♪ live from new york where business never sleeps, this is "squawk box. ♪ good morning welcome to "squawk box" on cnbc. i'm becky quick along with joe kernen, andrew is out today. joining us for the hour is peter boockvar, he's chief investment officer at bleakly advisory group. good morning great to have you here today we'll talk about everything happening in the markets, first let's check on the markets u.s. equity markets are indicated higher dow up by 63 points. so far for the week the dow is down but only by 12 points if things go like this today, you will be looking at 77 out of 8 weeks in a row where you have seen gains for the dow and the

s&p 500. >> there's a tweet >> oh. >> it happened it's a pertinent one for our becky quick. three minutes ago. donald trump, target ceo raves about the economy. the best consumer environment i've seen in my career, quoting brian cornell. is that what he told you >> that was right here >> you say it here, it comes out here >> he's watching us. >> he says a big statement from a top executive but virtually everybody is saying this when our trade deals are made and cost-cutting done, you have not seen anything yet. then it says @drudgereport, but it should say @beckyquick. >> he did say it here. that was an exclusive interview with brian cornell he did talk about how he felt about that >> there may be more there may be more coming i thought that was good.

>> that works. stuff happens here it found its way to trump land in a tweet >> appreciate it let's talk about markets in asia it was a mixed session there for the different major averages you can see at the close the nikkei was up by more than 0.8%. shanghai was slightly higher, up by almost 0.2% the hang seng was off 0.4% in europe, we already are seeing some active trading that's taking place you can see green arrows across the board. looks like the biggest gainer is the cac in france which is up by a half percentage point. look at treasury yields, which have been so stubbornly grounded the ten-year right now, still yielding 2.835%. hurricane lane now downgraded to a category 3 the storm's slow motion is

threatening hawaii with days of rain nbc meteorologist bill karins joins us now with more good morning, bill >> good morning. kind of like a nightmare scenario, a slow-moving hurricane near mountainous terrain. it's along the hawaiian island chain. i already have two stations on the island of hawaii reporting 26 inches of rain. significant flooding is ongoing. it's drifting to the north only at 6 miles per hour. during the day today it will be downgraded to a category 2, then a category 1, but it was never about the winds. the historical part of this storm is is the heavy rainfall the path takes it towards oahu and honolulu and then we take it as a weakening storm west of the islands going throughout sunday. it's the rainfall forecast there's about 1.5 million people that are under flood watches that's the entire population of the hawaiian islands

localized 30 to 40 inches of rain that takes small streams and turns them into raging rivers. that will happen over the weekend and today. we will get the life-threatening flooding, the mud slides, rock slides if you have driven around hawaii, a lot of roads are on the edge of the mountains. so a lot of areas will be closed off for a while. not worried about storm surge as much the water goes around the islands for the most part. two to four feet on the big eel island good news for the big iltd, they' island, the winds are not expected to be as strong there it's all about the water and the rain the next 48 hours >> i know hilo is the windward side that's the wet side all the time

that gets all the rain this came up and hit hilo first, i guess? >> yeah. it's as bad as they've seen. 26 inches of rain. it's supposed to continue raining there for another day and a half so some will get 3 1/2, 4 feet of rain but the time it's all done that's what we had in houston last year. >> we wish them the best in dealing with that. i don't know whether it's to say it's good that the rains are so bad, but the rain can also cause all the property damage. doesn't seem quite as dangerous for the loss of life >> the issue would be for life threatening part would be if anyone was near those streams or in structures. >> flash flooding. >> there will be water in homes that have never seen it before there will be evacuations taking place. >> thanks to bill karins we're following a developing story out of australia

prime minister malcolm turnbull ousted from office scott morrison was the winner of a three-war challenge for leadership of the ruling party he will be the sixth prime minister in over a decade. that's a lot turnbull survived a leadership vote on tuesday, but the margin was so thin his opposition consolidated and called for a second vote. >> scomo is what they call scott morrison >> they do >> yeah. he was saying earlier this week he was not interested in a leadership position. it's been rapid and six different prime ministers just over the last ten years. that has people feeling uneasy >> they don't elect a person they elect a party who picks the person >> which is why you can do rapid fire elections >> much like italy >> other countries get rid of their -- here it's major

we are talking about it. italy, eh, trailyaustralia. even in the uk, throw cameron out. it's kind of interesting scomo, will we start doing that? >> j.lo, a-rod, scomo. >> i don't like it >> joker >> i like it joker. >> that's a tough one. president trump just tweeting again he says our economy is setting records on virtually every front. probably the best our country has done tremendous value created since the election the world is respecting us again. companies are moving back to the usa. trade talks between the u.s. and china ended with little fanfare yesterday. no major resolutions coming out of the two days of mid level discussions, and now china's

finance minister is ramping up the rhetoric he said china does not wish to engage in a trade war but we will respond to measures taken by the united states we will talk about all of this in a moment. first, let's tell but a few stocks to watch. gap is struggling to survive same-store sales fell 5% in the second quarter offsetting gains at old navy and banana republic. art peck says the problem is attributed to an inventory backlog. shares down 7%. ross stores reporting better than expected second quarter results, but the off-price chain disappointed with third quarter guidance it has same-store sales growth of 1% to 2%. hp's second quarter earnings and revenue beat forecasts it's raising its full-year profit outlook they are benefitting from strong growth in its personal systems business

analysts were disappointed by the margins in the printer business that stock is down by 2.35%. let's look at the markets and the economy as we wrap up another week joining us is mark vitner. paul shatz is with us also, and our guest host, peter boockvar is also with us. let's talk about what the president has said today i'll start with you, mark. he's talking about how the economy is off by many measures to an incredibly strong performance. we did hear from the target ceo earlier this week who said in all of his years in retail he has never seen a consumer environment as positive as the one he's seeing now. what do you see when you look across the board >> the economy is in good shape. there's no doubt about it. i don't know if they're the best numbers ever, but they're better than we would have expected

going into this year we had a fairly upbeat economic forecast the second quarter was strong. from a consumer perspective one surprise was the huge upward revisions to income which were in the trillions of dollars over the last couple of years the saving rate was twice as high as had been reported. so there was all this talk about how the second quarter was a sugar high it seems to be more sustainable than folks thought previously. >> paul, you think that's what's happening with the market? it's seeing some of those things and it will focus on fundamentals >> i think it could be a couple things listen, as you said, the president tweeted, he is prone to a bit of exaggeration here and there. the economy is good. it has accelerated since the election here's what i will offer home sales and the housing market is under pressure in the

last six months. i will speculate that perhaps the consumer now, because of higher interest rates, is not buying the house anymore not buying the big ticket item, but juicing regular consumer goods. if the target ceo believes this is as good as it gets i wonder how much better could it get i see us printing a 3 handle on gdp. i can't see the economy accelerating from here there are too many headwinds coming down the pike after some of this sugar high from the tax cuts begin to wear off maybe in mid '19. certainly the my is not close to recessing right now. i think that comes maybe 12, 24 months from now. >> what we're talking about, the two views you two just expressed is what's probably playing out in the market now. mark talking about how he doesn't think it's a sugar high. paul saying he thinks it might be peter, how do you weigh in

>> the economy is good the third quarter will slow relative to the second quarter as the guests said, housing is moderating auto sales is slowing. labor market is great. overseas economies are slowing exports will probably slow the $64,000 question is can the fed engineer a soft landing or not. historically they don't have a good track record. we get deeper into the tightening in the fourth quarter and certainly next year. >> if there's something that kills this -- >> it's always the fed always the case. then you will have the ecb ending qe at the end of the year and how do markets respond to that. >> mark, how do you work that into expectations for the economy? the fed is the wildcard. we will hear more from jerome powell today what are you listening for what do you think the possible snafr scenarios are? >> bostic has been clear saying

we will not go out of our way to invert the yield curve kaplan and kashkari have been saying we are not going to go too fast i'm looking for anything that says that december is not a sure thing. right now we're counting on a rate hike on september and december we have two more rate hikes next year our forecast we have stronger gdp growth in 2019 than we do in 2018 that would say there's more of a risk that the fed may have to do more i really lock to see if there's any change in the rhetoric saying maybe we do need to be a bit more careful about intentionally inverting the yield curve. >> paul, you're talking about the -- even though we're not calling it a sugar high, you said it is a sugar high and it will wear off next year, then it will run into headwinds. what headwinds are those >> i don't think it definitely will you have a window of mid '19 to

mid '20. >> which headwinds >> the tailwinds of the tax cuts and deregulation the fed have an abysmal track record at the end of economic expand shupe expansio expansions they spew gasoline all over the place and some external spark happens. you look at 9/11, iraq invaded kuwait, the fed never stops. they always go a few rate hikes too far. i argue they'll do the same thing now in '19 or '20. >> those are the headwinds you're talking about i thought you were predicting something else i want sure which ones no one can see the future. if you're talking about trade, i thought there could be tailwinds from trade i don't know if you assume that ends badically >> i think -- >> hold on hold on. the housing problem that you talked about, that's more of a

supply problem that doesn't necessarily indicate weakness in the economy, does it >> joe, i think you're right on that. >> i'm not sure it's a supply problem. mortgage rates are up dramatically, they moderated lately, but over the next 24 months i think rates will continue to go up. that's certainly a headwind. not a huge one i think the tariff problem resolves itself favorably after we get through the midterm elections. i think the fed -- in the history of the world no fed has raised rates and sold assets at the time it's never happened. why does this fed think they can do it successfully when they couldn't engineer a soft landing last time? >> mark? >> in terms of housing, if you look at home prices, they have not eased off. typically when mortgage rates rise and they take a bite into housing, you see home buyers buy less house

they buy less expensive houses, so the median and average price comes down that hasn't happened i think it's mostly supply driven and also the past number, new home sales yesterday we had terrible weather in the northeast. economists are always blaming the weather, we had thunderstorms all through july that's where all of the decline in home sales was. there's a bit of a drop in the south, most of the drop was in the northeast. >> you can point to the weather in the northeast, you can also point to the tax situation in the northeast. the tax reform helped a lot of places, some of the states in the northeast are not necessarily in that position people have been watching to see if the more expensive houses in the nooertheast have been affected >> it's not just the tax reforms that have impacted that, foreign buyers have stepped away that's clearly an issue. boston is still going strong

i'm not that concerned that that's a tipping point i think housing is likely to strengthen in the latter part of this year. a lot of builders put off construction because lumber prices have risen so dramatically they have been falling the pick up inlumber prices wa driven by the tariffs on canadian soft wood lumber. but the prices have been coming down people put projects on hold, but they'll crank them back up in the south and the west in the late fall and winter >> great gentlemen, thank you for your time mark, paul, thank. coming up a crackdown on a tax avoidance scheme. and a warning about drinking alcohol even just a little bit you saw the pot story. >> i did ages your brain. >> thank god -- let's legalize it everywhere!

today's biggest water cooler stories are next as we head to break, the biggest premarket winners and losers in the dow. ♪

