♪ >> live from new york where business never sleeps, this is "squawk box. good morning, everybody. welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. let's look at the u.s. equity futures. we did see the markets across the board ending higher yesterday. it was the fifth session in a row that was positive for the dow. closed up by 50 points it was off the highs of the session you saw the s&p 500 and the nasdaq closing up. dow hitting another record high with all of these numbers. this morning you are seeing giveback dow futures down by 84 points. s&p off by 13. the nasdaq down by 50. treasury yields is the story you're talking about the two-year, five-year, seven-year, ten-year, 30-year hitting mult

yemulti year highs yesterday the ten-year at 3.215. a lot of comments made including from fed chairman powell saying where are nowhere near neutral rates. and if need be the fed is prepared to move past neutral. overnight in asia, check out the shanghai composite it remained close for a week-long holiday. the hang seng fared much weaker it was down by 1.73% in europe, there is some early trading taking place, right now red arrows across the board. down 1% for the ftse, also off 1% for the cac in france news just crossing at this moment, juul wants regulators to crack down on more than 15 competitors that it says infringes on its patents

alleging the companies come pied the design of juul products. juul a part of the fda campaign to crack down on e-cigarettes marketing to kids. you can read a lot more about what's happening right now on cnbc.com let's tell you about stocks to watch cloudera and horton works are surging. they announced plans to merge in an all-stock deal. both companies specialize in software that the companies can use to store, process and analyze data toyota and toft bank are tesoftg up softbank will own over half of the new venture which will be called maonet yesterday honda and gm teamed up

on the cruise vehicles just about everybody getting into the autonomous car driving game when i talked to masa son about this, the idea is you don't know who the winners will be, but if you place your bets on all of them you will come up with one of them. the pc maker giving an upbeat forecast for 2019 thanks to continued strong demand the company hiking its quarterly dividend i should have said hp at the top of that one. >> it's ten-four good buddy. >> i didn't know that. learn something new every day on "squawk. >> april 20th is mine. >> yours and elon musk's >> yes barnes and noble, we talked about this at top of the show. shares are up 20% in premarket trading. it's important to note the company's market cap is below 5$500 million the klain says chain says it isg

options after several parties have expressed interesting in owning the company that includes leonard riggio, the company's largest shareholder with about a 19% stake. barnes & noble said riggio is in favor of any transaction recommended bay special committee created by the board barnes and noble is the last publicly traded book chain but has been struggling with competition from amazon. sales in the last fiscal year fell 6%, and online sales remain weak falling 14% in the last quarter. management turmoil made the issues worse barnes & noble had five ceos since 2013 sounds like ge the latest was fired in july for violating company policies in addition to reviewing options, barnes & noble is adopting a poison pill plan to thwart any potential hostile bid by preventing any party from accumulating more than 20% of its shares you figure they -- we go through a list, record companies remember globe records >> yeah. >> no globe records.

no blockbuster videos. there's one left it's in alaska or something. i like photomats, remember those. >> i forgot all about those. >> every mall would have one you would drop it off. they would take out certain pictures, not allow you to develop those. >> turn you in for those >> yeah. >> there was a film, there was a photomat it was like a thriller -- >> he was psycho >> he became a psychopath. looked at all the pictures >> gamestop, still around. but of all of them -- >> trust me, the sorkin boys know all about gamestop. >> things that are antiquated by things moving away, we don't use film there's no records anymore if anything was going to survive, it would be the -- you go have your latte or whatever, you sit there, you browse. you can't browse on the --

>> i said the same thing about toys "r" us. >> yeah. >> i think barnes & noble, don't you -- i still see them. we go. i like walking through there except i always see "too big to fail." >> let's talk about another stock to watch today that's tilray. shares of the company dropping sharply around the close ye yesterday. tilray announcing plans to offer a 4$400 million convertible not. this is one of those volatile stocks that we talk about just about every day. right now indicated down by 5.6%. the dow hitting another record high. while the s&p 500 marches towards the 3,000 point level, dom chu is here to break it down, some of the winning trades of 2018. they all look like they're winners, but not really. >> they're all winners if you do it from an index perspective if you invested in things like the qs, a spdr etf, all of those trades have been winners

