2016. "squawk box" begins right now. ♪ all right it is coming home ♪ ♪ we got to get right back to where we started from ♪ >> live from new york, where business never sleeps, this is "squawk box." >> good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick. joe and andrew are off. guess who's here? david faber, you saw him, and mike santoli, with us for the morning. thank you, guys, for coming in. great to see you both. good to see you guys. >> happy to be here. >> long time. >> this is what it looks like. i forgot. >> still dark. let's look at the u.s. equity futures at this hour. markets did close higher yesterday. yesterday, the dow was up by about almost 100 points. 98 points, building on the gains we have seen. the best two-day and three-day rallies we have seen for stocks since back to july. all of this is coming post fed after the fed decided not to hike interest rates in september. and sounded a little more dovish

than some market players had expected. this morning, looking at futures down by about 16 points for the dow, s&p 500 futures off by 4. and the nasdaq down by 5. overnight, in asia, you'll see that the nikkei was down slightly, down by a third of a percent. similar declines for the hang seng. in europe, early trading, slight declines. the cac is down by .3%. finally, look at crude oil prices, crude oil, settled up another 2.2% yesterday, couple of strong days, this morning, down by 12 cents to 46.20. pairing losses that we had seen earlier this morning on reports that saudi arabia would reduce output if iran actually agrees to a production freeze. >> well, markets pausing. we have a busy friday on the economic agenda. we have the september flash

manufacturing pmi, that's out at 9:45 eastern. also, the weekly baker hughes rig count follows at 1:00. patrick harker, atlanta's dennis lockhart and loretta mester speak in philadelphia at noon eastern today. and rob kaplan in houston at 12:30 speaking at an energy conference. not much break from the fed speak so far. >> thought we would get a fu days. the corporate news, john stumpf stepped down from the san francisco fed's advisory council. in a statement, he tells cnbc stumpf made a personal decision to resign, saying his top priority is leading wells fargo. the announcement comes a few days after stumpf appeared before a senate banking hearing on wells fargo's sales practices. >> news came yesterday. and i was on the phone with somebody who said, oh, my gosh, stumpf just stepped down. wait, from the advisory committee. saw it flashing on cnbc.

>> same with the e-mails coming through. you raise the bigger question, is there going to be pressure building particularly on his own board of directors? what will be the direction there they choose to go given what many people find was a strong performance. continuing questionswas allowed >> part of the defense to this point, these were -- 5,000 employees, we have 100,000 employees, but only about 1,000 a year. the idea that it took five years to dig into this and find anything that goes back and we still don't have answers on a lot of these issues, how far up it went, who knew what, when and how, yeah, i think it does add -- >> when you speak of the competitors at banks and they're competitors, so take that for what it is, but they point out that, you know, if you see customer complaints bubbling up or employee complaints because it is typical that if certain employees see this kind of behavior, oftentimes they will

also report it, if that was the case, why wasn't it dealt with, why wasn't there a deeper dive done earlier and sooner, why did they have targets that people really had to push to reach for. and then the overall question, opening more accounts, the metric people should be measured by. a number of questions that go back to culture. >> if it was a source of high turnover in that division, all these things over a long period of time would bubble up. and you talk about the board having to weigh all this stuff, he's been there, nine years, 63 years old, this probably wouldn't be an illogical time. >> there is that old saying, if they run you out of time on a rail, turn around and make it look like a parade. >> comes back to a man you know better than any of us, that's mr. buffett and what if anything he'll do. >> he has not weighed in

publicly on any issues. which, some people are surprised by, but if you look at what happened with coca-cola, that was his mo for that situation too. he was unhappy with what was happening at coca cola, he dealt directly with the board. it is never really been his way to weigh in, either with companies that he owns a large stake in, he's the largest shareholder, berkshire hathaway, and wells fargo -- it is boosted above the levels you would be able to hold in. but he's never played that out publicly. if he had something to say to them, my guess is he would say it directly. just because he thinks it is the press isn't the way to do it. we will eventually hear from him. i don't know if he talked with them or weighed in on the issues. but my guess is we will hear from him but won't be first ones. >> people drawing some conclusi conclusions, a separate situation. >> that's ridiculous.

the idea that the buffett or berkshire is deciding who goes on jpmorgan's board is insane. jamie dimon decides those things. my guess is anything like that would have been worked out well in advance of what we have been hearing about. >> still some questions about the clawback or whether they will get some on that executive who just left the company. his inartful phrase of a change in direction, instead of speaking more forcefully, saying, yes, we let her go or she was fired. eight u.s. democratic senators asked the labor department to launch a probe into wells fargo pay practices, wanting to know if the bank violated laws. the labor department says it wouldn't discuss its decision-making process but takes the concerns raised in the letter seriously. >> yahoo! confirming that information from at least half a billion user accounts was stolen by hackers during a data breach that took place back in 2014.

yes. this is 2016. this is a breach that took place two years ago. the company says the state sponsored group accessed names, e-mail addresses and potentially security questions and answers as well. yahoo! began investigating last month after reports surfaced that more than 200 million accounts were being sold online. the company's internal probe began just days after striking the deal to sell its core internet business to verizon. verizon says that it was informed of the breach only on tuesday and there are a lot of questions that can take you in different directions on this story. the idea this breach concerning half a billion users took place almost two years ago and we're just now hearing about it is shocking. second of all, the idea thatter is ri verizon found out tuesday brings up all kinds of questions. there is a lawyer who brought up in one article i was reading today that some of the terms of the verizon deal state there

weren't security breaches, which means they could potentially either renegotiate the terms of the deal or walk away. >> i haven't had a chance to talk to the people who worked on that deal. and i know many of them well. >> that's the question. >> it does represent an adverse material change. as we pointed out so many times during the process by which they were selling the core business, it is far less important to verizon -- to the stock price than is the stake in alibaba. if you watch the shares recently, you see they're up sharply. if you put alibaba over it, you'll see the same move. 15% of alibaba shares are owned by yahoo!. that's what will be remaining in this company, if and when they finally also dispose of the stake in japan, it will be an investment company, with that stake in alibaba. it will trade at a discount. but we'll see, i did get some calls late yesterday from people saying is this going to have an impact? i don't know the answer. >> interesting, because yahoo!

stock told off during the day as the reports came out, not heavily, but with alibaba up 3%, yahoo! should have been up a percent or something like that. it wasn't the case. so people are nervous about it. but it is not a typical situation where there is an arbitrage that will break down because as david says, they're getting cash into the public company and, you know, the stake in alibaba represents all the stake value right now. >> you see someone being opportunistic. >> the larger question of why it took them so long to understand the breach and communicate it is something that harkens back to a time when companies really did not let us know that that policy seems to have changed over time, much more open about it, boards of directors were much more involved now when there is a breach, it is a board level issue. so it is somewhat surprising. >> that was my thought too. >> update on the protests in north carolina. demonstrators took to the streets for a third night in charlotte. this after a deadly police

shooting of keith scott. police issued a curfew for the city. but chose not to enforce it as the protests remained mostly peaceful. nbc's sarah rosario has the latest. >> reporter: a third night of people taking to the streets with police in riot gear, but thursday night a message rings clear. protesters appealing for video showing the shooting death of 43-year-old keith scott. dying at the hands of police tuesday. their hope, to resolve different accounts of that happened. >> what i see in that video is an individual who is sitting in a car, who gets out, and a calm and peaceful manner. >> reporter: the police chief agreeing to show the video it keith scott's family, their lawyer and the state bureau of investigations. >> i'm going to be very intentional about protecting the integrity of the investigation and in so doing, i'm not going to release the video. >> reporter: police say scott ignored multiple warnings to drop his weapon, though the

chief admits he didn't see him point the gun at officers definitively. but scott's family says he wasn't holding a gun, but a book, while waiting for his child to get off the bus. their lawyer says the video doesn't show a weapon. >> i did not see a firearm on the ground, i did not see a firearm at any point during those videos. it leaves more questions than answers. >> reporter: it is the latest officer involved shooting of a black man following a series of similar cases across the nation. the governor saying this is in no way a definition of who north carolinians are. >> we're not going to let a few hours give a negative impact on a great city. >> reporter: while protesters remained relatively calm on thursday, tensions are high with concerned citizens and demonstrators hoping for justice. sarah rosario, nbc news. we now know the protester who was shot on wednesday night has died. the police chief says he was shot by another citizen, and the case is being investigated as a

murder. we'll continue to monitor the situation and bring you updates along the way. back to the markets this morning. stock market bouncing on thursday. that was one day after the fed chose to keep interest rates steady. the nasdaq hitting a new all time high for the second day in a row. and joining us now is sri, president of global associates. and ashish shaw. thank you for being here today. let's start talking about what has changed. the fed left things the same. you think investment strategy has changed as a result. big part of the issue is duration. >> one of the biggest risks we see out there is that investors are actually piling into duration as rates hit their all time lows. >> you mean in the bond market. >> in the bond market. it is happening in an interesting way. we have seen the tremendous amount of money going into passive this year, $75 billion across the fixed income markets.

those investors that are moving into passive are extending their duration. taking more risk to interest rates as the rates go lower. >> did you hear anything from the fed that makes you think that rates are going to rise rapidly at least? one or two rate hikes in the next six months to a year? >> i think it would be shocking if we didn't. that's why i find it perplexing. >> you're a little confused by what the fed has done. and not convinced that we can believe that they're even saying? >> i'm not confused at all. they have no idea what they're doing. and i don't expect the fed to do anything based on a strategy. and especially in contrast to what cnbc's jeff cutmore spoke in hours of tterms -- it is ama

feels like a university of chicago economics department classroom. not in a developing country. and here she is giving advice to the central banks of developed countries not to inflate. i don't think the -- there is any confusion on what the fed is going to do. they're not ready it hike. they give speeches regul es reg about a few people saying up, few people saying down. and come december, you're going to have the same situation as december, 2015, year end is coming, we said we do something, but we have to do it. >> they'll raise a quarter percentage point in december. >> and repent for it in january and february of coming year, like they did last year. there is no policy. no strategy. it is all based upon what i can see the decision making. >> you think the markets react

similarly in january and february like last time, we see a big sell-off at the start of the year? >> i think whether there is a rate hike in december depend oz on what happens with the chinese currency in the meanwhile, we have seen interest rates shoot up. what happens with the european banking situation rumbling again today with even german policymakers being very concerned. if some of that goes, then they pass in december. if you have few data points showing up, few data points showing down, then you just go ahead and hike. the last question, markets do react very adversely in the first quarter 2017 if they do hike. >> you're calling this flying by the sate of the pants. they're watching a lot of other issues around the world that have never been part of the mandate, but probably are things that are -- they need to pay attention to. other central banks are at zero or negative interest rates. it is hard to fight that tide. i know that is not one of the two mandates. >> i agree with you completely.

