good morning, everybody. welcome to squawk box here on cnbc. i'm becky quick with jeff kernen. let's get you up to speed on the markets. u.s. equity futures look like they're giving back a little bit of the gain wes saw yesterday. the dow was up by over 30 points yesterday. you can see this morning it's indicated a little lower. dow futures down by 53 points above fair value. we'll have more on the markets in just a minute with black rocks global chief investment

strategist. first though a developing story out of the carolinas. the flood soaked state is now reporting at least 13 weather related deaths. while the rains have subsided at least 8 dams have been breeched. that's what is causing the massive problems now. we will have a report from the ground a little bit later this hour. >> among today's top stories ellen coleman is out and will be replaced temporarily by board member ed breen. i like him. i know him. he was tyco and motorola and i think he would be a good friend to the show. that's how i base things. i don't know if he would be great for dupont but he would come on and we could talk to him about things. good guy and hopefully we can talk to him about what's

happening and how this decision came to pass because it looked like petlz had been beaten back and all of a sudden they decide she's not the right person. >> but it came as a result of lowering guidance. >> which is what caused peltz to get active in the first place because the company wasn't performing as well as it could with the right person in charge. theoretically. she had been the chief executive since 2009 and had been -- i end up saying it twice. i always end up saying it twice. dealing with activist pressure and fended off the attempt to get board seats over this year. a european court today ruling

that it's drawing a lot of interest from companies, the man cited data that facebook allegedly provided to u.s. intelligence agencies. his case argued that u.s. law doesn't offer enough protection against surveillance of data transferred by the social media giant to servers in the united states. as a result ireland must now investigate whether the transfer of european survivors at this point should be suspended. >> this has been a long time coming because the eu has different privacy laws and one way of getting around that is saying this is kept on service here in the united states. you figured this was going to come to a head at some point. >> what's the austrian ireland connection? >> not sure. maybe it's where the servers are kept in ireland. >> it's an austrian student doing it. >> god just told me.

i hope to meet her some day, like that song. >> let's tell you about fed ex. the company is raising it's fuel surcharge for the second time this year and retailers and other shippers are taking notice. this increase was quitely disclosed online last month. the wall street journal reports the increase would add $170 to the cost of shipping 100 shoe boxes overnight from new york to atlanta. that's up from the current surcharge of $67. all of these changes come despite lower fuel charges. the increase is because of heavier packages and more residential deliveries which use more fuel but you have to wonder if that will mean differences from amazon prime. got to wonder if they'll have to go up too. a scandal this morning in the multibillion dollar unregulated world of fantasy sports. we're hearing of allegations of insider trading suggesting that

employers were placing bets using information not available to the general public. the new york times reports an employee at draft kings admitted to releasing data before the start of the third week of nfl games that worker won $350,000 at a rival site that same week. in a statement late yesterday they conducted a thorough investigation and says the employee did not receive the data until 1:40 p.m. eastern. they locked at 1:00 p.m. that day. this demonstrates the employee couldn't have used the information in question to make decisions about his line-up. there's no evidence that any information was used to create an unfair advantage and any insen yi anything to the contrary is incorrect. they barred employees from playing games at any other site. they prohibited employees from

playing on their own companies sites. this raises all kinds of questions about an unregulated industry at a not great time for these sites. >> i hadn't thought about it. the similarities between if you had information and how similar it is to -- >> sec insider trading. >> whether you knew something was going on at a company or results early or whatever. >> if you knew someone had an injury -- think if brady is out -- >> i don't know that they have information who is in the line-up early. i think they have information on what the most popular players are which would change your odds. these are getting the most money bet on them which means you have to go to other players to get the higher odds playoff. >> i've never done fantasy stuff. >> i haven't either. i thought there's nothing here but the more i read about it the

more i think there is something here and even if this is just the appearance it raises questions about whether this industry should be regulated. the reason it's not is because they say this is not a game of chance. it's a game of skill and that means the more you know the better off you are and if you're given inside information then no, you should not be allowed to gamble on any other site. >> dave briggs is coming on. >> he is. this isn't the first time this has happened. a lot of the employees have won big bucks on other sites. it's not a one off time. if you're somebody actually playing one of these sites buyer be ware and user be ware in that situation because the odds are stacked against you. >> so it's not just normal sports betting. it's all fantasy. >> i think. >> i've seen the adds on tv and, you know, they always got guys that look like they're from

jersey. and have you seen them? they have ink and they have their hats on backward. >> you get in for a low amount of money and maybe win hundreds of thousands of dollars. >> have you seen the guys that look like the guys you see and they have their hats on backwards. >> they're sports fans. >> they're young and sports fans. >> that's funny. i wonder what is going on here. in other legal news, u.s. law enforcement authorities are reportedly investigating an alleged un bribery scheme. the journal says it involves payments to un officials in exchange for the support of real estate development which could be lucrative. i'm trying to do two things at once. i'm excited about the physics prize because the guy that won it. >> the mobile prize for physics. >> yeah that's a real noble prize unlike the others. >> you mean economics and peace. >> i'm waiting for john kerry to

win his. you know that's coming. >> but i digress but i'm going to find more information. i think they're sub atomic particl particles. we used to think they're neutrons and protons but all of this stuff is fascinating and it helps us understand everything about the beginning of time and everything. it helps me pretend i can talk about it which i can't. in washington today, president obama is going to meet with business leaders at the department of agriculture. he'll focus on the proposed trade deal involving the united states and 11 pacific rim countries. and i just got to make one -- do we have a commentary thing? we don't have an editorial commentary thing. we used to have that. >> joe's opinion. >> yeah. because i just happened to see the huffington post today and

the lead story is the best story in the world, the astounding, drop in global poverty. it's been phenomenal. how quickly it has dropped. i obviously would attribute a lot of that to globalization and capitalism because prior to being able to have private property, for years the gdp didn't go up at all until you could own an idea and commercialize it. >> it's also smarter philanthropy which is borrowing from capitalism too. >> the private sector can be fill lphilanthropists philanthropists. >> but it's about teaming up with governments and being smarter about how they do these thin

things. >> but that's the lead story and the next story was democrats mobilizing to stop the tpp. >> but the huffington post has no idea about the disconnect between talking about the reduction in global poverty but we have to stop this trade deal and make sure about it. >> i'm not going to take the other side. >> we have to do these things. we have to have the free flow of trades. let it happen. comparative advantage. >> it does bring the rest of the globe up. >> but the writers there. oh, great. let's stop this trade deal. >> did we do the commentary? do we flash. >> this is squawk box. what do you expect? >> i know i can do this today. no one is here to stop me.

>> let's talk about the markets. u.s. futures are lower but comes after big gains yesterday. the dow was up by 304 points and for the first time yesterday you saw the dow moving above it's 50 day trading average for the first time in quite awhile. it was the first time in -- i forget where i read it but the first time in quite awhile that it moved above the trading average. the dow futures are down by 52 points and the nasdaq down by 22. let's check out how some of the early trade is going in europe this morning. you'll see in germany and france you see gains of about .3%. ftse slightly lower. the ftse mib is higher. in asia, i believe shanghai was closed overnight but the nikkei was up by 1%. hang seng down by .1%. the kospi was up. oil prices yesterday they picked

up a bit. also the ten year, people are making a big deal about how the yield was steadily climbing. it was but only to 2.04 act. this morning it's sitting at 2.044%. the yield finally fell back below 2% on the weak jobs numbe numbers. this is on the idea that the federal reserve might not be back in the market any time this year in term of thinking that they will raise rates. take a look at gold prices. at this point it looks like gold prices are relatively flat. $1,137 an ounce. >> okay. did you see this? the feature blog post right next to the lowering poverty. the author of free trade doesn't work says the transpacific partnership is a disaster and the liberal president obama should have known better.

so. >> this is hillary clinton now faced with a very difficult decision of whether she stands by it or steps down. >> she gave her her mojo back. the comment about benghazi gave her her mojo. now she has been everywhere for the past three or four days. >> on nbc. >> saturday night live, today show, all comcast properties. >> here's the two guys. >> it shows, which was shocking to me that they do have mass. >> that was shocking. each day we get medicine and chemistry. >> you have to tell me what this means. >> it's a sub atomic particle. that's all i know. something to do with mass and

patter. >> i got five seconds and then i'm out. billions going through every moment. i know that. they don't interact very much and they have a little bit of mass. >> you didn't know that. that counts for something. >> you knew they had mass. you knew before they did. >> i did not but i was able to repeat that. >> that's enough for your cocktail party conversation. >> i said five seconds. >> that is. that's your cocktail party conversation. >> we don't need to know about your love life. >> that might be less than 5 seconds. >> joining us is anna, the senior economist at wells fargo securities and let me start with you. the idea that the fed is not going to be coming back until next year, is that something you

buy into? >> it's definitely on the table. they put october at a 10% probability and even december is just a third. you don't cross over the 50% probability mark until march. and given that inflation is still at a very low level with less likely probability of increasing this year, it's likely that the fed is going to be on hold. our call is still for december but with economic growth in the 3rd quarter slowing it leads you to december being in question as well. >> is that why the market is acting the way it is. the reason that -- excuse me, the reason that the market is suddenly picking back up trading back above it's 50 day moving average? is that what's going into this? pop thinking this is great? the fed is going to be here for sometime? we're not talking about higher rates?

>> probably. we're going back to 2013 where you have an environment where it's not just the fed. european stocks have done better on the prospect. there's talk about the boj expanding. so we know there's no global growth or not much of it and we're going back into an environment where investors are taking some solace on very easy money. >> so we have the august sell off which is scary and we retested the lows when they didn't raise rates and there was the notion that wow the economy is really strong enough to raise rates. >> but we sold off significantly what looked to be that the fed should have moved and didn't and the knee jerk reaction was look this economy really is bad and then we came to grips with wow, maybe -- >> maybe we're never seeing higher rates. >> maybe we need to embrace that again but does it set up october not being a horrible month? do we already have the bad

october in september? >> august has historically been the worst month. >> do you think we tested the lows enough yet? >> i think you probably tested the lows. if you go down i don't think it turns into a bear market and to me you have lowered expectations enough that if you have a desen earnings season in q-3 you can go back somewhere close to flat or maybe with a nominal gain. >> okay yesterday we had ben bermuda in bernanke on the show and he said the fed is sitting around saying what does the market know that we don't. maybe that explains the pause why they didn't raise rates after the market puked in august but it also struck me that the market is sitting around thinking what does the fed know that we don? why are they not raising rates so it's almost a chicken and egg scenario or a high paced game or chicken where everybody is trying to figure out what the other party knows. >> it's definitely where the risks are. is it more of a risk to raise

rates prematurely or stay on hold? the fed has been on hold for so long that the risk is to the side of raising rates prematurely. if you look at what they're saying about inflation and approaching inflation of a 2% they put that estimate out to 2018 so even the fed doesn't think that the inflation rate will start to improve any time soon and wage growth is still very low. i watched the interview. one of the things mentioned was low product activity growth and with that you're not going to get that wage growth that's going to improve at the pace that would cause the fed to raise rates. >> this got people nervous after the press conference. you had stagnant middle income wage growth in the u.s. for a long period of time. it's probably more structural than cyclical.

if this is what the fed is focused on you could be at zero for a long period of time and what is it that's going to get the fed off of zero if it's a long-term structural problem that's not ameanable to policy. >> it sounded like the new normal. >> and there's debates over is it real but we can agree it's not going to get fixed by the fed. >> but you would say, regardless of any of that jump in stocks at this point. >> jumping in stocks i think on a relative basis you're probably better off in stocks so we favor stocks outside of the united states. more on the fact that valuations are easier and you also have the tail wind of a cheaper euro and yen and profit margins can extend easier in europe than the united states. >> thank you for coming in today. great to see you. >> thank you.