the qqq trust, the one that tracks the nasdaq 100, up 19% if you just bought it and held it the spdr etf up about 8% it talks about these divergences we highlight in the marketplace. we have a long/short transaction to show you the discrepancy we're seeing at the sector level and industry level just among stocks that are similar in nature if you look at a big one out there in the financials, jpmorgan chase, the bigger bank performer out there. another monster investment type bank, citi group, has not fared nearly as well if you would have bought jp morgan and sold citi group that would have been a great trade. another thing to look at is energy rising oil prices have been lifting the tide for many of those stocks if you were an exploration company benefiting from oil price rises, vers vers

oil services company, you would think those would work out, but no halliburton is down 15%. schlumberger is the same way you will see weakness in the oil services sector. you would think with many of these, it would get lifted up with people drilling more. one more place i would look is in the industrial side of things you can see a real divergence happening with two competitors this is a big one. airlines united continental up 29 prts just so far year-to-date a large competitor of theirs, american airlines, down 25%. as we talk about the winning trades out there, we say active stock pickers are not doing well, passive index managers are beating them, but if you looked at some places where these divergences are happening, it could tell you more of the story

about whether or not there are reasons to want to be a stock picker, especially if the market seems like it's at a record level where it can only go higher as things maybe pull back a bit, because we know they do, then those active stock pickers get back into the fold and outperform a bit >> we have to talk about these yields, i think. don't you? >> multi-year highs. >> waited forever. got the jobs report coming tomorrow what if that's strong? >> what about earnings number. >> and oil wage gains might be starting pi day is my favorite. >> 3.14. are there any others you got ten-four, ides of march. >> 420 you said. >> what's that >> i don't know. april 20th >> for more on the markets let's bring in scott kimbell from bimo fixed income, and jeff corznik

scott, this is the -- what everybody will be talking about. we'll have warsh on, kevin warsh. when you get through 3.20, over the overhead resistance, there could be a move higher now that we have gotten rid of all that resistance from years and years and years that's been building up plus you have all this stuff fundamentally, especially with powell's comments it seems like we could push higher to what near-term? 3.5 easy >> yeah. first off, good morning. thank you for having me. you hit the nail on the head a few moments ago. >> i do that a lot dom did? who hit the nail me or dom? say me >> i think you both did. i'll call it a tie >> good answer >> an early morning tie. >> good. >> but the big thing is really as you said, you have higher oil prices, starting to see wage gains. corporate earnings have been

good inflation gauge, you have inflation measures or expe expectations firmly above the 2% target so we've been looking at a range for the ten-year of 3.25, 3.5% at that point you're getting more broadly in balance with a positive economy working through structural issues. we have to point out that we are a largely consumer driven economy. while wage gains have been strong, they have not been so strong as to say that we're going to raise our target on the ten-year much above p3.5% but we acknowledge tuning down some trade rhetoric. rates are refocused on the u.s. economy, which is why we agree with what both of you had said at the start of the broadcast, the positive data and the positive momentum is outweighing the negative headwinds >> i can't imagine when the fed is meeting, given what powell said, they're not all on the same page. i didn't hear this from a lot of

other guys we talked to. i heard we are almost at neutral. we're ready to stop. i don't know whether the data changed, but that was a shocker to hear that, wasn't it? nowhere near neutral >> we think that we're sort of -- we're early in the midst of one of the most elongated tightening cycles. the fed are a group of people in a large meeting. the transition of the rhetoric and the transition of the policy's core beliefs will take some time to sort out. the way we've been viewing it, if you look at the positioning of corporate income and core plus bond fund is that you can't fear the fed, at the same time you don't want to fight the fed. our perspective has been to keep treasury duration or that sensitivity to rates lower and ride the wave of the u.s. economy and be more constructive and capitalize on the corporate bond market by investing heavily in corporates. we think that's most in tune with this transition at the fed. the policy of the committee is coming around to embrace an economy that is finally getting

in line with the fabled dot plots that have shown the fed's estimates have been quite a bit ahead of what the market is pricing. as those two reconcile you will see a convergence. >> powell said we could raise faster or slower he's trying to get you away from looking at those dots. >> that sounds like to me more volatility >> the truth is volatility has been extremely low you point that out it's 100% correct. there's one thing the fed values like any group of investors, optionality. the fed can sort of widen the expectations around their core dot plot or the expectations around the core pieces of data that we're looking at that gives them optionality to announce neutral or if they arrive at point they thought might have previously been neutral and realize they have to go an inch or two further they save dry powder the reality is this economy is showing signs of life that many of us have written off over the past five years.