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so you just pay for data -- by the gig or unlimited. saving you hundreds of dollars a year. plus, get $300 back when you buy a new smartphone. xfinity mobile. it's simple. easy. awesome. click, call or visit a store today. the u.s. department and internal revenue service are working now to block high tax states from helping taxpayers avoid the new cap on deductions for state and local tax payments the tax avoidance plan worked like this. states would set up funs ffunds tack services against state and local taxes that they owe.

i think governor cuomo was saying that as his father is rolling over then they claim those donations as charitable deductions on federal returns. the new rule would put a stop to that limiting deductions only to charitable gifts that don't benefit the taxpayer personally. i can't believe i'm looking over at boockvar. very few people get to come over here right? guest hosts are always stuck over there >> peter is special. >> i'm a veteran now >> there's a bid for doing this. >> i won it at an auction. >> you hit the bid you've been with us -- he's here -- >> he's been here for a long time >> after everything he puts up with >> that, too. a new study finds drinking any amount of alcohol can be hazardous to your health

a team of researchers sa alcohol kills 2.8 million people globally each year causing cancer, heart disease and road accidents. researchers reviewed data from 700 studies and corrected for limitations since a lot of that research relies on people to self report drinking habits. >> where is the data that shows a very small amount -- >> i think they're looking at as a society overall it's not beneficial i have not read the entire report, if you take all alcohol, basically a lot of people can't do it in moderation. those excesses overall as a society hurt us. i don't know they're counter acting the evidence where if you had a glass of red wine it helps with hasht diseaseart disease

i think they're looking at the ability for people to stay in moderation >> the people that -- it is -- could be genetic, i'm not saying they're weak but it's not measuring the beneficial effects of being able to on a friday after -- in this news cycle of having a couple of drinks >> stress factors? >> right people say what -- it's sad. i've known people that can't have a drink they cannot have a drink >> they go too far >> it's tough. can you imagine going through life where you at some point can't have a -- >> all or none >> yeah. it's unfortunate not to have a couple of beers after playing a round of golf. i feel bad >> right >> i think that's not measuring like -- i'll have a drink. i can guarantee i'll have a chardonnay with my finger up in

the air. >> none. >> you're not having a single drink? >> no. when did that start? >> three, four months ago. >> last time that happened -- >> no, i'm not expecting >> okay. that's what happened last time. >> that's not the only reason i don't drink. >> i was coming over toslap you. >> no. >> can't help himself. can't help himself >> no i'm out of that business >> okay. so you just don't have a glass of wine? >> no. i'm not saying i never will. but right now i'm not frlt. >> halyft wants to help get out the vote this november they will offer a 50% discount on rides to the polls for the midterm elections. some people in underserved communities will be getting free rides to polling places. lyft is reminding passengers to register to vote through their

app and social media accounts. >> you think if i'm not drinking i must be pregnant that's the only reason i would not drink? >> that's not what i meant i'm saying i know you like to imbibe >> i like to have a drink on weekends >> and last time i didn't notice -- or i sort of figured it out last time because you were, you know, not talking about it i figured it out we were somewhere -- okay. they're telling us to move on. >> i'm not saying that's the only reason, but it can be a clue >> i'm not. coming up, one medical is focused on improving a patient's experience we'll find out about a big new investment from carlyle. and next thursday we'll sit down with warren buffett, that's ahead of his lunch with the winning bidder of the annual glide foundation auction it also happens to be buffett's

88th birthday. that's coming up at 11:00 a.m. eastern next thursday. right now before we go to break a look at the s&p 500 winners and losers pah! that will never work. no, no, no, nah. a bulb of light?!? aha ha ha! a flying machine? impossible! a personal' computer?! ha! smart neighborhoods running on a microgrid. a stadium powered with solar. a hospital that doesn't lose power. amazing. i like it. never gonna happen.

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♪ welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning, everybody.

among the stories that are front and center today, the fed in focus. jerome powell set to deliver a speech in jackson hole we'll have full coverage throughout the day on cnbc u.s. authorities are investigating microsoft for alleged bribery in hungary the "wall street journal" says that the justice department and the s.e.c. are looking into how microsoft sold its word and excel software to middlemen firms in hungary at a steep discount those firms then reportedly sold the software to hungary's government at full price microsoft says late yesterday it fired four employees and terminated its relationship with four business partners in hungary. check out this story on apple. the company has been on a hiring spree and they're tapping talent from tesla positions include everything from manufacturers to security to supply chain experts. former tesla employees offered several reasons for jumping ship including lagging compensation

and concerns about stock price growth u.s. equity futures this morning are in the green dow opening up by almost 70 points s&p up by 7 hurricane lane is battering the eastern part of hawaii's big island the flash flood warnings exte extended overnight partsof the big island saw 15 to 25 inches of rain yesterday the state will almost certainly have more water from rain, surf and storm surge than its infrastructure will be able to handle we'll bring you updates throughout the morning earlier we showed you a trump tweet about the target ceo. the target ceo raves about the

economy. the best consumer environment i've seen in my career, quoting the target ceo a big statement from a top executive but virtually everybody is saying this when our trade deals are made and cost-cutting done, you have not seen anything yet. here's what brian cornell told us wednesday in an exclusive interview. >> it's a very healthy consumer environment. i've been doing this for a long time this is the healthiest sli environment i've seen. important for us we're building market share in virtually every category >> again, he talked about the best consumer environment he's seen in his career jan kniffen said this is the best consumer environment he's seen in 25 years you do hear this from the retailers. it doesn't mean every retailer is able to executed on this or make the most of it, but it's great to see a company like walmart and amazon and target all hitting on all cylinders >> you have jobless claims on a

four-week moving average claims at the lowest level since 1969 consumers are getting wage increases. everyone says wage numbers are modest, that's being dragged down in the aggregate because of people going into the labor force are younger people and without college degrees. everyone else is getting real wage increases that are of substance. the question is inflation running 3% we have to keep that low >> peter, i have not heard somebody lay it out like that. when you have such full employment, that could be hiding the inflation. >> every ceo is talking about having to pay people more. wage increases are a real story. >> that's a very interesting perspective on it. i'm surprised we have to the talked more about that that's something we need to dig into >> also an argument that is made

about the minimum wage it will come back to you if you raise it the people at the low end will have more disposable income. when it's done, that's one idea, but it's still a wage and price control which may -- when seattle goes to $15 an hour, some people have to leave. it can hurt job creation or can -- when it's done organically in a tight labor market, that's the way it's supposed to work the only thing we have to worry about is margins, i guess, down the road if it were to get so tight that companies are -- you're seeing an erosion, i guess -- >> that's the thing. the two main drivers have been low interest rates and the low share of labor costs in fact, a couple years ago the profit pie labor was getting the least amount since world war ii. that's increasing.

so what's good for employers could be a profit margin challenge. they could offset it through better productivity, but that's a question >> that's an interesting way of looking at the statistic and breaking it down we need to hear more about that. thank you. all right. the recent partnership of berkshire hathaway, amazon and jpmorgan might be one of the best illustrations of how companies are trying to find new and cost-effective solutions for employee healthcare. at the same time investors are looking for ways to cash in on healthcare joining us now is amir rubin got a new investment of 3$350 billion from the carlyle group i'm trying to figure out, amir, how what we're talking about -- we're talking about primary care so you will hire physicians and then once you have the -- you're in nine states now

you'll probably -- that 350 million will be used to double your presence. you are talking about primary care doctors just for people that work for companies or just across the board >> great questions first, thank you for having me pleasure to be here. yeah at one medical we are a modernized national primary care organizati organization delivering care in inviting offices and through digital virtual care, all of which are convenient to where people work, shop, live and click. people sign up as members either direct to consumer, consumer sign up but increasingly we have over 1,000 companies thatoffer this one medical benefit to employees. >> very interesting. okay it's never pleasant for some reason there's waiting rooms. it's always -- you never get in when your appointment is

supposed to be i don't know i don't know how you make it pleasant how do you do that i want to talk about physicians, too why they would sign up with you, because they're salaried, right? >> that's right. so we've really redesigned from the ground up the medical experience so, for example, all of our offices feel like living rooms they're all convenient to where you work or where you shop on your lunch break you can get care if i open up my app i can talk to a physician in a couple of minutes. so this great accession and convenience helps us deliver a 90% national net promoter score. now, we also build our own technology so we've made it a better place to practice medicine so our providers are not dealing with the passel hassles of the electronic health records. our system owns that complexity for members, the consumer, as

well as for physicians >> what's your average physician salary let's say your a neurologist versus a general practitioner, are there differences in what you can pay? is it different if doctors have their own practice >> all our providers are paid competitive salaries we deliver primary care. this is internal medicine, family medicine. >> okay. i got that primary care they call that -- they refer to that as secondary if you need a specialist >> that's correct. secondary or specialty care. >> good. they make -- can you tell me what they make >> they're making what -- it's market based they will make in line with what people make in each of the markets. one thing that providers like so much we have a modern technology

stack. for example, if you message or e-mail your provider you'll get a quick response at one medical. it's not that they have a big inbox. we have a layer of machine learning reading that message and sees maybe my prescription is stuck somewhere it moves that task to another national team member and takes that work off of our providers so by having our own technology, a modern technology stack we make it a better experience for providers to work in our medical offices, but also are able to deliver this high service to members. >> the technology side of things would be, i guess -- you emphasized that. is that going to help you do this more cost effectively what could we -- if we switch over to this, how much can we save on primary care delivery? it would be nice to save about 50%. i think you're saving like 5%, right? that's a start, i guess.

>> well, the exciting thing is we believe -- we've actually demonstrated this we can take 5% to 10% out of the total healthcare spend so primary care in the u.s. is only about 6% of the spend by having highly accessible care that's available 24/7, we're avoiding 30, 40, 50% of the emergency room visits. our office visits are longer our providers are paid a salary. most providers are paid a fee for every service. so they see people quickly, they refer out for tests. ours have the time to spend with people so we end up reducing the more costly hospital visits, emergency visits, testing visits by having this modernized accessible primary care offering >> is this going to be the model you use, carlyle group and others what do you see there? do you see it at some point in the future someone acquiring you

eventually >> well, there's certainly a lot of -- there's been a lot of chatter about ipo. for us it's about spreading this model across the country we are on track to delight and our goal is to delight million of consumers and take out 10% of the u.s. healthcare spend. we're thrilled with our partnership with carlisle. as we continue to grow we'll tackle that approach >> all right appreciate it. amir dan rubin, thanks >> thank you so much appreciate it. when we come back, diversity in the tech sector we have an update on one of the biggest problems in silicon valley next. and we have a big lineup of central bankers today live from jackson hole james bullard will join us at 7:30 then at 8:30 eastern we'll talk ay tedetta mester. stun you are watching "squawk box" here on cnbc.