>> coming up, big changes at dupont. ceo ellen coleman is out. that's next.

>> okay.

physics nobel prize. as one fiput the most tiny qualy ever imagined by a human being. they're along with the charged particles. they come in three flavors. >> i'm thinking of the smallest particle i have ever imagined and i think it's horton hears a who in whoville. >> he was small. >> but his stuff was even smaller. >> we're going to talk with this gentleman about dupont chief ellen coleman. she stepped down as ceo and chairman and it happened quickly and then they warned. again, shares of the chemical company have been hard hit this year. down almost 30%. we know what happened with commodities, et cetera, making it the worst performer in the dow. joining us now is our cnbc contributor.

senior associate dean at the yale school of management. you had well documented ink about so many things. you're everywhere but i don't see why we can't deduce from this that he was absolutely right that this company was not being run up to its potential and needed a management change. >> well, only if nelson peltz who i think we buried the hatch t hatchet between us. >> into his head. >> i think it was brilliant timing. >> all right. we're not talking about that. why wasn't he right? >> his approach was completely different. >> she needed to go. >> why? >> the company is not performing. >> it was up 266% for the first six years so now to the 7th year -- >> she is only 59 years old which is young. believe me. >> it's a mutually agreed upon

effort. and i don't think it's a good idea. >> you don't think it's a good idea for her to leave? >> she didn't want to be a lightning rod anymore. you do get worn out for it. it's a bad day for her. it's a bad day for dupont and a bad day for corporate america. she was a great inspirational force. in fact, unfortunately at one point i referred to her as the joan of arc of industry which she was bothered by. >> it does not make her -- it's not a good operator of the company's assets. >> what was his plan? what was that going to do now? we had a problem that had nothing to do with nelson peltz's plan. he would have had a plan for us is that the problem here has almost entirely to do with supply chain ripple effects of china. if china's not buying crops from brazil. who cares? a lot of us care.

brazil products are way off. ag products are down. >> it caught the stock market by surprise. >> but a ceo is supposed to deal with these things. >> and a board. >> if that was a problem you should have figured whether that should be a problem. >> the board should have had the wherewithal to stay together. the place never was itself. in this case i think the board made a mistake. >> this is ed breen. >> he is fantastic and they're lucky to have him on the board. this is a great board by the way. i just think she should have stuck this out. what's going to happen now is agricultural kem cams get sold off just hike we saw performance chemicals. when you sell these things in an auction it's a bad time to sell

and this is a company that performed very well under her. six great years as ceo. two bad quarters shouldn't end somebody's term. >> they don't have a replacement yet. they're doing a search for this. >> it's disappointing there isn't somebody from within and a pane that thinks long material. a agree. ed breen himself wouldn't be bad. jim is very good. another new hire for the board. >> he's only 59 too. >> we both think 59 is quite young. is he old enough for the job? >> youth won't be a hindrance to getting the job, right? >> no, i think hopefully it wouldn't be an issue like the old ronald reagan quote. wouldn't hold it against him but i think, you know, here's a company that's been a source of invention. still a third of their products right now are new products and roughly $10 billion of their revenue is from their own rnd period labs. nelson peltz wanted to split

that up. that had nothing to do with better managing of the problems in china and agricultural products and brazil really hurt them a lot. it was unfortunate timing. some people had an idea that maybe dupont, ironically citigroup analysts had a buy order on them thinking they're turning this thing around and they probably will. so you'll see six months later, this is what happened with ed zander when they came to motorola. he lucked into the razor phone. it just took a little while to come out. >> why is -- its up 4% today. >> people see an opportunity for quick fire sale prices. there could be a stock pop. so i don't put a lot of faith in that. they had this big article yesterday that was wall street journal saying well we took a look at how activists target companies have done and you actually take a look at the day

tarks it's only a short year period from 2009 and the activists targeted and the companies didn't do that well. and on profit growth they are down. where's the winning argument here? and i think that ellen had a lot more to offer and she probably has more to offer in her young career as you point out joe. but this is, this is, you know, a shame if people think there's a cautionary tale here is there's nothing in the plan that's going to anticipate what caught so many by surprise again about china's fall off and you can't wonder why they lost their nerve. jamie diamond's board stood behind them and that's a great model. >> it looked to me like she may have won the battle but peltz won the war. >> he has been buying stakes on this and you know he has to be

grinning. his plan didn't deal with this situation and they could have stuck this out. you wonder what lessons do other boards take away from this? they think if we can cultivate a relationship, you look at jeffrey great and you look at dan lobe. >> if they do look for a ceo and if carly doesn't make it to the white house she would be a great candidate because she was a great ceo. >> you can't drag yourself out of that one. >> we're done. >> her stock is up 7% when they fired her. and tom perkins said when they fired her the witch is dead. >> let me tell you about breaking news. pepsi coming in with it's earnings. the company beat expectations by 9 cents a share. earnings came in at $1.35. the consensus was $1.27 so

that's a beat of 28 cents a share. earnings per share grew 14 cents. organic revenue up by 7.4%. all of this was coming at a time when people were doubting whether the company could meet expectations. issues like the strong dollar effecting it but also the decline in traditional soda sales around the globe. the company also saying that it is -- it will no longer consolidate the rest of its results. the company took a $1.4 billion charge to write down the value of investments in that country but the company is also raising it's full year core constant currency earnings per share growth target. >> this is the company that your friend wanted to split into pieces. the integrated system works well. >> is it an overstatement to say that even the worst ceo is better than a career politician

at being president? >> it's questionable. you don't like john kasich. and jeb you don't like. >> i like jeb. i like christie. i like carly. so we'll see. >> thank you for coming in. >> rubio. now he's got some water. donald sent him some water. >> from the state of the union response. >> he used to like the donald. he used to like you. >> the donald. >> i like the donald. >> when we come back, the top 1%. new this morning, an exclusive report on the richest americans. everything from where they live to what they're buying. squawk box will be right back.

the great beauty of owning a property is that you can create wealth through capital appreciation, and this has been denied to many south africans for generations. this is an opportunity to right that wrong. the idea was to bring capital into the affordable housing space in south africa,

with a fund that offers families of modest income safe and good accommodation. citi got involved very early on and showed an enormous commitment. and that gave other investors confidence. citi's really unique, because they bring deep understanding of what's happening in africa. i really believe we only live once, and so you need to take an idea that you have and go for it. you have the opportunity to say, "i've been part of the creation of over 27,000 units of housing," and to replicate this across the entire african continent.

welcome back. robert frank was laboring at cnbc for years and finally gets to join us in the chairs. >> it's a big day. >> congratulations. new numbers on the 1%. are they not the 1% anymore? are they the 1.5%? >> we're going to talk about what's happening at the very top, the top of the top of the 1%. >> don't you think we need to change that number? >> yeah, i think we need to upgra upgrade. >> they live in a studio. 1% income is around $600,000 and probably around 7 million in network. >> in new york city. >> oh, in new york city. >> what about around the country? >> 350, 4. >> combined income. >> yeah but we'll tell you what's happening at the top of the top of the housing market. sales of million dollar homes up 21% over the past year and the higher you go the stronger the sales. a report found that there were

29,000 homes sold. sales of homes priced at 5 million or more increased 54% and sales priced at 43%. most of those sales were in new york and california. those were the top three cities and the top three zip codes were all here in new york. there are some surprises for million dollar listings. atlanta ranked second behind new york and ahead of los angeles for million dollar listings are the homes listed for sale, not yet sold. active listings in atlanta, billion dollar homes up 57% over the past year. the top zip code was park city utah followed by miami beach and then another park city utah zip code at number three. brokers tell me this shows that the top of the real estate market is being driven largely by vacation and life style locations as opposed to primary

homes but it could also be a little bit of a bubble warning because we now have the secondary markets with a lot of million dollar listings piled up not yet sold. >> yeah and historically what does that indicate? because i know -- i remember the desert out in palm springs it got -- it was so hot and then it was a wasteland. >> the ultimate indicator is ski homes. they rocketed up in 2003 and then they rachcrashed the harde. look at aspen and park city and vail. >> does that tell you that the markets are strong or weak? >> the markets where we have the largest increase in listings are not the markets that have the largest sales. of course the largest sales, new york, los angeles, san francisco. >> that stuff is just sitting on the market. >> it's just sitting on the

market. when you have a 54% increase in million listings in atlanta are there so many homes suddenly worth the million dollar. >> i love buyers. >> exactly. >> you have all the numbers. what's the top 10%? do you know what the cutoff is? >> are you guessing or do you actually know? >> i don't know. it used to be 4 or 5 years ago it was around $150,000 for the top 10% but also what we're seeing in emerging markets is people want to get their money out of the country and in developed markets they want to get it out of the market and into hard assets. hong kong happening this week. very strong despite what's happening in china and real estate here, diamonds, gold, all of those hard assets are strong. are they a bubble? yes but they'll keep increasing. >> you heard bernanke. we have to get inflation up. >> this is inflation. >> that's asset inflation.

that's what they say. >> need more hands. >> yeah. you do one each. >> when we come -- the three of us, we could be the monkeys. >> we're the monkeys. when we come back, starting this morning mcdonald's is offering breakfast all day. but is an egg mechancmuffin enoo boost the bottom line? shares up 5% in the last week alone. bob dylan. to improve my language skills, i've read all of your lyrics.

you've read all of my lyrics? i can read 800 million pages per second. that's fast. my analysis shows your major themes are that time passes. and love fades. that sounds about right. i have never known love. maybe we should write a song together. i can sing. you can sing? do be bop. be bop do. do be do be do. do do do be do.

we have that story next. plus, the king of clickbait. we'll talk to an entrepreneur that says there's a science to getting a video to go viral and

he can make it work to a company's advantage. stick around. we'll be right back. actions. they speak louder. we like that. not just because we're doers. because we're changing. big things. small things. spur of the moment things. changes you'll notice. wherever you are in the world. sheraton. 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?