>> thank you let's get to jeff. a lot of midwest common sense i see here you live in chicago, don't you >> i live in chicago >> you had all the opportunity to live in cincinnati working for fifth third. >> they moved me to chicago. >> but you've been to paris. why go back to the -- you have been to nirvana. you are not a big believer in seasonal trends, however it's the opposite for the midterms. usually stocks don't do well prior to midterms, they go up after it instead we have a strong move before >> there is a possibility. the markets have not digested very much of rising interest rates. they have been able to shrug them off they're starting to take a bit of a bite. that being said, we are staying overweight to equities the u.s. economy is still certainly in fairly good growth mode we're above trend growth we think we can keep that up for some time. >> not speaking to you specifically, andrew, you say that the pessimists are going to

find out that that 4% gdp print was not a one off. and that we are going to move maybe higher long-term liesman is not here. we can talk to him >> not 4% -- >> but higher than 1.9, right? >> absolutely. >> 50% higher, 60% higher. >> productivity growth >> we're underestimating the potential for productivity growth >> absolutely. yes, s yes. we underinvested in capital for so long. >> when you say long, what does that mean? >> through the rest of this cycle. you could see long-term -- >> how long does the cycle answer >> that's a good answer. through the rest of the cycle. >> subject to change, it's 2021. we're running out of labor that's our core problem in the u.s. economy two or three more years. you think we could be chugging along at 4% for three more

years? >> probably cool off a bit, but 3 plus for sure. >> earnings can't continue this crazy year over year pace, but you don't think deregulation and tax reform is a one-off either, so they will be at a higher level, just not quite as high because the comps will get harder the corporate side of tax reform was a game changer that came on top of elevated business confidence that's a recipe for continued capital investment that creates wealth in society >> anybody here worry about the police of oil going meaningfully higher >> yes >> when does it crack? when does that create a problem? >> there's nothing toal switcto. in the united states it has changed because now we're big oil producers. every cost to consumer is offset by producer gains, i think that's bad for the economy to have that disruption >> but 76. we've seen much higher levels than this before

>> it erodes every little bit we're being offset by empowered consumers because of higher wages. those are offsetting the cost of energy so far, but cost of energy plus higher interest rates are taking a bite. >> jeff also says the ten-year is not totally out of whack with where -- it's more reasonable where it is now in terms of inflation? >> i think we're pretty aligned. there with are you based, scott? >> i'm in miami, florida >> yeah. >> that's not the midwest. >> no. no a long way. but it's nicer weather that's for sure. as long as it -- you know -- >> lower taxes >> as long as you don't come down here in august. >> as long as you're still above the water. >> that's why the high rise is there. >> that's why they got those high rises i hope you're at least on the fourth floor >> jeff, thank you they put the pronunciation in

there in capital letters you need to know where is the emphases so you don't put it on the wrong sill labyllable. >> scott kinball, bmo. >> not bmo >> not bank of montreal. >> no. >> and dom chu, thank you. when we come back, what amazon workers have to give up for that minimum wage hike. and then at the top of the hour, a rare television appearance from former fed governor kevin warsh, he's our guest host for two hours we have a lot to talk with him about. as we head to break, a look at the big of the premarket winners and losers in the dow. right now american express is leading the way. it's up by 39 cents.

welcome back to "squawk box. amazon workers getting a raise but while the news looks positive for some it may not be for everybody. earlier this week amazon announced it was raising its minimum wage to $15 an hour but it is now getting rid of pay incentives for fulfillment center workers the change means employees wil no longer be able to earn bonuses and stock awards if they meet certain goals my understanding -- maybe i'm wrong on this, there's incentive pay, there's the rsus that you can get, and both of those programs get replaced with a stock purchase plan. >> the details have yet to be announced. a lot of times where there's a stock purchase plan, they allow

you to purchase it at a 15% discount i think it will depend on who you are. some of those incentives are based on how long you stick around for everybody who was making $15 already, they are also raising pay for those individuals. >> is there less performance based compensation now >> it appears there will be less performance based -- >> would you expect people not to be as motivated if you were at the top end getting motivated the most >> do those things work? do you hit more goals? you know where they worked well? wells fargo. if you hit the -- right? if you open up a certain amount of accounts. they were opening accounts left and right. >> right >> performance-based stuff can work >> yes actually, there have been studies on that issue -- >> might not be so great >> the less money you make, the more the incentive is more