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one night to save lives get ready to see it all tune in live, september 7th 8/7 central our next guest wrote a piece for fast money back in 2017 about black women struggling to

secure venture capital funding this month she wrote a follow-up entitled the state of black women getting funded in 2018 joining us now with more on the tech industry's diversity issues is barri williams diversity advocate thank you for being here >> thanks for having me. >> to set this up, you wrote the piece, the original article titled white men get funded on potential, white women get funded on proof, black women don't get funded what led you to that conclusion? >> if you look at the statistics, black women are the most educated group in the country and the most entrepreneurial. that's been trending that way from 1997 onward what i thought was interesting is that if you are the most entrepreneurial, if you are the most educated, why is there a lack of funding when you decide to found companies dug deeper and noticed the

average raise, if a black woman tries to get funding which was $36,000. >> compared to >> a white male who got 1 million. they have to have a minimum viable product to prove their concept works, and men oftentimes were strictly funded off an idea. >> you think this is because the vc firms themselves are mostly white men. >> i think so. richard kirby, a vc partner did a really interesting statistical lock over the last couple of years because one of his passions is to diversify the vc space. he looked at a data set of 1,000 different vc partners across large firms and found it is about 75% white, 82% male, and there were 8 black women, 6 latinas out of that data set the most interesting thing was 40% of all of those parties pants had even gone to harvard

or stamford and some overlap with some attending both >> what's the solution how do you fix this problem? >> i think there are a couple of solutions. one is something that i would also advocate when you think about diversity in recruiting. if you're a large tech company locking to diversify, you should look at candidates holistically and understand that maybe someone that a lot of grit but they don't have an ivy league degree or maybe they could work three jobs while also carrying a full load in school you can look at ability of someone to get things done and multi-task versus seeing someone has the same pedigree or they went to harvard or stamford business school. alarge pa large part of it is bg willing to look at different talent out there and marvin nichols has a new program called vc apprentice

in that case they focus solely on training black and latin women to train to become vcs, and at the end of the program ideally they would hire them >> bari, thank you it's a problem in a lot of other areas. thank you for your time. >> thank you. coming up, college football kicks off saturday with a few teaser games but the season is starting under a dark cloud of negative headlines. eric chemi has the details next. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey.

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some teaser games on saturday, but the season starts with quite a few negative headlines chemi joins us with some of the challenges ahead for college football. >> that's right, joe think about ohio state coach urban meyer suspended for three games because he didn't properly report his assistant coach with a domestic violence situation. the history of that at their household. then you've got what's going on with rutgers, some of the credit card fraud things happening there with players getting arrested and then at maryland where a player died earlier, youknow,

few months ago, and now it's come out what the coaching staff was like and how demanding and demeaning everything that was happening in that program. the north carolina coach not this week but recently was saying i don't believe football causes cte, mean while his players getting in trouble for selling some of their gear you have all these headlines adding up and they are not generally positive a lot are big 10 headlines but we will leave them out of it right now. the sport overall you think would be bad but i talked to some people on the business side, this he represent some of the big sponsors, the corporate guys giving all this money and they are saying we are not hearing a peep, the sponsors they are not concerned every single one of these things can be put off as an individual school problem everyone loves their school -- >> do you think it's more than the average year >> and is it really more than the average year i think when there's a player death and someone in ohio state's -- urban meyer's caliber it gets more attention. >> urban meyer it looks like they've already settled this. >> they've dealt with it, yeah it's interesting, the money

behind it doesn't seem to be drying up, everyone is supporting their school, everyone is supporting the overall sport. that's an interesting thing where in different kind of sports you might see sponsors want to pull away. >> we had things in the past paterno. >> yeah. >> i mean, we've had -- >> penn state, but penn state moving forward you won't hear about it again. >> what i saw, i was trying to explain it because it was funny, it had a parody of the top 25 teams and it had -- it started out, i thought it was real, it had alabama one, clemson two and then it said three through seven other sec teams that don't deserve to be there and then for the last 15 it had all the other usual suspects that aren't going to win, michigan, notre dame, you know, all the ones we always think of that are always there, whether they -- sometimes i'm not even sure -- >> what's your team? who do you like? >> to win or -- >> who do you root for i know you root for rutgers, that's easy, that's your school, but who do you root for? >> i don't really have --

>> i know you are a college basketball guy mainly. >> and i went to colorado, we had our own issues. >> they shouldn't even be in the pac-12 i'm a ucla fan growing up but i think utah and colorado being added in there, going from 10 to 12 is a problem. >> i like the notre dame/sc rivalry. >> i like notre dame >> i kind of still like that. >> you grew up near there so that makes sense, that's your local school. >> she grew up near oklahoma, texas. >> i born not far from -- >> before you're ten you lock it in the research shows there. >> went to kindergarten there says the guy from five different states as well eric, great to see you we will talk to you soon peter thank you for being with us today when we come back we're going to talk more about the trade war fallout. we will tell you about an american television assembly plant that is struggling to get the chinese parts it needs to attossn busine th sry coming up right here on "squawk box."

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every network every star kevin bacon dream big with us. one night to save lives get ready to see it all tune in live, september 7th 8/7 central good friday morning. the fed in focus in jackson hole as that symposium kicks into high gear. squawk news maker and fed news president james bullard will join us live the president tweetingabou the state of the economy and that becky quick interview with target ceo brian cornell from earlier this week right here on "squawk box. and the futures are pointing to a higher open this morning as china trade talks end. the latest on what you can expect in the today's trading session as the second hour of "squawk box" begins right now. ♪

>> announcer: live from the beating heart of business, new york, this is "squawk box. ♪ good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick. in studio with us is steve grasso steve also a cnbc market analyst and a frequent guest here. >> thanks for having me. >> we have a lot to talk about let's start things off just taking a look at the futures this morning we've been in the green all morning long, if these trends hold up this is going to be another positive week for the markets. the dow had a deficit of 12 points as we're heading into this morning, the s&p 500, the nasdaq were already positive now the dow is indicated up by close to 80 points, s&p futures over 7 and nasdaq up by 26 points if we were to stay in the green

here this would be seven weeks out of the last eight that the dow and s&p have been positive and i think three out of the last four for the nasdaq. >> why wouldn't it be positive is there anything in the political arena this week that would have caused it to -- >> i think what's more important food for the due tours is what jay powell has to say. >> probably. >> investors are keying off of that, is he going to be hawkish, more hawkish than expected because of the political headlines and the pressure on the fed. >> this is an unbelievable week. all the bears were saying this is the one that's going to kill the market this is it it's over. you're going to see a collapse in the market. we just haven't seen it yet. >> nope, we have not let's talk about a few headlines at this hour investors are looking ahead to this morning's speech from fed chairman jay powell. he will be speaking at the annual economic policy symposium in jackson hole wyoming, we will have more on that coming up and of course our interviews before that with regional fed presidents jim bullard and lor

receipt da mester. the durable good orders reports are out. economists think orders declined by 0.8%. the foot looker retail revenue beating forecasts and same store sales up by half a percent it was short of what analysts had expected on same store sales but foot locker says it expects to see stronger comp sales for the second half of the year. >> we're following a developing story out of australia the prime minister, ousted from the office the nation's treasurer, scott morrison will become australia's sixth prime minister in just over a decade. the aussie dollar moving higher, though, on the news this morning. as you can see right there, about 70 basis points. also president trump tweeting earlier this morning about our exclusive interview right here on "squawk box" with

target ceo brian cornell earlier this week. target ceo raves about the economy. this is the best consumer environment i have seen in my career, in quotes, from brian cornell. then back to the trump tweet, a big statement from a top executive. but virtually everybody is saying this and when our trade deals are made and cost cutting done, you haven't seen anything yet. here is what brian cornell said wednesday right here on "squawk box. >> it's a very healthy consumer environment. i've been doing this for a long time, i think this is the healthiest environment i have ever seen, but importantly for us we're building market share in virtually every category. >> the then tweeting about the economy overall, saying, our economy is setting records on virtually every front. probably the best our country has ever done. tremendous value created since the election the world is respecting us again, companies are moving back to the u.s.a >> it's crazy. >> it is crazy i don't know. >> i made the mistake of

engaging, which i usually just block -- and i have a new technique, muting is pretty good they don't know, but i don't see their unhinged -- >> because some people take it as a point of pride if you block them. >> i got into trouble because some people are really mad that i call him president i call him president trump. >> you call the president president? >> yeah. and i go, you know -- and that's like somehow showing, you know -- but it's that insane it's just -- it's that insane out there right now that you have the nerve to refer to -- >> twitter is a different experience for me now after i muted them everyone likes me because i mute everyone i mute everyone who doesn't. >> do you remember they called him shrub all the time it was the same back then, but this is a whole new level. >> the twitter sphere certainly -- >> is there any reason to engage >> -- magnifies it.

>> someone said why are you engaged. i said because 57% of millennials think socialism is great. i think it's time for some of us to speak up. >> you guys are the professional athletes did you ever see derek jeter talk to people when he was on the on deck circle to the fans heckling him he never did you really can't engage. i hear you, to your point, you want to educate people who have a warped sense of their view. >> the stuff i see is absolutely -- it's drivel. >> that's why you need -- >> and i had someone spell that -- that i engage in dribble, d-r-i-b-b-l-e what are you talking about how do you know? am i drooling? do i engage in dribble >> i think he meant drivel. >> he meant drivel you get some geniuses. anyway, let's talk markets wall street pointing to a higher opening this morning, joining us now craig hodges, ceo ofhodges

capital management and victoria fernandez chief market strategist at cross mark global investments. our guest host this hour steve grasso, director of institutional sales at stuart frankel, a "fast money" trader, a cnbc contributor and a guy that's got shirts in his closet that never -- >> this will get you nowhere. >> -- that never repeat. all right. what was that -- we always call craig we call him the incredible hulk because he looks so much like -- >> edward norton. >> yes, like edward norton anyway, don't tell us what ed norton thinks of things, i don't want to hear from him any more after this i've heard enough. anyway, what do you think of the market, craig? >> you know, i think the market is in a good spot. you know, this is a lot like the historic midterm election years which not a lot happens for the first nine months but the average return since 1946 in the fourth quarter after the midterm election is like 7.9%.

so i think things are setting up now. we've got a great economy, we've had just about the best quarter that's finishing up that i've seen and so things are good. you know, there's parts of the market, the industrials and, you know, materials, airlines that are really gone down quite a bit, i believe that's where the values are, but the backdrop is good i'm bullish from here. >> craig, we had a weird comment earlier that i was trying to work my way through and that is that things are so good right now that they can't get any better, so that was taken to be a bearish signal >> yeah. >> did you hear that did that make sense? things are so good right now they can't get any better so that's time to sell. >> this morning you mean >> yeah. i don't know if that -- so they're so good, they are as good as they've ever been in history but they can't get any better. >> you better watch out. >> you've seen a lot of these companies report unbelievably -- like u.s. steel, unbelievable earnings, it's like this is as

good as it gets and the stock is down 20% from the time they report it. there is a lot of that out there. >> do you have targets or you don't use targets typically for the s&p? >> no. no, but -- yeah, we -- you know, the s&p has never declined in the 12 months following a midterm election since 1946. the market does have some considerable upside, i believe, from here. >> all right victoria, you heard some of craig's comments there are you more bullish, less bullish? where do you fit in on the grand scheme of things >> i agree that we have some more room to run i mean, if you look, yes, he's right, the economy has been really strong, the last two quarters on earnings have been great. we're really looking at two major things to keep pushing this economy forward and that's going to be cap x one coming in, that is key because it has more goods producing jobs, bring more people into the labor market and it increases productivity. we saw the productivity number

go higher last week. that's your potential gdp moving higher we think there's a huge push from cap x and the consumer has been incredibly strong yes, we saw it in the second quarter numbers, especially the retail numbers over the last couple consider weeks, but we also saw retail sales the control group up about half a percent last week, that's at the high end of their six-year range. we're laying a strong foundation for the third quarter for the retail and then you go into the holiday season which is usually strong for them as well. i think we have some strong head winds behind us to keep this momentum moving forward. >> we've also been hearing that, you know, and the fed is on everybody's -- we are all talking about that, that they've never orchestrated a clean break and they have never had this much -- you know, they've never been this much involved in the economy for such a long period of time before i mean, do we know that they're going to be able to exit smoothly, victoria >> i don't think we know for sure that it's going to be smooth, but i think they have a

good path laid out we anticipate we will have two more hikes this year, september is basically priced in, december is about 65, 68% priced in at this point, 70 being that line in the sand, and then you have a break until you get closer to june we actually heard kaplan yesterday in his interview with steve say he anticipated three to four more rate hikes over the next year. i think that's pretty much what the market has priced in so there shouldn't be any big shocks unless we hear something or have geopolitical event that move the market. i think we can somewhat go along the path that's been laid out and there shouldn't be too much of a market movement based on expectations. >> i mean, i'm usually comfortable thinking that a lot of people say that, you know, they've already put to bed or put it to rest that the fed orchestrated a great response to the financial crisis and that we are in the clear and that we are out of the woods and i started believing that as well, craig. can it still come back to haunt us in your view at this point?