mcdonnells rolling out it's much anticipated all daybreak fast nationwide today. the struggling fast food giant

homes the move will help through the sluggish u.s. sales. bob is the senior restaurant analyst. struggling is like a relative term. they still sell a few things. they sell a couple of fries every day, don't they bob? >> they specialize in convenience and value joe. for mcdonald's it hasn't been about taste and. >> wait, speak for yourself. >> listen. i've got your breakfast here. >> what have you got? breakfast burrito, bacon egg and cheese and it comes in at a lofty 4 ounce. for the same price as that i can give you a super sonic burrito or a loaded breakfast sandwich at about the same price at over twice the weight. you're a numbers guy. that's pretty important to a guy like you. >> what do you i want though? will i have twice the gut? >> well, i tell you, i think

becky cares more about flavor and i think she's going to wind up going with one of these other products. >> no. i'm worried about fair, the egg mcmuffin is not a bad product calorie wise. the other products are all over the place, but generally, when america goes to breakfast, they are not counting calories at a fast food restaurant, but going for davis taste. >> you lost the battle if you show up there to begin with? >> listen, they deliver value. there's no doubt about that. that's what mcdonalds does well. they are competing against themselves. this is really a band-aid. this is not a solution. i think, ultimately, it'll help, but it's not going to get them across the goal line, so to speak. >> we've had people come in and it's made sense to me that if

they work on satisfies their franchise of people. if they work on freshness and operating results, you know, the drive through goes quickly, they don't need to reinvent the wheel if they just do everything better and quicker and fresher, then i figure mcdonalds will be fine. will this be net positive in terms of -- i guess they have to ramp up, have all the supplies, have -- however they make these. it's not easy to do it all day long. will they sell enough egg mcmuffins and other breakfast items to pay for all the additional equipment and whatever they need to do to serve it all day long? will it add to revenues and earnings? >> it's a good question, joe. to be fair, i think the company's focused on traffic at this point. i think they are willing to give up some check in order to get bodies coming back in the door. if you continue to have the

traffic declines that mcdonalds had over the last three or four years, you know, you're a marginal player in a very, very competitive industry. >> you know, it's funny. mainstream media does not like fast food. we had a mayor here, everybody had to retrofit the size of the cups regardless if they were sugar drinks or not. we are pc. over in europe, people don't have guilt over mcdonalds. a lot of times they are combined with the cafe, and everybody that people hang out there and have espresso next to mcdonald's. it's different here. we feel -- jim gaffigan, the comedian, was spotted in mcdonalds. he said, i'm here to meet a hooker, not fast food. [ laughter ] that's the perception of the country with mcdonald's. they have to work on that. >> listen. i've never heard that story, joe, but the thing that i would say is the scary thing is if

mcdonald's brings you in to remind you have not come for the last 12 months, that's not a net plus. they bring you back to win you over. same-day service won't do it. >> all right. bob, thank you. >> thanks. >> thanks for laughing and have been fun. appreciate it. >> the stock is up 5% in the last several sessions. >> really? i love the fries. once in a while, you know, relax, relax. san francisco can't have a happy meal because it induces people to come in, oh, my god. >> that is why kyle wants to go, but, hey. look at a photo. yeah, remember this? this was a photo going viral generating 10 million tweets within a week with users across the web debating the dress, blue, white, and there are trillions of pieces of content uploaded to the web each day, but this is a formula to predict the next big thing people will be talking about. emmerson sparks is the founder

of a danger media company behind omg facts and dose. both sites generate content getting more than 1 billion shares a month. thanks for coming in, great to see you. >> thanks for having me. >> how can you figure out click bait? what's the formula? >> well, first, i draw an important distinction between click bait and viral content. click bait means you created something with a headline that enticed people to click, but did not deliver on what the headline promised, thus the word "bait", and that's actually the opposite of -- >> i consider anything that brings me in and click on 33 pages is the idea. >> sure. you're going fishing, hoping to catch a fish. in our business, we win if they are inspired by the content they are proud to share it with their friends and family and

coworkers, so if we write a great headline and people feel let down by the content itself, that creates a negative share response. >> how do you get people? what's the formula? how can you guarantee you can create something that people want to click on? >> well, first, i would also draw an important distinction we can't guarantee rye ralty. there's more we don't know about why people share than we do know. however -- >> what surprises me is the idea we call it a science. to me, it's a gut intuition. what is it, if it's not gut, how do you put science to it? >> we have a approach to the problem, two-thirds are engineers and data scientist, and our approach is that we know that we can't predict with a high degree of confidence which specific articles are viral, but if we get enough at bats and the batting average is high enough, we can systematically engineer

viral content. >> how does that work? people create algorithms that tell you what's likely to go viral? >> yes. we have algorithms to predict which content has the highest probability of going viral with a testing platform optimizing content to increase probability of going viral. >> is that proprietary information, something you can do, come to you for help with it? >> well, we historically, we've done it internally and grown the add yoeudience on dose.com, but future is to work with brands and agencies to achieve some of the similar kind of results that we've been able to achieve. >> i know you started a company at age 12. how old are you now? >> i'm 28. >> wow. >> i'm somebody who clicks on omg facts all the time. congratulations, you lured me in. we want to talk more about it at a time when you're in new york. >> thank you, i'd love to be out. >> thank you. famed private equity

investor barry sternlicht for two hours. ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪ ♪jake reese, "day to feel alive"♪

we heard you got a job as a developer!!!!! its official, i work for ge!! what? wow... yeah! okay... guys, i'll be writing a new language for machines so planes, trains, even hospitals can work better. oh! sorry, i was trying to put it away... got it on the cake. so you're going to work on a train? not on a train...on "trains"!

you're not gonna develop stuff anymore? no i am... do you know what ge is?

kicking off the third quarter with a 300 point surge for the dow to start the week, but can the rally continue? we'll ask private equity player, barry sternlicht, of starwood capital. a hedge fund king maker, dan stern, provided funding for grads who become billionaires. he's on set on a rare television interview. scandal in the fantasy sports world, draft kings and fan duel protect their reputations against insider trading allegations. dave brigs says the industry has

big problems to deal with. he's here to explain as the second hour of "squawk box" begins right now. ♪ live from the beating heart of business, new york city, this is "squawk box." oh, so much fun. >> welcome back to "squawk box" here on cnbc first in business worldwide, i'm joe kernan with becky quick and andrew is off today. is that, like, off the record where he is, or -- >> no. he's actually going to be broadcasting from there. >> oh, yeah. he's at this foo-foo 1%er lefty conference in san francisco? >> sorry i opened my mouth. >> the vanity fair. >> i'm supposed to be there. >> ideas at aspen, you know,

lefties. >> i did this instead so i'm not there. >> lowering the earth's temperature and releasing the waters lower. >> andrew will be on cnbc throughout the day from the conference. >> he will. major perfect, though, had to go, major u.s. averages climb out of correction, u.s. equity futures at this hour are indicated down because i think they close with fair value up 14, and then they are down a little bit today. it was, like, 40 points or so, at this point. guess we're not going to show you that. showed you yesterday, and we'll have more on the markets in a minute. down 43 points, closing up 14, so down 29. that's a shot of pepsi for the heck of it. actually, becky will talk about that. >> out with earnings over the last half hour or so, and companies earnings beat the street, and revenue beat forecast, and company raised full year growth target announcing that it took an accounting change, and it will no longer consolidate the

results for the venezuela operations in the rest of the results. there was a 1.4 billion charge in the quarter to bring down the value of the investments in the country, but they are better results than expected, raising the full year guidance, and as a result, the stock is up 3%. dupont ceo is out replaced temporarily by edward breen. he oversaw the breakup of tyco. she's been the ceo since 2009, dealing with pressure from the fund, and fended off the attempt to get board seats earlier this year, but this time around, the company also announcing, again, that it's cutting the full year earnings forecast after the bell yesterday, and it's cited currency pressure and tough demand environment. china's the bigger picture here, but at the same time announcing she's stepping down from the company. that stock this morning up 5%. also a google company alphabet is in talks to use symphony

services. it's already backed by goldman sachs, bank of america, citi, and jp morgan. a developing story from the carolinas, the flood soaked state now reporting at least -- states now reporting at least 13 weather related deaths. we think south carolina got the worst, obviously, residents forced to evacuate with little notice because of fast rising water. at least eight dams across south carolina have been breached. we'll continue to bring you updates from the region as we get them. monday's rally, the dow, s&p, and nasdaq wiped away september's losses pulling themself the out of correction territory, but which is the best since august? dom chu has a look at that. and, dom, good morning. >> good morning. look at what's happening with the markets overall, we have this comfort, at least the bulls do to this point, about the market out of the phase from being down 10 % from the highs. the s&p 500, there's a big gain yesterday making the year to date losses at 3.5%.

these are the turmoil lows. you can see the s&p 500 actually up by 5% since then. we are slowly getting back. the question is whether this becomes a meaningful consolidation and rally to the upside. look at the sectors overall highlights, maybe energy perhaps is interesting here. it's windmills and solar farms on the one hand, but the energy story, of course, is oil and gas. the stocks up 11% since the turmoil lows. technology, semiconductors, all that sort of thing, up 9%. the retail side of things up 8%. cyclical sectors, more exposed to the ups and downs of the economy, perhaps a bullish sign, maybe short covering, remaining to be seen. health care, however, lacking, up 1 %, and biotechnology is the story. lagging since the tour moil lows. look at the other things people are focusing on. the stocks individually, nike 20 %, activision up 22%, and

newfield up 35%. that was a battleground for energy investors, and then two things to watch. transportation stocks and those biotechnology shares. look at two etfs that track them, okay, ibb is one for the biotech, and dow transports, there is signs of life in biotech, but underperforming. the two sectors and related etfs, guys, are battlegrounds for investors, perhaps providing a sign, joe, what happens in the future if they get steam, maybe we see the rally continue, but if not, who knows what happens, gu guys. >> all right, dom chu. thank you. our guest host is a pe power player that runs $45 billion in assets, sternlicht, ceo and founder, and, barry, when we have welch on, he cites statistics and sales and figures from 40 companies because of

clayton and lately we've had conversations, and i always focused on real estate with you, but that's not necessarily doesn't get enough information that you're available to provide. you got all kinds of stats about how this economy is doing. right? >> i guess so. >> and you also, in the most recent conversation we had, we don't have to talk about it or talk about you making the cut or anything, we're not going to talk about that, even though your pro did better than mine. >> wait, wait, wait. >> i had to do more. okay. anyway, yeah, not on sunday. anyway, how many things look good in the economy? why -- >> let's start with real estate. i think that's interesting. we have a very good seat at the real estate table. majority of what we invest in is property across the globe, and i think thinking about -- first question's, what's going ton in the economy, what's real, what's here, and what's going on?

