're interlinked, absolutely, more and more linked

with the rest of the world, but the u.s. economy is still relatively closed, so -- >> the fed still sure seems concerned about it. >> yeah. tomorrow, thursday, yes, will be so important with janet yellen's speech because if she thinks the market overreacted and the fed funds future is telling us, okay, off the table until december at the earliest, she'll try to fix that, i think, a little bit tomorrow. so if we get a yellen speech tomorrow that comes out in saying there's a very close call, tightening's coming. don't rule out december. i mean, she has the opportunity here to kind of get the market -- >> to walk it back. >> walk it back, thank you. if she doesn't, that could create more uncertainty. >> more chaos and volatility. >> tomorrow's incredibly important from that point of view. >> do you think we now -- remember the taper tantrum, the market went down on the prospect of tighter money, and the minute they would, you know, put the foot back on the gas, the market goes up.

has it changed? >> well, absolutely. >> yeah. >> they didn't figure it out, raise this time and the market goes up? >> i think we're on the other side of liquidity. i don't know if you see things this way, but i feel like now bad news is bad news. the fact that they are not tightening and that we're getting more liquidity is not good enough to keep the market going. what we look at is every time we've seen an injection of liquidity into the market, we've seen diminishing returns and risk assets, and the returns have gotten narrower and narrower and narrower and at a point where liquidity is going to drive risk assets negative. in my view, i mean, this is off -- out of consensus, but i think the biggest negative for risk assets would be another round of u.s. q.e. >> so what about, all right, we have mr. draghi from the ecb speaking today. >> right. >> if he suggests they consider considering purchases asset purchases to fight deflation, do

stocks go down on that? >> i don't think in europe it's enough to drive the economy or the market lower, but i think in the u.s., if we admitted that $4.5 trillion was not enough and we need more, that would have a very negative read through to europe, to japan meaning that qe basically does not work, central bankers can't control the stock market. that's what i worry about. we're at the point where nothing is going to get us out of this economic duldrums. >> are inflation fears relevant now? is it something we could slide into you think -- >> for the u.s.? >> anywhere. there's inflation fears around the world supposedly still, another inflection point we've turned, and i think with, you know, there's so much disagreement. people say it's not five, and it's a patient course. >> that's the fed's issue too. >> which is it? >> you can find any set of data tsh. >> is it 50/50? one will kill us,

hyperinflation, deflation, it's -- >> bullard is not even worried about deflation. >> who is? aren't you fighting yesterday's battle if you are worried about deflation or not? i don't know. >> i don't know. i think the market is positioned for disinflation. look at what's expensive, it's basically just inflationary investments, energy is super cheap, lowest price to book. i mean, it's hard to argue for inflation when you've still got massive overbuild of capacity in, you know, in regions of the world. >> in regions of the world, but not here. >> not in the u.s. >> not in the labor force. >> two to three years out now, greater risk is inflation. >> that long? >> i'm not going to say the next week. >> jim paulsen's been early on commodities, but, god, a -- oil recovers, you know, wages start to go up. >> oil inventories -- >> what if we get the read one of these days? >> a little pickup in wages? >> yeah. >> signs suggest we are. >> that's what i mean. >> small business wages are rising, a harder time finding workers. housing prices go up.

the early signs of inflation in the u.s. are there. i think the fed was so worried about imported deflation that they said, why not just wait a little bit long eer it's not an imminent risk. it will come. the lower we go, supply comes offing and that's going to turn around commodities issue and that's also going to play in. we have housing wages trickling higher, and then commodities turn, whether it's this year, early next year, then it's all going to come together and we'll see inflation. >> there was a generation of us that i didn't think the fed should worry about bringing inflation up. they are there because we were raised in a period of hyper inflation and that kills financial assets, and that's why fed tightens, that causes recession, normally, inflation fears, but now a generation has been raised that doesn't even -- has no fear. it's consensus. >> unless you live in brazil or -- >> right. but here inflation is never

coming back. the pendulum swung completely to the other side worrying me because everybody says now -- >> you know, i think that we could be in for a choppy market, so one thing that we noticed -- >> could be? i think we're there. >> that has not -- well, one thing we've noticed that's been the biggest driver of returns over the last year has been positioning. it's like the world switches from one position to the other. right now, we see the big crowded trades in disinflation plays. it's biotech, secular growth or high dividend yield, high growth or defensive yield. no one is buying cyclicals or inflationary bets. that could be the pain trade in the next quarter. >> going back to dom, looking at exxon and chevron, oil is not quite at the bottom, but it's close with a good dividend, that's an interesting, interesting thing to consider. >> absolutely. >> okay. all right. buy the dips. buy the dips.

>> we're dip buyers. >> what could you say wrong? buying the dip? >> i don't know, i don't know, it's early, only had one -- >> dip should be bought -- oh, it sounds like dip -- oh, there's a lot of words, add one sill ball and -- >> say flu shots. >> you know the joke about the fuber -- if the shoe fits? >> oh? if the fu -- yeah. >> like my daughters in the morning trying to get me say something and they giggle. >> you say things on your own when you rem, you know, the thai currency. >> the baht. >> ha! >> you're not getting me going there. no. >> it is a good currency for some people and some regimes, yes. >> some people you think should buy it, then? >> yes in some cases they might

want to. >> okay. but not short it? >> i'm here for two hours, joe. >> rebecca will be with us -- >> i'm so done. >> when we come back this morning, pope francis kicking off the u.s. tour in washington this morning. we'll get a live report from the white house next. a roundup of today's political headlines from donald trump's appearance on colbert to hillary clinton's announcement opposing the keystone xl pipeline, and "politico's" ben white is joining us, and we talk small business in america. we'll be right back.

