so you see that in data modelling and artificial intelligence so more modelling going on in the data level than on the programming level. >> i love talking about this stuff. i don't understand it that well. sorkin, i mean, do you feel you're in a -- >> i was doing a little python this weekend no joke. i'll tell you about it. >> that's impressive. >> you're ready? >> i'm trying. >> thank you. >> thank you we'll see you. make sure you join us tomorrow "squawk on the street" is next. ♪ welcome to "squawk on the street." i'm carl quintanilla with jim cramer and david faber pace of earnings will slow down this week.

we'll get a few dozen more reports and one down name in disney norm. europe is slightly red inflation data on thursday and friday the road map begins with a snack and beverage shake up among the most prominent women to lead a fortune 500 company. stepping down as ceo of pepsico. escalading trade tensions are hitting stocks president trump saying over the weekend his tariffs are working big time but chinese state media saying the country is ready for a protractive war. what do buffett and masa son have in common after 12 years on the job, indra nooyi stepping down as ceo of pepsico nooyi will remain chairman until early next year. she said leading pepsico has been the honor of my lifetime and expressed confidence that lagurarta will take the company

to new and greater heights in years to come. the ten year held pace with the market until the recent past >> i like to look as a total shareholder return when she became cfo and then ceo. so you're talking about 2000 to now. and there you've got a 411% return versus 333% for the consumer products and s&p 500 176% it had the best performance of the consumer products stocks it ignited the rally thinking longer term, i think the interest legacy in her company that was out of step with what younger people wanted. which is to be healthier and she transformed that company in many ways, also, became the sustainability leader not just for packaged goods but all companies. so good leadership and good total return steady hand, and tremendous succession like pepsico has had.

where you felt he was going to get it because he was named president last year. so smooth. tough industry. >> right. >> very tough industry. >> perhaps a little sooner than people anticipated there had been a lot of noise around the idea maybe she'll split it before she leaves. i'm sure you heard that. not that there was any truth to it it goes back to the effort five or six years ago to try to get the board to consider a split into snacks and beverages. >> don't you think the new ceo could be a total reset we don't know. great international background i think we're all kind of ever since darius took over honeywell, and was met with activists and decided to go with the activists' plan. i felt look out. >> to some extent. >> i mean, not get rid of but split off aerospace and he didn't go the full. >> no. >> no the full monty. >> right i'm not sure what they'll do

i know a lot of people look at the company and say, you know, they manage to use a distribution system to make it so they have a quick turn over so we go into a supermarket and the area that makes the most money for supermarkets is frito lay. i also think, i mean, i remember whether i first met indra. it was ten years ago and i said on tv, you know, i have a party for my daughter's swim team an overnight and no one ate the salty snacks because their bodies were temples. she had been introducing at the time, and i was an idiot, i think it's good to be self-deep i are candidating. >> it is they developed a whole new line of good for you. i could have had that. >> people are looking at -- >> kids want hummus, david

people are looking at the space. is that a function of the business now something else >> we're trying to figure out the morrisson where she is supposed to be on the call and they were like, hey, you know, we're, like, we don't really have a ceo we don't have a game plan. but, you know, stay tuned. pepsico kind of the opposite it will be a long-term chairwoman. >> i think that's a good point, by the way it's kind of the opposite. >> right. >> in terms of handling it quite well we talked about succession one of the more important things a ceo does in a board. certainly it's their number one, you could argue responsibility to effectively handle the succession at the right time. >> 12 years probably long enough. >> yeah. the world is changing so quickly. some ceos seem to understand 12 years is enough. and others would love to stay in the seat and the board is happy to let them. there aren't that many there longer than that. >> jamie dimon. >> correct. >> jamie has been there for 16 years.

>> and lloyd has been there 11 or 12. >> yeah. i think people get burned out. you know, they make a fortune. let's not say it's a bad job if the rich aren't happy, it's their own fault. it's one of lennons -- >> right. >> he didn't like the capitalists but his points are pertinent. >> they are. >> campbell's soup, by the way, i think people feel something has to happen. the kraft heinz quarter they emphasized growth. >> they did. they said they're going to return to organic growth you weren't here friday. >> wasn't that something >> it was surprising the stock did respond positively. >> yeah. because instead of a really pushy we have to do an acquisition, have to do an acquisition. they talked about how they're digitizing and the possibility second half of growth and immediately campbell's goes up. >> right and there was reports.

we'll see. >> not much to report at this point. that process is ongoing, jim their bankers are working on it. their lawyer is working on it. to your point, i think the companies there's some who say some disarray. >> that acquisition -- >> schneider wack suggestiacqui. >> david does this that's the kiss of death. >> right you don't want to see that. >> opposite of affirmation. >> it was a big number and i knew what the cover was. it was so far below. you're like oh boy somebody was anxious. >> whoa! and that didn't pay off. >> before we move on to trade -- the new guy at pepsi do you know him? >> i remember in july he made it and he has, you know, this international background the growth is international for these companies. >> yeah. >> because and, you know, it's going to i think we can get further and further away of the idea that all there is is the

carbonated soft drinks one of the reasons we talk about break up because people feel the frito lay business is undervalued because of the carbonated. >> yeah. >> let's see what he does. let's see if there's activist pressure now that indra is gone. no i just threw that out. >> are you going to do this? >> not yet not yet. we still have 52 minutes >> you're right. >> maybe on trade. let's get to trade this morning. obviously, quite a weekend the chinese media blasting the president's policies calling it a street fighter-style deceitful drama. but the president believes the strategy is a winner for the

u.s. people are looking at year to date performance and just about any chinese index. it's double digit red. a difficult year. >> i'm glad you brought that up. i think there's a growing sense within the administration. >> despite they say they're ready for a protracted war. >> what is so interesting the rhetoric out of china reminds me of the rhetoric during the korean war they're coming back with an old day, you know, the kind of, hey, the kind of a speaking that you used to get during the hardline days and it's almost like it rings so untrue it is -- here is a good example. the new tariff you don't want the natural gas oka okay i spoke to the creator of liquefied natural gas. they're hurting their own people they're raising the price for