the point is that why make all those speeches in the leadup. only the united states mattered, not look at anything else, looking at employment, looking at inflation, where as you quite correctly said, becky, they have to look at global developments. ? every o >> we're going to make sure that things are in line. so, in other words, there is a lot of -- an ambiguous situation from their view, and so they don't respond in a very linear way versus what they said. >> they don't want to admit they're watching all these things. >> what is the upshot for an investor at this point? you think you're bullish on longer term treasuries, talking about the risks in longer term fixed income. you think in this scenario, treasuries continue to rally. >> two things. on the first point about what the fed has been up to, in terms of the looking forward when they

have different data points, the story changes for a while the labor market was supposed to have no slack. in the latest read, somehow the labor market has more slack. how did the change happen? nobody knows. even data dependency is based on the interpretation month to month, not on the data, but the interpretation. the second is maybe i take a different view, i'm recommending the duration be lengthened. i see the ten year going below 1%, by the end of this year. so why would you reduce duration? >> what do you think? >> i think you to think about the risk return around this. we have an election where both candidates are going to be spending more money, right. congress wants to spend money, you have this populism, you give them what they want, more money. and at the end of the day, that is going to push the economy, you see greater inflation,

greater inflation risks, and at 1.6%, 60 basis points lower, how much higher can rates go. i think the risk return is very -- >> i can remember so many times we come into a year saying how can you go to duration, how can you do that? 2%, 2.5% and they have been right. investors have done that. your capital return from having done that is substantial. >> that's right. fixed income isn't about capital return. it is about income. when you're generating 1.6% on your bonds, that's not a lot of cushion. >> not worth the risk. >> right. poor risk. >> two points in response to you, you made a fair point about how people have gone lower and lower, rates have gone down. the expectation it will go to 250, now to -- i've been saying consistently it is going to go

down. down, down, down. now it is below 1%. you are going to do that and as for how long inflation can be kept, japan has done that now for 26 years running. >> all compares to that. >> i think if you look at what is happening with japan, japan is saying we don't want to lower rates anymore. and that is an important sign, because to your point, they have been the first into deflation, very aggressive, and they're saying it is not working. >> let's try something else. >> the story is the japanese took a quarter of a century to come to that conclusion. we just started. >> the benefit of the experience. >> thank you for coming in. great to see you. we appreciate your time. >> thank you for having us. >> the countdown to the first debate is on. hillary clinton and donald trump are going to be facing off monday evening. john harwood tells us what we can expect on the economy, security and each candidate's vision for america. that's next.

coming up, who is more likely to go to a stand-up comedy show? a republican, or a democrat? what about a rock concert? or a sporting event? the answers might surprise you. we've got the raw data from nielsen straight ahead. "squawk box" will be right back.

countdown to the debate is on. hillary clinton and donald trump will square off in the first of three scheduled debate and clinton rolled out her plan for estate tax. john harwood joins us with more. >> we have got an interesting backdrop for this first debate. clinton will enter the debate with a lead in the polls. we show that in our nbc wall street journal poll, seven-point national lead, a new poll out this morning from marist which shows precisely the same numbers. 48 clinton, 41 trump. there is a new wrinkle that hillary clinton has introduced with her estate tax plan, which she rolled out quietly yesterday. she introduced three new rates. hillary clinton had already proposed to raise the estate tax from 40 to 45%, 40%'s current law to 45% now. she introduced three new rates

for estates of $10 million to $50 million and new rate of 50% from $50 million to a billion, a rate of 55%. and for estates over a billion, 65%. now, you look at who would pay that rate. not very many people. the estates from 10 to 50 million, fewer than 3,000 of them. you lock at theok at the estate 50 million. here is the issue, here is what makes it interesting. when you have a rate like 65%, going over 50% for first time since 1981, that is a symbolic issue that donald trump could seize. on the other hand, it is the rate that donald trump himself would pay and it affects very few taxpayers. so don't know how that's going to affect the economic debate. donald trump jumped on it yesterday. we'll see whether he jumps on it monday night. >> one thing we were talking

about on set, will any of those people pay that 65% rate? you would imagine they have tax lawyers and ways to figure out getting around something stupid. it does seem like it is entirely symbolic. and playing to bernie sanders and what we have seen in the -- in everything leading up to this race. >> there is a play to bernie sanders aspect to it. but the committee for responsible federal budget would score that proposal, estimated that it would raise $75 billion over ten years. that's not a huge amount of money in federal budget terms but not nothing either. she also proposed the -- to end as president obama had the so-called step up basis for passing on investments to heirs where if you have realized capital gains, that if they're passed on to your children, if you are a parent who dies, they assume the increased value of the asset for tax purposes and

don't have to pay the gain there. that's 150 billion. that's a significant amount of money. all told, three different changes that she added to her plan to pay for small business incentives she proposed would raise $260 billion over ten years. that's significant amount of money. >> all right, john, maybe some revenue and some political symbolism. we'll keep watch. appreciate it. a programming note, cnbc's coverage of the first presidential debate will begin monday evening at 9:00 p.m. eastern time. let's talk campaign funding. clinton and trump, some of wall street's biggest political donors are simply staying on the sidelines for this election. kate kelly who follows a lot of those rich people joins us now. >> i've been joking around, i'm covering campaigns spending for the moment, until election day. it is like an extension of the hedge fund beat. among many other things, though, this year may be remembered as one where some of the major political donors sat on the

sidelines. key figures who normally give mega millions aren't doing that at all or aren't giving the money they do donate to presidential contenders. they're focusing on the house and senate, the so-called down ballot candidates hoping to have an impact there. consider some of the names. sheldon adelson and his wife were biggest contributors. this year, nowhere to be found so far. hedge fund manager paul singer and ken griffin fourth and 14th biggest donors by a recent center for response and politics count. since their favorite republican candidate marco rubio dropped out of the primary -- out of the general after he lost in the primary, they have done nothing to -- for his successor, donald trump, focusing on down ballot candidates as well and issues they care about.

richard uline, the sixth biggest donor, but donald trump has seen almost none of it until late july when uline gave his campaign $4,500. that's the hard money maximum. call it fear of temperament, anti-protection, or a protest, but the deep pocketed business leaders aren't spending on trump they would nrm they normally would. adelson leaked this week he's planning to give $5 million to trump and another $4 million to the other down ballot candidates. >> clinton has plenty of big money donors in terms of the hedge fund crowd. >> jim simons, one of the single biggest donor, donald sussman,

low profill except in this respect. what i was focused on is people sitting it out and it happens some people lean conservative, but ken griffin supported barack obama. we have seen others do turnabouts like that. in this case, i don't know if it is trump himself or more like a combination of the with. we have seen some other people cross aisles. hank paulson. >> i wanted to tease that out. is it trump the candidate or making a value judgment. we think it would be a waste of money. >> i think that's part of it. that's a great point. people apparently may have been hanging back. you think trump's chances weren't great. you'll see if there is a late inflow of cash, adelson may be

considered an example. it is worth noting, some of trump's more vocal supporters have not given a lot in dollars. carl icahn, they have all given pretty modest donations, none close to a million dollars. >> we talked about that. carl icahn in an interview with scott wapner said he was reserving himself, wasn't going to go on the advisory committee because he wanted to be able to take a lot of money and put it into a pac and can't do that if you're an adviser. >> hasn't materialized yet. these numbers tend to be low. they're reported, the monthly ones on the 20th of the month overnight and sometimes there is a bit of a time lag getting them up, you know, ready for the public. at the same time too, there are some pacs and that's where the bulk of the dollars go that are on quarterly filing systems. so we may not see some of it until mid-october reflecting the period i'm talking about.

it is worth saying that. i think we have a decent snapshot given how late it is in the game. it does appear a lot of people just can't make peace with either one in the general candidates and nor do you see a big embrace of gary jn son figure. one person told me they really liked his running mate and if the ticket were reversed, they would maybe put serious money behind it. and talk of weld dropping out, but he tamped that down. >> thank you very much. >> thank you. when we come back, democrats are more likely to spend money on pay-per-view, but republicans are more likely to subscribe to premium television channels. that's just one of the findings from nielsen's music 360 report. we have other surprising results right after the break. and as we head to the break, look at the s&p 500 winners and losers. and can you explain to y

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morgan stanley. time for executive edge. when is your entertainment spending say about you? new insights this morning from nielsen's annual music 360 report. david bakula joins us now. good morning to you. we all know republicans and democrats, i'm sure we hopefully people know both. and they are somewhat different. what did you find in terms of their entertainment needs and desires? >> we did talk to everybody here, we talked to republicans, talked to democrats and unlike the first presidential debate, we even asked the independents

what they thought. we did find there is quite a bit of difference between the groups where you have the democrats as you would expect to be a little bit of a younger demographic and with that younger demographic comes a much more likely to go to a live concert, for example, a higher propensity to buy digital music. republicans, much bigger fans of more traditional types of consumption. you get more physical purchasing on republicans. you get more of the radio listener. the traditional methods of listening to music. you get more stand-up comedy for republicans, which -- and sporting events which i think is real thely interesting. paid cable subscription, no indication that they like reality tv any more than anybody else. unlike their candidate, but, yeah, it is a little bit all over the place with respect to what they like to do the most.

>> and anything particularly surprise you on the survey or something that differed perhaps from the last time we did this. >> this is the first time we spent focusing on political groups. you want to look at exactly how the different groups are and how you can reach those different groups. so we didn't do a lot of political questions in the past, we have been doing this for five years now. and certainly the trends that we have been seeing is, you know, digital music has changed pretty dramatically. we have gone from a physical buying paradigm within the industry to a digital buying paradigm and now streaming paradigm. this is something that is growing extremely fast with the streaming piece. it is pretty interesting because it is more independence, more nonaffiliated political people that are doing streaming more often than some of the other groups are. they index high on streaming. maybe it is that younger demographic. how do we reach the people?

>> how much of this is age? and then urban areas where maybe you're an earlier adopter, how much of this is just what you might expect, age differences and where you live? >> you're absolutely right. it is a big piece of that is the age groups. the demographics. you see -- funny enough the democrats, when you look at what types of music they listen to, they lean more heavily into r&b and hip-hop. you have the lode e leader of t party, you have the first lady doing car pool karaoke to beyonce and missy elliott and stevie wonder, it fits right in that the rbi fan is a little more tipped toward democrats. >> all right, we'll be listening and watching. thank you. >> excellent, thank you. >> dave bakula. >> stand-up comedy is a republican thing, i guess an older demo now. >> i like stand-up comedy.