♪ pope francis arriving in washington, d.c. yesterday for the first leg of a six-day trip in the united states, the pope's first visit to the united states, and it's a whirlwind tour. we are joined from the white house where the pope meets the president later this morning, and, behavior, he's on to here, and we're awaiting him in new york too. >> reporter: it's a busy schedule, becky.

the pope -- or excuse me, the president and first lady were on hand to greet the pope arriving yesterday at 4:00. the pope waved to the crowds, but not speaking, presumably saving the breath for the more than 18 events here's attending in the tour along the eastern sea board of the united states. of course, it all starts today here at the white house where he'll be meeting with the president for an hour, and then greeting the 14 -15,000 people invited here for this arrival ceremony. later today, he holds a cannonization mass for the california missionary, and tomorrow, a first for the pope, any pope, addressing a joint meeting of congress, and then it's on to new york giving a speech at the u.n. to visit ground zero and hold a mass at madison square garden. philadelphia, the main event, outdo outdoor mass to conclude festival of families expected to draw 2 million people. the pope known for humility and focus on the poor is expected to touch on hot button issues here

in the united states, including immigration, income inequality, religious freedom, and climate change. of course, in the past, his comments about capitalism and its impact in negative impacts it can have have raised eyebrows in the richest country in the world, but papal experts who spoke with cnbc expects his comments in the u.s. focused on encouraging the u.s. to be its best self and live up to the ideals in our founding documents. back to you. >> all right, mary, thank you very much. we'll be checking in with mary just coming up in the next hour as well. before we take a break, we'll take a quick check on the futures, which are rebounding a little after renewed weakness yesterday. now they are better. up 40, then 50, and now 86. 86, up 8 on the s&p, and up about 29 on the nasdaq. up next, a key judicial ruling on a popular song means big changes for the next party. we'll explain, next. time now for today's aflac's

trivia question. how old was kris tovr columbus when he went to sea for the first time? the answer when we continue. aflaaac. aaaa-flaaaac. someone's sandbagging. i'd be tired too. he paid my claim in one day when i got hurt. one day? serious hustle. serious duck. in just one day, we process, approve and pay. one day pay, only from aflac. ah! (vo) wit runs on optimism.un on? it's what sparks ideas. moves the world forward. invest with those who see the world as unstoppable. who have the curiosity to look beyond the expected and the conviction to be in it for the long term. oppenheimerfunds believes that's the right way to invest...

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now the answer to our trivia question. how old was christopher columbus when he went to sea for the first time? the answer? 14. ♪ >> a u.s. federal judge -- that might be 20 years old -- no, that's older. >> that's way older. >> at least. >> 40? >> no. that is old. >> okay, 35. 35 years old. >> it was about -- yeah, about 1980, i think. >> that's about 35. u.s. federal judge has thrown out a copyright claim to the most recognized songs in the western world, "sailing," by christopher cross. >> no. [ laughter ] >> you can now sing "happy birthday," which i asked becky to do a lot of times, without risking a lawsuit. the judge ruled that "happy birthday" belongs in the public

domain, and the case was brought by a filmmaker after making a documentary about the song. that's like patenting -- >> we were risking getting sued all our lives? >> yeah. >> who knew. >> thank you. ♪ ♪ happy birthday it you >> yeah. >> times square is close by. >> 1979. >> '79. okay. >> that's old. ♪ >> oh, i hate -- >> not quite a one-hit wonder -- >> i can't remember another one. >> wow. flashback. >> here's another one. >> two-hit wonder. very good. when we come back, donald trump making an appearance on colbert talking about the proposal for security wall on the border with mexico and criticizing the iran nuclear deal, but declining a question about president obama's birthplace. we'll talk it over with "politico's" ben white next.

kohl bert >> the u.s. equities indicated up by 75 points, s&p up by 7, and nasdaq up by 5. stick around. we'll be right back. always obvious. ities aren' sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. awe believe active management can protect capital long term. active management can tap global insights.

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♪ welcome back. what time did you go to bed? >> about 9:35. >> you got 14 hours of this song. you have 14 hours. welcome to "squawk box," welcome autumn. weird. i thought that it was the 21st, so i've been thinking it's autumn for a couple days. >> well, it is for the winter and spring. is it off for the summer? >> i don't know, the equinox. there's google, there's a squirrel. he's cute. that's cute.

>> he's not real so saying the drawing is cute, that's okay. that's a google doodle devoted to today's equinox. when the sun appears to line up directly above the earth's equa equator. we think of it as the first day of fall. a lot of people like fall. i lot of people like fall. i like spring and summer. fall is a sonnet that reminds me of a period of my life. >> i'm sad kids go back to school. >> some are happy, but you're like me and my wife. shares rising, reuters reports that the cloud computing company is making a final attempt to sell itself as a whole before it starts with any asset sales. citrix targeted by elliot management, and jcpenney repolice statir replacing the chief merchant before the holiday shopping

season. the new merchant, the family and friends, congratulations to john thai. cisco rofrtedly unveiling a partnership with the chinese server maker today. the journal -- did you need to know his name? >> well, you know, knowledge is a good thing. >> yes. >> okay. all right. fine, fine. anyone's wondering, there is something called a chief merchant at jcpenney, and they have a new one. >> they need a new one. >> the journal says the announcement, other announcements, chinese president's visit to seattle, the deal set to highlight the challenges that foreign tech companies face in china. you're back. meg. she's back now with more on the drug pricing controversy thatd week and the "wall street

journal" went bonkers. look at the size -- did you see this, ben white? did you see the size of that thing? >> seems like they have a strong opinion on that. >> woah. >> that's a lot of words there. >> did you see it, meg? you can take this with you. >> oh, thank you, joe. >> the journal went crazy. investment, not good intentions, fuel high risk research, and price controls will limit therapies. probably never heard of that. >> never heard that before. to recap, they reversed course under a lot of pressure last night including from hillary clinton who tweeted monday sending the biotech index into a tizzy freaking out about the idea of capping high drug prices. this is a unique example. the rest of the drug industry says we're not like this. the clinton, campaign weighed in on twitter after saying good thing turing will lower an essential drug's price.

this plan event of prevents price gouging in a first place. yesterday in iowa, she laid out how. take a listen. >> when a drug has no competition, when there are not any other treatments that can do what it does, pharmaceutical companies can charge fees far beyond anything it takes to recoop their investment and far beyond what they charge consumers anywhere else in the world outside of america. i want to both protect consumers and promote innovation while putting an end to profiteering. >> the way clinton says she's going to end prop tiering include four tenants laid out in a blog post today. one, require a minimum investment in research versus marketing. another is to require companies to justify price increases like this one, though it's an clear to determine how to do that. there's been a lot of

congressional inkwur rees, and third is increase competition for generics, and, forty, limit the out of pocket costs patients pay every month to $250, which a lot of folks say affect insurers rather than capping what drops the cost. >> i don't understand how that would work. you're not allowed to pay more than $250, but the insurance company can't say no? or is it just raising the bar to make it harder and harder to qualify for drugs? >> a great question. they say it raises premiums for people if you limit out of pocket costs. >> or jump through hoops before they approve a drug to sign off on. >> there's questions whether it will do anything. you hope it works out well, but fair enough. >> this is sparking something that is going to be an issue for the rest of the campaign, i'm sure. this guy in particular, though, whatever his name is, he's an idiot, and he comes on and says things like, look, we -- we're going to do -- we have to do this because we're not making

any money, but that sounds very good. sounds like the same things, legitimate researches say about prices, but it's not one in the same. this is a unique situation. >> yes, they don't make money for a long time in biotech. companies work for decades before they turn a profit. >> exactly. >> that's the way the industry was built. >> that's not what this guy is doing, a hedge fund guy who cornered the market. >> like a domain guy, a begin -- >> squatter. >> a domain squatter. >> this guy came, in bought the rights to it, jacked up the prices, i have to make it to make money back, but he paid the price for it knowing it was a limited market and nobody else could get in. >> knowing no one else would make it. i want to know more about -- i don't know why -- what's the parasite, it's rare. parasites -- and she loves parasites. >> i love talking about it. >> what about it? how does it get in?