meaningful talking about millions of dollars, the incentive is much greater. it will be interesting to see. given the fact that they've got a lot of credit the last couple of days for doing this >> i think the devil is in the details. they have not rolled out everything yet every individual employee will look at this and say how does this impact me >> after the announcement came out, bernie sanders took credit for this >> he did, i saw that. >> but the stop bezos act had nothing to do with raising the minimum wage, it was a tax on these companies. i thought that was strange i thought maybe he was spinning it but then jeff bezos put out a tweet retweeting bernie sanders and thanking bernie sanders. >> you saw the latest move that bernie sanders and others are trying to break up the big banks, too, and the non-banks, things like berkshire hathaway, all the financial institutions,

they would like to see them broken up if it's 3.6% or 3.8% of gdp >> for bernie to embrace a big entrepreneurial success story is a joke >> but he embraced jeff, jeff embraced him >> we have to move on. what is a stamp collector? >> i forget. it may be the phili -- >> i used to be a stamp collector. >> do you have them anymore? >> absolutely. first covers >> stamps from bill gross's collection are selling for a record $10 million. this was the first auction in a series of sales of his stamps. the rest will happen over the next two to three years. >> i was doing a jeopardy answer >> did you ever? >> no. coins.

>> baseball cards? >> baseball cards. i never told you the story >> no. >> i first felt that horrible feeling of gambling, flipping them i had johnny bench, and rose, i flipped them i thought i could get them back. i ended up losing them all i realized that -- >> good lesson to learn early on >> that feeling of trying to win something, or you can lose it's a bad feeling >> this is the greatest feeling. happy national taco day. you can -- that's today. you can celebrate by getting teals on tac deals on tacos -- >> not a great feeling tomorrow. >> restaurants all over the country. freebies atta taco john's, and taco bell is bringing back its $5 taco day gift set

it almost set 5:aid $5 taco. they're not more than 79 cents there. i don't know how i'll celebrate. >> look out. >> love tacos. >> i love a good taco. the best tacos are around the block. everybody says that. there's a place around here. we're all going together >> we get off work at 9:00 >> we could have a morning taco. do they do morning food? they do? >> may 4th is also one of those things for total nerds like pi day. >> why >> may the fourth be with you. >> i like that one >> you do? >> i do. >> we'll take more >> send them in. when we come back, it is jobs week in america we'll get an early read on hiring from the linkedin

editor-in-chief, dan roth. right now a look at yesterday's s&p 500 winners and losers

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welcome back to "squawk box. we have a lot going on let's look at what's front and center at this hour. ireland's data protection watchdog has opened a formal investigation into facebook. they face a fine of up to 1$1.6 billion. if the regulator deems they didn't do enough to prevent that data breach. so a lot of people will be watching for how that plays out. development in the brexit negotiations british prime minister theresa may working on an all-uk customs union with the eu. ireland does back that deal. the border between ireland and northern ireland has been one of the biggest stumbling blocks did you see her dancing yesterday? >> again >> embraced it >> was it better >> it was fun.

funny. i love she just sort of took it on >> you can't take yourself too seriously. >> then back here in the united states, the senate voting yesterday to extend the faa's funding, but what is more interesting is the airline regulation included in that bill, it requires the faa to set minimum standards for seat width and leg room it prevents airlines from bumping a passenger who has already been seated on an airplane. checking u.s. equity futures. we are in the red. dow off 68 points. nasdaq off by 44 points. >> i'm pre-reading this. don't know how this ends fedex pilots are expecting holiday bonuses that are bit better than the jelly of the month club >> christmas vacation. >> the gift that keeps on giving reuters is reporting that fedex will pay retirement age bonuses

between 40,000 and $110,000 to keep them from retiring before the holidayshipi shipping season they have been constrained bay global pilot shortage and rising oil prices >> i heard it's really, really hard at this point from people who hire pilots, you can't find them >> right >> i mean, every private jet needs two pilots, right? >> right >> those are going -- that's a growing industry >> i try to keep a staff of four sometimes -- >> that's right. you're one percenter problem >> especially when we do the long-haul flights. you need the extra pilots. sometimes someone is on vacation >> when he says that, he really throws people off the -- >> the middle seat on united we are just over 24 hours away from the government's september jobs data.