>> i don't see it. you know, at hodges capital we make about 3,000 company touches a year with our analysts and over about 850 companies and i've never heard a more optimistic bullish time than we're hearing right now. you know, there's a lot of people think we are in peak earnings and even if we are at peak earnings and let's say the yield curve inverts, you still have on average about 18 months of positive market that will go up 21% from the time that the yield curve inverts. so i don't see -- you know, there's still pessimism and skepticism out there and that's what you need for this to continue. >> what are the chances the fed got it right i will say one thing, that richard fisher used to say the fed is not all good, now it needs some fiscal help did the fiscal help with the tax cuts did that come along right at the right time? >> everyone questioned whether it came along and was not needed i think it came along just at the right time everyone complained that this recovery was the slowest in the history of recoveries of any

economy in the u.s we needed something to get us over the hurdle. the problem is when you look at the market this week, are these things going to stick with us for the midterm election i will ask craig, when i look at the market this week, those news cycles, we have technology, we have retail, we have discretionary, semis, energy, all outperformed what did not perform were the staples, the industrials, the materials and the financials these news cycles are not going away so do you bet on what we saw perform this week? >> yeah, i think you will see continued -- like we've been talking, the consumer is in a great spot and there's a wired market you have parts of the market that are very expensive and it kind of makes me nervous those things don't seem to go down the stuff that's the cheapest, the airlines, the materials, the -- you know, the industrials, they are the cheapest and they get cheaper and cheaper. i think you need a little bit of both we're focusing on the stuff that is really, really beaten down that we don't think we are in

the midst of a recession that's happening now and we think there is a lot of upside in these industrials. you mentioned the semis, i think there's parts of -- look what micron has done, maybe $13 earnings and the stock is below 50 there's some really good values out there. >> victoria, i will give you the last word. do you see the -- is there a tipping point at some point with the backdrop of the political news that the market would finally sit up and say, wow, i'm really worried about what's going to happen? is that possible i mean, no one knows what's around the corner in this arena at this point. >> yeah, there's always -- you know, there is a new headline every day, right, but the market has been really resilient. even the news that's come out this week, the market was down a little bit, but we are still on track with the futures today to have another up week so i think the market now that we're wrapping up earnings is turning back and really focusing on some of the more macro

issues so that could bring a little more volatility into the marketplace. i don't think we really have a tipping point at this point in time obviously even the president has brought up impeachment, if that comes to fruition then i think you have some issues you have to deal with, but right now the market is extremely resilient, i think this bull run is going to continue and we're focusing more on the fundamentals from the earnings. >> okay. craig, i was actually trying to get -- i was trying to see if we could get the director to just give you a green -- like the hulk next time we're going to do that i've ruined it, though thank you, craig. >> my pleasure. >> there we go there we go. you've got to save that. i hope you dvr'd it, craig, for the people in your firm. >> well done >> all right don't get him mad. still to come -- just like edward norton. still to come st. louis fed

reserve president james bullard joins us live from the fed symposium in jackson hole. it's friday and i don't know, easily amused. interest rates, the president's take on fed chair jake powell, trade and the economy all coming up. next, tariffs may deal a blow to a small town company that makes tvs. kate rodgers has a preview hi, kate. >> reporter: hi, joe good morning element electronics which you see behind me gearing up to close its doors in october we wilte y al lloull the details coming up after the break on squawk you always pay your insurance on time. tap one little bumper and up go your rates. what good is your insurance if you get punished for using it? news flash: nobody's perfect. for drivers with accident forgiveness, liberty mutual won't raise your rates due to your first accident. switch and you could save $782

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we are continuing our trade war tour today kate rodgers has the story of a small south carolina town facing the closure of a television assembly plant in the wake of tariffs on goods that are imported from china. kate >> reporter: hi, becky that's right we are here at element electronics. you can see behind me this factory assembles televisions with products that are imported from china they say they're gearing up to close their doors on october 5th. laying off more than 100 workers in the process really just the latest casualty in the ongoing trade war with china. the company declined to participate in this story and comment for cnbc, but we did obtain a letter to state officials from element saying that the company is saying the closure is a result of the new tariffs that was recently and unexpected imposed on many goods imported from china including the key television units used in

our assembly operations. mike fanning says he's been working with state lawmakers really putting politics aside in hopes of keeping this facility open he also says element has accepted -- requested, rather, an exemption from the tariff process. take a listen. >> this is not the way to do tariffs. is that if you want to have a tariff policy, make sure that you are taxing people that are competing against americans. this could be a blow not just to manufacturing and jobs in our county, but even to retail and just basic quality of life issues for all of the folks in the county >> reporter: element has ties to both u.n. ambassador nikki haley, she was governor of south carolina and helped recruit this company to the state in 2013, as well as omb director mick mulvan mulvaney, his former congressional district included wins borrow in fairfield county where this facility is located both of course have since joined the trump add strargs, but senator fanning says mulvaney has been an advocate to keep

element's door opening, but a senior omb official says that mulvaney continually advises the president and ultimately president trump will make the final decision adding to the director has never spoken with the president specifically about element. we should also note that element has actually gotten push back from groups including the alliance for american manufacturing. they say they import their products from china and put them together here and they are not a true american manufacturer and therefore should not be exempt from tariffs, guys back over to you. >> kate, thank you very much kate rodgers. when we come back st. louis fed president jim bullard will join us live from jackson hole, wyoming where central bankers are meeting to discuss interest rates, the global economy and much more. he is our special guest starting right here at 7:30 eastern time. "squawk box" will be right back.

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aflac trivia question. when was the first tesla sold to the public the answer, 2008 america's biggest grocery store chain is taking a big stand against plastic waste and this time we are not talking about straws kroger plans to eliminate single use plastic bags from all of its 2,800 stores just within the next seven years the company will transition to reusable bags. paper bags will still be available, but customers will have to pay for them >> why not use paper pay for paper and you can recycle paper. >> easily, yeah. coming up, another squawk news making interview that you can't afford to miss, st. louis fed president jim bullard will join us right after the break. as we head to that break take a look at u.s. he can quit futures, green across cross the board. up 74 on the dow

>

. good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. among the stories that are front and center, microsoft is reportedly under investigation by the justice department and the sec related to software sales in hungry between the years 2013 and 2014. the "wall street journal" says that the probe centers on whether intermediary companies offered bribes and kickbacks to government officials to buy the software microsoft issued a statement saying it had fired four individuals and cut ties with those intermediaries following an internal investigation. two small cap retailers going in opposite directions this morning hibba sports shares are taking a sit after the apparel seller reported an unexpected loss, but the accessories retailer the buckle is seeing its shares jump after it beat estimates and posted a bigger than expected comp store sales increase. hibbett sports down by over 20%

this morning, the buckle up by 4.3%. two days of talks between the united states and china have concluded with no major breakthroughs on the trade dispute between the two countries. the white house says that the two sides did exchange views on how to achieve balance and reciprocity in their trade relationship those talks were the first face-to-face meetings between the united states and chinese officials since early june. they're out there, all the fed heads gatheredin jackson hole for the big symposium and our own fed head said in the nicest possible way steve liesman joins us out there with a very special guest and a long time friend of squawk. steve? >> yeah, joe, thanks very much i'm here with jim bullard, the st. louis federal reserve president, among those -- the dignitaries gathered here in jackson hole thanks for joining us. >> thanks for having me. >> let's start off with -- 21 basis points separates the two year note from the ten-year

note, it's not very much what signal does that send to you about the economy and about your outlook for where rates ought to be. >> i started talking about this last december and there has been a good debate on wall street and within the fed about what to do. a lot of people have said maybe we shouldn't knowingly invert the yield curve. i agree with that. i don't think there's any reason to take on the possible recession risk that you would be inviting and so i think we should be very careful. >> is this the market saying no more that you're here, you're where you want to be, you are at neutral already. >> the market is not seeing that much growth out in the future, they are not seeing that much inflation pressure or maybe very little inflation pressure out there in the future and that's why the ten-year hasn't been able to meaningfully break through 3% and stay above. i think you can still cling to the hope as we continue to raise

rates that the long end will go up, but it's not looking like it just sitting here today. >> we just had a very strong quarter, 4.1%, our cnbc update tracking other tracking forecasts is at 32.this morning, another strong quarter after that have you changed your growth outlook for 2018 and do you think it continues >> well, i think it's going to be a good year and part of that is fiscal stimulus and other factors that have come into this year, but the point is it's going to slow in 2019 and 2020, that's the standard forecast that's out there, so this is -- as a baseline i think that's what you should have in mind. >> the administration has a point of view on this which seems to be different from what i hear from the federal reserve. the administration thinks it can sort of change the dna of the economy so to speak in that it can raise potential growth by cutting taxes on corporations, increasing capital investment, increasing productivity and

ultimately this leads to real wage gains do you not buy into that scenario >> no, those are beautiful things and laudable goals and the deregulation agenda is pushing in that direction, the corporate tax cuts are pushing in that direction, but from a policymaker perspective, for monetary policy, that should not be our baseline case our baseline case should be probably the growth that we're seeing now taper off and it will go back to potential which is pretty low, so, you know, potential could come up to 2% or, you know, a lot of people in the fed have it at 1.3, maybe 2%, maybe a little over 2%, but not 3% or 4%. >> but if it does happen, take that on board, we can make policy if that does happen you don't have to be preemptive about that you can hope that that happens and not be preemptive about it. >> becky quick has a question back in new york. >> hi, becky. >> hi, jim it's great to see you. speaking about wage gains, we were having a conversation earlier this morning and peter

book far posited that we are in fact seeing wage gains go to a broad array of people but the reason he thinks it's not showing up in the average hourly earnings is you have so many new people coming into the workforce and they will be at lower levels maybe if you look at average hourly earnings it's masking a bigger number of wage gains that are going to a lot of people what do you think about that theory >> yeah, you do have other measures that you can look at. the atlanta fed's wage tracker is one that compares people in, you know, the same jobs. you can also look at the employment cost index year over year, that's in the high 2s. i think kind of no matter how you cut it we're really not seeing too much. one thing i would say about wage gains, though, productivity gains have been low, around 1% on average, and inflation has been below 2 so if you're looking at nominal wages you would only expect something in the upper 2s. i don't see it as being out of line with what has actually

happened, it's just not as cyclical as maybe some people would have expected. >> jim, we always talk about how crazy it is that, you know, we've been waiting so long for the ten year to start heading higher and then everybody says, well, it's tethered to the german bund which is 30 -- whatever it is, 30 basis points. it's tethered down there so how do you know that, you know, this yield curve you are afraid to takeon, how do you know that that's not a function of what's going on over in europe it just seems weird to me that the bond market is global, but, you know, inflation is disparate and varied all over the world. so they have this crazy number over there and we're basing our yield curve on totally different economic conditions that are present in the rest of the world and once again you might end up being behind the curve because we're responding to influences from a completely different place and maybe inflation and other factors really warrant higher rates here.