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consumer discretionary stocks have lagged so far this year. but if history serves as a guide, things could be starting to turn around. landon dowdy joins us with more from headquarters. good morning. >> good morning to you. we're hoping for a rally. we're a week away from the start of the fourth quarter. we worked with our partners at kenshow to see how the stocks performed in the previous four quarters. the stocks lagged so far in 2016 due to change in consumer taste, looking back over the past ten years, the sector posts an average return of 3.3% in the quarter, outperforming the overall s&p, which is up just about 2% in that same time

period. historically, what are the top performers? q4. consumer activity dominating as shoppers look to get away from the cold weather or treat them receives over the holidays. priceline up 12%. royal caribbean sailing up 10.6%. both benefitting from the holiday travel season. analysts say that priceline is well positioned for long-term growth within the space and thanks to strong mobile traffic and restaurant reservations. other outperformers, lowe's, and autozone up shy of 9% in the fourth quarter. that stock does well in these economic climates like this being the after market auto parts leader for those do it yourselfers. >> landon, auto parts, people giving floor mats for the holidays. what is the read on that in. >> that's -- i'm hoping that's in my stock. interesting thing to watch is the travel stocks. those year to date down the

most. as you saw in the past ten years, those are the highest. interesting to see if those concerns over zika or the brexit, if those are going to impact the travel stocks here in this quarter. hoping to see a rally like the past ten years. >> we have the ceo of marriott coming up. americans are going to be splurging on candy and costumes. that's according to a new survey. it found total spending for halloween is expected to reach $8.4 billion. that's an all time high and the survey's history. customers are expected to spend an average of $82.93. that's $9 more than last year. lots of candy. >> not to mention costumes. >> yes. >> costumes -- >> my daughter wanted to dress up as scarlett o'hara. you know how expensive one of those hoop skirts is. >> yes. we have gone through it -- >> you have to go to a real

theatrical wardrobe place? >> put some makeup on, make yourself a ghoul or whatever. >> here is a sheet. you're a ghost. >> that's mean. >> that's charlie brown. >> true. poor charlie brown. a new study reveals americans gain nearly 1.3 pounds during the holiday season. >> 1.3. >> we're not alone. germans put on nearly 2 pounds at christmas. they gain weight around easter as well. japan, the biggest toll came during golden week, a period that includes four national holidays, thanksgiving and easter linked to weight gains in americans. but not the fourth of july. where we do eat a lot of hot dogs or labor day. >> hmm. >> the grilling, i just saw statistics for grilling for labor day, supposed to be off the charts, the pounds of hot dogs, pounds of hamburgers. >> outside, though. better weather. >> i think i tend to hit a high

toward the end of the summer, steak on the grill, a much more high fat diet. >> back to seriousness and back to total discipline. >> maybe. >> maybe. >> we wish. when we come back this morning, a medical disrupter that has funding from big backers like peter teal. regenerating bones in a lab to help recover from injury or surgery. bad to the bone. the company's ceo will join us next.

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>> people want something positive to rally around. our brand has become one of those things. >> can't be passionate about a business, you're not going to find success. >> really felt like there was a need for a fitness experience that was going to be joyful. >> we discovered these entrepreneurs, ceos are rock stars. >> just so much more fun welcome back, everybody. imagine your own body being able to regenerate itself. that is the idea behind epibone. patients can grow new bones in a lab to heal from injury, illness, or surgery. nina tanden is the ceo and cofounder and is on set this morning. thanks for coming in. >> thanks for having me. >> this sounds like we could basically be star fish which is hard to imagine. why don't you break it down and explain how it works and why you

may need to regrow a bone. >> it's funny you say star fish. in some way we all have a way to regenerate. we're growing every day. and sometimes our capacity to heal is overwhelmed. what we do is take the stem cells that heal our bodies naturally every day and use those stem cells in the lab to grow new grafts that can be put back in the body. >> how do you do it? >> we take a small sample of fat tissue from patients. fat tissue contains stem cells in it. we extract those. >> with the needle you draw it out? >> yeah. and you infuse those stem cells into a scaffolding like a puzzle piece shape that's the right shape. and those cells attach and repopulate that scaffold. and after three weeks, there's a piece of living bone. we grow them in little systems just like this. this is an example of a -- the size of -- >> hold it up. >> a human sized piece of the

jaw. >> so the jaw would be one area -- >> for example. there are many bone grafts used in dental surgeries. >> is that typically the size that people are dealing with when you're talking about a bone graft? >> for facial bones, bones are, you know, this size or smaller. it depends what part of the body you're talking about. >> how have -- has science dealt with it to this point? what would be the normal process? >> we've been triangulating on what is the best way to repair the body. we're moving towards more and more anatomically correct shape. 3d printing is helping disrupt the industry. as well as including bioactive components. making things that are synthetic interact better with the body. as well as now in many fields approaching as therapy is the new trend. >> i was going to say, what are the sort of advantages in terms of somebody's prognosis once

they get a procedure and also the cost side of it. >> the alternatives now are using donor bones from cadaver. >> i've heard of this where they take cadaver bones and put them in your mouth. >> very, very common. or what's called autograft which is taking a piece of bone from one part of your body and putting it in the other. this happened with my husband. they took a piece of his hipbone to repair his ankle. >> is there a chance for the cadaver bone with rejection. the problem is when you get it from somewhere else is you've got to have two surgeries. >> exactly. longer recovery time and so on. and the bone won't come back. there's no bone in your body that you don't need. >> what is the advance in science or technology and is getting you to go into this now opposed to ten years back? >> the advances have been in biomaterials. so we can copy better in the lab what the body naturally does.

and i think it really moves forward in regenerative medicine. how does the body repair itself? how did the body grow in the first place? so, you know, to your star fish example, the more we learn about how it grew in the first place would be helpful. to try and copy those as best as possible. the better we copy the body in e the lab, the better the cells grow. >> is that a result of what? we have a sense of how the body does that? >> i would say the field of developmental biology helps us understand how does the body develop from an embryo into a human? how does the body repair? so those are all biology and science that comes in. and then the fields of engineering on how to then create the controllable systems that copy those processes. it's a convergence of fields. you find biologists and engineers and clinicians all working together to push this forward. >> go ahead.

>> what beyond bone might be a possibility? >> well, for us specifically we're thinking beyond bone is, you know, bone plus ligaments. clinical trials for these types of therapies. >> very quickly, where do you get your funding? >> we've had angel investors as well as government grants. it's been a mix of public and private money. >> how long do you have to go with the money you currently have? >> we just started closing on a $5 million convertible note round on the ninth of september. so 99 is a lucky number. >> you're doing this in brooklyn? >> we are.

we're in brooklyn. you need a field trip and visit us in the lab. our lead investor is a wonderful human being who cares a lot about health. we're lucky to have him and others. there's a lot of new york pride here in the group. so, you know, we're really committed to not just growing bones but being here in new york city and participanting in the scene here. >> well, thank you for joining us. we appreciate it. >> it's an honor. thank you. let's move on -- nina tandon there from epibone. coming up we're going to talk str numbers with a top strategist. you see there a lower open. and later, arnie sorenson. close to closing that merger with starwood. "squawk box" back after this.

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markets await data and fed speak. both coming up today. we're watching the futures after three straight days of gains. and what you need to watch next week. that's straight ahead. calm in charlotte. protests were peaceful last night after two days of rioting and looting. the effects being felt by business. a look at the economic impact of the protests that turned violent and how businesses prepare for the worst. >> plus avocados and coconuts are the new cash crop. rising prices, higher demand have fund managers takes notice. the second hour of "squawk box" begins right now. live from the beating heart of business, new york city, this is "squawk box."

welcome wac to "squawk box," everybody. this is cnbc. i'm becky quick with mark santoli and david faber. watching the futures as well. after another gain yesterday, you do see red arrows this morning. dow futures down by about 26 points. s&p futures down by five. this comes after the markets have tied together their best two and three-day rallies since july. nasdaq, by the way, sitting at an all-time high yesterday. it's down by just 6.5 points below fair value this morning. here's what's making headlines at this hour. fed presidents are out in full force today. patrick harker, dennis lockhart, loretta mester all have public appearance. only mester is a voting member of the if rks omc this year. with people still trying to figure out what to do next, we'll pay attention. marriott's acquisition of

starwood hotels is now complete. the $13 billion deal creates the world's largest hotel company. marriott expects the transaction will save it about $250 million annually and we'll get a chance to hear all of this straight in the horse's mouth. that's coming up at 8:00 a.m. eastern time. just an hour from now. valvoline debuting today on the new york stock exchange. raising about $660 million. the auto maintenance company was spun off from ashland. meanwhile john stumpf has stepped down from the san francisco fed advisory council. wells fargo tells cnbc stumpf made a personal decision to resign. his top priority is leading wells fargo. it comes just days after he appeared in a senate banking hearing. here are stocks to watch

today. shares of imperva -- bids to come out in two weeks. and bats global markets rising when cboe is in talks to buy the firm. the firm doesn't comment on rumors or speculation. and twitter sliding after one of the most followed tech analysts downgraded the stock. predicting a 25% drop of shares on twitter. now at underperform with a $14 price target. and shares of amazon closing at an all-time high yesterday at over $800 a share. yahoo has confirmed that information from at least 500 million users accounts was stolen by hackers during a data breach in 2014. now, the company says a state sponsored group accessed names, e-mail addresses, and

potentially security questions and answers. yahoo began investigating last month after reports surfaced there were more than 200 million accounts that were being sold or information from them was being sold online. just days after striking the deal to sell its core internet business to verizon. verizon said it was informed of the breach on tuesday. >> and what does this mean for the deal? some people say, look, security breaches are common these days. others say it depends on what the language is on that contract and i believe from at least one source that i've read in the papers, they're citing it saying there's somebody who says this was part of the contract that leaves open the idea of whether they renegotiate, whether they're able to walk away from the deal. >> i know. we'll see. verizon wanted to do this deal. it's unclear to me whether this would really impact them. does it give them an opportunity to try to seek a price cut. perhaps. but do you really go down that

road unclear. but the brief back and forth i've been able to do at this point probably not but i want to certainly be able to speak to some people. but overall, though, two years. >> that's what's shocking. the idea they first started investigating -- the breach took place a couple of years ago. they first started investigating i think it was actually july. at first they were saying it was not legit. saying don't worry about it. but as a consumer this is one more reminder that your information is not safe no matter where you're putting it. you should be really careful with passwords. you should not use the same password on multiple sites. >> yahoo says no financial information or transaction that you're using. >> if you're using the same password on their financial accounts. it's late to go changing things now. >> i'd love to stand more about

it. in part just why they were incapable of seeing their system was breached in some way. recently russia has been probed. i remember having done a documentary on chinese espionage. they've backed off a bit since there had been talks between our government and theirs about specifically cyber espionage. usually the focus there, though, has been on intellectual property. not necessarily stealing people's passwords. >> now over to some politics. hillary clinton is targeting tax hikes on the wealthiest americans. she is planning on raising e estate tax to 65%. right now only worth $5 bh million or more. hers would be the highest since the 1980s matching the plan by her rival bernie sanders.