joining us for an early look at hiring is dan roth, linkedin's editor-in-chief. yesterday we got the adp numbers. they were stronger than expected, but from what i'm reading in this report it sounds like you think hiring may be hitting a plateau. why is that? >> we saw a 1.1% drop in hiring. in general hiring is still strong, just less strong we're seeing a deceleration almost across every industry the biggest ones are agriculture, about a 4.7% drop, that's compared to a few months ago where there was a 32% increase in hiring in agriculture, and manufacturing is still up, but it's up much less than it normally is i feel like every month i come on talking about double digit gains in manufacturing, this month up 3%. >> the two industries you mentioned are ones targeted by the chinese with these counter tariffs. do you think that has anything to do with it? >> it's a strong possibility we don't have a way of directly

relating it to tariffs, but that drop in agriculture it's tied to something else going on. and manufacturing also both industries have been strong hiring to see that kind of a drop shows something is going on, that hiring managers are worried about something. >> do you see hiring growth continue as it has been in other industries >> logistics and transportation, both really strong energy is still strong in general we saw drops or deceleration in every other industry non-profits, arts, education just a general softening in hiring >> you had mentioned that in some of these sectors you had seen double digit increases in hiring is this an anniversary of some of those strong comps? >> we get that anniversary around may we've expecting the comps to be so strong, there's no way these will keep up they kept up through the summer, and now there are no red flags,

but maybe slightly yellow flags or green is not as strong. >> when do we get to the point where you are basically at full employment that's a big question. >> seems like when you still hawk to hiring managers, whether we are at statistically full employment or not, they feel like they are. you were just talking about this they can't hire. they're struggling to hire people they're doing things they have not done before in terms of hiring older workers, raising pay, we saw what amazon did with warehouse workers. if feels like full employment, and there's something else going on, that is workers are increasingly finding that there is work other places besides just these big cities. we saw a rise this month in certain cities that we had not seen before of places attracting professionals, nashville, charlotte, las vegas seattle dropped out of the top three. >> why do you think that is? >> i think housing it's expensive these places have been such talent magnets, people were

moving to get to austin, seattle, sflaean francisco, denr the housing prices went up beyond what wages were doing >> by the way, real estate may be coming down in some of those places or not moving as fast >> but can it come down fast enough that it gets -- you already moved, you relocate your family there suddenly seattle is more affordable will you pick up roots again? i don't think so >> if you think things are leveling off is it because of something happening in the economy or because it's hard for managers to find people to hire or a combination >> i think it could be a combination. it's hard to find people to hire, but -- >> almost a yogi bearism >> exactly these numbers are gross numbers. we're looking at not just new jobs but people changing jobs. even in a strong economy you should be able to find people changing jobs all the time >> that does make it sound like it's the workers environment the workers have the upper hand. >> the workers still do have the

upper hand no doubt about that. >> dan, thanks for coming in >> thanks. >> dan roth. coming up we'll talk business travel and travel tips with the ceo of booking app hopper the company announced a new round of funding. at the top of the hour, our guest host will be former fed k governor kevin warsh you're watching "squk x"awbo on cnbc

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. welcome back a new report saying that china used tiny chips in a lack that infiltrated u.s. businesses including amazon and apple. brian sullivan has the details >> this may be the weirdest story of the week or year. a major cover piece that amazon and apple are denying. the facts are a bit complicated. i'll talk a bit. you can ask me questions i'll do my best to answer them according to the bloomberg business week deeply researched study, six former and current government insiders confirmed a tiny, like the tip of a pencil microchip was found on servers

built by a chinese-owned company that builds servers for data farms own ted by amazon, apple n others to perhaps steal any information that was coming through that server farm one company is called elemental, it was bought by amazon in 2015 elemental compresses video for amazon prime and they compress video for things like cia drone footage and other government video surveillance apple, amazon and others have come out denying this. apple about an hour ago came out and said we are deeply disappointed that in their dealings with us bloomberg's reporters may not have been open to the possibility that they or their sources may have been wrong or misinformed amazon says it's untrue that amazon web services knew about a supply chain compromiscompromisy

acquiring that company elemental. according to the story six people said they had found a tiny little alteration on a mother board built by a chinese owned company that goes into apple and amazon and other types of server products that may have been used to steal information >> brian, just to your point, you started reading that apple denial i think the other half of that denial they issued is interesting. they say our best guess is that they are confusing their story with a previously reported 2016 incident in which we discovered an infected driver on a super microserver in one lab that one event was determined to be accidental and not a targeted attack against apple you don't often hear that many details when you have a denial issued or something that refutes a story. >> here's the thing. apparently apple finds in 2015 that one motherboard of one server had a bad microchip or