>> joe, i was in the fed in 2000, 2001, the yield curve was inverted, we pooh-poohed it, we got it wrong, greenspan had it wrong. 2006 one of the first speeches bernanke gave was on the yield curve, he poo-pooed he, he got it wrong we have to take this signal seriously. >> so you don't care that we're basing our interest rates on economies that aren't -- they are multi-speed all around the world and we are tethered to these low rates but maybe we shouldn't be >> i appreciate the global argument, but as far as inflation in the u.s., i just don't see much inflation pressure and the reason you would want to be preemptive would be to shut down incipient inflation and the market is not seeing that, i'm not seeing it in the tips market i'm an inflation hawk but i just don't see that developing, and

if it does develop i think we could react and react appropriately. so i just don't think this is a situation where we have to be preemptive. >> let me see if i can wrap it up in terms of what your outlook is do you think the fed ought to be done for the year in terms of raising rates? >> yeah, i think, you know, if it was just me i'd stand pat where we are and then i'd like to react to data as it comes in. i'd like for inflation or inflation expectations, see if they are moving up what i like about the tip space measures of inflation expectations is they've already incorporated all of this in. they've already thought about the german bund, they've already thought about the fiscal policy that has comeon board, they've already thought about the fast growth this he still don't see much inflation. >> they already may have factored into -- >> they are factoring in what they think we are going to do, but they are mo market is more i

wish than the fed. >> how do you react to comments by the president of the united states about fed policy? >> we have a mandate by law and so we do the best we can to try to hit the mandate lots of politicians comment on monetary policy, we have hearings before congress, the senators and the congressmen get to comment it's not unusual historically for presidents to comment, so i think it's in this day and age we are probably going to get comments from the white house. >> steve grasso has a question back in new york. >> hey, jim. so i love your perspective looking back at greenspan because he did raise rates in the space of the inverted yield curve, that was the wrong thing to do looking backwards. chair powell he is boggled by the fact that there is no inflation. why are we having this debate about raising rates? >> because many people are sticking to their phillips curve arguments. the phillips curve has not been

very effective way to predict inflation over the last 20 years and unemployment is low, a lot of people have in mind that that's going to lead to inflation, therefore, we need to slow the economy down. i do not think that's a good way to think of policy in this particular environment and i would focus more on where we think market expectations of inflation are. >> thank you. >> jim, what do you see as the biggest risk right now >> the biggest risks >> yeah. >> coming out to jackson hole here, we have not been in as good a situation as we are today for a long time. i think coming out here. a lot of times we were in crisis mode. >> every august it seems, right. >> yeah. so i do think we are in good shape for today, but monetary policy is about trying to think out -- you know, to play it out two years ahead. >> if you have it wrong is it wrong to the down side in are you still more worried about lower inflation? >> inflation has been so slow, so sluggish, to slow

if we all of a sudden got some heat i think we could just move rates up and probably contain it pretty easily, but what can happen here is that you tip -- it's a long expansion here, you could tip into recession if we play this wrong. >> but pick up on what joe is saying because i think he has the right sort of -- identified the right risk in terms of what people are talking about, which is, okay, right now the u.s. is tightening, but europe and japan remain very easy and they appear to be easy out into the horizon as we can see. >> yes yes. >> what does the world look like if europe and japan start to tighten along with the united states are there risks out there, especially, you know, something mentioned a lot by the critics of the federal reserve which is that low interest rate policy has fueled misallocation of capital which means that there is stuff that's going to burst when the fed and everybody starts tightening. >> yeah, i would say if they start tightening it's probably good news because it probably means they've got something good happening in their economies.

>> fair enough. >> europe did have a good year in 2017, a little bit weaker data this year so ifthey came around i think it would probably be good news for sort of the g-7 economies that they are picking up. >> you don't worry about an environment where all three central banks are taking out that easy monetary policy. >> if they were doing it randomly i would worry about it, if they were doing it in response to better economic conditions or inflation pressure i think that -- you know, inflation is europe is even lower than it is here on their preferred measures and so -- and japan has struggled as well to get their inflation rate up. >> joe has another question. >> jim, let's say someone asked me to write a history book and i had -- on one of the chapters it's how the fed's response to the financial crisis which was extraordinary and never seen anything like it before, can i write the history book now and say the fed successfully navigated through the financial

crisis and there were no problems with the unwind is that behind us? because i still hear people saying fed still has thisin front of it and we've never done it before. can i write that history book or will i need to send out an abridged edition or something? >> well, it does seem like a never ending story i do think the fed navigated the crisis whether we navigated it as successfully as we could will now be a debate that rages on probably for 50 years or more. as far as whether the normalization process is over, i'm very much of the mind that we should not think that we're harkening back to the 1990s or 2,000, we're trying to get rates to those levels. if you look at short term rates, they've been declining, short term real rates have been declining since the '80s, some 600 basis points lower than they once were. so we are in this really low

real rate era and we have to tread lightly on what we're doing here 2% is not -- 2% today is certainly not what it was in the mid '90s >> jim, let me follow up here and maybe wrap this up in the question there are protesters here who say the fed wants higher unemployment, and there are people who say that this is the wrong time to tap on the brakes. how far should the fed let this economy run? 3.9% unemployment. we're still doing 200,000 jobs a month in an economy that everybody thought was done or out of workers. >> you've got to love that number. >> you have to love it but as a central banker, you describe yourself as an inflation hawk it should make you nervous. >> i'm an inflation hawk but i'm not a big believer in the phillips curve. >> okay. >> yeah, i don't think that low unemployment is a threat and

it's really an opportunity to do a lot of good things in the labor market you can pull african-american unemployment down to levels that are more consistent, hispanic unemployment lower, that are more consistent with unemployment in the rest of the economy, you can get people into jobs who have been marginally attached to the workforce, that will set them up to survive the next recession, do better during the next recession there are a lot of good things that can be happening. they can be developing human capital if we can get them into the game here. like i said, i'm just not seeing that much on the inflation side or frankly on the financial stability side, either. >> jim bullard, thanks for joining us joe, with that rosy outlook i'm done for the day here. i'm going to go fishing for the rest of the day because -- because as joe -- as jim said, it's as good as its ever been so there is no point in actually doing this anymore we have loretta mester coming

up, i will be here for that. >> i'm waiting for the trump tweet, jim bullard good man. agrees with me that's coming out any second here he is a good man we don't need -- you know, don't work against us with what we're trying to do not yet. i don't even want to go to break because i think it's going to come up any second i'm kidding. >> he might be replacing powell. >> keep your schedule free. >> what are you doing later, jim? you got call waiting thanks, steve. >> i think i'm going to get coffee >> thanks, joe >> it will be the same price it was two or three years ago, which is your point. >> that's right. >> when we return except starbucks raises prices regardless of -- of -- anyway. corporate stories and stocks to watch this morning when we return let's take a look at the markets right now. i think they went up, you know -- it's not much, but that was pretty bullish stuff if you like low interest rates. we just heard from jim bullard the ten-year note, take a quick

look right there you don't want to mess with the yield curve. 283 now. check out the dollar, which i would guess would probably go down -- it's not 1.15 on the euro "squawk box" will return after a quick break.

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the stock it up by 1.75% auto desk reporting quarterly profit of 19 cents a share, better than the street was expecting. revenue coming in above what the street was expect and that stock is up by 8.75% intuit the publisher of turbo tax and quickbooks beat estimates on the top and bottom lines and announced a dividend increase and stock buy back program, however, the stock is down after the ceo brad smith announced that he will be stepping down at the end of the year that stock is off by 2.3%. intuit, if you're doing tax software, what do the tax changes mean obviously the stock was run up pretty significantly over that time, but are more people going to need turbo tax?

>> i don't know. i'm waiting to do it on my postcard. >> right >> still hasn't been done. >> you and mr. forbes. >> he did it, he played that stupid cure song again, grecco, can you hear it? i almost teased you with it earlier saying friday, i'm feeling a little in love. >> doesn't that make you feel younger? >> no. you can't play it 52 times a year it's not original. >> what i love about this is there are very few ways to get under his skin this drives him nuts >> to get under whose skin >> joe's >> few ways to get under joe's skin. >> actually there are many easy ways -- >> i used to leave the closet door open when we were back in englewood cliffs because the coat closet would drive him nuts. >> i had to get up and close it. >> i said you can't do it 52 times a year, he just said that's a challenge

>> guess who is going to win that challenge. >> the guy who is playing the music right now. >> that's right. all right. when we come back today we're going to wrap up the hour with some investment ideas with our guest host and "fast money" trader steve grasso. later jay powell will be addressing attendees at the jackson hole symposium we have a preview of what the markets want to hear. also a programming note, next thursday i will be sitting down with warren buffett ahead of his annual lunch that he does with the winning bidder of the glide foundation auction it also happens to be buffett's 88th birthday. that's coming up at 11:00 a.m. on thursday. >> 11:00 a.m.? >> it's at their lunch where they do it so we have to wait until lunch. >> can you tape it >> no, he's not there. 11:00 a.m. >> for me, joe concerner, nothing. fork