natural gas. now is the tariff on our side going to really lower the deficit? >> no. no and, i mean, by the way, we're running at a trillion bucks now. the $21 trillion number is only going one way now. that's hard to imagine i don't know where the tariff money is going, actually i mean, we're talking about whatever it might be 10 or 15% on a certain amount of goods it's not going to amount to that large. but it's paid by the importer. >> right. >> conceivably passed on but not necessarily. >> no. >> where does it come? >> i don't know. doesn't it remind you -- >> right. >> where did the money did you get a check? did you get a check from dimon >> no. no checks. >> there you go. >> i don't know where the money goes. >> we're a couple of months from fiscal '19, according to omb, will bring us our first trillion dollar debt year, right? >> yes. >> we have apple who has a trillion dollar market cap and you just kind of -- >> it's the year of the

trillion. >> yeah. >> the chinese and their editorial by saying china has time to fight to the end time will prove that the u.s. eventually makes a fool of itself. >> wow okay that's rhetoric. >> it's rhetoric meanwhile, the yaun keeps going down. >> and inflation is going to come up. that's going to be a stock market where you have incredible stag inflation, which is why whoever is leaning on that thing. the chinese government will have to prop those up. >> yeah. there's a line in the sand. >> the impact on the consumer, though, is another -- if the dollar is strong, then it's costing you -- you're buying more stuff so conceivably you're offsetting the tariff and so you won't have to pass anything along. >> right. >> but there's inflation, you know, larry always talks about -- >> right. >> strong dollar helps you there, doesn't it? >> you don't want the kind of inflation that is brewing in

china. >> okay. >> now remember we think that china, because it's a manned economy. nothing can happen to them and that's their wrap. i don't think that -- they remind, you know, jpmorgan, the man, always said, you know, if you have to speak about whether you don't need credit, well, you need credit. and i don't, you know, to me, if i were china, i would not speak softly i wouldn't speak at all. they're giving you the rhetoric like, you know, hey listen it's kind of rhetoric -- >> yeah. we have a little bit, yeah. >> i know but i'm saying it's the rhetoric you get when you're going up against belichick you know, we're going to come after him and beat him are you kidding me >> no. >> maybe trump is belichick. >> i don't know why he sacked michael butler. >> that's a mystery. that's a mystery just like the last play of the seahawks why? >> right. >> some things are unknowable. >> perhaps you didn't want to win? what is the greater win? we'll be studying the malcolm

butler sit down we'll be studying it for years. >> right conspiracy theories just like jrv jfk. >> i was in training camp and i said it's okay to fail but not quit i asked everyone to listen to the commencement speech brooks gave at miami. i listened to it. >> oh, my gosh look at that. >> that's when i told the coach about the trick play i wanted. this is when i gave him the philly special. >> oh. >> faang and philly special. i know you. >> yeah. franc wright -- >> like nixon for the redskins. >> right that's the coach saying sure i'll try that. maybe i'll use it against the colts. he didn't want to use it opening day. it's too big a day. >> right. >> but the colts >> sure worked the first time. >> yeah. >> hey, man, i would bring you back every year. no doubt about it. >> my first year i talked about tnp. the second year about underpromise and overdeliver this year failing but not quitting

it was well received. >> there was an am anymore cront >> i'm up against brooks and kelce so i had to use notes. when we come back buffett and masa son and kyle bass as we said, s&p and nasdaq up five straight weeks. s&p is 1.1% from an all-time high back in a minute

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and two-hour appointment windows. click, call or visit a store today. two conglomerates berkshire hathaway beating numbers numbers getting a lift from apple. as for soft bank, the company run by masa son. 49% jump boosted by flip cart which is a beautiful trade on buffett, underwriting at geico is 5x year on year. >> i think that, look, geico is a machine. but i love the fact, you know, the rails are -- and a lot of

that is because of coal. and china, by the way, is short coal they need more coal. so you see, i mean, they put a tariff on coal it's cutting their nose off. but i do think that the rails are in renaissance mode because of the, really, a lot of it is just the sound texas. southeast. lots of plants being build and you can't move that stuff by rail the truckers have killed themselves by being so expensive. and a lot is the new rules, which is saying the truckers can't drive forever. and they're being enforced. >> i just saw carloads for july intermodal up 6.9. >> oh, my. they make a fortune. these are spot prices they can charge what they want. and one of the things, you look at csx, by the way, this is $71. i mean, that's a great railroad. norfolk southern does coal from their basic area but, you know, they're up on everything it was a brilliant acquisition

buffett makes some smart acquisitions. >> he does. >> except for what dexter is the only one that didn't do well. >> the airlines didn't treat him that well years ago. >> yeah. >> you have to go back a long way. >> right. >> by the way, even the purchase of the apple shares in significant ownership there. >> yeah. >> in terms of timing. >> look he just kept buying and buying people kept saying does he understand they're not the same. >> we didn't get much on their buyback what the formula there is now right. now we've got the results. >> no, we don't know it is opec. >> right there's a sense among some that until he starts maybe things are a little pricey. >> yeah. look, i mean, nice run and everybody feels so comfortable the insurance business is mixed business if you look at aig, you would think the insurance business is terrible. >> yeah.

but not for -- >> yeah. >> soft bank we mentioned -- it's funny i'm glad we're taking minute or two on it. i think the stock is looking up. it is. ai is a key focus. >> oh, yeah. >> it's related to every single investment. >> yeah. >> alaevery single investment, a make, to a extent, it doesn't necessarily have to be ai specifically but maybe the chips that help run it the arm holdings deal was one of the first. >> right and the vision fund which is managed by soft bank but a separate roughly $100 million fund the largest investor is the kingdom of saudi arabia. they have a 17% return guaranteed on their money. it's amazing what ma is a son. he's moving out of the mobile

phone business and they hope the sprint deal works, in which case, they'll be a combined owner of t-mobile/sprint which telecom is the other owner. >> the paper i know you have, well, you're opposed has the justice department is leaning toward. >> really? >> yeah. >> interesting the big deal i say that because david has never really been at the forefront of championing. >> no. i haven't. >> no. >> only my own reporting that's it. >> yes. >> i know the name was around on friday, right? >> yeah. >> we're going to get cramer's mad dash and countdown -- [ laughter ] >> countdown to the opening bell let's get a look at the futures here squa "squawk on the street" is back in a moment.