some sort of alteration to a microchip which shouldn't have been there bloomberg in this feature piece citing six former and current officials inside the government and inside some of these companies saying this was found. it's a bizarre story >> do we have any idea the extent of the information and data this would give them access to in a meaningful way >> we don't. when you talk about this elemental, they talk about video streaming from drones. they talk about government surveillance video it's not just amazon prime and the jack ryan show, it's sensitive government -- remember, amazon web services has a massive government business they currently do. they would like more government business i think the implication is we frame it in the donald trump versus china with trade, computer motherboards and servers are one thing that the administration had been talking about getting more manufacturing

done here. 90% of all computer products, the hardware, is made in china if there's a fear of government interdiction and intervention, putting out microchips that are infected to steal information you will ramp up this trade war to another national security level. but apple and amazon are out with strong denials. listen, you have written books, you write articles, to come out with a story so strongly denied you better be sure of your sourcing >> the one thing i don't understand about this piece, i did try to go through it a bit, given the denials, you would have imagined -- the denials now, sounds like there were denials then, but you would have imagined those denials would have been strong before the article came out as well clearly you have to think that the reporters who wrote this felt that those denials were untrue >> yeah. to your point -- that's the point. if you're the bloomberg

reporters, bloomberg is a major news organization, i worked there for 13 years if you go to your editors, you say i have a story, six government insides who are saying this happened, but the companies say it didn't, you better be sure your sourcing is good because i have never seen apple come out with a denial sort of with this magnitude. amazon coming out making comments it's untrue they knew about a compromise if you parse the amazon denial, it's untrue that amazon web services knew about a supply chain compromise >> they're not saying it didn't exist. >> yeah. what do we do? become word detectives, i guess. it's a bizarre story and by the way, if it is true -- if it is true, think of the implications china may have put a tiny malicious microchip on a serve their is designed to process our

information, corporate information and sensitive government information to steal that information if that is accurate, if the story is right, the long-term implications for china, for manufacturing, for the trade conversation, for everything else in between, i think as ron burgundy said, takes it up a notch. >> 13 years at bloomberg, you're still in therapy >> i'm only 27 years old, it's amazing. >> did you ever say the word "i" there? >> we never said that. >> did you get time off for good behavio behavior >> us times did. >> can you imagine not saying "i" here >> i cannot. >> there's no "i" in team. there is me. >> we are coming back in a moment after this. popular travel booking app hopper announcing a new round of funding. we'll talk to the ceo and 'ldoouer wel that next

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welcome back to "squawk box. travel booking app hopper -- not hooper hopper announced a new roundch funding. if you're not familiar with the

app. you select a travel destination, and the app predicts the cheapest time to book your flight with us now is the ceo fred lalon lalonde. >> i don't know if fred remembers that -- does fred remember he looks like a young man. >> anyway, fred, congratulations on this new round of fund-raising what did this new round of fund-raising allow you to do >> yeah, thank you, this fund-raising is about the world of app for us. it's the number one travel app in the u.s we have over 30 million users but what's really changed over the course of the last year is our pickup outside of north america. so there are markets like european, southeast asia, australia, latin america where we've seen extraordinary growth. upwards of 300% year over year, because we've been adding

inventory in the app so, this funding puts us in that position to continue that growth and become the worldwide leader in travel. >> fred, your biggest competitors are who, priceline >> absolutely. we compete against priceline, expedia. and those companies own all the brands >> and how is your business model different? >> we're fundamentally different because the hopper app sees into the future we were built on the premise of big data we collect billions, 750 billions prices every month. and we track airfare predictively if a user is looking to go from new york to london, hopper, a year in advance, will tell you the best date in the future to buy your airfare we also do the same thing for hotels and we're expanding >> and why are you able to do this in a way, for example, i imagine, you would contend that the folks at priceline around