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on any screen. bingo! alright! and watch whatever you buy. wherever you are. head to xfinity.com/stream to start watching. simple to rent, easy to buy, awesome to go. the phillips curve has not been a very effective way to predict inflation over the last 20 years and unemployment is low, a lot of people have in mind that that's going to lead to inflation, therefore, we need to slow the economy down i do not think that's a good way to think of policy in this particular environment and i would focus more on where we think market expectations of inflation are. >> that's st. louis fed chairman -- or fed president jim bullard responding to a question from our guest host today, steve grasso, who is the director of institutional sales at stuart frankel and a "fast money"

trader. >> it was very trelg what he said when you look back at how bad greenspan got it in hindsight it's refreshing that he gets it. >> if the ten year doesn't move where i it can't because of the 30 basis point bund, then they've got to stop raising rates then are they done? >> they should be done he said if it were up to him he would be done. i think that's a signal for the markets that you want to be buying this market, not selling it. >> one thing i will point out is bullard is not a voting member of the fmoc this time around it is a table that very closely listens to each other and they do tend to -- >> this is the theme when president trump comes out and starts talking about lower rates and they say is chairman powell going to listen, it doesn't matter if he listens or not it's in his brain now when bullard comes out and says this it's in everyone's brain. trump is not the only one saying it. >> we are going to talk to loretta mester later on this morning who is a voting member this time around the markets are taking this

pretty positively today. >> the markets are taking it positively, home builders, i'm in lenar and when you look at how these things have been battered down, if rates are not increasing the way they think they're going to increase, take a look at home builders that have been pummeled recently. >> we've heard lumber prices are going to come down. >> you have to work all the way until 6:00 tonight. >> i have to work all the way until 6:00, straight through, but it's friday. >> are you on "fast money" have you heard of that show? i thoughtyou were on halftime report i was trying to yank your chain by saying you were on "fast money. you're on "fast money" >> i love you on closing bell. >> that will never happen. >> i'm on tuesday. i'm on closing bell. >> god bless you. >> when we come back black rock's chief investment officer of fixed income will be joining us on the markets. and later we had back to jackson hole and the fed symposium loretta mester of the cleveland

fed will be joining us from steve liesman. plus the most expensive cars ever to sell at auction roll into pebble beach. robert frank has a look at what's on the auction block. "squawk box" will be right back.

about our exclusive interview with the ceo of target we will show you what caught the president's attention. it's a big day for fed chair jay powell, he will be delivering a closely watched speech in jackson hole, we will talk to black rock's rick reared and cleveland fed president loretta mester that's this hour. and it's one of the biggest classic car auctions in the world. robert frank is live in pebble beach where they are expecting record sales numbers and talking about the impact of auto tariffs. the final hour of "squawk box" begins right now ♪ ♪ live from the most powerful city in the world, new york, this is "squawk box." >> you and andrew are constantly doing stuff behind me. >> you missed. >> good morning and welcome back

to "squawk box" here on cnbc plastic straw. >> what? >> this is a plastic straw. >> yeah. >> live from the nasdaq market site in times square i'm joe kernen along with becky quick and our guest host this hour is black rock's global chief investment officer of fixed income rick reader we will get to rick in just a minute but how much you got -- that you got to worry about, how much money, fixed income >> a trillion 8. it keeps us busy. >> you just heard bullard and we will have loretta mester and, you know, there's jackson hole so you might -- were you paying attention to bullard >> i heard pretty similar views to where he is today not always, but this time pretty similar views to where he is. >> it's great to have you on this day, especially, rick the futures right now up 80 on the dow, the nasdaq up 21, s&p up 6 the market, you know, i don't know you wonder a lot sometimes whether it's in a vacuum but after the week we have had in washington, market is going to end higher for the week.

>> after the week we've had in earnings, though there have been strong numbers that continue to come in with these things. >> that's right. i saw some -- i guess it was bronosaurus rex. >> i saw those comments, too. >> i've been hearing that since -- remember boris slaus berg said that two years ago that the market was going up because they thought pence was going to be president. >> i think the conversation came up with byron because the president said if he were not the president that you would see americans -- that you would see the stock market crash and americans would become poor. >> i don't know what you call a crash, but if this gets really, really serious i think you will see -- >> at least a correction potentially. >> i think you would see at least a couple down days constitutional crises -- >> doesn't happen very often and to be talking about something like that -- >> there's a pat buchanan piece on drudge this morning about

some of the ramifications. actually it's saying that it would be bad for democrats they are not saying the "i" word right now because they're worried about saying it prior to the midterms they don't think it's a good strategy but you know it will happen probably if they get in but the senate probably won't go along with it. his point is trump is not ever going to resign like nixon because it puts him in too much personal jeopardy if he doesn't have the presidency to shield him. it just would be an ugly horrible divisive time and i don't think stocks or bonds -- bonds probably do well -- >> you will -- it's pretty amazing. middle of the week the fact the equity market, i thought you would dip when you got some of the aggressive news, but the market is extraordinary. given how high you've come you think you would get a half a percent down. >> obviously it's not a witch-hunt i don't know what's going to come out, but manafort and stormy daniels don't necessarily speak to russia yet. i think that's part of what -- >> the news we got this week

also doesn't clear the decks by any stretch. it definitely means that there are strands that are going to continue to be followed for a long time to come. >> right. >> yeah. all right. we will talk more about this in just a moment. an update right now on hurricane lane currently battering the state of hawaii 20 to 25 inches of rain have already fallen on parts of the big island floodwaters and landslides have blocked roads. the current track of the eye of the storm passing to the south and the west of the island chain, but officials caution that you don't need a direct hit to cause significant damage. in this case it isn't the wind but the rain from the slow moving storm that's putting hawaii's infrastructure at risk. we will bring you updates on the hurricane throughout the day trade talks between the u.s. and china ended with little fanfare yesterday and as far as we know no major resolutions coming out of the two days of mid-level discussions. now china's finance minister is rmpg ramping up the rhetoric as new tariffs kick in. he said in his words china doesn't wish to engage in a

trade war, but we will resolutely respond to unreasonable measures taken by the united states. the yan moving higher. foot locker reported quarterly profit of 75 cents a share, 5 cents above estimates and comparable store sales increase slightly less than expected >> it's up 1.5%. >> the nader is available. >> manator. >> it's available along with mondelez. >> no, mondelez is still taken. >> if you are starting a company venator. >> whatever. shares of gap are taking a hit this morning gap did beat estimates in its latest earnings report but saw a bigger than expected decline in same store sales. president trump tweeting this morning, here is what he

said, target ceo raves about the economy. this is the best consumer environment i've seen in my career, in quotes. a big statement from a top executive, but virtually everybody is saying this and when our trade deals are made and cost cutting done you haven't seen anything yet. all right. that's what the president tweeted today. here is what brian cornell told us in an exclusive interview on wednesday. >> it's a very healthy consumer environment. i've been doing this for a long time, i think this is the healthiest environment i have ever seen, but importantly for us, we're building market share in virtually every category. >> separately, president trump tweeting about censorship. social media giants are silencing millions of people can't do this even if it means we must continue to hear fake news like cnn whose ratings have suffered gravely people have to figure out what is real and what is not without current censorship >> the phrases -- so he's talking about social media so he

throws a cnn in there. even cnn has to stay on the air. then you throw the ratings things in there. it's gratuitous. >> right. >> the famous roman emperor gratuitous nastiness. it's a big day for jay powell, he will deliver a closely watched speech out in jackson hole let's talk expectations with our guest host black rock's global chief investment officer of fixed income rick reeder i thought we would definitely have more rate increases i thought normalization was far from over. listening to jim bullard, it sounded like he doesn't want any more rate increases, he thinks we're normalized already >> so i think there was a question today, i think where inflation is going, we are not -- when you look at the trend, i think some of the points he made about traditional economics, look at the growth we're running and think about in the second quarter you're getting over 4% real gdp when you look at the traditional

metrics of what creates inflation, with err not going to create that much inflation core pce under 2 when you talk about what you guys talk about whether it's the amazons or apples or teslas, et cetera, you think about the way the real economy is today or take the market cap of the s&p you have incredibly different consumption today. you think about all these companies how they're driving down inflation and they're creating dynamics that are more efficiencies, but i just am always blown away by people say if you hit this level of gdp you have to hit this level of accelerating inflation i actually don't buy it. >> we are hearing from employers constantly that they are having to pay more for labor. that that rate is rising you are not seeing it in average hourly earnings yet, but it's hard to think that thatdoesn't start to really pop up at some point. >> so you think -- a couple things are happening i think average hourly earnings were running 2.8, 2.9, it's not bad but i think your point is right, you are getting wage acceleration but the question is does that that have to translate into price increases and can companies actually get pricing

power, really get some of the home data recently, you are starting to see some backoff in terms of some of those levels. i think the consumer is very different today. you get these wage increases more and more is getting into savings, people are thinking about retirement, thinking about what is my consumption basket today. i can do most things on my phone today, i don't actually need the -- i don't need a tv, a radio, some things i think the consumption basket has changed and i think the dynamic around can companies get through in a world of amazon and a world of companies that are pressing down, i think the whole gig today when you think about where cap x is going, make your company more efficient you have to be the cheapest manufacturer, producer, marketer in the world. and i'm not saying you don't create some inflation, we will run 2.5 core cpi, there is there is not that accelerating pressure. >> do you understand how the yield curve and recessions are related? can you explain that to us here is what i got -- here is what i got from him, don't mess

with the yield curve if it's telling you something, don't invert it, you know, don't actually take steps to invert it because that can cause a recession. for some reason that seems like that's putting the cart before the horse. i thought that the yield curve inverts after the companies in the economy indicate that we're in a slowdown. can you actually engender a recession purely from -- >> no. >> huh >> no. there are a couple things. first of all, if you take historically what's the best indicator of an impending recession it was the shape of the yield curve however there's a couple things happening today that are really significant, one, the pension fund demand for long run interest rate products is extraordinary, that's pressing down the long end of the interest rate curve meaning you're flatter than you should be the second is you think about what's propelled this economy higher you have incredible stimulus and the view is, which i don't disagree with, you're going to accelerate fast and then the economy is going to start to moderate from here so you don't need to go much beyond 2.5, 2.75

in terms of interest rate moves. the third period is interest rates would be higher if we thought inflation would accelerate and the world myself included doesn't think that's going to happen. >> you didn't even mention the german bund. if you have all of these people in funds who have to buy bonds and the only place they're going to get anything relatively speaking is in the united states. >> so, i mean, it's a bit more complex because you have the cross currency basis you have because you have to manage where your hedges are, but the last time i was on this show we were talking about -- i still think rates can move moderately higher, i think the ten year will go into 3s, but low 3s. when we think about what draghi said he is not moving interest rates until the summer of '18, it's hard for our interest rates to move dramatically higher jen time soon. >> why is the boone so low, though is it the european bank there, there are pension funds there and insurance companies there that have to be purchasing those? >> there is a bit of complexity

around people, the byers and swapping back to dollars and it actually is attractive for places like japan to buy things like bunds or french notes, et cetera that being said you have a central bank that's keeping rates extraordinarily low and owns the bund. the net supply -- every time you short it, we like to short bunds when they get down to 28 or 29 basis points in the ten year, every time you do it you know you're fighting against a supply and demand dynamic because mr. draghi owns virtually all of them. >> mr. bieber and the real housewives are on some morning shows but everybody switched because they heard we're talking about the yield curve over here. everybody in the country, honey, quick, change that they're talking about the yield curve. >> for smart people it is what they're watching. >> nothing more exciting than the yield curve. >> i brought it up okay what i kept saying i was worried about was -- so we're tethered to these low rates because the rest of the world is still