does it take over your body? yuck. >> this is spread through cat -- >> poop? okay. >> we talk about poop so much on this show. >> yeah. >> a lot of people can carry this parasite, and it's not until your immune system is compromised that the infection affects you, and that's why we talk about hiv patients, patients on chemotherapy. >> and pregnant women. >> it's a parasite. i don't believe it's a bacteria. >> bigger than a bacteria? >> i think so. i'll look into it. >> one thing clinton said that left me scratching my head. the amount of money the pharmaceutical funds spend on marketing versus research. what's the mix now? >> she's got a point there. unfortunately. >> yeah. well, depends on the company you're talking about, a company like -- >> there's a lot of times you saw when a company's drug, big seller, goes off patent, there's

an xl version, and they'll have that under patent so they spend all the money on marketing, this new xl version, extending, and putting that aside, you got all the genetic information now, all the basic science research, it's not paying off for a while, but all the money you spend trying to maintain exclusivity through marketing, and they do need to market, you know -- >> it was very amusing listening to clinton's speech yesterday. how much time she spent on how much she hates direct to consumer drug ads,alking about people skipping through wild flower fields looking happy and talking bowe the side effects. that's in the speech. >> that is a saturday night live skit, right? >> you have to keep the mute button close, and anything that you take is going to kill you. anything you take, what you're taking it for is not nearly as bad as what happens to you. potentially. >> yes. >> unbelievable. >> you could drop dead at any minute. tells you about who watches

nightly news. >> ben, talking about this from the political perspective. >> sure. >> how big an issue is it, what's the play, it's nuance, but boiling it down, passions are heated and maybe we miss exactly what's happened here. >> right. i don't know that it's a huge issue on the campaign trail, but one of these a guy raises a drug price 5,000%, whatever it is. coming across as a shady hedge fund manager who annoys a lot of people. that's easy for a candidate to grab on to because it connects with people who are outraged by it. obvious to jump on that, and i think it lined up with the speech she had planned anyways, sort of a nice coincidence for her politically, but pharmaceutical drug prices is not an issue on the campaign trail. >> what was said yesterday that caught people's attention is she's not in favor of the xl pipeline. it was in the form of question but as the pope landed on shores, and as president xi landed. >> funny how the timing worked. if you think it was an accident,

it was not. it's an issue she wrestled with for a long time and said at the state department she was incl e inclined to approve the pipeline, a lot of pressure on her from environmentalists, big donors to come out against it. she did that, she did it a time when people are not going to pay that much attention to it. but, you know, this is a popular era right now. this is the left, the democratic party, bernie sanders surging, had no choice but to say she's opposed to the pipeline because it's a touchstone issue on the left. she supported it, numbers would go down more. she had to move left. this will annoy the center, wall street democrats, people who think it's a growth issue and think building keystone is good for jobs. she had no choice. had to say no on keystone, and you saw the reaction, left is thrilled with it. >> did you watch colbert? >> i did. i watched trump on colbert.

thought he was muted. kind of -- much like he was in the debate. this was not the really aggressive aggressive frump. he left kocolbert have fun, and of course, the question about obama's birthplace, which he chose, again, not to address. >> not to address. so between what happened there and not addressing them and ben carson, the huge issue he faces over comments and whether or not a muslim should be president of the united states, how does this play out over time? >> well, i think for trump, you know, he's made it clear that, you know, some of his support is based on folks who continue to have questions about president obama's citizenship or religion. if he were to come out, yes, an american citizen, no, he's not a muslim, he risks alienating his supporters. >> were you at the white house correspondence dipper? >> no, i don't get invited to that stuff. i'm not fancy.

>> one where trump was in the audience -- >> oh, i did watch that. >> obama had the podium, and he spent five minutes -- >> no, i'm sure. >> for trump -- >> it's a basic question -- >> the president is not going to defend trump. if someone says trump has a wig, you think the president will say, no, it's his real hair? >> he didn't say, the question is he's not a citizen now, and born in the united states, been proven long form birth certificate is out, and i can't talk about it, it's off the table. he doesn't want to say yes. >> obviously, he's born in the united states. >> president of the united states. >> that would have been a better answer. >> you know, it's disappointing with opportunities to say, look,

this is a settled issue. >> a guy born in the united states, move on to something else, but he won't because supporters thrilled to the idea that obama's not -- >> i guess you're not a fan of joe, his clown weighs the birth certificate -- >> a fake long form bitter certificate made on the internet probably. >> i'll tell you, this -- and this was for her, meg, but -- >> i missed her. >> meg, the talks of plasma is an interacidic protozoan. it's not that disgusting. >> that's why you're not supposed to change litter boxes when you're pregnant. >> i'm getting rid of the cat. i don't want to get this thing, and pay $18,000 for the drug. >> the cat is named chubby? >> i have a dog too. >> dog named clyde who is awesome. >> cat people in the world and

dog people in the world, and -- >> i actually give credit to my wife, she rescued them both. >> chubby? >> chubby, he's not chubby. >> i think they'd like to meet my german shepherd. >> he'd run quickly. >> my german shepherd would run, believe me. >> really? >> yeah. >> ben, thank you so much. programming note, candidates go head to head at cnbc's republican debate next month at the university of colorado in boulder. joe? >> yes? >> your turn. >> okay. up next, that's exciting, that debate, what do we know about it so far? >> not a lot yet. >> they need to tell us some stuff. anyway, small business in focus, squawk box inside the shark tank with robert herjavec on the climb for startups and how it's changing. oh, no, another one. as we head to break, look at u.s. equity futures.