>> we had john harwood on earlier. he said this impacts a small number of estates. we're talking about 320 estates for some of these things and fewer over a billion dollars. so obviously it's pretty good from the voting perspective. you're not going to have a lot of people who are necessarily offended by it. but you look at rates at 65% and that may catch some people's attention. >> it may. although if you have over a billion dollars, typically you have an army of attorneys who have figured out ways for you to avoid it or hopefully you are charitable and have a foundation and take it down below a billion in terms of what you're leaving. donald trump in me meantime is is planning to cut tuition costs for college students. he said he will work with lawmakers to tie to a good faith commitment to lower cost. trump is did not offer

specifics. another page straight out of bernie sanders playbook for hillary clinton. student debt in the united states has topped $1.2 trillion. it's leading to all kinds of problems. a programming note for you, trump versus clinton this coming monday in the first of the presidential debates. don't miss cnbc's special coverage starting monday night at 9:00 eastern. well, let's get back to the markets now. microsoft grabbed headlines this week when it announced a $40 billion stock buyback program. but just how much is microsoft actually bought back in its own stock over the last year, you ask? well, dom chu is here with answers. >> good morning. everybody is talking about this idea that stock buybacks are getting all kinds of traction again. we know they've been a big part of the market narrative for some time now. remember with microsoft's $40 billion, the target $5 billion acquisition. lockheed martin added $2 billion. a lot of these companies buy their own shares.

that helps. the fewer shares outstanding, the more to bump up the profits. take a look at this. according to s&p dow jones indices, apple spends far and away on buybacks. they spent $37 billion buying back their own shares last quarter. in percentage terms they didn't buy back that much of its own value. general electric buys about $16 billion worth of its own stock in the 12 months ended in june. and microsoft, about $16 billion as well. as for the companies, guys, that get the most benefit from share repurchases, check out this information. because quanta services, they reduced their share count by 27%. h & r block lowered its share count by 20%. and american airlines by 20% as well. these are three of the companies

that have benefitted the most from reducing share counts and boosting their earnings. er share. as we talk about the overall narrative, as we approach the latter part of this year when it comes to the earnings numbers. back over to you. >> no guarantee. joining us to talk more about the markets, dan suzuki from bank of america merrill lynch. dan, thanks for being here this morning. >> thanks for having me. >> so the markets kind of put the old play book back into motion, it seems like, once they got that no move from the fed. it seems you buy some dividend stocks and here we are in all-time highs. where does that leave you? >> we're still on the cautious side here. to me i have seen no positive data over the last couple of months. even the central bank activity we got -- i think it's odd that the markets are interpreting it so positively. the boj basically, the markets rally when you do quantitative

easing and you lower it to the curve and flatten it. and reverse qe and the markets are going to rally again. same thing with the fed. you've got no incremental data except growth is going to be lower for longer. that's why we're flattening the pace of rate hikes. i don't think the data has been positive from central banks. and economic data, look at it. they peaked out last july and have been rolling over hard since. every major indicator we got this month to the downside. and if you look at some of the regional isms, they point to another week of isms. you've got the empire both point to ism adjusted. that's pretty low. >> does that just mean the fed missed its window? we're still looking at an environment that probably doesn't warrant zero interest rates or near zero interest rates even if it's weaker than it was six months or a year ago.

>> i think you make a good point. our house view is swrooel a rate hike in december. if we're right in that the data is -- it's showing signs we're weakening and we actually see a market correction, yeah, i think it's going to be difficult for the fed to hike. >> but in terms of this idea that it's just kind of more of the same, it's the environment we have been in where you've had an upward bias to the market, we had a pullback on the s&p 500 and it did generate anxiety. rates will shoot higher. i see this here according to your own firm's numbers a 12-week high in outflows from equity funds in the latest week pulled out of stock funds. do you think that sentiment is defensive enough to warrant the market being where it is? >> i don't think so. i mean, on the face of it, it seems like investors are bearishly positioned. when you dig through the data, you find the investors are more bullish. if you look at short interest on the market, we're actually at the lowest levels since last spring. spring of 2015 before you saw

the correction in the market. and if you look at active managers position iing. so i think positioning is really not all that bearish. >> what are you supposed to do though? and if you're right and all the economic indicators are pointing -- or many are down, then the fed's less likely to raise. rates stay where they are and i'm getting no return anywhere else. so the same narrative stays in place to why equities are the place to be. >> the point is that the central banks and you're seeing this out of japan, is becoming less and less effective. this is why earlier this year we had this big rally on the back of increasing hopes for fiscal stimulus. now, i think those hopes have gotten overdone and you're probably going to see fiscal stimulus come through a lot weaker than where expectations are. >> why do you think that? >> region by region if you go through it, it's hard to think that you're going to go on the upside. so for the u.s., these politicians talking about these

massive infrastructure spending plans. the reality is you're probably going to get that tempered down by the time it gets to congress if you get that at all. and in all likelihood, the implementation on benefit from stimulus next year. that's very little for all this you're getting. region by region i think it comes through. ecb, it's not new news. they've been doing fiscal stimulus for over a year and a half. i think the incremental stimulus is probably going to disappoint japan, china. our economists in china thinks that expectations are high relative to the policy makers about how growth is. they're probably not going to surprise to the upside. >> well, it was another reason everyone thought rates might go higher. maybe not. thanks, dan. when we return, a third night of demonstrations in charlotte after a deadly police shooting. the city is home to companies like bank of america, bayer,

duke energy. and scenes have been very violent. we're going to get an update on how businesses there are dealing with the protests over the last few days. "squawk box" will be right back.

a third night of protests in charlotte, north carolina, after the deadly police shooting of keith scott. police issuing a curfew on the city under a state of emergency. this after two nights of

violence and unrest. sarah rosario joins us now with the latest. >> reporter: it's been very calm here this morning. protesters stayed out past that curfew, but it was okay because police said they could as long as they were protesting peacefully. now, what protesters are upset about and taking issue with this morning and what they have been over the last couple of days is they want the police chief to release video of the shooting death of keith scott. that is something that the police chief says he will not do while the case is under investigation. what he did do is he showed the video to keith scott's family. their attorney took a look at it along with the mayor. and now there are some questions about the video. the lawyer says he's still left with many questions even after watching that video. this is what protesters want to see. they feel like this video will shed some light on what really happened. the lawyer says that it appears

that scott is calm in the video and that he does not have a weapon according to the lawyer. and charlotte's mayor says the same thing. she says it's too ambiguous to tell what he has in his hand. you can tell he has something in this hand, but it doesn't -- you can't make out that it is a gun. so these are all issues that i'm sure will be addressed as the days continue and we haven't been told about any other protests that are expected here in charlotte. but last night hundreds of people took to the streets. they circled around the blocks here in uptown charlotte. at times things were getting a little heated, but thankfully other people, religious leaders in the community and other people who were keeping calm were able to calm down others who at some points were getting excited. we did see some of these protesters shaking hands with the national guardsmen. there is a state of emergency still in effect in charlotte. the national guard and the highway patrol is here.

reporting live in charlotte, sarah rosario. now back to you. >> thank you very much. again that is sarah rosario from nbc. it sounds much calmer last night than previous night. charlotte's mayor jennifer roberts reassured residents yesterday the city is still up and running. >> today our city is open for business as usual. and we let people know, come to our town. we are here working. we are here to serve. >> she also said during that conference they would not enact a curfew. that changed later when she enacted a curfew from midnight to 6:00 a.m. commerce has take an hit. for more on that we're going to talk to a senior staff writer with the charlotte business journal. eric, thanks for being here this morning. we've seen the pictures. we've heard a lot of the

reports. heard that bank of america was telling its employees to stay home, i believe, yesterday. just wondering how things are operating in the city and what you see. >> definitely the mayor was more than just a little bit of optimistic yesterday with that statement yesterday. bank of america, wells fargo, duke energy, ally, and a number of others who said stay home, work remotely. a lot of restaurants, museums were closed or closing early. the streets were sparsely covered. and so there certainly was a very different atmosphere around downtown charlotte. i expect it's probably going to be better because thursday night was peaceful for the most part. but it has been anything but a normal week around here for sure. >> probably a lot of people glad that it's friday. maybe can get through to a little more normal by next week. is that the expectation? >> yeah. i think that a lot of people are

looking to get through the weekend. the carolina panthers have a home game on sunday. and i think that a lot of people are hoping that if the football game in the weekend goes smoothly that things will begin to calm down. but certainly this city has been rocked in a way that it has not been in many years. i've been here 20 years. i don't remember anything like this. >> you bring up the nfl game on sunday. are there any changes in the schedule? any additional precautions that you know about? or is this going to be business as usual and game on? >> well, it's business as usual and game on. what we've heard from both the league and the team is they're monitoring the situation which doesn't tell us much. i would think you're going to have some security enhancement if nothing else the fact you have the national guard and highway patrol who sent in re-enforcements yesterday to help with the security of the city. you'll see more of that and of course the curfew that wasn't

going to happen that ended up happening is still in effect. so you'll see that this weekend as well. and like i say, i think if they get through the weekend with a pretty peaceful situation, things will then probably start to return to normal next week. >> eric, you know, even beyond the recent events just more broadly, a lot of business organizations were sort of doing lesser pulling out of north carolina because of the bathroom access law. is there any sense down there that there's a little more about the business climate that seems in jeopardy? >> i think people here are jolted and stunned by the past couple weeks. september to remember has become september to forget. we've had the first mayor who was convicted and imprisoned on corruption charges, came home this month. we've had the house bill 2 you're talking about. the ncaa and s.e.c. has removed

events from north carolina. and then you come to this with the civil unrest, the shooting of keith scott, and charlotte has always liked to think of itself as a city that much like atlanta is too busy too hate, that gets business done, that does not sort of devolve into civil unrest. and it's just been an ugly, violent week and those other events that preceded it have been upsetting in different ways. >> eric, we wish you the best and thank you for your time today. >> thank you. when we come back, folks, we'll be talking economy, regulation, and yellen's handling of the economy. aaron klein and george selgin will be here to share their thoughts. now that the train makes it easier to get here, the neighborhood is really changing. i'm always hopping on the train, running all over portland. i have to go wherever the work is. trains with innovative siemens technology help keep cities moving, so neighborhoods and businesses can prosper. i can book 3 or 4 gigs on a good weekend.

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not just wealth, but things that matter. morgan stanley . coming up, we'll have more on the economy and the fed's decision to stand pat for now anyway. and we're watching oil. saudi arabia says it will lower production if iran caps its output. the futures are slightly lower but oil about flat on the day after a couple days of gains.