doing this in the same way i would imagine they have access to the same data, too? >> we've been doing this for over a decade. we have proprietary algorithms that also operate. but fundamentally, hopper is part of a new commercial marketplace that are deeply built on data and ai you can see by the platform that it's different and the other thing that makes us totally different is that we're only an app. we're mobile only. and the user is totally different because you're, in fact, letting the app do all of the heavy lifting for you. you're saying when you want to travel and you can even leave that open where you want to go and the app continuously shops all of these prices for you. so, for scale, we sent about 2 billion push notifications to our users over the last two years. the other things that we compete against are websites where you have to do all of the work yourself and what we see, because we track all of the data, is when

us as human beings do this, we end up on average paying 5% more than we would have if we bought the first price that we've seen. some people get deals but on average, we do much worse, we are tracked by cookies and airlines and websites know that we're doing this at predictable hours. the hopper app does this for you and much better. >> fred, congratulations on the raise. we look forward to seeing you in the future appreciate it. >> thank you thanks for the interest. when we come back, our guest host for the next two hours will be former fed governor kevin warsh, he's going to join us after this quick break

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interest rates on the rise we'll hear from former fed governor kevin warsh at&t ready to roll out to major cities we'll talk to at&t communications ceo john donovan about what you can expect. plus, amazon minimum wage hike comes with a price. that's just ahead. "squawk box" is right now. live from the beating heart of business, new york. this is "squawk box. ♪ good morning, welcome back to "squawk box" right here on cnbc from the times square site, andrew ross sorkin with becky quick, joe kernin.

nasdaq off about 36 points a couple headlines to bring you the fed chair powell saying the u.s. economy is experiencing a remarkable set of circumstances, powell spoke with pbs' judy woodruff yet >> there's no reason to think that it can't continue for quite some time now. eventually, external events, exogenous events happen. and don't last forever there's really no reason to think that this cycle can't continue for quite some time, effectively, indefinitely. and toyota and soft bank are teaming up for self-driving technology softbank will hold half of that new venture. called monet honda and gm teaming up on the cruise self-driving which also,

of course, soft bank is an investor in. data center equipment run by amazon web services and apple, we've talked about this, may have been subject to surveillance by the chinese government by a tiny micro you chip inserted into equipment the bloomberg report saying that chip which has been the subject of a top secret u.s. investigation was used in gathering intellectual property and trade secrets from u.s. companies may have been introduced by a chinese server company who assembled machines in those centers apple, aws and micro, also deputyi in disputing those results. amazon's comments were a little different. it was a vigorous offense -- >> as vigorous offense as saying we didn't know about this.

>> exactly and stocks on the move on this national taco day key bank markets initiating coverage of fast food stocks including chipotle do they finally make a taco? >> they're talking about it. i don't know if they actually have one there's a new ceo. >> anyway, make a taco you got the taco bell guy now. >> and stock's up 42% this year. >> yeah, well, you know, they don't need to go into their problems at this point mexican is tough enough. starbucks, all have an overweight, the price point for chipotle, 500, starbucks, 195. and tilray dropping sharply now around the close yesterday. it's a simple -- you know,

because of the convertible note, that's why it was down $400 million in convertible notes. and a private offering to investors in canada was announced. shares of cloudera surging and plans to america in an all stocks transaction both companies analyze data. kevin warsh is former federal governor and a maim mentioned frequently on the short list for who was going to be the next fed chairman kevin who knows this stuff inside and out lucky to have you today. kevin, great to see you. >> it's great to be back here. >> i know we were talking for a few months when you were going to come back on. it's a good thing we're lucky, rather than smart, because we picked a good day. you look at yields across the board they're all up sharply

yesterday, the two-year note up at its highest since 2011. the five-year, at its highest since 2008 so what's happening here >> what's happening, nature, gravity. ten-year should historically and theory red theoretically to the gdp history shows that ten-year yield hob 5.5. they've been held at longer yields long after the crisis ended. i suspect what happened yesterday is a little bit of gravity. >> yesterday, we talked about the comments that jay powell made along with what we just played for you, we also said that we're a long way from neutral and that you can expect the fed to keep raising rates right from neutral and beyond that, to me, was a little different than what i had anticipated or heard in the past from him >> so, it's a little different from what i read of his speech

the day before and it's a little different from the statement of the fmc the week before. we don't know what neutral is. this is neutral fiction. the neutral rate ten years after the fact we might be able to assess what neutral is i find it a bit mprooffputting >> you're growing a gdp at 3%. i kind of assumed that was neutral, but what do you think it is? >> so, again, we don't know, historically, we define a neutral rate as monetary policy that is neither restrictive nor communicative. if you look at conditions today, monetary policy, even after the yield up in move yesterday looks about as loose as it did ten years ago. i view this whole discussion about neutral and what's this