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a short documentary debuting today, it spotlights stories of small businesses across the country, and some lucky entrepreneurs receive a $25,000

grant. shark tank shark entrepreneur robert herjavec is part of the project. he is joining us this morning to tell us about it. have you seen the dudes on west texas investor yet? hill billy shark tank. >> a ripoff. >> it's fun, though, isn't it? >> i don't know, how is it more fun than us? >> come on. >> who cares about them. >> we can watch both. >> yeah. >> well, what it tells you is there's on sy-fy, there's a shark tank like project, showing how popular small business is today, and everywhere i go across the country, people want to start a business from kids, young, old, everybody. >> it's changed a lot since 2008 and 2009, right? so since the great recession, i think we've seen a pickup in the amount of small businesses. >> well, i think we saw people could not get a job when the economy tanked, everyone thought of starting their business, but that's the beauty of the

documentary is it shows how vital small business is. not only does it employ people, but brings back communities. we have a furniture shop called orange moon in chicago that was in a bad area and kind of brought people back to it, so that's a thing about small business, vital to the economy. >> it's the one sector where there's no disagreement. i mean, big companies to this day, political part of it has it out for any big companies, but even the left will say, but small businesses there -- >> who doesn't love small business? >> right. who says something bad about entrepreneurs in starting from scratch and earning success and everything else. >> it's gratifying to see. >> what i love about having my own business is you're in control of your own destiny. i hated the idea of working in a big company, show up one day,

think things are great, get a mortgage, and then you're laid off. how many jobs did hp cut last week? >> right. >> that's the great thing about small businesses. you start a business -- >> be prepared to fail potentially a couple times. >> i think it's, you never get to take a vacation day without it money out of your pocket. >> what's the saying? entrepreneurs is the only one who works 160 days a week or to give up an 80 day a week job to work 160 days a week. that's great about the documentary. so inspiring. you see so many people, it's their dream. it's their blood, sweat, toil, and tears, and everything out there. >> and the average entrepreneur makes under $100,000. people don't realize that. these are working people that -- >> well, let's not belitting someone making 50,000. >> that's not what i said. you can't levy the 1% against most entrepreneurs 37. >> great point. when you think you start a small business you'll be rich, but it takes a long time to get rich as

you know, but it's great because you get to contribute, do your own thing. >> we actually don't know. >> yeah. >> you might know. >> we don't know. >> have you thought about starting your own business? >> no. i thought about getting rich -- >> my mom and dad had their own business in a garage next to our house growing up, and i loved that. it was a great childhood, going out to the office and watching my dad do his thing. >> interesting stat, 85% of small business owners, entrepreneu entrepreneurs, had a parent who was an entrepreneur. what's hard is what if you don't come from an environment like that? it's really hard to go out there and start a business, and they are not making it easier today, but it's so inspiring, and that's, you know, this documentary is 25 minutes online. shows so many stories. anybody can do it. >> when you did the documentary and with "shark tank" do you see common threads of the small startup businesses that succeed? are there things you see because you meet so many would be

entrepreneurs. >> it's interesting. >> there's got to be a couple things that say, oh, they are going to do it. >> it's interesting. the documentary's very much like "shark tank", and we see people on it that succeed, love what they do. it's a cliche, but if you love what you do, you never work a day in your life. you see that passion and that drive because it's going to be really hard. i mean, startsing a small business is going to be days where you don't want to do it. it's not fun. it's not exciting. you just got to keep going. >> robert, you mentioned that the government is not making it easier. what are the things you strip away if you had two or three things that you would do at the government level to meek it easier for entrepreneurs? >> yeah. what we are seeing in other countries is the capital gains tax. the investment in small business, there should be a credit. if i invest in a small business and take that risk, i should get a greater benefit back on my capital gains tax later on. just a lot of risk. >> well, how many small businesses are sub chapter s? when we raise taxes on suppo

supposedly the small businesses, the one chapter s small businesses, it's just on individuals, but it is on business. small business. >> it is. >> are they mostly that? >> most of them. most small businesses are small. it's interesting, most people think if you own a business, like you said, you're rich, and it's easy, but these businesses are contributing to the community and they are the little dry cleaning shop, the bike shop, all the other things. there's another business in san francisco ca francisco, a pizza shop started by deaf people to combine the deaf and hearing community in one place. and so, you know, their goal is not to be the best deaf pizza shop, but the best pizzeria. that's what we see on "shark tank" and the documentary. people are so highly motivated to be great at something. >> that's great. >> yeah. >> looking forward to seeing it. >> yeah. >> it's interesting. that's what we love about this

country as a canadian. >> i was going to say a boot still. >> we do. i have to get a voice coach for the show. stop being canadian! >> exactly. >> so inspiring to me that there's still so much opportunity for you to start businesses. >> thank you.

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china's president defending his country's economy and markets in a speech to hundreds of business executives in seattle. a closer look at why china fears still hang over wall street just ahead. diesel deception, volkswagen's boss facing a grilling from the board. how far reaching is the sandcan? the ceo of auto nation discusses what is next for the world's second largest auto maker. farm suit call companies on the defense, and the ceo of alnylam is here to talk prices.

the second hour of "squawk box" begins now. live from the most powerful city in the world, new york, this is "squawk box." welcome back to "squawk box" here on cnbc, first in business worldwide, i'm joe kernan with becky quick, and futures this hour last i saw up 20, and now up 19. they had been up as many as 80 or so. it does seem like it's thin trading. holiday trading this morning. but that's not much of a rebound. add up, what did we lose thursday, friday, and yesterday? >> almost a complete reversal. >> i think we're a thousand points above the lows. and people talk about testing the lows in the s&p around 1800.