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among the stories front and center this morning, facebook may be in a bit of hot water with its advertisers. they're upset with the social

media giant after learning facebook's viewing time for video estimates were overestimated for about two years. facebook has since changed the way it calculates viewing time. harvard university endowment lost 2%. that's its largest yearly decline since the financial crisis era. poor stock performance was a key reason with it falling more than 10% in that year. earnings just in from athletic retailer finish line. they earned 53 cents per share matching analyst estimates. revenue above forecasts with same store sales rising by 5.1%. americans will be splurging on candy and costumes this halloween a new survey from the national research federation found this year. expected to reach $8.4 billion. >> i love this music. >> we used to play that for the clown for mcdonald's years ago.

freaks me out. speaking of nightmares, that's an all time high in the survey's history. that $8.4 billion. consumers expected to spend $82.93 on average. and that is nearly nine bucks more than last year. >> costumes are expensive. if you're buying for a bunch of kids. >> you happened to be talking about what do you go to party city for. this is their super bowl. >> this is where you head to party city for. still want to see that clown. >> nice fade. do that again. >> kbru guys still have it at "squawk box." >> guys behind are working it. all right. markets seeing gains on the day after the federal reserve chose to keep interest rates steady. many betting they won't raise rates close to november instead opting for a december hike. janet yellen saying it's the idea of timing that's divided some of her colleagues at the fed. >> there are risks in waiting

too long to remove accommodation. we need to take a forward looking approach. i've also advocated on making policy forecasts based on where the economy is heading. and taking account of risks. >> we're joined now by aaron klein, an economic studies fellow at the brookings institution pen by george selgin at the cato institute. thanks for joining us this morning. >> good morning. >> good morning. >> aaron, if we could start with you. just give us a sense -- there's a little bit of chatter out there that we have some bit of gridlock within the federal reserve policy makers. you had three dissents this time. is this just the nature of the cycle or something else going on there? >> i think we ought to celebrate a little more dissent. when people in the fed vote their mind and they're conscious, i think that's a good

thing. i think chair yel deny the right thing in keeping the rates where they were. you raise the interest rate when inflation is coming. frankly we could use more. growth and inflation. but having a couple dissents to me is a good thing. monetary policy choices are hard. this isn't necessarily clear cut. so i wouldn't read too much into that. >> and george, do you think that the fed either missed an opportunity or needs to kind of get on with something? or are they okay? sort of keeping things where they are for awhile? >> i actually agree with aaron. the fed can only raise interest rates successfully if the markets are ready for it. and if it doesn't cause a contraction which raising rates prematurely can do. right now the numbers don't seem to warrant the fed tightening. and if it tightens too much, the end will be a more sluggish recovery even than what we have now. >> isn't that a chicken and egg

scenario? the markets have to be ready for the fed so the fed has to jawbone. when the fed's been jawboning and crying wolf, many don't believe when it jawbones. at some point you've got to raise rates. volcker didn't think you needed to have the markets ready to go. >> remember volcker was raising rates a at time when inflation was very high. now we have a situation where inflation and spending are both low. raising rates in this situation could put downward pressure again on market rates. there's a difference between the fed controls which it could raise but which also means tightening. and what happens with other market rates. and that depends on the current state of the economy. there are better things the fed could do to get rates ultimately to go up. >> and i am a little concerned about the fed in the market. it feels like a bad episode of charlie brown where it talks

about raising rates and then yanks it away. i think they've got to be consistent and stop threatening that the next hike is always going to be at the next meeting. >> but aaron, you know, i -- everyone here we focus on that next move and when it might be exactly. and it seems like it's been deferred a few times, but maybe the bigger picture here. you know, the fed lowered its longer term outlook for what potential growth could be and therefore how far it has to go in raising rates for the next couple of years. isn't the conclusion that the fed thinks there's not that much of a hurry to get to some place that isn't much different than where we are now? >> the big news hasn't been the fed funds rate which has barely moved at all but the decrease in the natural rate of interest. the long-term projection of the national rate of interest is almost half of what it used to be. and that's a real change. and that plays through both the path of the fed and the future and also the economy.

you know, it seems as if the fed thinks that our potential to grow is smaller now than it was five or ten years ago. that's far more troubling. >> george, you know, given that backdrop a lot of people say if the market gets great comfort that rates are going to stay low for very long, that's when you have excesses built up. you have distortions in the markets and that raises its own risks. are we at a point where that has to be front and center right now? >> well, it does. but i also think that the fed has to put more emphasis on other things it can do to revive market activity. indeed, the interest rate is now set on reserves. it is as aaron suggested too high. it's discouraging lending which really has to be revived if you want to get economic activity going. and oddly enough, we're in a situation that the less lending we have, the lower interest rates tend to be because there's an overall lack of productivity

in the economy. the fed needs to work on the regulatory end of things making it easier for banks to lend creating more opportunities for them to lend by backing off on some of the over stringent lending regulation that it's been doing since the crisis. that'll revive economic activity and ultimately that will force market rates or move market rates upward. that's the long run strategy the fed needs to be thinking about. >> meantime, we're going to have a new president relatively soon and beyond the election and what impact it might have, how does what the economy might look like under either of these presidents come into the fed's decision making and what can we expect out of washington in that scenario? >> well, i really think washington needs to get its act to gt. the fed can only do so much. we need fiscal policy reform. we need a large infrastructure investment to get this economy moving now and in the future we need sensible tax reform to unlock potentials for growth and

make the tax code more efficient and streamlined. fundamentally that's going to take congress and a new president. so the fed can only do so much. i think it's time for a handoff to have sensible smart economic growth. >> george, what are the chances of that? >> right now nate silver says it's about 65/40. clearly it's shifted a bit. i have no idea what president trump would do. one minute he's for infrastructure, the next minute he wants to cut it. there's no consistency or clarity. and markets like certainty. >> george? >> i have to agree again with aaron on trump particularly. i have no idea what he's going to do and i don't think markets have any idea what he's going to do. and that is itself a problem. it's similar, though, to the problem that markets are never quite sure what the fed is going to do because it talks one way and then it does something else. so we've got uncertainty all around. trump certainly won't help. but as for hillary clinton

having policies that will take us in the right direction, i doubt that as well, unfortunately, because what we need is productivity. and encouraging banks to lend more and take on more risky projects which i don't think is her cup of tea. >> so george, on that point i disagree. she's outlined a very detailed infrastructure proposal, corporate tax reform is something that she and speaker ryan could work together. you know what you're going to get with senator clinton. it's a steady hand, it's an experienced hand, and it's a pretty detailed set of policies opposed to kind of a random set of outbursts that vary from one day to the next. >> we'll see if the formula for productivity is in any of those. thanks much. programming note. the topic will be one discussed during the debate. don't miss cnbc's your money your vote coverage monday at 9:00 eastern time. coming up, we're going to talk media stocks and possible

deals. we'll talking about viacom and cbs. in fact, we'll cover it all. that's after the break when we have anthony de cle men tee joining us. "squawk box" will be right back. there's the clown. this woman owns this house, with new cabinets from this shop, with handles designed here, made here, shipped from here, on this plane flown by this pilot, who owns stock in this company,

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leslie moonves recently said cbs and viacom are not in a deal. but would it make sense? to talk about this is a ga is anthony diicaliclementi. all the guys show up and moonves was there. viacom interestingly didn't -- wasn't there. tom duley says he's leaving on the 15th. i reported it was his own decision. the question is why and i don't have the answer to that. some people might speculate, well, he sees a cbs deal as something that is going to come down. >> somebody still needs to replace him. >> once again it raises the specter of that as a possibility. you think it makes sense? >> taking a step back, what les

moonves said this week, he is not in active with viacom. what does that mean? why doesn't he say we're not in any discussions. are they negotiating price? but i think what you said might indicate that viacom indicates that it's an internal ceo search. that suggests the longer term is let's keep this thing in a holding pattern with the longer term outcome. some sort of reunion between viacom and cbs. you ask me does it make sense. and we pub established a pretty detailed merger model earlier this week. i think if you look at it in terms of acquiring vooichl come. even if cbs pays a 25% premium, you get 20% accretion. there are a lot of investors who think they can pay no preemup

and if you factor in cost synergies, you can get 30%. now what investors say was i don't care because viacom is a set of troubled assets and you put these companies together and now cbs and les moonves is saddled with crappy cable networks. >> a world that we know is becoming more and more run by over the top platforms or skinny bundles and the question of course becomes anthony, what is a must have? what's a must carry for these ott streaming groupings and/or skinny bundles? and you don't come up with a lot of viacoms. >> another piece of news that came out is directv now. at&t is going to launch a skinny bundle service before year end. most of the media companies are on board for that. it's unclear if viacom is. they renewed their at&t deal. but we don't know -- i mean, at&t says very aggressive price

point. okay. then the question is you've got 80%, 90% of the networks in it. so how can they make money on a very low price point? and he's talking about lower cost for digital product. doesn't have to run a truck to your house the way a cable company would. in the longer term, my question is if the skinny bundles whether it be slink tv, playstation view, will hulu live be profitable over three to five years? if not, then the question is what's the longer term game plan? obviously these are all very strategic products being launched on the market. >> from the point of cbs investors, this would be perhaps an unnecessary complication that's been a clean story for cbs in terms of what's going to work. but would having those other assets to try and position for this new world not be something that you think les moonves might want to attempt. >> les is thought to be the broadcast of tv. he's been very successful programming the cbs network. he's a tv content guy.

can he take his content expertise and leverage that to make the distribution, the programming networks at viacom really succeed? that's an open question. i like cbs because they don't have a lot of extraneous networks. it's one must-have network with five to six times the average rating of any of the cable networks. so they can be nimble and do things like cbs all access. i think les doesn't have to be forced to do a deal. if he does a deal, it's not necessarily a bad thing for cbs stock. that's where the market might be getting it wrong. it's factored in right now. but if that head line hits the tape and david you'll report it. >> i hope so. thank you. that's my expectation. >> i think it's possible that cbs is actually up on the day and people debate that. >> it could depend on what we see as the terms. probably over the longer haul here, it's probably more likely than not. you expect he would be saying exactly what he is. we don't really need to, don't

really want to. >> but the investors who own cbs today who say well i would sell it if they put the companies together are basically saying they're going to pay a lower valuation multiple if you're saddled with this slower growth. >> a movie studio that's got serious issues too. >> you know, cbs shouldn't say take viacom in assuming that paramount is worth $10 billion. i mean, that's something reports have come out $8 billion to $10 billion, and i don't think that's a real number. i think anyone long viacom in the paramount valuation, need to think about the substance behind that. >> let's talk about two other real numbers or maybe not real numbers. yesterday "the wall street journal" reported that publis has said it got numbers they overestimated the average time watching videos. this is what facebook said.

what does that tell you? that's kind of a shocking discrepancy. >> yeah, it's surprising to the market this morning because it taps into the theme of when a marketer or a branded advertiser buys space on google and facebook, they're relying on the transparency and the honesty of google and facebook's first party data. when you rely on a third party nielsen who doesn't have a vested interest. so the accusation is going to be facebook's grading its own homework, however you want to put it. if you're getting the same level of brand awareness uplift for kind of a higher amount of time spent watching the ad. then it implies a higher on facebook's ads. >> wait a second. that is like the best silver lining you could paint on any of these things for overstated. how do you overstate by 60% to 80% when you're a network based on tracking this stuff and this

was supposed to be the perfect way. >> okay. let me ask you. you're in charge of allocating ad budget. does this change how you feel about allocating more ad dollars to facebook? >> that's my question. do you change your rating on these companies as a result? does that change your opinion or not? are they going to be able to charge the same premiums? >> so i've got to believe that, you know, the time spent on video, the time spent on mobile is just a secular trend that is growing fast enough -- >> then why lie about it? >> i don't think they intentionally lied. >> you think they just don't know? >> it was a measurement convention that they used supposedly that was -- >> yeah. they're change it from average video views watched now to average watch time and they've been clear about how they're changing the metric. and i'd be upset if they're now changing their metric. do you think it's going to have an impact on the dollars or the amount of ad -- >> so you don't?

you're the analyst. >> if i try to quantify it, roughly $2 billion of facebook's revenue is video ad today. does it mach me second guess whether i'd put another step function of budget to video revenue? i don't know. i have to think about that. but i think you just have so much of a sector for online live video that probably won't make a difference. >> okay. thank you. when we come back, we'll talk to marriott ceo arne sorenson. we'll be right back. coming up, coconuts and avocados are the new cash crop. with prices soaring, will they become as popular with portfolio managers as they are with hipsters? a look at two hot farming markets and what's driving prices higher. so get your guac and coke kncon milk ready.