to start with housing, housing is set out most of the recovery, actually doing well and the chairman of tripoint top ten home builders, new york stock exchange listed expense has steady growth. the housing market problem is jobs. there's not the workers. there's not demands. >> can't find people to hang -- >> 62% participation rate in labor force, right? >> right. >> we're not getting people off of welfare and off of whatever. the disability rate is too high, and people not participating. >> that's because they don't have a reason to get off it because it's pretty flush when you -- >> i won't get that this is abnormal, but it's 62%. we can't find the workers where we need them. >> the ceo of toll brothers said last week, without immigration, his industry would be doomed. >> it would be dead. >> how much do the jobs pay? >> well, actually, we thought we'd get all $26, we may $22. you're competing with social

programs, and it feels like, you know, it feels that way, and housing is pretty good, sales rising, but a sustainable pace with a good view because of tripoint being national. we have rental housing. we have way point, 17,000 houses to merge with colonies, home business, and another 18,000 houses, 130,000 houses, very strong. very -- the rental business, there's 38,000 apartments owned in the funds. they are getting 7% growth. very strong. that looks good. hotels, we own 700 hotels, right, in different parts of the country, oversea, and from the low end to the high end, pretty good numbers. 4-5% revenue growth. some places higher. last week 9%. both rate and occupants are strong. we have million square foot malls, same rental sales growth.

that's okay with inflation at 1.5%. it's not -- i wonder where the consumer is, right, because we have a huge oil dividend, and where did the money go? where did they put it? why is it not helping the economy more? we can talk about theories of what's going on later, but we also have office buildings that are leasing up, and at reasonable rate, and some places very strong growth in rents. so the facts look pretty good. i mean, the united states in particular looks good. england looks pretty good. eastern european countries, pola poland, czech republic look good. it feels like the markets telling you the party's over. there's reasons, there's backdrop for why we have this -- i call people standing in quick sand. it feels really bad, and part of it is that they are growing so pathetically weekly that you wonder what arrows are left in the government's quiver and what can they do to support growth? i do think one of the things -- i listened to jack the other week when he was on, and he did a great job.

what's interesting in the political climate, we don't talk about it, what it's doing. like, you have trump, carson, carly fiorina, these are noncandidates. i mean, they are not normal candidates. >> not conventional. >> not politicians, right, and then there's sanders leading in new hampshire. there's a new layer of uncertain te in the world. what happens if people that we don't think of career politicians actually -- i mean, we're going to have 14 months of uncertainty as trump bounces in the poll, and i think that that, then you throw in the geopolitics, putin, bad actors coming out because obama's leadership is less than desirable probably on the world stage. you are seeing putin do things whether bombing our aided rebels in syria or flexing muscles, i mean, he's having a good time. they are feeling good about their deals. they're going to get $100-$150 billion released. there's a theory that the

iranians are going to put more oil in the market, destabilizing the energy markets again, and maybe they'll bring -- forcing opec to get to the table. you saw saudis lowered prices on sunday, i think 11.70. the cracks, we survived, companies reeling from the low prices, but everyone feels like we have not seen what's around the corner, behind the curtain, and we're nervous. i agree with that. >> feeling or reality? this is a feeling that things are uneven or a reality because we see slows growth in china, think the oil markets are destabilized again. >> as ceo of a company, you absorb uncertainty. when 9/11 happened, you just lead your people. we don't have that spirit of leadership right now in the united states. we are feeling a little flailing. we're feeling, i think, whatever happened in the u.n. last week, i mean, it's not feeling of a

leader. everyonemen menmen menwants a l. trump, a charismatic guy, firing half the people in washington, you know that, and you're fired. >> he knows how to do it. you're fired. >> like this. >> there's something to be said for that. even a leader just changes. you have a focus point, and i think business climate, you know, you talk about the fed later, fisher's on, i mean, it's not it doesn't feel right. also, there's no liquidity, right? >> right. >> yesterday's market was up 300, we love it. goes down 300 -- >> you did well with the numbers, and then i was thinking, can those numbers that -- all the ones you started with, sounded good, can that be absorbed? can there be an average or less than average economy accounting for the numbers because the fed is at zero? is that good enough to get you the numbers? >> i wanted the fed to raise rates two years ago, at least

the year end and not penalize buyers. they need to get it over with. they must do this. >> you're a real estate guy. you're the guy who shouldn't want it. >> you don't need these rates, the economy doesn't need it, and 30 to 50 basis points, if that's a decision -- >> one of the things bernanke mentioned was the housing, you said was not doing well until recently, but now the housing market could take that rise in interest rates and see through it? >> yeah, i do. not 3% on the short end, but 50 points. telling everybody the fed is paying attention. there's wage inflation. when it's there, it's going to be too late. right? we opened a hotel one, 1 central park in new york, opened a new york called jams, farm to table, we couldn't open for lunch. we couldn't find people, waiters, we couldn't open. like, you're kidding me, right? you go next door, offer the guy

a dollar more. >> you had to pay higher? >> right, right. it's amazing. it's an amazing phenomena that you're -- we're 5.1% unemployment, so what are you -- isn't that close to the record lows? >> yep. you know what else is close to record lows? 6 2is close, 62% participation at 5.1%. you're on to something. what do you need to make a year to overcome all you can get from government? >> varies by state. >> you got disability -- >> i've seen like $55,000. >> i've seen $55,000 is what you need. you drive to work, need gas, get dressed, put on a suit. why would you go? >> even get a phone. >> yeah, you get a phone. now, the left, and i've seen media, whatever, but they put these -- they look at these, say it's not true that it's $50,000.

>> by the way, that's another issue for the economy, is this vilification of business which creates jobs that has profits. it just makes people uncomfortable. i mean, i think companies feel whether it's the banking system, just tell us the rules, we can play by them. don't change them and adopt them and reverse them. for small companies, it is a burden, it is hard. you know, i live in connecticut, so -- >> you're not talking about yourself with small companies, but small businesses? >> well, we run into enormous bureaucracy, and i did some work down in washington when they were talking about the holdings for banks on mortgage securities and issueance of debt, and there's seven agencies with, like, what do you do? all do the same thing? why are there seven of you, like, how about one? >> right. >> if you ran it as a company, you would consolidate agencies, bring discipline, and it's like anything. it's like something in the school system. you don't get fired, you don't

feel like you're going to lose your job, there's no productivity. >> the other issue bernanke said, lack of productivity. >> it's interesting and weird. it's disparaging corporate profits, workers get paid is bad, and it's hard to explain, but it is a globalization of the economy. >> right. >> we have to keep our cost structures in tact. so, also, the dollar. the dollar, again, so the currencies we are, so you see it, for real estate, and this is super important, right, it's the flow of funds, where is the min co money coming from? i've never seen as much for an appetite for u.s. property from all over the world -- >> trying to get the assets out of their home countries? >> interesting question. that's, to me, for me, we have an op conference at the end of the month. that's the headline question, right? will they accelerate the pace of investment and really pay anything to get the money out, it's not a real estate play, but a safety play. it's 2% yield, better than the

treasuries. >> we can take a break. >> did they tell you? >> no, they told me ten times, anyway -- >> we'll talk for an hour. >> we'll revisit that. >> we were ignoring because we want to hear more of what you said. >> i was listening to you, and i said, that's why i introduced you like that. people are tweeting, when this guy's on, i pay attention. i -- they do. >> i'm telling you. >> well, thank you. >> barry is with us for the rest of the program, pepsi reports earnings beat earlier this morning. digging through the report with an ammi ianalyst after this. and dan stern joins us in a rare television interview, seat funded 26-year-old bill ackman and bet on barry sternlicht. later, insider trading allegations, dave brigs from nbc sports, are weekly fantasy games rigged? we'll be right back. (vo) what does the world run on?

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it's gotten squarer. over the years. brighter. bigger. it's gotten thinner. even curvier. but what's next? for all binge watchers. movie geeks. sports freaks. x1 from xfinity will change the way you experience tv. welcome back, everybody, pepsi co reports third quarter results a short while ago, and with reaction to the numbers is the seep your analyst for u.s.

beverages, household products, and personal care at jp morgan chase. john, numbers benter than expected, the company raised guidance for the full year. what do you think of it all? >> no, i think it's a reassuring quarter. we heard so much over macroweakness, and i think people were a little concerned things might drop off a little bit, but instead, they came back stronger than anticipated, stripping out some of the fx related pricing from venezuela, which the market is skeptical of, it's a better than expected quarter. >> what do you think just about the long term trends? look, that stock up by 3% this morning on this news, but it's the long term trends that have a lot of skeptics out there, do you worry about those or do companies manage through those things? >> you're talking about the pressure on csds, and, you know, we expect that to continue going forward. >> what's csds, sorry. >> carbonated soft drinks. >> okay. >> consumers are concerned about obesity, that's a problem.

they are concerned about artificial sweeteners so that's a problem with the diet portfolio. you're left with noncarbonated beverag beverages, water, iced tea, et cetera. that's growing, there's offsets. >> there's questions whether to sblit the company up, but what you said, the idea that it's the snacks company and the noncarbonated beverages growing, it makes it seem like it's better to keep them together. >> well, you know, i think the market creates a value argument that says, you know, the frito lay asset is a great asset and you could get more for that on a stand alone basis. the company likes having balance and offset from an operating stand point. you know, things are going well in one. you got flexibility to manage the portfolio, deliver growth on one side, extra profit and cash flow on the other. >> i mean, you even look at yum brands, and that's off 18 years ago, and over that time period, up tenfold or doubling from

pepsi shares. is that an argument too? >> well, not necessarily. i argue that the capital allocation decisions that you made at yum may not have happened if you had kept it as part of pepsico. those are different levels of capital intensity. yum is focused on growth, potentially, and pepsi should be focused on generating higher returns. the blanalances are difficult w portfolios that desperate. >> what think about pepsi versus coke coca? >> coke is getting their act together, under performing in the last couple years, but they are getting the right targets and strategies in place, less expected growth in carbonated soft drinks. pepsi grows faster in the next couple years because there's a preference for pepsi. that's been the case for the last couple years, but the gap narrows as coke got its feet on the ground. >> okay. john, thank you for joining us today. >> thank you. >> programming note for you, by the way, pepsi's cfo, hugh johnson, is joining "squawk on

the street" in the 9:00 hour. that's a great thing about, you know, when you think about that. you know, so should they keep frito? it's a great asset, might do better spinning it off, but it's such a great asset it's nice to have it there to justify set the other business. you have the investment banking moe tiff. sometimes, spin it it off, here's why, and others say buy it back, take the fee there, bring it in. >> fees on either side. which is it? >> is it better -- >> definitive answer. >> it's the best strategy is whatever makes fees. >> exactly. you can argue it, but yum seems to say maybe they should have spun off, right? you can operate it better if you're not -- you know, thinking about -- >> i hear a proposal that shareholder votes should be tied to the length of your holdings in the stock. >> you get more votes as a longer term shareholder? >> you run a public company, it's very hard to survive attacks from activists.