>> dow has a few points. >> yeah. that'd be, like, mark faber, yeah. you should definitely not buy that. >> that one? >> yeah. >> you shouldn't buy right now for -- anyway, european markets right now are, i think, probably responding to somewhat to yesterday, but they are up the most, actually, the ftse up in greece. it's about time we put maybe among other -- >> take greece off the screen. >> that's what i was saying. don't you think we should? although, stuff keeps happening there. >> they're not done. >> put hungary in instead. >> they reelected the guy because he accepted austerity. >> that was good news. >> really? >> the fact they reelected him to push further austerity on the country suggests the population is not happy, but they allow it

to happen. >> they'd rather stay in the e.u.? >> correct, correct. a few other stories investors are talking about today. mortgage applications jumped nearly 14% in the latest week. mortgage bankers association point to rate strovolatility, a the volkswagen boards meet today, dealing with the major emissions scandal, and shareholders and representatives are taking part in today's meeting, and we'll hear more soon. harvard's endowment increased cash holdings in fears that some markets have become frothy. harvard is looking for investment managers with expertise as short sellers. shares to watch, citrix rising, reuters claims the cloud computing company is selling itself as a whole before it starts with any asset sales. it is being targeted by activist hedge fund elliot management. facebook's instagram

announced there's more than 400 million users, 100 million more than twitter. shares of haren therapeutics jumps saying it met the goal of a study, and as a result, that's a big winner today. up 28%, 28%. i don't know that company very well. take a look. market cap about dr after today, i guess it's 1.2 billion before that move of 9 points. china's president trying to assure officials on a laundry list of irritants, everything from trade to the country's stock market swings to cyber security. president xi spoke to 650 u.s. leaders in seattle last night. michelle caruso-cabrera is there covering the president's visit, and, michelle, what have you learned so far? what jumped out at you at the

initial meeting? >> reporter: trying, as you said, becky, to be reassuring about the economy and say the right things about what the american business community would want to hear, and there was a lot of the american business community there last night, a star-e studded event. the boeing ceo was there, and henry kissinger, the ceo star of ford sitting next to him, and microsoft was there as well as bill gates. in his speech, president xi spoke for 20 minutes, pledging no competitive devaluation. that was something he already told the "wall street journal," defended the stock market intervention by the government recently doing it to prevent sus temperatu -- systematic risk, because he said it was self-recovery and self-adjustment. he said people should not be concerned about the chinese economy. there's head winds, but it's

only a problem in the course of progre progress, and he also, in one of the biggest issues we know the white house is concerned in, he's pledged that the chinese government will not engage in commercial theft, not get involved in hacking, and he advocated a high level of joint dialogue with the u.s. on fieging cyber crime, and we know when he moves on to the white house thursday night that's going to be one of the issues. now, on the agenda today? a couple of things, going to boeing. he's going to two different meetings. one of which is behind closed doors. we don't know about it. that's the one about the internet over at microsoft. we're not sure exactly who is attending that one and expect it to be the thornier one. there's the more public meeting organized by hank pallson, and we'll hear that and see what he says at meeting and will be in att attentans of that one with 15 big american ceos attending as well who we're told are going to express concerns about what's going on in china in terms of the economy, in terms of whether or not foreigners can do business there, and other the

ere issues we talk about, guys. >> michelle, i guess the question is, we can have lie level dialogues where everybody says the things they are supposed to say. the real question is what gets done beneath the scenes? i mean, these are serious issues. they are not going away. talk about something like cyber security, there have been accusations that all the way to the highest levels that china has known about this and has intentionally gone out to spy on u.s. companies. one thing to deal with it, but quite another to see action. >> reporter: yeah. and so there are so many key issues raised within there, becky, and there has to be, at some level, decided by individual companies who have to make the choice about whether or not they will do business in china, follow the rules there imposed by the chinese government making it easier for the chinese government, if they want to do the things they are accused of doing, you know, are they going to assist in that. at the same time, there's the

d diplomatic channel and government to government channel which is the issue is we separate the two, right? >> right. >> spying versus commercial interests, and china conflates the two. how do you disengage that when they see the economic advances of the country deeply tied into whether or not they can advance politically and commercially. >> all right. let's continue the conversation. michelle, stay with us. joining us right now to talk more about what this means is john rutledge, chief investment strategist at geneva based, and our guest host is rebecca patterson. i should mention that peter is the author of "crouching tiger," and, gentlemen, welcome to both of you. >> thank you. >> peter. >> good morning, becky, joe, peter. >> peter, pick up where michelle left off, talking about how difficult it's going to be to try to -- as these two powers

rise, how china is more and more important, getting to the point taking on the head of issues like cyber terrorism. >> sure. i think, becky, you got right to the heart of the matter of what they say is a lot different from what they did. as a practical matter, i don't think they can get anything done on cyber, and one of the problems we have right off the bat is that president xi adamantly denies china's involved in organized hacking, which is totally counter factual. there's a trust issue. i think there's a trust issue in seattle when 600 ceos sit down with the chinese premier and basically they know that the china is stealing their own technology. they forced the technology transfer. so politically, what's going to happen is this. we've got president xi coming here. all he wants is pomp and circumstance, the big red parade, and to show at home to

his constituents and countries like japan and vietnam, which he wants to have them be afraid of china, that china's basically a superpower on par with the united states. what we should want, and i'm not sure the white house delivers on this, is issues related to chinese aggression in the eastern south china sea. some agreement on cyber, and some kind of an agreement on the economy, and also let's not forget north korea, which is continually threatening to lob missiles at us, only in existence because of china's support. as you said, becky, there's issues. this is going to be the last meeting before the presidential election, so it's a water shed event. i'm not sure people recognize that, and if nothing gets done, you're going to have people like ash carter at state basically defense saying that we got issues that need to be settled, and they will not be settled.

>> john, i know that you have always seen things from china's perspective on this as well. is there a chance that china will be willing to give on some of these substantive issues? >> you know, i agree with peter. this is all a show. you know, words are cheap. a televised appearance like this is really for his home audience, but, you know, let's face it. so are the televised appearances of our officials when they go to china. they are playing to the home audience. what we should, i think, be paying attention to here is that things in china have changed enough in the last year to two years, so that the politicians and the leaders are worried about domestic stability to some extent. there's been a certain amount of clamping down, you know, on the sfeklation and other things. you know, this society is moving backwards from the progress made before, and the government's getting tougher, and so i think that we see that in the foreign

policy. we see that in the domestic policy, and we saw it in their clown car policy response to the stock market. that was ridiculous, the idea you put speculators in jail and that makes the stock market go up? >> yeah, i think you're raising dr. >> they are really in trouble right now. >> yeah. this is rebecca patterson, good morning. >> morning. >> that's an important point here because i think policymakers in the west are looking for two things. we want strong growth out of china because that helps us, the global economy, but strong growth requires intervention so equity market does not implode or devalue too quickly, but at the same time, we're telling them, we want you to reform and open capital markets and have a freely trading currency. well, you can't have cake and eat it too. at the end of the day, strong growth from china, it's slowing, but if you have a $10 trillion economy growing at six, still not horrible, but if we want that, do we have to accept that