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welcome back, everybody. avocado and coconut prices have spiked to record levels this year driving fear through the hearts of hipsters everywhere. susan li is here and joins us with more on the cash crop. >> okay. so the modern superfoods avocados and coconuts in tighter supply. let's start with avocado. prices have spiked to twice as in 2015. the u.s. imports 75% of the avocados we eat. and many come from mexico.

there was a light yield this year to adverse weather. which means prices rose exponenti exponentially. and avocados have caught on in china and europe. so now you notice you're paying $1.95 instead of $1.80. coconuts as oil and water has been on the move as well. coconut water has been a huge trend the last few years. coconut water production is surging. the philippines the highest exporter. so with more dmond for toke nut water, that means more harvesting of young coconuts which means less availability for coconuts to make coconut oil that goes into industrial goods also like detergents as well. and we've seen coconut oil close to doubling in the last decade and with el nino typhoons impacting or the largest coconut producers, higher demand. you know where that equation is going.

>> i do. we have to wait for the new healthy food fad to move along and bring those prices down. thank you. when we come back, marriott international ceo arne sorenson on the company's deal closing with starwood. we'll be right back.

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done deal. marriott completes its merger with starwood. drones taking off. >> look up in the sky. it's a bird. >> it's a plane! >> a new way of deliberating the sky. plus a selfie could make your next uber a little safer. the final hour of "squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box." >> welcome back to "squawk box" here on cnbc. i'm becky quick along with mike santoli and tyler mathisen. good morning. >> what happened to faber? he got older and heavier. he's running down to the exchange. >> you're kind enough to step

in. we appreciate that. futures have been higher all week long every morning until this morning. there are some red arrows today but these are modest declines at this point. dow futures down about 25 points. s&p futures down by five points. of course stock market has had its best two and three-day runs over the last several sessions since july. the nasdaq down 8.5 points below fair value this morning closed at another all-time high yesterday. take a look at oil prices this morning too. oil prices down by about 16 cents. $46.16. crude oil was up sharply yesterday once again. so if you look over the course of the week, we have seen some pretty big builds into wti. and among today's top stories, let's get you up to date. regulators considering antitrust action against apple over its domination of the nation's smartphone sales. apple and others accused of keeping surplus models of older iphones off the market.

in other tech news, yahoo confirming that information from at least 500 million user accounts was stolen by hackers. the company says a state sponsored group accessed names, e-mail addresses, and potentially security questions and answers. and a programming note, cyber security in focus at our upcoming cambridge cyber summit in partnership with m.i.t. and aspen institute. we'll talk to top names in government acidemia. information available at cnbc.com/cybersummit. and the former socgen trader has been ordered to pay 1 million in euros. after costing the bank 4.9 billion euros.

kerviel. had allowed those trades to happen. >> so he's getting -- >> quite a reduction in his fine. >> getting off cheap. >> wonder what he's going to do with the extra euros he doesn't have to pay. among today's stocks to watch, twitter. mark mahaney downgrading to underperform. he's predicting a 25% drop in the stock because of weak ad revenue. walmart upgraded to overweight at barclays. the firm says investments in improving the labor situation appear to be resonating with customers. now to our news maker of the hour. marriott ceo arne sorenson. the hotel company clearing regulatory hurdles and closing its deal to acquire starwood for $14 billion just this morning. now the largest hotel operator with 1.1 million rooms and 5,700 hotels. thanks for being here today. >> glad to be here. good morning. >> you said that size matters. bigger is better.

why? >> well, it really starts with the loyalty program. loyalty program strength depends, of course, on knowing our customers, delivering value to the customers, but a lot of that value is about the range of change. so if we can offer them a place to stay, no matter where they're going physically, no matter what level of luxury they want all the way to fairfield. whether they want a lifestyle hotel, we make that program that much stronger. and that allows us to create this big ecosystem of direct relationship with our customers. >> although you've said for now that the two preferred customers programs, these loyalty programs are going to remain separated. >> although last night we announced that customers can go online, link their accounts. will match that highest elite level in the other program. and they can transfer points from one program to the other. so there's a high level of functionality already. it's going to take a little longer to get to a place where

there might be just one program. because we've got technology issues. we've got external partners, credit card companies, time share companies. and we got a whole bunch of customers who are very interested in the way these programs evolve. and we want them involved in the conversation. >> what i see is the lapel pin. it's a "w" for w hotels. if you turn it upside down, it's "m" for marriott. that's why this merger works. it's 30 different brands you have. >> 30 brands. >> do you need 30 brands? will you have 30 brands ten years from now? >> the answers to those are probably no. do we need 30 brands? probably not. will we keep 30 brands? yes. why? it gets back to more choice. >> but then how do you differentiate the brands, one from another? i mean, that seems like a hard trick. >> yeah, no, they've been competing against each other. >> right. >> so they have been drawing distinctions as it is.

now, we will over the next couple of years with our hotel owners -- remember every hotel we've got is owned by a separate real estate investor. which is one reason we don't change those brands overnight. but with them we'll say what are the product and service attributes for each one of these brands so that the customer has some sense what the distinction is. >> are you going to be encouraging these brands to compete against each other. is there going to be more of a symphony and everybody working together? >> well, it will be both. our business is -- the industry is highly dispersed. and pricing is available every night for every hotel. we do think there are companies of scale that can be achieved in cost side and revenue side. but on the revenue side it's going to be more about driving occupancy than rate. individual hotels in some respects do compete against each other. >> that's a weird setup to have internally. have you figured out the entire plan on how you do that?

because i don't want my division "a" beating the heck out of division "b" with price cuts. >> well, that's right. but every hotel is different. and so some locations are going to be better than others. some products will be better than others. and generally hotels settle into a relative positioning that makes sense. >> part of as you said owning that relationship with the customer through the loyalty programs means having people skip those booking systems like the pricelines and those people who have to basically collect a commission for booking those rooms is are there any new initiatives on that front? do you see that as a direct relationship with those services? >> well, it's both. around the world you've got different players who are trying to get in the reservation business or compete with us in one way or another. sometimes they're great partners. so you think about expedia. we've got a great relationship with them. if they deliver to us a very occasional leisure traveler who really doesn't know hotel brands, doesn't have any real

reason to be in a loyalty program, that could be good in an incremental business. if on the other hand their aim is to try and get into being in the middle of the relationship that we already have with customers, that is simply a new expense i team. that gets us back to this loyalty program. if we know you and can deliver value to you, you're going to come to us directly. >> i can see why having the relationship with the customer directly between you -- with no intermediary works for you. tell me as a consumer am i better off if i book my room through you directly, through w, through marriott, than going through expedia? am i going to get a better rate, a better room, early checkout? >> yes, yes, yes, yes. you're dramatically better off. >> even on the rate? that's the reason -- >> even on the rate today. so the longest distinction has been about points. you can't get point ifs you book through a third party. >> the founder of kayak

yesterday, he said exactly the same thing. you'll always get the better deal if you go direct to the hotel brands. >> and free wi-fi if you book direct, free mobile service ifs you book direct, keyless entry will be driven by -- again, part of the loyalty program and most recently cheaper rates. and we did that in part because even though the rates have for years been the same through these channels, there was a popular perception you'd get a cheaper rate through a third party. and it's never been true, but the advertising programs have sort of encouraged that. so we say you know what? the best way to prick that bubble, if you will, is to say we're going to give you a discount if you book directly. >> bun of the things you've said is you have a lot to do. what is at the top of your to do list? >> loyalty is the first thing. since we announced this deal, the spg members have said what's going to happen to us. marriott which is a competing company is coming in and taking over. we love spg. and so they've been chatting.

all these social sites where the frequent travelers get together and debate this stuff. so we rolled out something for them today. and we're excited about that and obviously very interested to get the reaction today as that news comes out. i think the next immediate step is to stand up the human side of the organization as quickly as we can. >> what does that mean? >> who the leaders are going to be around the world. there obviously is change and any change can create anxiety. the sooner we can get that resolved, the sooner the whole organization is looking towards the future. then after that you've got questions around technology and systems that are used and procurement platforms. and reporting platforms. there's lots of stuff to do. >> could we possibly get some fresh towels for mr. sorenson? you've got 30 brands. but one you don't own is airbnb. how disruptive is it to your business long-term? how big a threat is it? >> well, we're watching.

i think one of the most comforting things is that even as airbnb has grown dramatically, we have been performing at record occupancy and building occupancy year after year. so it tells us it's not life threatening. we think why? because it's mostly focused on leisure. and mostly focused on folks who otherwise probably weren't traveling before. or if they were traveling they were maybe staying with a friend. because the rates are different. i think going forward they're big. so we'll have to watch them. i think the competition may in some respects get easier, not harder. why? because the more they use dedicated units -- think about them as microhotels as opposed to the extra room in your place. it's not that different an experience from a hotel. so then it's a question of what's the location, what's the rate, what kind of service do i get, what's the risk -- >> if i'm traveling with a big party which is what i do which

is why i use some of those services. it's better to get a house with five rooms. >> and that's a place where it's a different kind of experience. i think we'll do some things there too. i listen to my adult kids, for example, and they will -- if they're traveling small they're start with a hotel company only if the rates are too high they might check elsewhere. >> i travel with 15, 17 people because i've got brothers and families and we're all traveling together. it's a different experience. let me ask you while we have you here. what does the economy look like in the united states based on your brands? because the fed opted not to raise rates just this week. we're thinking maybe december. but you've got information not only of what you're seeing now but what the bookings are out to that time? >> again, most of individual travelers book very shortly before they stay. so our long lead is about group. group is a somewhat different

dynamic. i think it won't surprise you to know that we see the economy growing anemically in the united states. it's not our business is up year over year but not in a robust way. and we see corporate travelers, corporations particularly being somewhat cautious about their spending. not retrenching totally, but also saying, you know, we're not quite sure what the future holds. >> are security concerns affecting your bookings most in europe? can you trace it? >> the markets that have been hardest hit, brussels, france, and istanbul. >> you feel it? >> yeah. turkey the most significant today not surprisingly. you've got events not only in istanbul but a geopolitical situation which is very complex. so occupancy is down 20, 30, 40 points year over year. >> how much is extra security costing you? is it a major -- over the past