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monday is never fun but at least we get the first mad dash of the week. we have about six minutes until the opening bell. >> david -- [ inaudible schlumberger is, you know, sl

slumburger david, buy my stock. that's what it used to be called buy my stock this is a company that has wildly gone up it looks like some people may have -- >> yeah. there was a report on friday. >> yeah. this is up 11% what i like about the deal is once again you get the companies that are kind of like the fabric of the stock market. it's been there forever and next thing you know it's gone more money goes into the index funds. it never stops. >> am corps. holders will own 71%. 29% held by buy my stock. >> we should get -- >> yeah. >> i don't think so.

this was the pro business government. >> it's interesting, isn't it? >> yeah. >> we'll watch this and keep an eye, of course, on am corps. in australia. that's going to be the key one here. >> it's a proud company. >> all right buy that stock you got an opening bell a few minutes away stay with us

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u.s. bank the power of possible. you're watching "squawk on the street." the opening bell in less than a minute on this monday morning. war of words heats up between the white house and china regarding trade. the slower pace of earnings is with us. we'll get about 43 s&p companies this week. indra nooyi leaving pepsi. we talked about that goldman supping their estimate for the year. >> i thought that was significant. i know a lot of people feel that buybacks are waste of time and money. just the opposite. i know they help but people think it's optimal earnings. but i continue to say that what

matters is the -- [ applause ] they've done a lot of ipos but not nearly enough to make up for the deals. [ opening bell ] it's a clinic. he buys when they're down. >> it's like, hey, the stock is down big let's be opportunistic by the way, they're not capital constraint. >> no. >> they don't have to look under the cushions if afor the money. >> there's the opening bell.

we'll keep an eye on pepsi and how the market votes on the succession. >> people say, listen, it's the opportunity to do a reset. maybe something major. i don't expect that to happen. i just want to comment on the ipo market there have been so many chinese ipos you are surprised by the rhetoric from the people's republic in the end they're trying to sell deals but it doesn't matter. it's the president of the stock exchange it's like two separate worlds. let's flood u.s. with a lot of ipos we don't flood their country with a lot of ipos. >> they come here because that's where the money is. >> that's real news. i think that's one of the reasons. and because of our rule of law and because of the transparency of our trading and a lot of other things. >> no one gives any thought. i scoured every news outlet to the idea that google has decided to censure itself and go into

china. >> by the way, do we know if that was true or not i thought i saw something. i don't know i would go to carl because he's usually on top of it. >> there's another story today out of bloomberg they're in talks to offer cloud services on the mainland according to sources. >> cloud services there. microsoft had a fantastic cloud number from azure. amazon web services, i don't know how they do it. is there a day they don't sign up clients i think google has room. there's the adoption of the cloud is weirdly early. >> yeah. >> but, you know, like if you look at kraft heinz quarter they're talking about doing social media clorox 60% of the ads are social media. it means that facebook gets some ads. facebook going up. let's face it, facebook has been fighting an uphill battle

because of the cost structure and the decline in the growth of revenues and it seems directly related to the fact they have to do more policing and we don't know how much money they're making doing things that were sub rosa that we weren't crazy about. >> right people want to buy disney. >> yeah. holy cow. >> above 114 a few more dollars and challenging the 2015 record, as far as i can see. >> what happened to espn as a negative >> it's funny you mention that it's pure speculation. we don't know what the numbers will be like people are watching to see if there's growth at espn and whether sub losses will have stopped. >> are they? >> because of the virtual yule npds the ott they're on so many platforms. so there's a real question there as to whether you're going to see a turn in espn. >> by the way. >> it seems to be, again, i'm just parroting some of the

bullish cases i've heard thinking about owning this stock. i don't know whether it's true. >> jeez. >> i want to make that clear $152 stock like. espn plus i like very much my wife doesn't. >> you had a deceleration of cord cutting >> it's incredible. >> it's still happening. i think 3.3% year over year. it's not clear how much when you cut the cord if you're going to one of the over top products i think it's about 85% but you couple that with this and we'll see. but they're going to direct to consumer anyway at disney. >> i think their product is great. we talk about the movies and the acquisition will be a discussion if i were bob ieger i would say espn is doing well, too. that's it. and give us some numbers for espn plus. we haven't mentioned les moonves. so les moonves let's move on. >> he's still the ceo of cbs that's all you need to say. >> okay. >> we talked about the all access projected numbers for next year.

>> $8 million. >> and doubling to $16 million for showtime and by 2022 showtime and all access. >> another situation that i think that there's an article in the journal today about netflix. these all access plans are gaining traction and why? because the millennial's, you know, listen, we'll give it a shot. >> how many do you have? i don't want to add to the subscriptions. i want one. >> right millennial's they multitask. have you ever talked to a millennial and they're playing candy crush while they talk to you and doing call of duty could you give me a second of your time. >> they're listening. >> 100% mind share. >> yeah. how do they do it? >> i know. on disney, 122 is the record back to august of '15. >> i'm going to blow that out if david is right. >> we got an upgrade of comcast. they go to overweight from neutral. >> it was a great quarter.

>> listen, you know, sky is not over sky is not over yet. >> yeah. >>well, it hasn't concluded. i think there's i still believe it's there's not a high likelihood that disney/fox will come back to compete but i'm making a point, you know, the process is not yet ended. we don't know. one would expect even if they did comcast will do whatever it takes to win that. to take something away there seems to be encouragement. first of all from the quarter comcast had. that's number one, and the idea they're not going to be doing the big deal namely for fox, which ended at $38 cash and stock disney. >> but the revelation you grade was said may not happen about the idea of cord cutting slowing down where did you get that that's fabulous for comcast. >> those are just the numbers. i'm just saying that.

>> by the way, jim, it may not be one small data point -- >> it's an giant step for mankind. >> we have a new high on apple today. $209.04. it centers around the decision to remove most of alex jones' info wars pod casts and shows from itunes citing violations of content policy it's about apple regulating hate and this is the sort of puzzle that a lot of companies are now in. >> i think a lot of companies look at what happened with facebook and just want to get ahead of them. but i also think that apple is doing its -- when they take over yahoo! and they bump yahoo! finance -- >> you keep talking about that. >> it's big. it's $400 million. >> you keep talking about that. >> i do. >> you know something.