little bit of heavy handedness intervention is part of the game? >> if i may, rebecca, the fundamental issue here going on for going on ten years now, is a structural imbalance in the global economy that begins with china's severe export dependence and every time it slows down rather than figure out how to stimulate consumption and grow the domestic economy, it resorts to currency manipulation and devaluing the yuan, and that's the issue. it's not going to change until the chinese governments that and begins to do things like help secure pension reform and puts money into the hands of chinese consumers that they'll actually spend and save and that they begin to develop their economy that way, and that's -- that, to me, is the issue. it would really help is the

white house pressured them towards that rather than just a stalemate that we have now. i mean, china thinks if they grab all of technology, they'll be able to be a vibrant country, and that's not going to be the solution to their growth or ours. >> peter, let me argue the other side of that, just for a moment. >> sure. >> you put yourself in their shoes, and you say, your job is to take an economy that is overly dependent, else on infrastructure investment and capital spending and turn that into a consumer economy, that's not turning a battleship, but like turning south america. it's a big, big job. they made a little progress. they could do more. but, you know, the pmi last night for the manufacturer sector was lousy at 47. >> sure. >> it's been below 50 for six months in a row, but the service sector has legs and is growing. all employment gains has to come from the service sector because they are losing jobs in manufacturing like everyone else as they move to cambodia or laos

or vietnam or some other place. >> kind of ironic, isn't it, john, they are suffering from the same kind of thing, yes. >> michelle? >> absolutely. >> no, i was just, when you listen to the conversation what ultimately at the core of china's issues, if you can take a high level view is they still have this belief, and sometimes we think they have an ability to control things from the top but what is dynamic is willingness to run on its own and allow all, you know, the invisible hand to work and they struggle continuously with the idea of, you know, are they going to hold on loosely or control it. the more you control it, the less controllable it becomes. >> you're right. >> that's why the clown car -- >> no faith in the markets. >> that's why the clown car is perfect. throwing people in jail for basically operating in the stock

market the way any kind of investor would. i mean, it's comical that the chinese communism party thinks that they can do command and control and in a capitalist framework. it won't work. >> absolutely. >> to declare the market self-corrected as if he would know. >> yeah. >> folks, thank you. >> yeah. >> this is a conversation we'll be following the entire time that the president is here. michelle, thank you, checking in later, and john, peter, thank you for joining us. >> thank you. all right. you're here. you're going to be here. coming up, guest host rebecca patterson on what's driving the markets. you know, yogi bear. i think my kids think that yo yogi berra came from yogi bear, and he allegedly sued him for the name, and he admitted we didn't get it from you. it was a coincidence. >> just happened how similar. >> we'll be right back.

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welcome back, watching futures this morning, and they have gone up, 80 points for the

dow, up just about 15 points, and now right in the middle of 55 points. s&p up 4 points, nasdaq up by 21. a stock to watch, intel went to underperform saying channel inventory was drained in the first half. that could signal the outlook for pcs improving. and growth out with the latest investment outlook titled "save by 0." >> that's a fix song. ♪ fix by zero >> get off zero and get off quick. wow. no comment on that. will 2% fed funds harm corporate america that has already termed out its debt? a little. will stock and bon prices go down? most certainly. he argues the near term pain is

worth the long term gain. rebecca patherson, our guest host, and would you ever, like, raise cash to be able to buy the 15% dip? >> yeah. >> where are you right now? terms of cash? >> well, we've been -- we're fully invested now. >> as much as you'll ever be? >> not saying it's all in equities, but we don't have excess cash now. the selloff in august, had sloppiness the last couple days, we try to use that as app opportunity. >> you had cash before that? >> a little. not a lot. i wish we had more, but we did take the cash we had and tried to find stocks that have gotten beaten up, in our view, unfa unfairly. >> when people try to raise cash to reinvest inspect market, that's -- that's like timing the market. >> exactly. >> hard to do. >> time it both ways, get out the market at the right i'm and get in at the right time, and that's really, really hard. >> and 34 many times you are

buying back higher than where you sold. >> with tax consequences from doing that. >> think about after tax returns as our clients do, you got to always be mindful of that, time it right, and be sure whatever the net benefit is is greater than the tax cost of doing it. >> if there's one thing to cause you to go into your committee, whatever it is, say, look, we have to step aside, more than just an average, what would that be, the one thing that you're not thinking of? >> if i saw any leading indicator data from the united states saying what's happening overseas is starting to feed into our economy? a greater way, that would cause us to change allocations. >> we had plenty in five years. the -- it's almost like we get a good one and bad one a lot of times, alternate between things that make us think we're going to start growing fast er and things remind us, no, we're not.

i don't know how to know which one. >> volkswagen was, okay, we can never know what's going to come up day-to-day, but overall, if we think the recession risk is low in the u.s., and that is our view today, we're going to -- that's our primary philosophy, invest with the cycle. >> all right. when we come back this morning, a big meeting today for the world's second largest auto maker, volkswagen. they will be grilling its ceo over the company's e emission scandal. the ceo of auto nation, mike jackson, is here, teselling a l of volkswagens, and we'll be right back. you're watching "squawk box" on cnbc. first in business worldwide.

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truly, the end of an era, legendary baseball catcher, yogi berra, died, a 15-time all-star, three mvp awards, 13 world series, ten as a player, three as manager or coach, and major league great, and went on to coach and manage teams including the yankees and mets.

i didn't know him that well because it was a long -- as a baseball player. i did not meet him until he was the late 70s, but sweet, had a golf tournament every year, and famous yogi-isms. so many of them, 90% of the game, baseball is half mental. you can observe a lot by watching. >> that's my favorite. >> good one. deja vu all over again was when they hit back-to-back home runs. >> future ain't what it used to be. >> exactly. >> we'll be right back. we'll miss him.