15 years, you probably had to invest much, much more. >> i'm sure. >> and spend much, much more. >> collectively across the world and again these are expenses by the hotels and it's tens of millions of dollars. we have many areas in the world we've got dogs, stopping cars. >> quite a business changer, isn't it? >> it is. and it's an interesting one because we are an open hospitality company. we tend to welcome people and we want people from the neighborhood to be there as well. >> sure. >> what about just in north carolina? not only from what we've seen the last few nights with the violence that's played out in charlotte but from the longer term where you have companies pulling out, events that are pulling out and not going there because of the concern about the new laws in place? >> yeah. it's frustrating, obviously. you know, you take it from the perspective of the business we're in. but so often these political matters come up in a way that is driving divisiveness between

people and it's really often unfair to the local groups. so when indiana made their move a year or two ago, maybe, yorm precisely. we spoke out against that. we said it's unfair to the folks in indiana who are very hospitable and welcome everybody. and here laws are put on the books to divide people and say certain people are not welcome. it's obviously not good for business. indiana moved quickly to repair that. north carolina it's a little bit more complicated in some respects because you've got charlotte moving, the state moving, folks that are being sort of pushed apart, i suppose. and somebody needs to find a way to sort of step down from that conflict and say let's resolve this and get it behind us. >> arne, twoept thank you for coming in on such a big morning. congratulations on something you've spent a lot of time putting together. >> yeah. >> now you can flip your pen to "m" for marriott. >> i should get a motor on it so

it turns. thank you. we're watching crude prices this morning ahead of next week's opec meeting. jeff is following this? >> reporter: i just had an important interview i think with the russian finance minister. there continues to be this news beat coming out of algeria that we will see some form sof cut or freeze with the iranians on board and ultimately the russians will sign up to that. when i sat down with the finance minister, though, of russia, he clearly gave the impression that he doesn't see too much value at this point in a freeze given that he makes the case if there is any modest increase in price as a result of a freeze, u.s. shale producers will quickly step in and eat up that extra margin. let's hear what the russian finance minister told me. >> translator: therefore a

freeze on the part of several companies after a growth in the tempo of the economy in a whole is declining. which could lead to a rise in oil prices. therefore in our plans, in our budget plans we are making decisions on the basis of a conservative approach when planning prices. we are basing our plans for the next three years on $40 a barrel. >> reporter: the finance minister also went on to say as they're preparing their budget for 2017 through to 2019, they're looking at ways of helping companies in the oil and gas sector in russia stimulate production through tax incentives. now, that to me doesn't sound like an administration that is ready to sign up this month to an oil freeze. but we will wait, we will watch, we will see what opec can agree and whether the russians can

come onside. but for the time being to my mind, this sounds like the russian finance minister just throwing a bucket of cold water on those who might be getting carried away and thinking oil prices are going to shoot through $50 a barrel some time soon. back to you guys. >> jeff, it reminds me a lot of what we heard from the fed here in the united states just this jawboning, jawboning, jawboning and never seeing the stuff. the markets tend to be skeptical every time the jawboning starts again. >> reporter: i absolutely agree with you. i think the challenge the russians have is they've had two years of recession as a result of sanctions. their budget deficit for the first half of the year was over 4%. they're struggling to get that down. the finances don't look great. there aren't too many incentives for them to actually hold back production at this point and reduce the revenue they get from energy. because it makes up some

40%-plus of the contribution to government spending. so it's really quite difficult for them to sign up and buy into an output freeze if they don't feel it's going to deliver extra revenue at this point. back to you. >> thank you very much. when we return, your money your vote. we are three days away from the first presidential debate. donald trump and hillary clinton will go head to head about the jobs, economy, and more. former cea chair during the clinton administration laura tyson will join us on set after this break. always obvious.ies aren't sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances.

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know three days away from the first presidential debate. one topic that has topped the list of american concerns is the state of the economy. joining us now is laura tyson former chair of the economic council of advisers under president clinton. she's also called a surrogate for the clinton campaign. i don't like that word in that context but we get it. you have ties to the clintons. at any rate, there are two competing tax plans on the table. mr. trump's, he has packaged as

he does with messaging brilliance. mine is about growth. okay? critics of mrs. clinton's plan will say that hers is about wealth redistribution and punishing as it increases tax on the wealthy. how do you respond to that? is it justifiable and is there a messaging deficit on the clinton side? >> it's hard for me to answer questions about a messaging deficits. don't do messages. what i will say is thinking about how you started that. the trump economic plan or tax plan. the tax plan itself has been all over the map. it's kind of hard to call it a plan. it hasn't been very deeply disclosed. when it's been disclosed, the numbers keep changing. there's complete confusion about whether the carried interest 15% would apply to carried interest or not. so i want to start with the notion that the plan itself is

really unclear. and then secondly, i'm going to say that basically when he gets up there and says this is my plan today -- this is today's variant to my plan, he basically says don't worry about the fact that this could by itself really increase the deficit. don't worry about the $4.4 trillion to $4.9 trillion hole over ten years that my tax cut creates. i give you that range because of the uncertainty. don't worry because we're going to grow out of this. but actually there are no serious economists any place who believe that. there are no numbers to support the fact that his tax cut will generate so much growth which along with so much benefit from deregulation, again not measured that the tax cut costs nothing. that there's no deficit. and then when people point out that there is a deficit that will increase, he says we'll get rid of it through waste, fraud, and abuse. then it will take just pennies off of the budgets of all of the

government programs. if you add that up over ten years, it's almost a 30% cut in non-defense discretionary spending. do you know what that includes things like? veterans health benefits. so the plan doesn't add up. >> so you're critical of the idea that he has changed his plan over time among many other criticisms you would have. but that he's changed his plan. but couldn't you at the same time say it was responsible for him to change his plan because the first one was scored a at a $11 billion ballooning of the deficit and he has brought that down. and whether you agree that there is or is not growth that occurs because of the fiscal stimulus, you'd have to say that changing the plan may have been a responsible thing to do. >> but i think at the core of the plan is irresponsibility. because whether -- >> is a fallacious argument.

>> whether it's now down to phi. say the estimate right now is that they're somewhere between $4.4 trillion and $4.9 trillion in lost revenue. and that range, that missing $1.5 comes from a different uncertainty. what does his 15% apply to? what does it apply to? so we've got this hole. we have this hole. that is at the center of his plan. is the notion that i will cut taxes. i will cut them in a way that disproportionately benefits the top. it will create a big deficit. we can debate the size of the deficit. and then don't worry about it because we're going to have the supply side economics. >> is there no growth that results from cutting taxes or does it not get you back to $4

trillion? >> by the way, the evidence on cutting top rates as he's doing is that there's no growth effect. if you kind of look at the literature -- >> zero? >> what about the regulatory piece of cutting back regulation? >> so regulatory is a different set -- a different argument. all i want to say here is what he's assuming is he creates a big hole in the deficit so therefore he has to come up with big numbers to fill the hole. his number on the benefit to the economy from deregulation is also not a credible number. he's talking about numbers that are like 2% of gdp. >> i was going to say 5% gdp to get back to there. >> it doesn't -- and also let's think about a key part of what he's proposing here because i do think this also should matter and does matter to voters. when you say where is the biggest set of deregulatory effects. he doesn't believe in climate change. he does not believe in climate change. he says it's a hoax. he says it's creation by our enemies, it's a hoax. therefore, a lot of what he is

proposing is deregulation in the energy field. and frankly i don't think either the u.s. or the world can step back from its commitments made in paris which is one of the great international agreements of all time to begin to take serious multi-year steps on climate. so deregulation for me like when you actually break it down, his numbers don't add up. they're much too big numbers in terms of the effect of deregulation on growth. second of all, look where he's taking the deregulation. the hit is on energy. >> laura, thanks. appreciate you being with us. we'll all be watching monday night, won't we? >> yes, we will. >> i'm not talking about "the voice" either. the first presidential debate, of course. don't miss cnbc's special your money your vote coverage. that's monday night at 9:00 eastern. everybody's going to be watching hofstra university. >> that's right. when we come back, your next package could arrive at your doorstep from the sky. we're going to talk about the drone race next. ♪

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♪ well, amazon has received most of the attention. it does have competition for drone delivery. u.p.s. taking to the sky for

delivery first. and morgan brennan joins us with the details. >> reporter: hey, becky. so u.p.s. taking to these skies yesterday to test a commercial delivery of a package via drone making it the first-ever major transportation carrier to try this type of delivery attempt on u.s. soil. so the delivery scenario, a child forgot her asthma inhaler after heading to day camp on a remote island, children's island behind me. this was a three mile eight minute mission over water. it was conducted by sci-fi works. and under the new faa regulations that rolled out bb sci-fi is running regular experiments to develop its technology and collect data to contribute to a viable drone business model for u.p.s. >> the total cost of ownership of drones to actually have a full drone delivery fleet is not determined at this time. but the cost per mile is pretty low. maybe as low as 5 cents per mile

on actually delivering, moving the drone. >> reporter: so there is a lot at stake. analysts say drone technology is key as consumers continue to buy more and more online and do so with faster and faster delivery expectations. and the competition is fierce. you've got amazon conducting advanced delivery tests with its primary drones in the uk. dhl has been using a copter in germany. and wing drones are delivering burritos at virginia tech nap is just to name a few. but right now with the data being collected and regulations that are being sorted out and built upon, it's really these type of deliveries, these urgent deliveries to remote locations that make the most economic sense from a package delivery standpoint where drones are concerned. guys? >> well, burritos to college students does sound like an urgent mission. thank you very much, morgan brennan. appreciate it. for more on drone delivery, let's bring in tech crunch

senior writer darryl etington to talk about how feasible this subpoena. darryl, it seems when they first announced they were experimenting with these things it was more to convey a message we'll do anything for the customer. we're going to go the extra distance for that. is this now close to reality to being cost effective and routine? >> i wouldn't say it's that close. amazon started doing this like a marketing ploy rather than anything else. but the reality of the situation where the volume they have and the amount of deliveries they make and the time they want to make them within, it's going to become a necessity almost to deliver via drone in the future. the u.s. regulation that was just passed does help. it means that pilots can fly without a aviation license drones but they still require one pilot per drone and line of

sight except with special permission. so that's going to be difficult out of fielding commercial fleets. >> when you consider just exactly how much merchandise can fit in a truck trailer or even just kind of a van, a u.p.s. van or something like that. how many drone dos you need to replace one of those vans? it seems maybe it's going to be around the edges of a very specific types of deliveries. >> true. yeah. it probably will be last mile. and i think one of the most recent tests that we've seen is with mercedes. they've been working with the starship technologies group and they've shown kind of a demonstration of how that might work with vans doing the neighborhood portion and then the door to door from these centralized vans are fleets of drones lifting off from the vans and delivering the individual packages that sort of not even last mile but last few hundred feet. >> so basically the drone taking the place of the driver who would walk the box out of the van? >> yeah. exactly. but you could see how that would actually maximize efficiency a lot. that you would not have to continually stop and get out and

then get back in. as you're driving at a relatively slow speed, the drones could deliver the packages, do that last door -- you could see a huge increase in terms of efficiency. >> darrell, it makes sense with the example we were watching where you fly out to a remote island, not a lot around. where i get confused about this stuff is a busy urban area where there's already a lot of traffic, already all kinds of things floating around and not a lot of space. if you have a lot of drones flying through that area, what are the dangers that could exist from that? >> well, there are a lot of potential dangers. it's not just from physical traffic, but it's frequencies, radio waves, there's all kinds of things the drones would have to contend with including pedestrians. and another key key thing is what happens when the drone fails? like, you have to have redundancy so when the failure happens, it does something that's safe for all involved.