>> david, it's like you when you say i don't know anything but let me tell you what is going to happen i know absolutely nothing but this is going to occur. >> you brought up yahoo! finance and apple having insight so many times. >> i'll stop. >> i think it's interesting. >> no, i'm done talking about it >> done talking about it. >> done. i've been silenced. >> want to talk about growth stocks >> i'll check my tomatoes. >> the no sun crushed me this year. >> we should mention praxir. linde informed by the ftc over the weekend that it may have to make further divestitures in order to satisfy the concerns of u.s. regulators at the trade commission and you can see praxxair is down on that. there was a certain level of divestitures under the merger agreement that they were obligated to make, but what they

said over the weekend is that a higher probably that threshold for divestiture commitments which has to be accepted by each contract party under the agreement will be exceeded and so that has people concerned that the deal itself, therefore, could be in trouble. that spread is widened about 20%, at least, annualized. you know, it's funny we quickly made this point but it's worth making begin. sinclair tribune came out of nowhere. the fcc, this deal, obviously, the department of justice is still after at&t and time warner there's been no shortage of unexpected regulatory moves. >> obama would have been approved, i think. the idea ever since david said

to me, listen, this sprint t-mobile creates a true competitor against at&t and verizon. it might be hard you have to spend a lot of money on 5g. that was breathtaking. aye done a lot of work on this i'm switching my position. >> out of the gate, that's what the guys were making the argument. >> yeah. it's resonating. >> the question from an anti-trust theory point of view going 4-3 and saying that prices are not going up as a result, can they get there but what happens if sprint and t-mobile are left behind so you have -- >> that's the argument they make. >> i think that's possible as i marvel that apple is down. >> yeah. >> ten year note 2.94 is the

lowest of the month. i know it's not that far into august, but it brings up what jamie dimon said over the weekend in aspen about what kind of interest rate you should expect even now. take a listen. i'm sorry. we're waiting for it. >> dimon said he thinks it should be 4% today be prepared for a% or higher a higher probably than most people think. >> that would make stocks not as competitive. obviously it's an important call by jamie. >> when was the last time we saw 5 percent. >> it was a long time ago. >> the housing market coupled with the lack of inventory plus the starter homes with a higher rate at the beginning. it would be consequential. it disagrees with his theory that he compounded about the country doing well the country not doing as well for a% it's obvious he could say, jim, that's wrong it's a sign that the economy is

booming. that's why you get 5%. but i also think that 5% would have everybody chattering what is going to happen next? especially at the cpi is hot. >> right and that's the reason. >> right we'll get that on friday. >> right dow down 67. largely on the back of intel got cut today over at barclays we'll get to bob good morning, bob. >> good morning. happy monday not big move in the indexes. the s&p up five weeks in a row about 1.5% from a historic high. take a look at the may term. oil is up nicely today we had a saudi crude production unexpectedly it's not helping energy stocks but banks and consumers staples a pleasant surprise for the last several weeks. semis and banks lagging. these are modest declines here i mentioned about 1.5% from historic high on the s&p it's because of the wonderful rotation we keep having. it saved the market time and time again tech has been the market leader for the year but if you look at the third quarter what is going

on, really, we've got health care doing well, industrials doing really well, consumer staples has been pleasantly surprised for the whole quarter. and we've talked last week, of course, about kraft heinz and clorox just put up tyson here tyson and all the other consumer staples had a horrible year. a little bit of good news today is the s&p on the bottom line. while they talked about the same thing higher prices for chicken feed, higher labor costs, higher freight costs. they said they were raising prices and we've seen a number of these consumer staples companies announce price increases we'll see if that sticks we're 80% through earnings season the numbers held up very well. most important thing is q3 numbers at 22.7% that's up maybe a half percent from the start that's pretty good normally they come down more notedly. so the year is holding up well 2019 most people have about 10%

increases. not peak earnings yet but the important thing q3 holding up here our markets are not being affected much baytar riffs it was another ugly night over in china shanghai and shenzen down 2% just take a note about where we are. some of this is currency related to tariff issues these are 1% over new highs. but the shenzen is almost 30%. that's locals trading my point here is it's been rough

over there both with the currency and for the china markets. china local a shares market with locals trade and that's primarily the shenzen. all this trade talk definitely impacting china's viewpoint. down 63 points on the dow. back to you, carl. >> we'll get to rick santelli in chicago. good morning, rick >> reporter: good morning, carl. you mentioned the feature of the 10s. look at a one week of 10s. keep in mind, we popped out of 22 sessions of 2.80 closes on the 23rd of monday on that friday, the next start charts and you can see how this is going to be the lowest yield close. we get in the stretch should it occur. rounded to 2.95 is the lowest yield close in the curve so far. it's been a tight range coming out a tight rate for a long period of time if we look at bunlds, the

patterns are the same but the amount of wiggle or the spread between the two oscillates a bit. the important feature continues to be it is one market it's just a scaling issue to some extent. but that scaling issue where the yields actually are in relationship to the entire is something mario draghi will have to pay close attention to. we look at what it going on in china. it's the same story almost day after day. their currency keeps moving lower. we have to monitor to see how they deal with capital outflows they've had on other occasions when this has occurred as you see on the chart, historically we started out comping august and july and now may of 2017. dollar index a big day for the dollar index followed by several big days if we look at it it's up a third of a cent now as you can see on the one week chart. it's been moving steadily higher as a matter of fact, they close at the 95 and higher levels. this could be the best close since july of 2017 carl, jim, david, back to you.

>> rick, see you in awhile still to come, reaction to ind indra nooyi stepping down as ceo of pepsico dow is down 55 points. "squawk on the street" is back in a moment. hi, i'm joan lunden with a place for mom,

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it's controversial, that's for sure, but i think the discussion that, you know, should be focused on what's the end state here the end state should be to reignite a global debate on trade, i think that has happened and to think about where we want to get to. and what we want to get to is very few or none in terms of tariff barriers or nontariff barriers to trade. >> reporter: st. louis fed president bullard on cnbc europe this morning talking about how this might game out. maybe you get a deal with mexico

early and then move from there time had a piece over the weekend saying you get a real truce on say, china, maybe you add $2 trillion to the stock market >> we're all waiting for the first deal that the president did on tax reform. >> because it wasn't a deal? >> i just think that the stock market's acting like there will be a deal and i think the stock market could be wrong about that we have been up a lot for a long time the rhetoric is not good and i just feel like that people are a little too optimistic about trade and i think that the goal is to beat china and the chinese stock market will be broken, and that's when they'll come to the table, because a lot of people went into the chinese market, it already happened. >> it's working out for some of those long-time china shorts,

we're waiting. >> my guess is kyle bass will be coming up. enter but mo >> but more on the implosion of the banking system >> there's so much debt, and you don't really hear much about it. but our balance sheets, by the way the fed put up some numbers this weekend, about the amount of debt we have, as household debt, we're just incredibly low, people's balance sheets in the country are just amazing. >> and some of these savings rates is stunning. the amount of money people have actually pocketed is more than we thought >> lots of untold stories, but we're telling them here on this show >> we're going to try. we'll get started with stop trading in a minute, dow's down 55