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welcome back to "squawk box", everybody. boeing signed deals to sell 300 aircraft to three chinese firms. the u.s. aerospace giant will also set up an aircraft plant in china. boeing is the first u.s. company to announce a business deal

since china's president arrived yesterday. also, bhp militant plans to change funding policy. they are taking steps to ensure that a promise on payouts to the british shareholders is met. this could cost us trail yap investors. the stock is down slightly this morning. shares of biomed realty trust getting a boost after stating the trust is in talks to sell itself. it's attracted interest from blackstone, according to the reports, and that's a stock up by 9.5%. pope francis in washington this morning. he's expected to arrive at the white house in just over half hour. it will be an event the world can follow on social media, and mary thompson is on the north lawn of the white house with more of the pope's social reach. mary? >> reporter: well, becky, you know, pope francis won't be known as francis the 1st until his successor chooses the name, but he's the first pope of the media age, waiting in crowds to take selfies or tweeting or the

staff tweets on a fairly regular basis. the pope has nine twitter accounts in all different languages with 23.4 million followers, only a third of katie perry with over 75 million followers issue and less than bill gates has, but it is more than the followers of the dalialama and president obama. twitter says in the last year, there's 3,000 tweets per day pensioning the pope with the tweets from his account retweeted on average 9992 times, a better retweet rate than the king of saudi arabia as well as president obama. now, advertising pr executives tell cnbc that the pope is master of tapping into the talent that comes in handy in the trip because a recent survey done by verizon, head of the papal visit, shes that about 80% or half of catholics use social media to connect with the church

and 80% would share any papal experience they have on social media allowing the pope another way to reach the faithful. among millennial catholics, three quarters share faith on social media, and for the papal visit, there's a way to do so. there's a number of new emojis including a pope kissing a baby and another eating a sub, assuming it's a phillie cheese steak ahead of the trip to philadelphia including the trip to the u.s. he arrives in the u.s. in a half hour and updates coming up on "squawk on the street." >> not on a friday, the cheesesteak, probably. >> no, no, that would have to be fish or something. >> funny you would mention that. i may be stopping by there. >> i'm sure you used to eat though on friday, joe. >> or the one at wendy's where you know e what fish it is. >> mcdonald's you just hope it's

fish. no, kidding. thank you, mary. when we return, diesel deception of volkswagen under fire, facing a grilling by the board, the latest after this. ideas are scary. they come into this world ugly and messy. ideas are frightening because they threaten what is known. they are the natural born enemy of the way things are. yes, ideas are scary, and messy and fragile. but under the proper care,

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it is crunch time for volkswagen and leadership team. the auto maker board is meeting in germany today over the emissions scandal. and phil le bow is in chicago with more. you were here yesterday, back

there. are you back there, phil, are in front of the sign? >> in front of a blue screen back in chicago. an update of what's going on with volkswagen. two important meetings happening with the board of managers going on over in germany and one on friday, today, the executive committee for the board of directors, meeting, drilling the director about what's going on with the diesel deception crisis. his fate should be decide the because the contract is up tomorrow, and the question is whether or not he will sign a two-year extension as was expected, or if the board decides to go in another direction. meanwhi meanwhile, investigations continue to mount around the world, in particularly, here in the united states. these are just a few investigations into what's going on with the diesel engines from volkswagen. the epa, starting it all, the department of justice, several state attorney generals yesterday said they are investigating what's happening with volkswagen engines, and

there's several foreign countries doing their investigatio investigations. remember, relative to sales of diesel models, select diesel modders here in the united states, many of the dealers, all of the dealers can want sell certain models, talking about the passat, the jetta, the golf, the beetle, the audi a3, they are on a stop sale basis now, in other words, they are on the lots. look at shares of volkswagen. pummelled. it'll be curious whether there's a move with the stock today relative to any news from the executive committee meeting with volkswagen, with martin, gu but, again, the stock showing a bounce bag today, guys, but it was beaten up over the l.a. couple days. >> phil, stay with us. we'll bring in mike jackson right now. mike happens to be the chairman and ceo of auto nation, the

largest vw dealer in the country, and, mike, the question has to be, what the heck, how did it happen? it's not a rogue engineering who did this, but a team of people who knows how high in order to get this through. >> becky, unfortunately, you're absolutely right. look at the scale of the decepti deception, over six years, 11 million vehicles challenges from the regulators, starting three years ago, already having one recall last year that didn't really resolve the issue at all. it points to a systemic failure at the largest automotive manufacturer in the world. this year, one of the most prestigious and respected manufacturers, and so it is absolutely shocking. it's really hard to get your head around so this is not a rogue employee, not poor judgment, not a lapse. this is not negligence.

this is a deliberate scheme to deceive customers and regulators, and in that sense, it's absolutely shocking. >> what does this mean for you as the largest seller of the vw cars in the country? i know you put out a new policy weeks ago saying you won't sell any cars that are under an active recall at this point. how many cars do you have on hand? >> so, becky, for the auto nation portfolio, vw represents less than 1% of the business, so it's very manageable. on the bigger issue of the state of recalls in the u.s. auto industry, i think everyone would agree that it's a black eye and dysfunctional what's going on over the last five years, and we as a company said what can we do not just to be a cricket, but also to be part of the solution. so we made a decision that's now implemented that we will not retail or wholesale any vehicle

that has an open recall. now? is significant that on any given day 5-10% of the our inventory has open recalls, and as phil can tell you, getting the parts and the fixes can be extremely difficult to do on a timely basis, so it is disruptive. it is expensive. this idea that consumers can't come into our company and have the confidence that any open recall for any year or model vehicle hasn't been resolved when they buy it or we wholesale it back into the marketplace is no longer acceptable. we've taken a leadership position. i think we've set the standard. i think someday the whole industry will look back and say, i can't believe we used to retail vehicles that had open recalls. >> phil? >> hey, mike, this is phil. i got a quick question for you. how much was what's happening with volkswagen is going to make those few enthusiast and small market of people who were

looking for diesel models really question whether or not they should buy a diesel here in the united states? in other words, do you look at this and say this is a water shed moment where what little momentum diesel had in the country is really going to be set back substantially for several years? >> phil, i think you're 100% right. describe the customer. this customer is green. they bought this vehicle to significantly reduce the their c co 2 footprint, and they were not willing to spew off more nox for reducing the c 02 footprint p. they are passionately green, it was a social responsibility statement by customers, and they feel betrayeded. that's going to be a challenge to get the vehicles back into compliance and deal with the feelings of these customer, and i think it's another black eye

for the diesel engine, fairly or unfairly, but, phil, you're absolutely right. combine the decline in gasoline prices now with this cloud over diesel technology it's an issue, and bigger issue in europe where diesels are 50% of the mix. >> right. >> and you have the -- it's a much bigger issue there, but now you're saying, hey, the vehicles really were not client with what we thought. >> mike -- >> but in europe, to point out, guys, in europe, it's cultural issue and infrastructure issue opposed to here in the u.s. where it's a decision. i'm going to seek out a diesel model. >> yeah. phil, you're right. >> mike, it's rebecca patterson. good morning. you know -- >> good morning. >> you're working in the industry 24/7. if you could reach out to volkswagen today and tell them here are one or two things i would do in your shoes to get in front of this, what do you think