easing because they have no inflation. how do we know that that isn't -- that we are not responding to economic conditions that aren't even here and our whole interest rate, you know, structure or our yield curve is based on conditions that aren't here and we may be missing the conditions that are here that warrant higher rates and we are inflating assets and not unwinding the balance sheet and we are stuck where we were five years ago how do we know that that's not happening. >> that's an hour long question. >> now that we have 100% viewership. >> i think you are talking about something that's really important. it will be interesting to see what powell said today about the global economy because a global economy, china, europe, emerging markets is moderating today. our economy is going to be extremely well the data you will see over the next couple quarters part of where the fed has to move and i don't agree we should stop now raising rates. >> you don't. >> no, but when you get to the

neutral rate, let's say that's 2.5, 2.75 there's no reason to go any further you don't want to drive the dollar up. the biggest risk to the economic system today is the dollar appreciating significantly if the fed were to keep moving to get to restrictive policy, you force the dollar higher, create a dynamic around foreign exchange reserves. part of your' seeing crises in turkey, argentina, italy, brazil is there is a lack of dollars in the world and you force the dollar higher, it's a tricky thing. when treasury has to issue tremendous amounts of debt. >> i don't know why we don't have 100% -- i really don't. i think it's dribble. >> you mean drivel. >> is it drivel? >> it's drivel. >> people write into me, they say i have dribble >> rick rieder is our guest. we have more to come from him this hour. when we return, trade war, we will talk about the economic impact of president trump's

tariffs. next thursday we will be sitting down with warren buffett ahead of his bunch with the wedding bidder of the annual glide auction. this year's meal went for over $3.3 million it's coming up at 11:00 a.m. easterti nn meext thursday you are watching "squawk box" right here on cnbc that. [music playing] (vo) progress is in the pursuit. audi will cover your first month's lease payment on select models during summer of audi sales event. that's confident. but it's not kayak confident. kayak searches hundreds of travel and airline sites to find the best flight for me. so i'm more than confident. how's your family? kayak. search one and done.

the united states and china holding trade talks, the white house says both sides exchanged views on how to achieve fairness, balance and reciprocity in the economic relationship joining us is the director of the brookings institution's hutchins center on fiscal and monetary policy david wessel david, it's great to see you we could really use some help breaking down what their tariffs have meant so far for the american business. if you look at the markets very little impact, markets continuing to climb again and again, but there are pockets of the economy that are really feeling that what can ps are those, what sectors are those? >> right i think as you point out pockets of the economy are feeling the effects. the first effects are anybody who buys steel and aluminum to put into the stuff they make so, for instance, the government tells us that the price of

washing machines and dryers is up 50% over the last three months that reflects the fact that the president imposed tariffs on imported washing machines and tariffs. what's happening today is a new round of tariffs against china and that's beginning to take its toll we see some people laying off workers, there's an ebite company in seattle that imports the bikes they design from china, it's called rad bikes, they are raising the bryce today from $1,500 to $1,700 and blaming it on the tariffs. if you look at the overall economy this is having a very modest effect. estimates are that the gdp grew by more than 3% in the third quarter and inflation, though creeping up, still isn't going up very far, so it's a reminder that in this country we still consume most of what we make and we make most of what they consume. >> we have heard that the talks between china and the united states didn't seem to yield much of anything in terms of any concrete results or even the next round of talks at this

point. if this continues to ratchet up and we really do get to the next level, which i think is an additional $200 billion of imports that we would be putting tariffs on, what would that mean for our economy and for china's economy? >> i think you're right. i think basically it looks like they're making some progress in talks with mexico to retool the nafta agreement, but that there's no progress with china whatsoever the chinese basically are saying that the u.s. wants three kinds of things, one set of things is buy more u.s. goods, they say we can talk about that, a second set of things is give american companies doing business in china a little more maneuvering room, the chinese say, well, we can talk about that, it will take a while, but the third basket is president trump is asking them to change their whole business model and the chinese are refusing it's a game of chicken and i think the more thetariffs go u the more these isolated effects will spread. i don't think it's going to destroy the american economy unless it spills over to the

stock market and to business confidence. >> what's happening in china at this point i guess i'm trying to get -- if this is a game of chicken who is going to blink first who is going to be forced to blink first because they're feeling pressure at home >> i think this is hurting china or will hurt china more than it hurts the u.s. china exports 20% of its gdp, we export 12% of our gdp. our economy seems to have substantial momentum, theirs is slowing down and they're trying to avoid creating a massive debt bubble so they're struggling so i think the economic effects will be tougher on china and that favors president trump. on the other hand, china as you may have noticed is not a democracy. >> right. >> so they may be able to take the pain a lot more than president trump. i mean, with he may see in november that trade effects, tariffs, farmers being angry, manufacturers laying off workers and blaming the president, that may hurt republicans at the polls. the chinese don't have to worry about that problem >> all right so we will keep our eyes on

november, a lot more to come between now and then david, we hope to see you to walk us through some of those steps. thank you. >> my pleasure you're welcome. coming up, proctor & gamble wants to trademark three-letter terms like -- i mean, like lol and actually they wanted to do wtf, even the ones where you know what the "f" stands for. >> it's in the public low main. >> they're criticized for not appealing to millennials if you want to talk to millennials you have to talk lol and wtf. we will tell you why. >> it doesn't work. >> first robert frank is in pebble beach, california, for the world renowned auto auction. did you bring your sticks, robert >> yeah, talk about omg, joe well, with wings like these the classic car market is soaring this week but the big threat is tariffs. we will explain to you why tariffs could add more than $300,000 to the price of this mercedes coming up after the break. ♪

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♪ welcome back, everybody. 23 and me which provides dna testing kits for consumers is telling outside app developers that they will no longer have access to the company's raw dna data anonymous versions of that

data had been available to developers of apps focused on things like weight loss and health, but now those developers will only be able to use reports that are generated by 23 and me and not the raw data the company hasn't said if the move was driven by privacy concerns or a desire to retain control over its data but given all the privacy concerns my guess would be the former not the latter there have been massive concerns raised about this and some privacy advocates trying to push lawmakers to much it tougher to get any of this information. and proctor & gamble wants to trademark a lot of those three-letter acronyms to use on its soap packaging applying to trademarks on acronyms like lol, wtf and nbd. >> what is nbd >> no big deal. >> all right >> but there was another what you tweeted there was another "f" one there, i forget which one it was. >> rotlf >> no, it wasn't that one. it was something else. i can't believe proctor & gamble -- they're really

stepping out under criticism for not getting the millennials. >> what gets me is that you can take what's in the public domain and trademark it and make it yours. get over it. >> this might backfire any way, the whole thing, lol. >> when we come back, cleveland fed president loretta mester will join us live from jackson hole that's just a few minutes away then we will head out to pebble beach, california, for one of the biggest classic car auctions in the world >> it is considered the holy grail among car collectors ferrari only made 36 ferrari gtos and this one is about to become the most expensive car ev sd.erol we will tell you why and for how much coming up after the break

welcome back to "squawk box. we have breaking news data in the form of durable goods. the headline durable goods number we were expecting a negative 1% it came out as a negative 1.7% so a little business disappointing last month's was revised to

plus.7 durables x transportations, a plus.2, we were expecting a plus.5 both of those were not good. capital goods orders nondefense x air we got a 1.4 on that that's the only beat that's significant. we were expecting a plus .5. the reaction from the stocks was fairly muted s&p is up 5, now up 4.5. lost a half. the ten year was coming in at 2.83, stays at 2.83. the bigger deal today here is going to be jay powell's speech today. i think that one of the reasons the stocks are up a little bit is because some sounded down beat on the economy meaning they might not be tightening as aggressively back to you, joe >> that was interesting, we were going to get more from not powell, but another important voice here to listen to, right now let's get back out to the fed symposiumin jackson hole and steve liesman joins us with

another special guest. steve? >> joe, good morning thanks very much i am here in the kansas city annual -- kansas city federal reserve annual conference at jackson hole with loretta mester, the cleveland federal reserve president. >> good morning. >> let's start off with what was just being discussed first of all, the economic data has been pretty good does it look like or feel like the third quarter is going to continue the strength of the fourth quarter -- the second quarter? >> yeah, this third quarter is coming in strong so far. i mean, we have our now cast at the cleveland fed, we look at internally and they are between 2.5 and 4 percentage points increase it's a strong quarter. >> for the kwa quart. >> have you upped your forecast for the year. >> i'm now at 2.75 to 3% for the year, probably closer to 3%. so that's higher than i -- >> is that a forecast you increased because of the tax cuts >> i think that the fiscal policy, the stimulus and the tax cuts has been a positive for the

economy in terms of growth, demand growth. and so that's one of the factors. but also there has been more momentum in the economy than i might have anticipated businesses still are very upbeat, small businesses especially seem very upbeat. so that's one of the reasons that i've upped my forecast. >> does the momentum continue into 2019 and 2020 >> i think so, but i think we have to acknowledge that the fiscal stimulus on the demand side will be probably waning so we have to take that into account. i actually had my forecast coming down a bit in the out years, but again, you know, you forecast as you go along, you would adjust your forecast as the data comes in. >> so from about as far away as those trees are behind me you can see my next question coming which is if you up your growth forecast do you increase your forecast for the right policy rate >> so, you know, i think we've been on a good path in terms of a fed funds path that's been a gradual increase in the funds rate path. i think what we're trying to do and what i think about policy

we're trying to calibrate our policy path to the economy so far, you know, we're basically at full employment, a little beyond full employment in my view, we're basically at or 2% inflation target and i think we will be sustainably at that by the end of the year i think most of the data will come in that way so, again, you know, we are at our targets and yet we have ak day testify monetary policy. right now this gradual upward path of a policy rate seems appropriate to me and, you know, why not steeper well because we don't see signs of overheating of the economy and we are at our goal. >> i just want to follow up with this real quick, which is a lot of people thought that it was the gradual rate hikes of the greenspan era that led to the financial excesses that led to the financial crisis why aren't you doing the same thing right now? >> well, we are monitoring financial conditions we're monitoring them very tafl flee i think we're doing a better job

than we did in the past but we certainly look for risk. leveraged lending is a little up there, i think, you know, if you look at stock prices and other asset valuations some of those are excessive. so we've got to take that into account. i see that as a risk, but right now i don't think that we see excesses so that's why i think it's important that we keep on this gradual upward path. >> becky >> steve, i want to follow up on this whole conversation, too, and i feel like i'm going down the rabbit hole with a number of different iterations we will talk about, but, loretta, you said that you think you're raising your gdp expectations for the year, but you think we are on the right path in terms of the number of rate hikes that we are going to expect and you're doing that in part because you think the fiscal stimulus will slow next year if that's not the case, if you continue to see things plowing along and you don't see some of the let up that it sounds like you're anticipating, does that mean that rate hikes that we've

got on the board right now will have to be increased >> well, it will depend on what happens with the other part of our goal which of course is inflation. again, we are going to try to calibrate, but you're right, fiscal policy could be an upside risk to the forecast that's the way i view it at this point. so we're going to have to take that into account. again, we go meeting by meeting in the sense of we actually look at how the economy is doing. so we don't pre judge things, we come in looking at what the data is telling us and sort of calibrate our policy to it i don't think we can say now where interest rates are going to necessarily be a year from now. i think we're going to have to look at how the economy evolves. there are other risks out there, some on the upside, some on the down side and we will have to be monitoring the economy as we go along. >> thank you >> do you see a need for the federal reserve to hike rates above the neutral rate and what is your neutral rate >> of course we all pencil in a long-term --