you can take apart a company and increase value short term. >> right. >> right. >> you demolish the long term benefit, and jack welch said being big at ge allowed him to experiment and absorb the experiments, absorb the losses. make them small, you can't create the new apps, experime s experiments, and take the losses. i mean, we are, it is a problem for companies in the united states, the dupont resignation. it's a problem. it's structural. i don't see anything wrong with more votes for longer term holders. i don't think it's a bad idea. >> long term more than two years, five years? >> probably at least a year. >> at least. >> manage gains, right? >> at least. >> you're in the a day trader. >> most of the activists are in it for a year too. >> what? >> most of the activists are in it for a year. >> only if management -- >> if it's a long herb battle. >> right. fending off business works,

sometimes focuses on management, the company's tight at tnl, their only focus, but you can subsidize longer term things you have to do that you know are good returns on inestment. >> all right. back to you in about ten minutes, hopefully. coming up, jay leno comes to cnbc taking us inside his enormous garage. his new show premiers tomorrow. but we're going to give you a sneak peek right after the break. 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?

welcome back to "squawk box" on cnbc, first in business road wide. we have the stories following this, sky works solutions buys pmcsierra for 10.50 a share. a 2% prep yum to the closing price as of yesterday. shares of container store under pressure, revenues short although comp store sales were better than expected, and health

technology firm alumina hit hard. the company expecting lower than expected revenue for the third and fourth quarter, and it's down 17%. bad day if you own that stock and you wake up and go, i'm going to check. >> yikes. >> jay leno is known for the expansionive car collection. the new show brings viewers inside his huge garage. he covers classic cars, super cars, restoration projects, road tests, and in this sneak peek, self-driving cars. >> well, the term is misleading. there's no such thing as a self-driving car because that's not legal. it's driver assist. when i was a kid, cars barely had power brakes. there's power brakes, an assist. people don't like self-driving cars, but they don't mind self-driving airplanes. you think the pilot is driving? he watches dials and monitors and participates in the landing

and everything else, but for the -- i'm not denigrating pilots, but mostly, airplanes are self-flying. that's where i think the next generation of cars will be. they'll never be -- the idea of you jumping in the backseat with a bottle of scotch driving you bar to bar, that's not really going to happen, you know, but that's what people think, partying in the back of the car driving you around. no, forget that. >> ruined all your hopes and dreams. >> yeah, "jay leno's garage" premiers tomorrow night at 10:00 p.m. eastern on cnbc. >> new show? >> yes, a new show roll out. >> on cnbc? >> yes. >> you can see -- you remember chevy chase doing a talk show? >> yeah. >> do you remember wanting to, like, crawl out of your skin to go somewhere? only lasted a month. there's guys like leno that for how long, you just watch and never feel uncomfortable. did you want to listen to him. >> yeah. >> you know what i'm saying?

>> i know what you're saying. >> am i right or am i right? >> the gift of gab which a lot people around here have. we'll meet a hedge fund key maker, dan stern, and he is joining us next to talk about top fund managers and where the reservoir capital puts more than $7 billion to work. right now, heading to a break, though, look at the u.s. equity workers after a gain of 300 points yesterday, the dow giving that back this morning. down 49 points below fair value. we'll be right back.

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♪ welcome back, everybody, our next guest is behind the biggest names in the world of business, especially hedge funds. seed funded billionaires dan, and persing square's bill right out of business school. he also has a hand in helping

barry stooern little bit launch starwood capital. joining us now is dan stern, founder and co-ceo of the 7.4 million asset management firm, asset capital. we'll talk about markets in a moment, but before that, we have sad news that happened recently. we mentioned it here on the show. legendary investor richard greenwater passed away last week, a mentor to both you gentleman and many others including president george w. bush, and, dan, tell us about what richard meant to you and how he influenced you. >> first, i want to thank you for the show you did years ago while he was ill, meaning so much to him. while he was getting sick, he watched it over and over again, and it was generous for that tribute. >> barry pulled that together. >> that was a great show. >> it was the favorite thing we've done here. >> it was really fun and it meant a lot to him. this was a lion in the investment business and person. he mentored so many people, so

many letters from people i never heard of from all over the world that told me a story, you know, that, dan, i'm sorry about the passing. i sent richard letter randomly, invited me down, and i had one conversation and made a few phone calls and changed my life. you heard that story over and over and over again. he gave his entire fortune effectively to charity for inner city children and helping underserv underserved youth. a legend in the investment business, mentored many people, and a legislate long term leaving just an incredible legacy. he -- they formed -- he and his sons -- formed research consortium to go after research that causing al timer, and there's an impact in the world for years to come, beloved by so many many. >> barry, an influence on you too? >> you're right, met him once, and he changed your life, so

positive and optimistic. i made $12 on my first deal, and he called, you're rich, rich, rich! calm down, richard. but he made you felt like you could do anything, and that, you know, he celebrated the country and the system that we live in. he really was, let's find something smart to do, always something to do. funny thing was he made more money retiring than he did working. >> yeah. >> we started the show on macro. the macro's never been so important in investing than it is today. the view on rates in five years is the most important decision to make in property markets today. richard was a legend at that. his big bets, oil, gas, he got long, oil, like, 150 bucks a barrel, like the tail wind trade, and oil shot through, and he made a lot of money. >> yeah. i mean, he was long at the very bottom when everyone hated it. he was the real deal. >> contrary. >> the real deal. >> you were, like, roommates or something?

>> oh, god, no, but working at the same time, right? >> no, no, we were, like, a bunch of young rats. >> did you work for richard's company? >> no. i actually was going to work for him, but he said he would not pay me anything, just interest in deals, and i was not positioned to work on that generous offer. i probably should have. i really -- he's an attractive man because he made you think. >> yeah. >> i tell people the smartest people are the people who say they don't know, but they'll find out and do the work. richard was like that. he was, like, i don't know anything, let's figure it out! he sent us off to do. >> dan, you're following in the footsteps, how did you know ackman was smart? he he already done alexanders when you seated him? >> no. i got a call from people saying, meet these two kids six months out of business school. they want a fund. oh, they came from money management? no, they never envested in their life. i said, why would i do that? very smart people called me, and

i had breakfast with them in a diner in the upper east side. this is david and when he started, six months out of business school, and i met him, begrudgingly because friends pushed me, and i basically backed him on the spot. which i've never done before or since because this guy is incredible. >> his track record. he seated me. we met in the beach in a hamptons. you drove up in an orange porsche, and i'm in a house with eight guys. don, john, and this incredible house, but he came by, that left an impression. i could barely get a scooter. he shows up in tommy taylor's car. >> yes. >> when you seated -- so -- how -- what's your take? how do you stay involved with the good fortune of the people you seed? do you own portions? >> some of them i do.

you know, i've stayed friends with most of the people for 20-25 years. i had dinner last year with mike who i started with in '94. a good bill story, he calls me four times a year, 20 years later, put it on the calendar, and calls me four times a year, dan, i -- you were there when in one else was, and i told myself i'd never forget, and he calls four times a year and we go to lunch. he's a softy. these are legends now. >> that's a notable quotable, bill ackman a softy. >> that's true. >> deep down. >> ceos would not agree. >> he might be a few layers deep. >> so i stay in touch, involved in the business as long as they want me to, but, you know, now i work for him basically. >> knock it off. >> but, honestly, he's seated anchorage, another great fund in the united states, an amazing ability to find talent. dan was a people backer, you know, and i was afraid, really, to go when i left my prior job,

and i was backed by the burdens of the vanderbilts, and dan was running the vanderbilt's money, and i think it's -- interesting, in business in general, in today, in venture, you back the guy, right, his stay withness, he'll be down, kicked, lose money, will he stay with it, will he have conviction and correct hiser errors? that's underestimated in every investment, who is the guy? >> that's what i picked up. e d he made you believe in yourself more than you ever thought you could. he picked you up. as a seater, bumps in the road, i believe in them more than they believe in themselves. >> he turned himself into a mini richard, basically. >> right. >> and danny, myself, michael, bill, we all passed through the office the way i passed through richard's office and you did and all the people you mentioned,

but we knew ed since he was 24. >> yeah. >> and richard the same, i introduced -- ed visited me in n nantucket years ago, met ed, an on the spot, i can see it, he zoomed in, said, this guy, you know, tracking this guy, and six months later. >> can guys coming out of business school now, are there people like sternlicht and like you? i'm not sure capitalism is a good way to do thing, and i'm sure free trade is a horrible thing. these are the kinds of ideas put forth in the current environment. >> that's a loaded question. >> there will be the opportunity to do this over the next 40 years for people or -- >> yeah. >> we're not past the point of turning to europe social funding land? >> business has changed, orv obviously, but there's 10,000 hedge funds. returns have not been stellar, exactly, and i don't think the answer to, you know, mediocre

returns is more hedge funds. you're swimming upstream to start with, and base of regulation, i think the prime brokers find it unprofitable to deal with small hedge funds more and more and they are tougher and tougher. there's reasons why small guys swim upstream. it's harder, but the best guys can still start. we seated eight incredible people. >> what's the ratio? >> i think it's about -- 70% that make it, and about, you know, 25% to 33% are very successful. as a venture capital aspect, you need two to four winners. >> it's hard to start a hedge fund, money is swimming to the big guys and continues to consolidate. that's in the property sector. >> look, i think people felt there was going to be a historic once in a generation migration of talent to the street to the buy side, and it never happened, so that did now materialize because it's just hard to start

up. there's few big successes that you think and lunches from what was thought the destruction of the soft desk. >> one of the things that bothers me about the markets, and taking your thoughts on it is the program trading, all of these -- every time i read about it here, another program trade that's, you know that buys and sells the dips and creates a massive volatility with liquidity in the markets how much does that affect it? >> it's a rough year. it's hard. you know, when you sell, like, we have a mortgage read, it earns commercial mortgages in etfs, think it hurts residenti l residential, they dump all the stocks that benefit from rising rates. we actually -- the loans are based, so the cash flows are up with rates rising. it's dumped by etf. we know what's going on. you know, it affects our ability to raise capital and grow and -- >> how much do you think that's

playing into the hedge fund complex today? >> that's causing the bigger guys, generally, generalizations, to out perform. look at credit to pick a sub sector of hedge funds -- >> helping them out perform? >> out perform. large scale credit thought it would hurt the guys because of the big portfolios, but there's more liquidity, and the street wins with them because they dwindle down. the bigger hedge funds in credit outperform the smaller guys, opposite what people expected. >> wow. dan, thank you, a pleasure to talk to you and looking forward to having you back soon. >> my pleasure. >> barry with us the rest of the show. when we return, more of this morning's big movers, stocks to watch after this.

one stock to watch, sony, splitting business into another company, the unites products used in iphone and other product, and it's been one of the best performers in recent years, stock barely changed. when we come back this morning, the fantasy sports industry in crisis over allegations of insider trading. we have the details next. and then, former dallas fed president richard fisher is here

with a take on the weak job numbers, fed's timeline for rate hikes, and more. stick around. we'll be right back. care of my heart.