are the most important steps they should be taking immediately? >> that is now the question now that this has occurred. they have to understand that the strategic brand position of vw in the united states is at risk. their sales can be impacted on how they behave over the next few days, weeks, and months. they need to take accountability, full responsibility, and then proceed to do whatever it takes to make customers whole, shareholders whole, and regain trust of regulators. it will not be easy, but it's one of the moments where you just have to do whatever it takes to confront what's happened. if you hesitate, don't really step up and deal with it quickly, your brand is at risk

in the united states. >> mike, is this a broader problem? should we expect that other car makers have done anything similar to this? >> first, i would be shocked if this is in other companies. it's not unprecedented that it happened ob a smaller scale. the trucking industry, diesel engines a decade ago, a billion dollar fine with these types of devices. but, you know, the whole compliance system is based on trust. it's primarily a self-certification process, and this will shake the trust between the regulators and the manufacturers for everyone, and you could expect a lot more scrutiny about around safety and clean air and if you're volkswagen, you can expect not only a fine, but you'll end up with a monitor in your

development centers and in your factories for the next decade. >> mike -- >> it will be a long journey to reearn trust. >> nobody's going to avoid audi or porsche, are they, because of this? >> porsche has a great degree of autonomy and self-certifies. there is one audi engine -- >> just by being volkswagen management, if someone not even diesel, say, i don't like the company anymore. >> i think, as i said, the volkswagen brand is at risk and how it develops depends very much on how they respond to the crisis. i do not think it overflows to porsche and audi and the other brands. i think it's very much focused on volkswagen. >> okay. >> mike, thank very much. great to see you. >> good to see you this morning. >> and, phil, thank you, too.

folks, when we come back, outrage of the skyrocketing price of a drug 60 years old coming to a boil. the ceo speaks out against price gouging, and awaiting the pope's arrival at the white house. as we head to break, look at futures this hour. all over the map this morning. right now, looks like dow is up by 52 points, s&p futures up by 4. can it make a dentist appointment when my teeth are ready? ♪ can it tell the doctor how long you have to wear this thing? ♪ can it tell the flight attendant to please not wake me this time? ♪ the answer is yes, it can. so, the question your customers are really asking is, can your business deliver? i

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okay. the futures up and indy kalted about 47 points or so. rebec rebecca, we have a second and this part of the calendar year and we found you out it's the first day of fall today, what is it about october any way? is it the witches? >> are we writing off september? >> it's bad. we seem to go into october with things. >> yeah, and then people chase. so many crashes.

>> when you look at calendars and september and october look wiggly. the number of times that you get the sell off is big. when you get the average and it feels that october is always bad, but it's just a few cases that bring down the whole average number. perception is reality. if they say that it's going to be bad and scared to get back in the market, it could have an impact. i am watching mr. yelling tomorrow. i would like for her to come in and he gives nothing to october. >> the market is writing it off now. if there's uncertainty, what's going to change over the next weeks. >> back to this and the outrage for a 65-year-old drug has them turning and other companies are

sitting up and taking notice. john, thanks for joining us. >> thanks. good to be here with us this morning. >> one of the things that was made is that they were going to use the revenues to make a better version of the drug and that they needed to make a profit after he bought it for $50 million. what are you making of the claims, are they legitimate? >> i don't think so. this is what we do in the bio echo nichl. this is not how we focus. most americans get it when they work hard and take risks. people do tend to hate it when people try to cheat the system. >> yeah, it's an unprofitable company. i have been work for a long time

to bring the drugs to the market. that's a claim that they were make asking that they needed to turn a profit and that nobody should blame them for that. what do you make of the claim? >> well, we're a business and we ultimately need to make a profit. otherwise, we won't survive as a company. we're bringing the innovation for and we're around for 13 years and have several years left before we're profitable. we have invested over a billion dollars and think that we can make a difference in people's life with the things that we bring forward. we're not bringing forward medicines that were in vent in the 50s but medicines that were in vented in the 21st century. that's where the difference is for the patients at the end of the day. >> hillary clinton seizing on this issue and attack most of the drug industry and saying that the drug is too high. do we have a problem with the drug problem in the united states? >> yeah, it should be value and access. there's a lot of data that shows that the drugs reduce overall

cost. data from the bureau of shows that every dollar spent on drugs is a savings of over $7. i am looking at data this morning from an analyst showing that the cpi have been flat at 10 percent as a health care cost since 1960. there's a need to focus on the value that the innovation provides for the patient and overall system. that's what the companies are focused on. >> thank you for joining us. we appreciate it. >> thanks. i would rather be if i could be one of the other because i want the tail to move around. >> i would be like small. >> they're the size of -- checking the features and there's the pope. there's the pope. i recognize him.

he has arrived. now he is departing. departing and amazing he is a person very comfortable with crowds and likes to press the flesh and get there with the follower and that's nice to see right now. we will be watching and coming in tomorrow and wondering about traffic and things like that. we go west from where the studio is. i believe that he is going to be east. there's a lot of. >> you wore this outfit for the pope. these were white robs. we will be right back.

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for a free 30-tablet trial go to cialis.com 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. and before we let the guest host go, the migrant crisis is a humanitarian issue right know. what we try to do is try to figure out if it has a impact on europes economies or markets and you can watch some of the backlash already starting. these are people that have got, you know, beheadings and

chemical weapons behind them and then a barb wire fence in front of them. >> i think that this was an issue when the number of rev you guys today was greater than world word two. for us as investors, we think that it's horrible, but can it affect the economy and the market? so far it has not. we have the confidence out this morning. it's actually suggesting that the growth in europe is continuing to have a positive momentum. and leading into the care and improvement. so far it's not an economy issue. >> the po potential split over the issue where they're forcing it down and do it by con census. >> this is a huge test and the fact that they're putting

frontier spots and maybe it's not permanently dispayabled. this is taking a step backwards. you have to watch the elections later this year and the data and hopefully it does not become a market issue. >> thank you. >> good to be here always. >> that it does for us and continue to watch the pope coverage. squawk on the streets will pick it upright now. good wednesday morning. you're looking at the white house and beginning the six day visit to the u.s. and meeting with the president this morning and delivering remarks this morning with an address to congress, a trip to new york city as you know, philadelphia this weekend. we're going to watch him as he makes the way to the white house and rose garden and when they make the remarks, we will take them live.