>> i thought you used -- >> we could use -- some of us use pencil so we can change them so i'm at 3%, which is about, you know, the fed -- >> the neutral rate. >> the neutral rate. i think it's hard to pre judge that now in most cycles you see the funds rate going above what most economists think of as the neutral rate but i think we have to really look at how the economy is going to evolve and, you know, as that neutral rate has been coming down over time so again there's a lot of moving parts there. i think this is a case where we write down a forecast because i think it's good to give some indication of where we're going, but we also have to look at the error bands around those forecasts. that was one of the things that the fed added about a year ago, with he actually added error bands around those forecasts that we do four times a year. >> can we talk about one of the risks which is from tariffs. cleveland is a funny place in that, it seems like some parts of cleveland would benefit from

the steel and aluminum tariffs and other parts -- on net what are you hearing from people in your district about tariffs? >> you're right, we have steel companies but we also have manufacturing companies and we are dependent on trade with canada especially and the auto industry so it's basically mixed. a lot of the firms have said that they are concerned about the tariffs and then when you probe them a little bit further have they taken action most of them say if they've done anything it's maybe postpone a decision but they haven't really done in i go in reaction to the tariffs yet. this is something we're monitoring but i haven't seen it come up strongly in the data yet. we did do a survey in about a third of our firms that we survey said there has been some acknowledgment in their firm that the tariffs could be a negative for them and a quarter -- and they said a quarter of their customers have reacted to it. >> you talked about risks earlier. one thing a lot of people have

mentioned are corporate debts, the amount is large and the spreads are low, meaning that there are people out there reaching for yield and that that's a potential flash point with higher rates when they get higher, that there are potential defaults do you see corporate debts as a potential achilles' heel for the economy? >> not overall, but there are companies that are highly leveraged that we are monitoring in terms of that issue, that precise issue so they will be effected when interest rates go up and so that's something we're monitoring as a risk, but so far i would say generally not a big risk, but something we're monitoring. >> i got the wrap, it's cold, but i do have to ask you this question jim sat in this seat an hour ago and he said as far as he can remember this was the easiest mellowest august for the fed that he can remember in a number of years he didn't use those terms, but do you agree with that >> i've been coming here for over 15 years and i would say that, you know, with the economy

growing above trend, with the unemployment rate very low and with inflation at 2%, it's pretty clear a very compelling case on what the fed has to do so in that sense i agree with him. >> that makes me really nervous. >> don't be nervous. >> okay. loretta mester, thanks very much becky and joe, back to you guys. >> such a great shot, steve. the entire time i was waiting for big foot or something. seriously. can you imagine if you're there and all of a sudden if that -- i mean, we would finally have proof. we would finally have proof and i asked the director and i sent him a couple shots of big foot and we didn't have time to transpose it behind you. >> we have our cameras, joe, the cameras are trained on this area here looking just for that. >> if he's anywhere on that two shot -- i mean, couldn't you see him walk right by and just -- >> it's so perfect. >> just behind, right? >> i mean, i'm stalling because i really think -- no, probably

not. it would be just too good if we saw him. thank you. oh, no, oh, wait a minute. wait a minute. that's the best we could do -- that's the best we could do on short notice >> steve, thank you andthank you to loretta mester, too. >> loretta mester, yeah. >> our guest host this morning is rick rieder, he is black rock's global cio of fixed income we say said at the top but one point how many trillions in terms of bonds that you are managing. >> 1.8. >> 1.8 trillion. you must be listening closely to everything that mester just said. >> i think generally she's right. there are a couple significant questions of the economy overheating, the economy is not overheating. we are at capacity utilization traditional economic measure, we are not at even significantly high levels. inflation is not moving up a significant magnitude. i don't think the economy is overheating. second, the leverage in the

system is not like it was in the financial crisis yes, there are the point about there was a lot of credit that's been issued full stop, i think equities are cheaper than credit today, there is -- there's been a lot of credit issued, but you're talking about big investor economies with big cash flow so there is not the stress points in the system that i'm worried that they have to move faster one thing that people don't talk about that is usually important, when you drain liquidity, when the fed reduces the balance sheet and the treasury issues a net trillion dollars a year what you're doing is draining liquidity from the system and the fed has to be -- i talked about it before why the emerging markets have a hard time, when you drain liquidity it's important. the feds are doing the right thing, you don't have to move faster >> i think about that playing out in the markets had particularly that would be a big issue, people think that maybe equities prices have been inflated because of all the easy moneyest that out there. how does that show up in the real economy. >> i don't think multiples are that high, particularly given the dynamic.

when you talk about the revenue growth we're seeing today and you look at where companies margins are today. >> but no question if you are looking at what you can get for bonds, it looks like a better place to put your money, you said it yourself, equities are there. >> you look at the historic yield you're getting in equities relative to the bond market it's still attractive i think going forward you will see m&a that will start to abate somewhat because of global growth uncertainty regulatory it's hard to get your m&a through and you've levered already, companies have already borrowed you end up buying back more of your stock and i think what you will see going forward and you talked about record levels of he can equity buy back, maybe you don't do as much m&a, capx, it's an easy decision particularly when you have activists that are searching around, pretty easy decision i will just increase my buy back program and you shift equities higher, that's the dynamic we're seeing today. >> it's been happening. >> that's a durable concept. i think you will see that play out for the balance of the year. >> for the balance of this year,

but we are only talking about four and a half months left. >> i think we've had a decent call with he said could equities be up, 10% this year, u.s. equities could be up 10% this year, i think so could you go a bit further the point being you are going to start to reach he can lip ream i look at cash flow generation relative to the cost to finance it you're getting pretty darn close to he can librium. could you push through another few percent, for sure, but i would argue once you do that we're getting to the top. >> i know it's really hard to talk timing on these things, but if you look to 2019, you don't even have to look that far out, what does concern you? is there a point that you think, this is going to be agent hairier? >> the one thing i watch more than anything else you have to watch growth in china. people underestimate how big china is in terms of global growth it's almost 30% of the global growth depending on how you measure it for commodity demand, you know, china is really, really important. what it does for global trade, what it means for global

inflation. we talk about demand for commodities, et cetera, china is the big deal i'm confident the u.s. economy is going to grow do i think we slow down from 3% growth or 4 in the second quarter, i do, but for the last 20 years what people don't recognize, gdp in this country is about 2.2%. we're growing a lot faster than -- in a demographic that is slower, boy, growing at 3 is hard to do over a long period of time i don't think you will see a pernicious u.s. rapid slowdown but you do grow closer to 2 over the long-term for sure. >> china's growth slows down, it not only impacts other global markets, do you think it impacts us or does our stock market look like a better place to be relatively speaking or are you just separating economy -- >> first of all, if you think about places, we had this discussion yesterday, debt and equity and -- but i think there's attractive parts of em you said how confident am i that the u.s. economy will keep growing and the durable growth is durable to the extent that equities are

a safe bet, i think they can consistently move higher where china is a big deal, china has to be careful about capital flight, really careful about their currency if you can start to create a domino effect that's really dangerous for the global economy, that infects the u.s. in terms of deflationary conditions, et cetera. that's something that i think is really, really important not so much you have investors looking at the chinese equity market versus u.s., but china's impact it's not like it was 10 or 20 years ago, it's impact on the global economy and the financial system is tremendous. >> we will have more from rick coming up. up next robert frank is in pebble beach, one of our favorite places for the world famous auto auction and he will join us to talk classic cars and the buzz around auto tariffs that's next. ♪

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the most expensive car ever to sell at auction is on the block, so where else would robert frank be? joins us now from pebble beach, california bring your sticks, robert? >> no, i didn't, nor did i bring my checkbook because these cars are really getting expensive this is the coachella of cars, the burning man for burning rubber, more than 100,000 people expected to come to monterey and pebble beach for car week, but all eyes are going to be on this car, it's a 1962 ferrari 250 gto

and it is about to become the most expensive car ever sold at auction. the estimate on this car is between 45 to $60 million. now, the gtos are considered the holy grail for collectible cols ferrari made 36 of them. they dominated racing during their time many think this car is the most beautiful ferrari ever made. over 100 cars are expected to sell for more than $1 million over the next three days, but the big threat hanging over the market now is tariffs. it turns out, the 25% tariffs that the president is proposing not only apply to new cars but would also apply to preowned and classic cars coming from europe. and it turns out, because the u.s. market is so much stronger than europe, a lot of the cars coming for sale in the u.s. come from europe and would be subject to the tariffs that could choke off a lot of the supply. >> the issue that we're going to have is, nobody is going to be

willing to pay an additional 25% to get their cars. there might be a 20% advantage to bring it to the u.s. to sell it if i have to pay 25% to get it here, it's going to kill the market >> reporter: as a for instance, this porsche is estimated at $5 million. so that could add more than $1 million to the price tag of this car if it were sourced in europe and a lot of porsches, ferraris, and mercedes would be sold here. a lot of people concerned about the uncertainty and perhaps rushing this week to get in to buy the cars and sell the cars before the tariffs come into affect if and when they do. >> that's crazy, robert. just the price of that car you know, let's talk about this. would you want that car? do you want a g5

[ laughter ] >> reporter: i -- [ laughter ] i would -- you know, a g5 is another level of expense. >> you better have more money. >> reporter: if you buy -- >> you need some money to run it, i think. >> reporter: yeah. i mean, these are great cars there's a ferrari 308. the magnum p.i. coming up. becky, you're a ferris bueller fan. i got to drive that car yesterday! it's coming up for auction the actual car used in the movie is coming up for sale. it has the dent from when he kicked the car at the end of the movie. i got to drive it. >> you're going make me jealous. roll back the odometer >> reporter: to get the miles off. exactly. >> that's cool i can't wait to see the video. bueller. bueller. an economist we can tie it back to business

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u.s. authorities are reportedly investigating microsoft for alleged bribery in hungary. that's crazy the "wall street journal" said that the justice department are looking into how microsoft sold the word and excel software to middle-man firms in hungary at a steep discount and those firms reportedly sold the software to hungary's government at close to full price microsoft said it fired four employees. it terminated its relationship with four of its business partners in hungary. when we return, more from our guest host later today on "closing bell" cathie wood will talk about her letter to elon musk urging him not to take the company private. st tayt 00.m p. eaern time

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the value of capital is to create, not just wealth, but things that matter. morgan stanley the odds of a september rate hike is over 90 percent. the top performing sectors in the month leading up telecom, full-times, and discretionary. all right. we promised going to break much more from rick rick, thanks. >> no, he has 20 seconds. >> yield curve show.

>> i think people are misinterpreting. we talk about it you can make money on fixed income. it moved up to the 2-year is 260. our big fund is up today where you use and take your fixed income is a big deal today. it's exciting. we're going to do a show on it. >> i don't want any fixed income maybe i'll get some. >> all right thank you. see you on monday! right now time for "squawk on the street." good morning and welcome to "squawk on the street. we get a look at the last trading day of the week. in you cas