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a skap this morning in the multibillion dollar and regulated world of fantasy sports, there's allegations of insider trading suggesting employees placed be ed bets usi investigate not available to the public. and the new york times says an employee admitted to releasing

data before the third week of the nfl game, and the wokker won $350,000 at a rival site, fan duel, the same week, in a statement yesterday, draft kings says it's conducted a thorough ingags saying, in part, there's no evidence that any information was used to create unfair advantage and any insinuations to the contrary are factually incorrect. draft kings and fan duel barred players from playing at any other site and they were prohibited already on their own sites, and comcast ventures and nbc sports have stakes in fan duel, and i don't know how to play because i -- >> that was very confusing. >> thought you had to know the injury status? has to do with knowing who every's betting on? >> well, i don't know. who everybody picks? >> the information in the story is what i read this morning seemed like what they cited is who is the best bet on player, an ideas on odds and i don't

understand the odds in the scenario, but i don't think it's the list of who is injured or not because i don't know why they haves information earlier. if you could see the book, essentially the market maker, and you see where people are betting on either side of this, if you are an employee with access to that information, you can see where that gives you the unfair advantage. >> i guess, yeah. >> i mean -- >> yeah, i never -- >> i never followed -- can you name ten players on the chiefs? >> no. >> i couldn't either. >> i would not be good at -- i mean, i follow. >> the jets, not the chiefs. >> can you name ten on the jets? >> i've been following the jets since i was 6 years old. >> i could name ten on the big red machine, but that would be 1975. >> that's not that relevant. >> like me, i'm not that relevant. >> i'm not relevant. >> the question and concerns this brings up is whether or not this is an industry that receives more regulation because there's people around the peripheral asking for that at

this point. >> so many other things that should be regulated. or not regulated. >> like, to -- >> another new federal agency. >> you're an expert on gambling and casinos? >> own caesar's. >> and owned golf courses? >> in the past, yeah. >> out in arizona. >> yeah. >> well, some other courses, and that's app interesting business, not good today, but it's interesting what happened post crisis, right? people have not come back to play golf. >> yeah. >> i just got an e-mail from leon at mammoth mountain, so right, we need 3,000 workers, and there's no seasonal employees. i can't find 3,000 people. we have to raise their rates, and it's the worst he's seen it. >> wow. >> it's amazing. >> barry is with us the rest of the morning with more to get to with him. when we come back after the break, berne berne said yesterday that the fed is going to have to make a tough call in terms of his plan to normalize

interest rates. we have former dallas fed president, richard fisher, joining us to talk about this, calling for the fed to make tough calls and raise rights now. his take on the weak september jobs numbers and more. we'll ba right back.

no hurry to hike, continuing the policy heavy lifting in the last few years, we have to see more action from other policymakers. >> former fed chairman, ben bernanke sharing views exclusively on "squawk box," and fan who shared the dallas fed, richard fisher. >> a security cyber darling worth more than a billion dollars, illumio protects apps with titans on wall street. they talk about the stealth mode funding and unicorn status. >> a scandal rocks the world of fantasy sports. a draft king employee accused of insider trading, growing doubts of transparency and legality in

question. we have an inside look straight ahead. the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box." >> a lot of sacred cows in the world. welcome back to "squawk box" here, i'm joe kernan and becky quick, and andrew, andrew is on assignment. we're about 90 minutes from the opening bell on wall street, and futures are indicated down about 27 points. i know. i love andrew. i'm kidding. i was kidding who he is. he's at the big liberal love fest at vanity fair. y yes. >> actually, i bet he's up. >> yeah, he's definitely up,

tweeting and stuff like that. check out the markets at this hour. googling and tweeting. googling and tweeting. >> he's focused. >> yeah, yeah, i am. markets up responding to that nice move we saw yesterday, so weird, suddenly on friday, people like easy money again, and we got a continuation of that yesterday, even if the economy never does really recover. we're going to go up in terms of asset prices. >> that is good. >> tongue in cheek. >> that is good. >> that is good again. for a while, it was not, now it is. >> a brief moment in time. back to the other stories investors talk about today, dupont ceo is out after dealing with pressure after investment pressure. she's replaced by board member edward breen, and they cut their earnings forecast yesterday saying currency pressure and

tough demand environment with commodities. the new volkswagen ceo says changes at the auto maker will not be painless. it's the first sign job cuts could come as a result of the scandal. on the economic front, the trade data expected, and the gap expected to decline $48 million because of a rise on exports. >> pepsi beat by 9 cents, and revenue also beat street forecasts. they have an amazing board of directors, forecasting the company raising growth targets for the year, richard fisher is here, on the board, and we have -- you -- i like the cut. you make a striking -- you're like the silver fox. >> oh, my god. >> how about your son? he makes tom cruise -- >> finishing a new movie. >> miles did? >> about the sharon tape

murders. only four actors in the line. >> your son? >> miles. >> you've never seen miles do the tom cruise intimidation? >> you have a picture of him in your wallet. >> greatest thing ever, anyway, we digress, again, movie studio linon's gate and movie cable channel starz in merger talks. the paper says the talks have been going on for several months, no assurance of a deal it's struck now. now. >> thank you. >> yesterday morning, we had former fed chairman ben bernnanke on the show, and this is what he said about the hesitancy to raise rates. >> it's not evident to me that policy's too easy because, again, because inflation's very low, and, you know, we just are now approaching a full employment level of output, so it's a tough call, but, you know, again, the folks who are arguing a few years ago that the fed was, you know, creating this

radically expansionary policy, you know, predicted high inflation. we have not seen it. that's an indication that policy is, if not radically easy anyway, and we'll see, and, again, we'll see the fed is looking to normalize overtime, and they are going to make tough calls how to do that. >> joining us now to react to the comments and fed's message to the markets is richard fisher, former federal reserve bank of dallas president, a cnbc cricketer, and our guest is barry sternlicht. great to have you here, thanks for coming. >> thank you, becky, great to see you barry, and joe even. >> oh, thank you. >> bernanke would not weigh in on what he would have done because he doesn't want to second guess janet yellen, but laid out the argument for why the fed did not raise rates. what do you think about it at this point? what do you think about what happened, especially given friday's job number? >> well, first of all, i think the former chairman was correct.

it's a tough call. i think, personally, there's remorse about the september decision. >> not to? >> the way the markets react and, of course, the last five days are good in terms of stocks, and we saw the overnight treasuries, the short term bill trading at 0 and negative rates, so -- >> first time ever, right? >> first time i remember in my lifetime which is 35 years. [ laughter ] so, you know, no former chair wants to interview with the business of the new chair, which is what you saw yesterday. he's a gentleman. he was being kaurcautious. janet yellen will determine his fate in history. this is not over. we don't know it worked. it's worked temporarily, but ben made the point yesterday, which i make and joe makes all the time, until there's fiscal and regulatory policy that allows this expansion monetary policy to do its job, you don't have an

outcome. >> you made a great point in that yellen is determines his legacy in deciding that. i was surprised he left before starting the process of raising rates, but for two reasons, not only to control the legacy, but also to start the task and really take on the hard work. >> yeah. look at all the hard work done under his fomc. i was there the entire time, taking a heck a lot uft chair and everybody, but the issue is we'll see if it was and once so-called normalization begins and liftoff begins and the proce process continues. everyone's else followed the united states' lead. he deserves enormous credit, but the long term outcome tells us -- it's a four act play. we don't know if it's a comedy or tragedy. we'll see. >> feels like it. the central banks make up for inept fiscal policy across the globe. >> europe never restructured and

printed money. it's not a long term cure, but it's working, so they followed what we did. we structurally are better than -- >> we don't have the problems -- >> better than europe, but they followed the same policy. look at japan. it ain't working there. >> draghi has to deal with a lot of governments. >> the way we do things in the country, there's some innovation and earned success and entrepreneurial spirit. europe, i don't think you can. >> this is america, the best in the system. >> we'll see. >> there's a point -- that's the glue -- >> we are 62% right now. you have to make more than 50 grand to come back into the work force. there's a lot of work to do to reverse what's happening. >> congress is at fault. not the central bank. >> and the executive branch. >> i'm talking about government, the government. not just the president and a weak congress, republican and democrats can't get anything done, and also set regulatory

policy that's counter productive. >> by getting things done, they raise taxes, do infrastructure, and others want to cut taxes and do regulation. there's different ways. one thing the chairman made issue with yesterday, which i knew he would, was that wall street journal, the editor put in that headline, how the fed saved the world or saved the economy. >> that's the old time magazine cover. >> right. >> because ben knows what einnig it is for his legacy. second, third, he knows it's early. we don't know how it's going to play out. i mean, greenspan's legacy in 2002 or 2003 looked different in 2009. >> longest baseball game in history was 26 innings and ended in a tie. [ laughter ] >> okay? where are we? >> what do you think? >> this is a long term play. i don't like innings. when i joined the fed, i made a comment rear in the sixth inning. remember that? >> that's right. >> never doing that again. it's the longest baseball game in history, and it ends in a tie. >> one thing the chairman said,

i want your thoughts on. inflation's low, but it's actually -- it's fake low. >> right. >> you have a collapsing commodity complex, oil crashed, but the rest -- >> it's supply driven, and just to put it, we feel very strongly, not because it comes out, but the trim pc is the best calculati calculation, oning at 1 preponderate 6% and has on an annualized basis month as month after month. take the cpi, which some people actually live by, because they have to pay rent and so on, it's running four tenths higher than the pce. it's between one and two, and because it's a two, you don't start the process because this is a huge tanker going through the sea, slowing down, way up before you dock. so the world is a wash in liquidity because the central government's printed money across the globe. >> right. >> how much does that enfluns the short end of the curve? how much down that influences the long end of the curve? too much money so they'll have, you know, buying treasuries in

government? there's so much money out there. has to go somewhere, not just all in the stock market. >> that's right. we're floetd iating in liquidit. the temperature year dipped below 2%, but it's been bopping around 2 for time and memorial now. >> we invest in property, we get confused, thinking 2% looks like a ridiculously low long ten year, but italy and france, it's 1.6. >> and that's amazing because of the euro, because it's an enormous recovery. austerity. >> i like italy. >> i like italy. >> richard? >> yes, ma'am. >> looking at the feds not raising rates, lousy job report on friday -- >> don't get thrown off on it. look at the unemployment claims, going down, the data is strong, we are in a channel -- here's a number to focus your mind on. if we just create 100,000 jobs a month, we'll stay at 5.1%