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>> we were thinking this quarter was a breakout quarter it's been under a lot of pressure for a long time and there's a reorganization going there. but a lot of people think it's not down enough. the operating cash flow could be significant and this is a company that truly needs to divest i like the fact that they have reduced the debt in the last two years. but it's just not enough >> the board and all having their say. >> i think expectations came in too high that's what i think hurt it. people felt that there were things going on that were better and it does look like things are kind of okay >> they put a number on their expected tariff effect, which is rare, 1$100 million, they said,

annualized >> i didn't expect it to happen. but i just think in the end there are lots of different forces that think that there's a supplier to anybody that amazon wanted there isn't really anyone having a great time being a supplier, even the power companies >> we have market access, which is a great thin company, people love those in my last book, i suggested they break up the company, but they didn't need to. they have just been on fire. and sea world. sea world? >> i saw that. >> that's a killer buy >> we'll see you tonight, "mad money," 6:00 p.m. eastern, when money," 6:00 p.m. eastern, when we return, kyle bass, hce there's so many opinions out there,o ofs hard to hayman capital dow's down 60. something for him?

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good monday morning, welcome back to "squawk on the street. we're here at post nine of the

new york stock exchange. dow is down 54 points. got the s&p going green, though, busy week as the war of words regarding trade heats up on both sides of the pacific >> shake-up at the top, after 12 years at the top, nooyi is stepping down. it. plus working big time, china unleashes a new round of criticisms against president trump. and hayman capital ceo kyle bass will be here to talk about why president trump is right to have a trade war with china. st. louis fed president james bullard appeared on cnbc

earlier. >> there was only one -- the economy slowed down and didn't quite turn into a recession, so i think you have to respect the signaling aspect of the yield curve. >> meantime, jamie dimon at jpmorgan said that investors should get ready for rates of 5% or higher, it's a higher probability than most people think. jim freda and chief strategist david zervo is here with us. good to see you both is the curve what you're thinking most about right now? or what's the lead in your mind? >> i'm thinking about the china story more than the curve, but the curve is front and center, but it's a story that i think jim summarized pretty well, it's a great indicator, and you have to watch it and more than likely we're going to see an inversion in the next 12 to 18 months and that's a good signal that 12 to

18 months from then, there's probably a recession on the horizon. >> as far as what we're seeing today, how does the needle move? >> i don't want to steal kyle's thunder because i know david's got him coming up in a little bit. but a lot of the stories that the trade war is kind of working, i know it's not nice to say are short ort of true, thinr going pretty well. this is not 2015 or 2016, which a lot of people want to make parallels to effectively there's a growth grab coming from the u.s. away from china and i think the market's recognizing that, the dollar's recognizing it. >> when president trump says we can win a trade war you agree with him >> it's risky, and you can end up in a noncooperative theory. he's trying to force more cooperation by threatening a defection.

it but the odds of that coming out better because it's much worse thing for china than it is for the u.s. whether it's opening up oil and gas, whatever it is, that's a huge positive for u.s. growth, european growth even chinese growth, so i think it has a silver lining, if you can cajole china to open up china is about to maybe go through that transformation which we have all looked for which is out of communist and state control and something closer to a free market base >> you focused on trade, you focused on the yield curve, which is more likely in your view >> the yield curve is an issue for a little bit further down

the track as david said. i think on the trade side, i would probably describe it a little bit more like a poker game, where it lookslike you have one somewhat inexperienced and aggressive person on the table putting down a whole bunch of money and chips in order to scare the others into submission, doesn't seem like the best strategy to me. >> because >> because it's not clear what the objective is, it kind of seems like you can't really describe what the u.s. administration's end goal is on this, so it's not really obvious how it ends, it's not really clear what the offramps are for the administration so it just sort of ratchets up and ratchets up. so we have to put this in the context of a turbocharged cyclical boom in the u.s as david said earlier, we're seeing that yield curve, and interesting last week, for the first time in 10 months, you had

u.s. data surprises actually start to turn negative so this notion that the u.s. is about to turnbull let proof is not proving out the data on a foreign basis. >> what i'm trying to get to is david's point is there's a lot of noise on trade, it's a tradeoff for the economy, much more damaging to the u.s how does it affect u.s. market here, do you drive your u.s. market allocation based on your concerns about trade >> i think inevitably it does, but i think our starting point is more valuations and whether it's attractive to take risks and i think our view has been inclusive of the trade restrictions, but a number of other factors, valuation isn't that attractive in other areas of the risk areas. the nuance on the trade discussion is really around what

a bilateral trade is for the u.s., which is the u.s. versus everyone else. u.s. versus everyone else may not turn out so positive for the dollar or for the u.s. we think we're probably in a pretty early stage, but what we would like to see and what would make us feel more secure on the risk side is that you actually see some of the offramps being left open and it's not so obvious to us that they are being left open. >> david, if i could just back away from trade for a second, because you did indicate that in the next 12 to 18 months we get a recession? >> no, 12 to 18 months we get an inversion, and 12 to 18 months after that, we get a recession 36 months is the first time frame you would look for a recession. in a way, if you think about it,

most recoveries were much faster snap backs that then had a fall. if you look at the growth rate, we have one of the slowest recessions on record >> why do you think that is? >> regulation, we swung the pendulum really hard toward regulation i call it secular stagnation we had a lot of regulationings thregulationings -- regulations that hindered recovery earlier this year, investment was growing 1.9% on an unyulized rate on that story, as we talked about on the show. >> productivity increases, and/or the wage increases which you spent a long time friday talking about the employment. >> i think you have to get the investment to get the productivity so this is a good sign that we're getting the investment at least.