those are things being worked on by a lot of technology companies and what has given that a boost is actually kind of the computer vision work done for things like self-driving cars. there's tremendous interest in that area. that's resulting in a lot of image processing, lowering the cost of those sensors. so all that stuff is coming together in the same way that cell phones helped usher in the consumer drone revolution. this is going to help with the commercial drone side. >> the regulatory thing you mentioned, line of sight. that limits what these things can do. unless they change that, i don't really see it as all that viable. the other thing i would question is what about the weight constraints these things have? i can see them delivering an epipen to someone who needs it or a burrito to someone who needs it desperately, but a case of wine? even something like that would seem to be beyond the current capacity. >> yeah. i think some of those improvements that i was talking about with consumer drones like

we've seen the battery life go up. we've seen the weight capacity go up. so these things are changing and they can get -- you could see them delivering heavier loads especially if they start using fixed designs or play around with different ways versus the traditional quad copter you're probably used to. another thing starship technologies, that company i mentioned earlier, just yesterday announced they're going to start trialing in washington, d.c. of a ground drone. so these would actually just roll and they look like little six wheeled coolers that roll around and have a 40 pound carrying capacity. >> a six wheeled cooler that arrives at my house, now you got me, man. >> on a friday afternoon. >> on a friday afternoon. i'm thinking of that already. darrell, thanks very much. appreciate your time. >> thank you. all right. coming up, harvard misses the grade. the endowment fund losing money. we'll tell you why when "squawk box" comes right back. hey look,. [music] shawn: look at those pearly whites, man.

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sharing a ten by ten room,ng threestruggling.nding, i rent this place and then i started home sharing. my roommates help out all the time. they are glad to meet the guests and that opportunity that airbnb has given me is such a priceless gift. i was able to take three months off to take car of my family during a family tragedy. the extra income that i get from airbnb has been a huge impact in my life. harvard's endowment fund lost 2% during its fiscal 2016 that ended in june. that is the steepest annual decline for the fund since the financial crisis. it lost 27% back in 2009.

the fund was hurt most by a 10% loss on its stock bets the previous year it saw nearly 6% return on its investments. harvard has now lagged its rivals for several years. the school has had three investment chiefs since 2005 and is currently looking far new one. mike? go. apply. >> apply to be the adviser or at harvard? >> either. coming up, can a selfie make you safer? uber is rolling out a new feature. we have the details when "squawk box" returns. a basketball costs $14. what's team spirit worth? (cheers) what's it worth to talk to your mom? what's the value of a walk in the woods?

the value of capital is to create, not just wealth, but things that matter. morgan stanley

welcome back, everybody. new this morning microsoft announcing plans to roll out a new security feature in the uber app across the united states. the feature is a realtime i.d. check that will prompt an uber driver so share a selfie before going online. joining us now is joel sullivan. he is the chief security officer for uber and andrew shuman who's vice president for microsoft corporate. gentlemen, welcome to both of you. it's great to see you. >> thank you. >> good morning. >> joe, why don't you tell us a little bit about what this is and how it works exactly. >> sure. we heard from drivers that they really care about our efforts to protect their accounts and we heard from riders that they want to have confidence that the person who picks them up is the

person that we've screened. so what we've done is built a technology feature so that when a driver comes online, they're asked to take a selfie. we then use microsoft's technology to compare that selfie to the profile photo we have on file. and that helps us bring an extra level of confidence to the security of the ride. >> andrew, why don't you explain how the technology itself works. is this just facial recognition software or something to ensure it's the same person? >> exactly. microsoft launched the services about 18 months ago to let different application developers around the world really be able to make their applications very natural and easy to use. and these services include things that let you do speech or natural language or image search or other pieces. and in this case we're leveraging a lot of the stuff that's gone on in microsoft research and in the bing technology stack that lets you do comparisons of two facial

images. >> joe, let me ask you two questions, if i might. number one, i assume you're doing this to address either a real or a perceived problem. question one is, were you finding that sometimes people were getting picked up by folks who were not certified or credentialed by your operation? and was it a problem, in other words, that the guy i thought the guy who was driving wasn't the guy. and number two, do you use fingerprint and fingerprint security and run them from a data base? and if not, why not? >> so to answer your first question, our goal here was to kind of address a low frequency but high severity issue. from the standpoint of a driver, they've invested a lot in their account. they've gone through an extensive screening process. it doesn't involve fingerprints but it does include a county

background check. they've gone through this long process and investing in a feedback rating. thap value that account. it's attached to their livelihood. so in a world of account takeovers, data breaches and things like that, we want to make sure that these drivers can feel confident that no one ice going to steal their identity and account by stealing their password. as a rider, if you see the photo that doesn't match, it happens rarely and the not typically a malicious purpose but we don't want it to happen. >> in other words, does the driver have his brother sub for him or something more nefarious than that? >> in the context of identity theft, it's typically to generate a fraud or something like that. not to actually initiate a real ride. >> andrew, why don't we talk a little bit about where else this technology is being used. how people come up with it and

where we've come. like, how good is this facial recognition that you can do right on your iphone at this point? >> that's a great question. yeah, we've been leveraging this technology in a lot of different place. it came from some of the core things we use in bing image search. a lot of people search for, say, celebrities or different famous people. and you have to get better and better at having a core algorithm that understands the features of someone's face, understands the various pieces that you're looking at. and as you might imagine, the human brain is quite good at understanding faces and recognizing faces in a variety of settings and places. and so our opportunity here is to make the software more and more natural like that so that it starts to compare features and be able to identify a person based on their photo. >> so let's say you're an uber driver. you decide one morning you're going to shave your beard. what happens? >> right. right. well, that's where these tests are helpful. i mean, some of these examples we can handle that kind of

situation because we're using other features just like your brain does to be able to compare the two things and recognize me even without my beard. in some cases, we may need you to have a new profile photo uploaded if you're gone but most the time these kinds of general facial features will work. for example, we do have a feature that prompts the uber driver to remove their glasses so we can make a good comparison if they're wearing glasses but weren't in one of the other photos. >> uh-huh. >> interesting. andrew, joe, thank you very much for joining us this morning. >> my pleasure. >> my pleasure. when we come back, jim cramer joins us live from the new york stock exchange. give us a preview of "squawk on the street." we'll take a look at futures right now as we go to break. looks like modest losses are indicated pretty much across the board.

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♪ the underbelly of this economy, the part that's missed the entire recovery and is really rooring ahead and people aren't paying attention to it is the residential sector, which

has been part of every recovery and is not presented. >> that was barry sternlicht of starwood capital. that was during the delivering alpha conference earlier this month. and to hear the rest of his comments along with thoughts from the other top investing minds on the panel that day, including marc lasry of avenue capital, head to deliveringalpha.cnbc.com. right now let's get down to the new york stock exchange. jim cramer's there and he's getting ready for his show in just a few minutes. jim, a lot of things we've been tossing around this morning, but i guess start with oil prices and see what you think about some of the latest news, whether or not there's actually going to be some sort of a deal that opec can reach next week. >> i think they'll be no deal. i think that the policy of manipulation among venezuela, nigeria, russia, saudi arabia has been continual. this will be the sixth time that they've done this. they rather not cut back. they talk the market up, make extra money, don't forget the

saudis really do need the money. so it's been a policy that works until the day of the meeting and then the meeting fails and oil crops right back to $42, $43. it's been a continual pattern. the media buys into it every time. almost like we're lap dogs. >> right. we were pointing out earlier feels a little like the fed, they talk it up, jawbone it and then never quite materializes. >> yeah, well, look, i mean, these guys are shrewd manipulators. it's a club we've never liked. as soon as they cut back the united states immediately picks up and takes the slack. so they're not idiots, but they know the media will buy into their secret meeting on the side in algeria. and venezuela, what credibility do they have? saudis, they have no credibility. but we've always believed there's about to be a deal. and there can be no deal because that would mean the united states takes share. and they hate us. >> i loved -- my favorite was when this move started it was based on the idea that a meeting set up there was going to be another meeting where they would talk about this.

it's like, okay, wait a second. >> the saudis have been flooding us with crude trying to keep all of our producers from making any money. it's just what happens. but we let them get away with it because we're really hapless. >> you know, jim, it's been a fed kind of week which means it's kind of our brangelina fed thing, we've got some fresh fed commentary from boston fed president eric rosengren, one of the three who dissented when the fed decided to keep rates steady this week. he says the case for a rate increase has become even more compelling in recent weeks. that's what he says. he says the economy has made further progress towards maximum employment and stable prices and has done so in the face of what he describes as significant headwinds, such as the brexit vote and european banking problems. one of the most recent fed statement does note that inflation is slower than the official 2% target. rosengren says the low unemployment rate risks overheating the economy. >> that's significant. >> i guess we'll have to see if those are ir reck siconcilab ir

differences. when we dock bam this morning's biggest movers. "squawk on the street" coming right back. ♪ okay, so you launched your bank's app. now what? how will you keep up with the new demands of today's digital economy? the fact is: some believe they won't need a traditional bank down the road, so at cognizant, we're helping banking and financial services companies think digital, be untraditional, and reimagine what the bank of the future can be. our clients can now leverage customer intelligence

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there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits. fidelity -- where smarter investors will always be. let's get a final check on the markets this morning before we hand it off to "squawk on the street." the futures have been a little

weaker all morning. but look at this, we've paired tho losses, s&p off by 3.5, nasdaq down by 4 and don't forget it closed at an all-time high again yesterday. oil prices as we were just talking with jim are down slightly 17 cents, but still at $46.15 which is a big gain over the course of the week. want to thank tyler and mike, it's been a pleasure. >> great to be here. >> thank you for having me. >> folks, join us on monday. right now it's time for "squawk on the street." ♪ good friday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber at the new york stock exchange. markets taking a pause after three days of gains and the best week for stocks since the middle of july. we're going to get some fed speak today as officials begin to make their first comments since wednesday's rate decision. europe and asia down modestly overnight. oil's up four days in a row as speculation builds about a possible deal next