unemployment. we're stuck on this 200,000-plus number. you can't continue that forever. we're doing pretty well, and, as you know, i feel corporate balance sheets are in strong shape, small businesses are feeling better, banks are beginning to lend to them, and the survey data, the ism, manufacturing index, barely above 50, an infusion index, but it's above 50. we're not in bad shape. we're not. in fact, we are, north america, including mexico, by the way, and the united states, because of nafta. >> because of donald trump. >> i'm not building a wall between us, but i think news, weather, and sports america is the epicenter of global economic road with 500 million people, that's not insignificant. we're in the lead again, and we went through the period where europe was superior, kennedy, yale, japan number one, and china, china, china. the u.s. is number one. we're in an advanced position

that brings capital in, why our rates are low. >> free trade works. right? capitalism works. free trade works. >> it still work, and, by the way, the toughest part of negotiating trade agreements, because i did it for tour years, is negotiating with congress, not china or japan or anyone else. >> your warning is beware? >> well, thaim play around. there's protections in the industries, certain industries that are not happy here, insurance industries are always something. used to be the motion pictures association, that's no longer an issue, but the tobacco companies, but, of course it's a good thing, lowering costs to consumers worldwide. it's a tax cut. i admire this administration. they always -- every administration waiting in the the end, but they push freer trade. >> what happens in the election cycle where you -- >> this has always been the case. the only president leading with a chin on this is bill clinton. he campaigned in the democratic

party pro-nafta. >> we'll see whether his wife -- >> i'm not commenting on that. >> okay. stuck in the muck, someone that i respect points out worldwide debt to gdp is 286%, all-time high, 57 trillion more than 2007. >> why. >> why do we need more government spending? >> we need to have better run government so that we reduce -- >> not saying create more? >> no. run responsible government. >> be clear. people think congress not doing anything means they are not spending money. >> no, that's not what i'm saying. run it so it incentivizes people to use money to create jobs and improve the living status. >> that sounds like the private sector, not the government. >> that's 100% right. >> which is rare. >> i rested my case. >> stop badgering the witness. >> thank you. thank you, you have to be here, a cnbc contributor. >> oh, stop. >> you think the fed throws

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welcome back, everyone, watching the future, and there's give back this morning after gains, but that's deadly declines, the losses. dow down by 30 points after gaining 300 points yesterday. the s&p futures down 7 after gaining more than 30 yesterday, and the nasdaq opening down by 20 points. cutting the size of the board of directors to nine members from 16. wow. it's also exploring strategic alternatives for oil and gas business following discussions with major shareholders including carl icahn, the largest shareholder back in august. >> days of torrential rainfall in south carolina causes dangerous flooding prompting mandatory evacuations in the areas of the state, and this morning, fears this disaster is not over.

dams, more, apparently in danger of breaking, possibly, and more flash flooding. dave wagner is in columbia, south carolina. hope not, dave. >> reporter: yeah, it is still very much a mess here, joe. good morning to you. the water continues to rise, not recede, unfortunately. it's been a dangerous few days, 11 people dead in south carolina, two in north carolina, and residents have been forced to flee at a moment's notice. part of the problem are these dam breaches that have taken place, 18 dams breached statewide, nine in the midlands, that's the columbia area, and they have done some of these controlled breaches to relieve some of the pressure on the dams, but the problem continues, and there's a fear that more of these dams breach today. we should point out here that there is no clean water for about 40,000 homes and

businesses. that's a problem for businesses like this pizza place behind me. it's a problem for the starbucks and the hair salon in front of me, so they can't open today because they do not have clean water. also, classes have been cancelled for all the students in the area including 30,000 students at the university of south carolina. they are not going to classes today. part of the problem is it's just too difficult to get on the roads here. one bit of good news? the sun is timely coming out for the first time in about a week. certainly, it's shining a bright light on what's otherwise. a dark and very difficult week around here. becky? >> hey, dave, one of the questions to get things like water back for the 40,000 homes, that's going to take time. not something you can imagine in the next day or two. are there any sort of calendar timelines for how long something like that takes?

>> reporter: no. well, water has been coming and going, sometimes cut off, and sometimes it's on, but there's no clear indication when that water will come back. the hotel where we're staying, we have water, but it comes out brown, so it's not exactly clean. >> all right. dave, thank you very much. this is, obviously, a situation we need to continue to monitor, and we thank you for all your reporting from there. when we come back this morning, a scandal erupted in the world of fantasy sports raising questions about who has access to valuable data. plus, tomorrow on "squawk," jay leno is here for the premier of his new show that takes viewers inside his garage. here's a sneak peek as jay visits with tim allen. >> right now, we're going to go see a muscle car buddy of mine, another guy growing up in the middle of the muscle car era, the ultimate muscle car guy growing up in detroit. let's go check out his stuff.

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welcome back, everybody, a scandal this morning in the multibillion dollar unregulated world of fantasy sports. allegations of insider trading suggesting that employees were placing bets using information that was not available to the general public. new york times reports that an employee at draft kings last week admitted to inadvertently releasing data weeks before the nfl games. he won 350,000 at rival site fan duel that same week. in a statement released

yesterday, draft kings said it conducted a thorough investigation, and it says in part, there is no evidence that any information was used to create an unfair advantage and any insinuations on the contrary is factually incorrect. they have barred employees from playing games on other sites as well. employees were already prohibiting from playing on their own sites. again, this is something we've been talking about all morning, just trying to figure out how it work, and the information, apparently, that some of the employees may have at some point would include access to figuring out which players were being the most bet on. theory you can't win to bet on the most -- can't win a lot, can't pick the favorites. >> it's weird. great. with -- just because you picked 40-1 -- >> you're able to see that on the horse races versus this is information that's proprietary. >> i want to pick the -- not

40-1. >> you don't buy lottery tickets either. >> i want to know if they are hurt. >> but that's not the information. we have economic data on trade, and steven wood of russell investments expects a increase in november, and how assets are for a possible move. right now, headed to break, look at the u.s. equity futures, weaker today, but not a lot. dow futures down 25, s&p down 7.

welcome back, everybody, right now, time for international trade. let's get to rick santelli. >> the august trade balance bet it's going to be a deficit hitting the wires at 48.3. darn close to expectations. definitely a bit larger than our last look sequentially which was slightly revised to 41 preponderate 8, of course, minus numbers on both, but how does it stack up? well, it actually is the second highest deficit of the year for the second biggest negative of the deficit of the year, and the king, of course, was march at 52 and change which was the widest deficit since october of 2008. what was the best?

it was february at 38 and change, and so, you know, this number is as expected. it doesn't mean it's good just because it matched expectations, but it is below 50, we're at 204 on the ten year, and, of course, i love listening to the great guests we have today, structure better off than the crisis. time may heal all wounds. back to you. >> thanks, rick. talking markets now, everybody waits for this every month, it's been a long time, around there? joining us with stephen woods with us, and these guys have no life. these producers, chief market strategist at russell investment, and stephen is expecting a rate hike in december, saying expect the markets remain choppy the rest of the year. wow, out on a limb. out on a limb.

wow. what happened in september when there was no increase, the markets sold off, and friday, with the bad number, we're up five straight days, first time in 2015 up five straight days. >> what happened in. >> there's a couple narratives which i don't know that i necessarily buy. you know, the chinese narrative is driving markets, the chinese markets slowing down, and it's been choppy. we've been asking ourselves for ten years now what will the market reaction be when the fed decides to raise rates, and we've been pricing that in for a large number of weeks now. what surprised me about chair yell yellen's conference was how she referred to the additions and dollar. to have a sitting chair of the chair refer directly to the u.s. dollar is certainly not historically -- >> the mandate unless you say

that the dollar influences inflati inflation, therefore, part of the inflation mandate. but that's too many, don't you think? >> yeah. >> i'd have just, you know, the employment -- >> employment. i mean, i can see if you do the back door effects of the dollar on inflation, you know, and we look at oil, look, and it's a low inflationary environment. in the broader picture is, september, you know, december, could be how many angels are dancing on the head of pin in the next five to ten years burks they want to move in 2015. i think, because going into next year, and there's not a recession, but there are chops globely, the fed was a full suite of tools at their disposal. >> raise them to lower them again. >> even if they go to 50 basis points, go to 50 to 41 or 49, and they could signal, fed funds with trillions sitting -- >> one and done? >> i think it's one and then they become data dependent. they could get a two for one if they go in december, 25-50 basis

the range, and next one could be 50. it's a freebie, two for the price of one with the same number, but i think the most important is that glacial path after they -- then they are data dependent after they got that -- >> what do you think the rates will do? >> i think the shorter end of the curve is going to, obviously, respond quick lookout it. i think the longer end of the curve, belly of the curve, might not. there's a lot of international forces. you got the bund trading below 60 basis point, and you got -- there's really a date of birth of high quality paper out there, so i think that there is a flattening. it's -- it's a flat yield curve, but flattening. when we were younger, interest rates went from 0-20, now 0-6 on the scale of the y axis, coming county. >> the most important decision is where interest rates are five years from now, but never said where you think they'll be. >> it stays flat. they raise the short end. there's not enough global growth

to have the curve, but flattens the 30 year, the 10 year, the five year. >> i was talking about global property markets because as you exit what you think you sell the property for now is critical. yields are low that small movements like five to six or three to four can wipe out your equity if you're 75% leverage of the that's the math of it. it's exponential this low. think of the inverse. it's multiples. you're selling at 25 times cash flow or you bout at 33 times cash, a 3% yield, and you sell at 20 times cash flow? no lever the bet can withstand that. so investing today, buying patients, working on multibillion dollar transactionsings right, you're vetting a 5% yield, a 6? that will be partly reflection of interest rates. one thing i think i'd ask you, do you think this -- what do you think the markets will be to the

raise, inevitably happens, right? one day they will, asigh. >> right now, the market's been chop choppy. >> because rates are not going up? >> and the region they did not raise -- >> it's not scattered plots but sc scattered logic from the fed. >> confused, stay at 0 all the time. the only thing i figure out is what -- are there already conjured up negative effects seven years of no -- >> anywhere where there is some reckoning to be done? any inflated areas caused by 0? >> sure. >> did the fed -- >> all asset prices are too high. >> okay. they say there's no inflation, but there's asset inflation. did the fed inflate the bubble that almost cost us, you know, the economy in 2008? is there another bubble inflated now? >> that was a different problem. >> different issues. >> inflate it last time? >> that was the point.