>> that was a good discussion, david, it's always good to see you, and gene, what a pleasure, thanks for coming on, please come back. when we come back, a shake-up at the top of pepsico, indra nooyi is stepping down and sarah ieisen is on the phon. >> nooyi was the longest serving ceo in the beverage industry nooyi hasn't date e indicated t she's going anywhere and that has created some speculation for investors in the analyst community that maybe the company is interested in making some strategic changes first, what comes to mind, refranchising the bottlers

something that it's competitor coca-cola is doing right now and it's being rewarded in the market remember, one of nooyi's first objectives is taking over the bottler. so the fact that she is stepping down in october is fueling some hopes in the beverage community is that is a change that she's going to make. it's frito lay and it's something that investor nel l years ago, nooyi won a board seat i did just get a comment from nelson peltz released a

statemen statement. we wish her all the best a truce was made a few years ago when it comes to peltz and nooyi and whether they would be open to a split despite the somewhat smooth internal transition of corporate leadership the other point i would make, guys, is that mr. laguarta has been done a good job in turning the beverage market around it's seen declining sales, and that's going to be the big challenge. on the last earnings call, indra nooyi said they know what they need to do on the beverage front. but that's going to be one of the biggest objectives turning around diet pepsi, which was never formulated right to appeal to younger consumers and to turn around the beverage business and i know you brought up the point that this is a trend in

the food and beverage industry it's been stunning, completely new lineup of faces leading this industry just in the last two years, we have seen new ceos of kellogg, general mills, tyson, nestle, hershey, j.m.smucker, who mel, de -- hormel and dean foods. something indra nooy was out front on, but kongtds to address the portfolio to address consumer needs >> you might have heard our discussion earlier with jim about indra's willingness to fight back, any argument that the company should be broken off and whether laguardia thinks they should be broken up do we know >> we don't know

we do know that he's only the sixth ceo in the history of this country. and the history of this company is going internally for ceos so in terms of his appointment there, it suggests that there's going to be a continued strategy set. the company is also emphasizing laguardia's international experience, he served in sub saharan africa, he also led the european region. i have to say there have been questions over the years about leaderships at this country, a few high profile departures in the last few years, including brian cornel, and part of that was nooyi's fight and ultimately proving that pepsi was better as one, one company for beverages and snacks there's no indication that

that's going to change, but with the change in ceo, comes questions about the company's strategic leadership, one of these businesses, as mentioned, suffering. >> thanks for calling in on your day off, sarah >> thank you, guys, enjoy. the state media in china is going up to president trump's trade policies and policing beijing, threatening to force protesting in peer to peer lending. eunice is there with the latest. >> official media have launched a personal attack against president trump saying that his trade policy is a straight fighter style deceitful drama of distortion and intimidation. went on a tear and saying that washington has lost its mind and larry kudlow says the trump administration shouldn't under

estimate china's firm will to win a trade war. china has imposed tariffs on all american goods that come into china if the u.s. imposes it's plan to impose tariffs on an additional 60 billi$60 billion f china's goods. now in response, kudlow had described china's threat as weak and also president trump weighed in, tweeting that the tariffs are working and getting the chinese to talk to the administration though it is unclear whether or not the two sides are talking. michelle >> and what about the protests that we're seeing reports of eunice but the financial district and it being in lockdown >> that's right. the police, there was a police crackdown in beijing's financial district and according to organizers, there were thousands

of protesters there, hundreds of police and that the protesters were mainly regular investors who had lost money in the peer to peer lending industry so this industry matches people with money with ordera arordina who are looking to get capital quickly who haven't been able to get it through main stream banks, so the company has grown in recent years, but has been having trouble because there's been tighter regulatory conditions so many more of these lenders have been starting to fail we're s it is not common to see these protests in china. what is not common is that the idea that chinese investors are going to bail them out i think it highlights some of the difficulties this country faces when it comes to trying to

rein in and manage some of the risks that come with it. >> if the government always bails you out, it's not investing actually you don't call it catching, you call it fishing. >> when we come back, we're going to continue the conversation about tariffs, hayman capital's kyle bass is here, on whether the u.s. should start a trade war with china dow's up 3, we're back in a moment hi i'm joan lunden. today's senior living communities have never been better, with amazing amenities like movie theaters, exercise rooms and swimming pools, public cafes, bars and bistros even pet care services. and there's never been an easier way to get great advice. a place for mom is a free service that pairs you with a local advisor to help you sort through your options and find a perfect place. a place for mom. you know your family we know senior living. together we'll make the right choice.

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trade wars have heightened trade tensions in the last few months cloef investment officer, kyle, you and i talked a few months ago i know at least at this point, about the aluminum and steal tariffs and you were explaining the rationale behind them and let's fast forward to where you are, the president continuing to say tariffs are going to be a benefit and the chinese saying they have time to fight until the end and that the chinese will eventually make fools of themselves. why won't we make fools of ourselves? >> i think the key is to

understand this in an even larger picture of trade. it's the geo politics of china whether you look at the defense department reports whether you look at the trade representatives, we all know that china steals $200 billion a year in intellectual property from us for over a decade. what we're trying to do is counter balance china's offense, and china's offense is through economic coercion and given the fact that they believe in their own economic strength in the last decade, now they're trying to translate -- it's all rooted in the fact -- it's all rooted with the basis of their strong position in the globe economically and from a trade perspective.

it's really important for us to try to level the playing field a little bit here. >> yeah, now i know you take issue with some of the people who come on our air and say that the tariffs are ultimately attacks on u.s. consumers and will simply result in higher prices why do you not believe that to be the case? >> yeah, i think that's just patently false i think when you look at the case now, tariffs are a little less elegant than the border adjustment tax that you and i talked about about a year ago. in this case, president trump is kind of whining about a devaluation of the chinese currency and saying that -- worrying about that is going to bring higher prices and it doesn't. all a devaled chinese currency

does china has to either take thehi in price or in quantity. in the u.s., the dollar cost literally stays the same of anything we put tariffs on in china. and i think those pundits that argue to the contrary, there's no evidence to suggest that's true, in fact we'll see here as we start collecting tariffs, if the price of u.s. goods in dollar terms goes up and i don't think it will. >> what do you think will happen to chinese currency. in fact you have been betting against that currency for some time in part because simply said, the banking system would imploez to to force them to go that route. do you think the devaluation will -- >> i think that it's rooted -- my beliefs are rooted in the fact that the chinese are

running the largest financial instrument in world history. some are in the shadow banking that we just heard about the chinese protesting in the financial sector in beijing. they have drogrown lending so aggressively, so quickly, that they're going to have to restructure their bannings it's our view, when you look at all the balance of payments of china. their balance account just went negative for the first time in the first half of this year. that's largely due to the fact that there are bigger issues with regard to how china operates it's economy. they need more dollars for what's called china inc.'s investment capital and so it's kind of a tale of two worlds and what's happening now is the tale of china is going more negative so they're going to have to borrow more dollars and they're

going to have to figure out how to get more investors to veinvet in china it's going to be tough for china to attract more money in the near term. >> this all seems to be related to it reflects to a certain extent to what people describe to the trump administration, namely that they can pressure china enough so that it will acease to oa cea accede to our demands, is that the case >> i'm try to be take my political glasses off and look at this objectively. and we have the advantage here, china's been fighting a trade war for the last ten years, the u.s. has just realized that we haven't been fighting for the last decade so we have to push back and china doesn't like it and trump's unpredictable with

russia has two advantages, our trade negotiations with china and our other negotiations with north korea. and the in fact that we only export $130 billion worth of goods to china while we import almost $5 billion to china, we have got the leverage to really work through this tariff and trade war. and again, we have been fighting this trade war for a decade, no one's realized it and now we're starting to push back. >> there were worries that the chinese -- given the way that their economy is run could have boycotts for example of various u.s.products and/or even businesses that are well known over there that aren't use businesses is that a fear that you have that certainly many do have, that will spread in simple numbers how much we export from you and how much you export to us >> i think when you engage in

changing a large imbalance, let's say in trade, or if you impose tariffs or even border adjustment taxes, there will be individual winners and losers, that's just a fact and for the companies that do business in china, that was their decision to invest corporate cap ex and as sets to a country that does not respect human rights and does not respect the rule of law. i don't think doing business with companies that are doing with china will immediately push back due to the trade restrictions if i'm a board or if i'm a corporate ceo or if i'm in cio of an endowment or a pension, i have to think about what the real risks are to investing in a country like china >> right, and when the president talks about somehow addressing our $21 trillion national debt

through trade, we have plenty of economists, kyle, come on and say, there's no way we're going to be able to get rid of a trade deficit giving the huge budget deficits that we're running, do you agree? >> yes, so idea loj ideal logict do way think -- if doesn't matter if you run a 10% fiscal deficit, the central banks will have your back if we look at china, the bank of -- every bond the ministry of finance has ever issued. and yet japan has no problems. >> they never got to their end point as you used to say they would, kyle. >> that's my point, my point is

it doesn't matter, the 21 trillion of debt just doesn't matter, the quad drillon idea of debt i've just got to say the fiscal managers say it just doesn't matter anymore >> kyle, what do you believe -- yes, make your point, sir? >> i just wanted to say look at the united states, we engage in a tax cut which doesn't take effect until next year, when you look at the net effect in real dollar terms we're going to stimulate our heighten our economy in the next few years and we're growing the deficit at full employment, that really hasn't happened before in u.s. history i think we're going to see a real move higher in the first quarter going into the first quarter of next year, and in

theory, we should see some real inflation, we should see wages, we should see inflation happen given the fact that we're stimulating full employment and we're doing so in an vooimpenvin where we shouldn't be raising our fiscal deficit even more it just doesn't matter anymore, david. >> the question for me on china again, what will in your mind as someone who believes this is the right fight to be waging right now, what will represent a win >> i think a win is opening up the sectors in china that are currently completely closed to u.s. investment. if we were to engage in a trade war with china, if we said we're just going to mirror your -- if you say -- we won't lie and

steal from you if you will agree to not lie and steal from us a win is opening up their markets to the u.s., respecting the rule of law and even forcing them to not engage in these enormous human rights violations like as we sit here today, the largest human rights violation is happening in china where they have taken a million people against their will and put them in re-education camps. and that's just crazy. all we talk about on cnbc, ask this a good or bad thing to happen to prices in the u.s. we need to be thinking more globally about our full relationship with our trading partners and mabrying them under the microscope a little bit more as we engage in these economic negotiations >> that's an interesting point you make there, of course, you could conversely put that in terms of europe. but we don't have time to kind

of go there, kyle, we're going to have to leave it where we are right now. thank you as always for joining us kyle bass from hayman capital management >> always provocative. when we come back, trump, tehran, tensions, the u.s. reimposing sanctions on iran plus an apparent assassination attempt against the president of venezuela. we he avall the details, skba"sw on the street" will be right back don't go away.

time now for our etf spotlight. taking a look at some of the consumer staples following that news >> those consumer staples had been on a roller-coaster ride over the last few years. you can see the xlt, the spider's etf have gone nowhere in the last few years as rising interest rates and diminishing growth products from driven investors away of the 22 stocks in the s&p 500,

consumer discriminatory sector are positive, but that's a pretty decent sign we are led by supermarket chain cr kroger kellogg is up 21%. and pepsico is up about 19% to 20% as well. and consumer staples xlt is up around 7%. other consumer related funds that have benefitted from that include the vanguard consumer staple as well as the i-shares, ticker iyk, so we focus a lot on the spider one, that xlp, but these are some of the other that are affected by that staples stay many of the sanctions will

go into effect tonight at midnight, those being the financial sanctions that the u.s. government is reimposing on iran senior administration officials told reporters that this is part of the maximum pressure campaign that is resuming against iran and in 90 days there will becti will go into the u.s. energy sector it is evaluating on a case by case sector but they are not granting broad case e based wair any country. they said the goal of this campaign and the backtracking on the jcpoa is to get iran to change their behavior, but the end goal is not regime change, that is an important distinction as they see these things go back into effect. they meet with the iranian government with dno preconditions. they said they're working on a global coalition with the u.s.