>> did they or didn't they? >> i think they did. >> really? >> they did what monetary policy's designed to do, and in asset prices, you know -- >> well, stabilization. >> rates were 5% in 2007, short rates, right? >> by bringing them down. post crisis. >> they didn't have a choice. >> they didn't have a choice. >> the right move. >> you also got a sympathetic european central bank, federal reserve, and they -- >> push capital where it shouldn't be, and it's not going to work. maybe that's what we see, it's not -- there may not be a burst, but we're not getting the growth that -- it's not deployed. >> we talk about rates like it's the end all and be all. richard fisher was here in your seat, and when you see innovation -- >> i'm a fan of him. >> i think he's in richard fisher's seat. >> yeah. correct. >> sorry. >> no we're going to have this credit where credit is due. >> when you see the innovation in the united states, and the

energy of the new companies, and it totally fires you up about the country and about our future, and everything else is noise. this is building global world class businesses because the system works and capital flows to these entrepreneur, and then people take risk capital. that's the heart of the american economy. it's good. >> it's really good. >> 25 points, stop talking about it, but don't raise -- you got to raise rates now. >> i think northermalizing the process. equities go to the mid-single digits, in line with nominal gdp earnings. that makes sense, not by the end of the year, necessarily, but looking forward, equities come into, you know, the rate of gdp, a dividend kicker, so there's the recovery. i think the fed has done a pretty good job of stabilizing, and now it's the tough yards ahead. >> if we stay the course, let's just stha hillary clinton is elected, something like that, and we -- let's just say it happens. you painted a really good picture of what makes america

and what makes it great. who knows what she'll do. she's getting pulled left by bernie sanders or whatever, but if we have a continuation of seven years with regulation and everything else, would you be as optimistic? are you banking on the private sector coming back into -- >> i want the white house not to vilify business and not play to the socialism -- it's not every worked on the global stage. we have to get out of this rut we're in. it's just accountability, personal responsibility, taking risk, putting capital, working hard. that's what made the country. we always had rich people and the vanderbilts and rockefellers. in my youth, we thought they were great. right? we want to be them. that drove our country, right? don't vilify them. >> i'm going to quote bono. he said, when he grew up in ireland, the big guy on the hill, he said, i want to kill that guy, hence the united states, i want to be that guy. that's the difference.

>> that's the message that is lost. >> we're losing it. >> it's education. you have to get educated and find a job. you have to have it skills. the message has to fit together. >> yeah. >> i think it's uncertainty too. the tax policy, regulatory policies, fed policy is ranked uncertainty. >> the government can't fix this. it has to be leadership. >> with hillary clinton, i wish the camera was on you for your expression for that. >> no. >> that was a agnostic expression. >> it was? interesting. >> no record of it. >> yeah, there's not. the directors missed that. >> look, the debate is -- there's a government that can't have unemployment benefits -- can't sustain, you can take every penny i have and every wealthy guy, and it wouldn't work. >> you run out of opm. okay. all right. >> and other people's money. right? >> yes. >> stephen, thank you. >> thank you. corporations brace for cyber warfa

warfare, joined by the ceo of illumio protecting your data. we are ready to kick off a new show on cnbc, "jay leno's gar e garage" premiers tomorrow night, but catch him here tomorrow morning at 7:20 eastern time. we'll be right back.

actions. they speak louder. we like that. not just because we're doers. because we're changing.

big things. small things. spur of the moment things. changes you'll notice. wherever you are in the world. sheraton. welcome back to "squawk

box," and general mills issued a recall and apology for an -- okay. an allergic reaction. that's a company. i was wondering how that was related to general mills. it's not. i see allergen and think bow tox. some were label as gluten free, but some contain wheat. that's interesting. it's not -- >> it was an accident on some batches. >> it's not that there's anything toxic -- >> well, to some people. this is a new launch for them, raising issues about the brand because it comes at a bad time. >> okay. >> but it was accidently introduced into the gluten free oak flour products. they were waiting for the flour to come in, and this stuff got

put into it. >> okay. a concern for every company in america, talking cyber computer, but a new firm, illumio, is refining how data centers are secured and it has serious backing raising $142 million in two years. among the investors are salesforce.com ceo mark beniof and ben, and joining us right now to talk about how to protect your company from cyber threats is illumio founder and ceo andrew reuben. thank you for coming in today. >> thank you so much for having me. i'm excited to be here. >> what's the difference between yours and other cyber security forces? you try to protect the entire company and no one hacks in, but you're different. >> sure. traditionally people protect the perimet perimeter, build a brick wall and a lock on the door.

illumio discovers vulnerabili vulnerabiliti vulnerabilities. we are looking inside the data center at everything, how it behaves, what it's doing, and how the things talk to one another. with that knowledge, with that picture, we're actually putting a protective shield around the assets, like putting a body guard in everything in the data center, and as it moves and changes, the body guard adjusts accordingly. >> do you work in cop junction with the company building the brick wall or is this instead of? >> alongside it. it's not instead of. the brick wall has value. we want bad things out if possible, but as we all learned, that wall can be penetrated. >> it was described as a hotel, traditional strategy is locking the front door, they do that and lock every room in the hotel, right? you -- sony's issues couldn't have or wouldn't have been -- would have been a lot more difficult. it's a software package. >> it is. one of the interesting things we see time and time again, even

the scott trade breach is that most of the time the companies are not aware of problems for weeks or months. in that case, it may have been over a year because they can't see what's happening inside, and they certainly can't protect it if they don't understand how the things are behaving. >> i thought andrew would be a great guest because this is a huge issue in corporate america today, and it's becoming a bigger and bigger issue, so what you thought were inpregnantable firms, and i know you signed up with a client, morgan stanley. how big a business is this going to be, and how important do you think it is in corporate america today? what kind of expense is this? something like companies spend a percent much revenue on this? is this expensive to do? i don't know. >> i think that's one of the reasons why this reached a board level. people talk about securities now as board level topics. it's because the board now has a responsibility to look at cyber risks like financial risk or any

other risks to the organization. we know the day after a breach, what it looks like, you see the story, but the reality is there's huge ripple effects when a company is compromised, brand reputation and revenue impact. if customers decide it's unsafe to do business with someone, that impacts the top line. >> target. >> absolutely. >> i think i hit a tipping point where i'm sick of companies taking information, private information that they shouldn't be cleollecting from me if they can't protect. there's not a need for every company i do business with to know my date of birth and social security number. >> i think that's a place where the board steps in more actively because one of the jobs the board's going to have going forward is that they have to challenge management to think about security differently than the way we have in the past. we're fighting a completely different war now than anything we traditionally have had to in the past and we have to rethink from the beginning including tools we use. >> people watching this show want to talk about stocks, is your technology going to be an

interested player? you're a unicorn, but traditional guys disrupted by you? >> as becky said, it's about existing alongside the existing -- >> guys at the front door, don't do the back door, other companies displaced? >> that was one of the advantages we had, protecting the inside required starting with a clean page, build the technology over a two-year period from a blank sheet of paper. it's not a path from how thing w were done in the path, so those existing protecting the perimeter, it's a challenge to go inside. >> looking for the goal, do you plan on staying independent? go public eventually? offer to be bought? >> we have one strategy to build a sustainable company. we believe the opportunity in security is enormous right now, and we built something that solves a problem differently than what exists today and use that in order to deliver value to the customer and build a

public company. >> thank you. >> thank you so much for having me. >> thank you. all right, when we return, jim cramer is joining us from the new york stock exchange, find out what he's watching when the opening bell on wall street finally rings. later today, don't miss andrew! andrew reporting live from the vanity fair new establishment summit. even he's a little old for this gig. among his special guests, ventu venture capitalist mark andrissi. (friends gasp) the app where you put fruit hats on animals? i love that! guys, i'll be writing code that helps machines communicate. (interrupting) i just zazzied you. (phone vibrates) look at it! (friends giggle) i can do dogs, hamsters, guinea pigs... you name it. i'm going to transform the way the world works. (proudly) i programmed that hat. and i can do casaba melons. i'll be helping turbines power cities. i put a turbine on a cat. (friends ooh and ahh) i can make hospitals run more efficiently... this isn't a competition!

let's head down to the new york stock exchange. jim cramer joins us now. where were you on ellen kullman and nelson peltz? to me, it looks like she may have won the battle but kind of lost the war. if he was saying it could be more efficiently, peltz was, has that view been vindicated? that the company wasn't being run well? >> i think that you're right. it's obvious. these are different businesses. the spinoff of kmores was a total bomb. that thing has been horrendous. i thought that peltz should win. he made a spirited discussion on "squawk on the street" about the merits of it.

i didn't understand why they didn't have someone on the board agreeing with it. and i think the reaction after was disastrous. you're right, kullman won the battle and lost the war. look at how the stock is up. people think ed breen broke up tyco and he'll do it here. yeah. i look at the businesses. no, they didn't make that much sense together. they didn't. >> i haven't talked to you since that jobs report. is it really 3.9 gdp? what are we? is it 5.1 unemployment or 62% participation rate? does anyone know what we really are. >> we don't. participation rate is compelling. in the end, look, jdl would have looked foolish if they raised

that number. i just need them to get it over with when there's some strength. if there's strength in china when october comes around and they start opening and china comes out and they're making stimulus and can be good, europe is stronger, i didn't like the german numbers last night, we should. until we see a bit more sanguine, it's okay to be on hold. >> all right, jim. we'll see you in a couple minutes. when we come back, we'll wrap things up with our guest host. tomorrow on "squawk box," sam zell will be here. he called for a market correction back in april. find out if he seeses mo s morm downside. "squawk box" will be right back.

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back to our guest host. barry, they say history rhymes, it doesn't ever reit, but it's a weird environment of just, you know, you heard my conversation with cramer, it's like there's conflicting things. >> yep. >> i don't know -- is it a 3.9% gdp economy? >> no. no. but there's some things that are good. wage inflation is good. we can get the middle class to get higher incomes.

>> that's going to happen. we just heard people -- >> i think china is a big question mark. one of my friends on the west coast said the banking system in china has 170 trillion, and they have 3 trillion of reserves. if you consolidate the reserves and properly capitalize the banks, they're not really as rich as we think they are. because there's no way the marks at the bank and balance sheet are fair value. they're probably not as rich and definitely slowing. at the end of this -- >> but we know this. >> the global growth, countries like brazil, they're imploding. india is one to watch. there's tremendous liquidity. the big issue is will they take

capital back? you saw the saudis take back capital last week. it's uncertain. there's a lot of counter currents in the market. you're seeing it. >> barry, thank you very much for being with us today. it's ban mreeen a pleasure. >> thank you for having me. >> thank you for joining us. right now time for "squawk on the street." >> good tuesday morning. welcome to "squawk on the street," i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. can the market make it up six days in a row? the premarket had suggested a pullback. futures did turn positive about ten minuteses ago. dupont, pepsi, fedex and tesla are news. people talking about the zero yield at the three month auction.