to ramp up this pressure on iran, but the first step coming from the u.s. tonight at midnight when those financial sanctions against iran's government go back into place, michelle >> thanks very much, what's crucial about the ones that come up in november, kayla? >> well, they didn't give much detail, but just pointed to the idea that you could see new sanctions on oil trading coming out of iran or on shipping activity at many ports, so that is something i know many investors especially in the commodity complex are going to look for with these sanctions coming together. the treasury department put out some guidance several months ago sort of delineating what would happen today, you would have to expect something similar would happen with regard to those sanctions that would be coming back in november too >> i know this affects other

country's relationship with iran, namely the russians and the chinese and the idea that they might make up for some supply >> the administration initials were asked about the relationship between china and iran and the impact on iran's economy in the last 90 days is proof positive that those nations are not going to step in and help them out we'll see what happens going from here. let's also talk about venezuela, the government there says an assassination attempt against nicholas molas meduro od over the weekend here is the video. this is saturday during a military parade. and suddenly he stops talking after hearing a loud bang. most people on stage flinched or ducked and then the soldiers lined up on the boulevard below

all ran for their lives in apparent fear. the government channel then cut to a commercial break but you don't have commercial breaks in a government run economy here's another video that was retweeted by meduro, where you see what looks like a drone, explodes midair, meduro and his government say this shows the moment of the attack the venezuelan ministry of communications says it is real the government says they have arrested six people, few details on who they are. >> notice some discussion this morning about whether or not it might have been an attempt to allow him to attack the up station in some way. >> so i have called it around alleged attempted assassination. because there's suspicion that e

er erduon actuall is this at&t innovations? yeah, wow..this must be for one of our new unlimited wireless plans. it comes with a ton of entertainment options. great, can you sign for this? yeah.

hey, uh.. what's in that one? that's a shark. new and only with at&t, you can get unlimited data, 30+ channels of live tv, and your choice of things like hbo or amazon music. more for your thing. that's our thing. visit att dot com. i we worked with pg&eof to save energy because wenie. wanted to help the school. they would put these signs on the door to let the teacher know you didn't cut off the light.

the teachers, they would call us the energy patrol. so they would be like, here they come, turn off your lights! those three young ladies were teaching the whole school about energy efficiency. we actually saved $50,000. and that's just one school, two semesters, three girls. together, we're building a better california. . >> pepsico's ceo has resigned. ramon laguardia -- we'll talk about just about anything. mike, good morning, it's good to talk to you. >> good morning, carl. >> a lot of discussion about indra's legacy today, how do you think about it >> i think if you look back and

you look at the consumer products universe, indra's really made a very distinctive and defining imprint on pepsico with her original articulation of performance with purpose, way before that was kind of a popular concept, to think of the corporation and it's role in the society more broadly and i think indra has really been passionate about trying to drive the company to adapt to the 21st century and in so many ways, whether it's the die versversity in the workforce, whether it's the opportunity for health and wellness, i think indra clearly has put a mark on the company in terms of her passion and commitment to both performance with purpose, you know, the importance of the company, being a good corporate citizen as w l well, and adapting to the new

realities of today's consumers. >> what about more in terms of corporate strategy and tactics, the degree to which they prioritized core brands over younger drinks and vice versa and how that impacted shelf space especially in the last few years? >> that's affected every company in the last few years where you're trying to nurture the core and trying different things that will appeal to millennial's millennial's are very different in terms of their preferences. and every consumer company i know are dealing with millennial's who are very different in their habits. dealing with amazon and the changes of kind of the whole internet and the impact of that on both marketing and delivery of your products i think you try some things, some things work, some things

don't. but pepsico as always been willing to challenge the status quo. and i think will to do so under ramon. >> a change in relationship with the bottlers or maybe a change in the structure of the company. >> aramon worked for me for many years, so i know ramon laguarta for many years, he's got a -- ramon is unique in that he ran spain, russia s and larger markets, europe and most recently aspresident of pepsico, he was always very entrepreneurial. he came to us from a lollipop company, and we had our spain business selling loply pop l iin the side in addition to our

beverage products. his style is very different than indra, he's pragmatic, he's got terrific people skills, he's a savvy operator and is very grounded but like indra, he's going to have a high passion for excellence, he's very results oriented, he's global and he's going to embrace trying to adapt to change as indra has for more than a decade now. >> michael white, talking about indra noi avg oyleinpepsi. s&p continues to hold on to a modest 3-point gain, we'll be right back about potential investment opportunities in real time. fidelity. open an account today.

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more "squawk on the street" coming up.

let's get to the cme dpr dprup -- group in chicago. >> good morning. good morning to jim carron thank you for joining me my first guest of the week >> thank you >> investors, whether you of financial assistance or doing it on your own requires a lot of issues, head wind issues that no amount of homework will enlighten an investor. what did you tell clients, what are the biggest risks where it is hard to garner the truth how to effect your portfolio >> in terms of portfolios, one of the hardest risks is by narrow risk. there are two. one is china and trade and tariff talks and the other is what's going on in europe with italian politics, eu budget and all of the volatility that could cause. we have seen what's been going on but the reality is between now and the end of august, as far as u.s. china and tariffs go, we're

not going to know anything until the beginning of september what do you do between now and then same thing with what's going on in italy a lot of talks around the budget, that's going to take place into september if those go through and everything is okay, it is a strong risk on environment if they don't, it could go the opposite way the key is to build a portfolio to withstand volatility and add opportunistically when it creates itself >> there was a time when an investor looked at various head winds and think likely they'll have negative effects for equities which used to mean positive effects for purchasing, treasuries and safe harbor fashion. are today's binary risks moving the same direction >> in my opinion, rick, things are highly correlated.

if good things happen, if the binary go up, and beyond yields go up. it is not why, if it is for good reasons, it is fine. good tail wind, good earnings, fiscal taxes, all these things i don't see moving higher in interest rates as hurting equities, but if we have a risk off event that means rates go down, equities also fall as well i think we're in a high correlation environment. this makes it challenging to create a diversified portfolio between equity and fixed income. >> jim, we're out of time. i want a yes or no answer to the following. does that mean in your opinion that maybe that's one of the reasons 3% is elusive, because of those binary issues >> yes absolutely that is the reason. >> that's what i wanted to hear. jim caron, thank you david, back to you >> thank you, rick santelli.

time to send it to jon fortt for a look at what's coming up on "squawk alley." >> david, it is the week after apple hit that trillion dollar market cap the question is are more big tech stocks going to hit that mark too or is this a sign that fu aumt ar a top a llrgencoming up on "squawk alley. trades and high-yield savings. but if that's not enough, we offer innovative investing tools to prepare you for the future. looks like you hooked it. and if that's not enough, we'll help your kid prepare for the future. don't hook it kid. and if that's still not enough, we'll help your kid's kid prepare for the future. looks like he hooked it. we'll do anything... takes after his grandad. seriously anything, to help you invest for the future. ally. do it right.

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good morning it is 11:00 a.m. at pepsico headquarters in new york, 11:00 a.m. on wall street. "squawk alley" is live ♪ ♪ good mocnday morning i am carl quintanilla, jon fortt is back.