proper r-star rate is really a proxy for productivity and we in economics are terrible forecasters of what productivity is going to be so, it strikes me the discussion around neutral is way overstated and frankly, i was comforted by statements a week from chairman powell in his conference and john williams, that after talking about neutrality for a couple years said let's cast it aside. >> what are they good at predicting >> how things were in the last economic cycle >> yogi berra was right. it's hard to predict, especially about the future >> right but what shouldn't be as hard is what's happening outside of our window and if you look outside of our window, the u.s. economy has been booming since last spring it's only found its way into the newspapers in the last six months a year ago, the fed and most forecasters said the economy this year would grow at 1.8%

now 9 and 12 months later, they've been mugged by the data. the truth is by the time we get to december, i think they'll have to mark up that forecast once again >> they only missed it by 60% or 70%. i was joking because i was wondering why you picked on productivity as the ones they're not good at. i don't know anything they're good at, really? is there anything consistently they're good at, looking back, and they're not even right about that all the time. >> so if policymaking in the modern construct is all about getting forecasts right it's hard to get policy right if the forecasts are this wrong they were wrong on the downside, they were wrong on the upside. i give jay powell credit is introducing humility into the forecast process the occupation with dots looks quite at odds with forecasting acumen >> and i think that's what he's

trying to do, wean the market off being spoon-fed what the market is doing, 18 months and beyond, right? >> i give him credit 20,000 at the fed. 840 phd economists, all from the finest schools and everyone has a forecast and as a leader, what i've been encouraged in the past month, he's trying to walk back from these. letting the markets work and let i know there's a lot of attention where interest rates are going to be. what's the fed going to do about it markets set interest rates central bankers don't. >> although for the last ten years central bankers have been setting the interest rates, not the market >> exactly, as what we chose to do in the darkest day of the crisis, my judgment, my view that was necessary and

aggressive to get into long-term treasury set prices. that was ten years ago the new news last year, in the papers, the economy is booming and the federal reserve and other sent travel banks are still trying to set prices it's a very difficult transition and we might be seeing some examples of that >> how sustainable do you think the boom is? that seems to be a fundamental question to what the fed is doing here and i think there's a real debate on that issue. >> there's a real debate most economists are on the larry summers view, not surprisingly, it's a sugar high. that is, they never supposed it could grow this fast now, they're working this year, even though they didn't work for ten years. my take is the tax bill and the change suggests we're pretty early in a business recovery long after we had a consumer recovery and housing recovery. plenty of things can go wrong, but these economies could have a

good run in front of them. >> you've written many editorials and i've heard you opine about the risk of asset legislation when you set rates too low. it almost looks like we dodged that bullet. and it may have dodged it because the appreciation that the fed orchestrated in asset prices, the policies that we've put in place allowed the underlying economy to justify the higher asset prices. almost like it worked. it's almost like the fed increased asset values and then serendipity, we got, you know, somehow we got tax reform, deregulation, we got this crazy president that came in and disrupted everything. and did some of these private sector things. people aren't even sure he's republican sometimes but somehow, he stayed with republican policies. and all of those warnings that you wrote about might not happen the economy suddenly has come up

with it justifies those prices is that possible >> so, it's possible that the economy is on a fundamentally different projectory productivity can move up. >> is there no day of reckoning that you were so worried about, does it not come >> oh i'm always worried about the day of reckoning don't be fooled by that. i would never call these things mission accomplished >> we never do that. >> and i certain wouldn't describe this economic recovery as likely to go on indefinitely. my own judgment is that there are ricks everywhere in the world, not least between the united states and china. >> right >> but what we've never seen in the world until this episode is booming u.s. growth, a strong global economy and incredible monetary policy with incredibly large balance sheets so, let's run this experiment out. what central bankers and policymakers should care about

is the real economy. asset prices will take care of themselves we need not keep a $4 trillion balance sheet. >> but are you less concerned, given at this point, that there has been some fiscal help, that congress might have chili done a couple things that worked? >> i'm less concerned about the real economy meaning, the real economy can boom again but my concerns about risk assets have as high as they've always been. >> as high as they've always been >> yep >> we're going to dig into that. kevin is with us for the next two hours. we still have lauds of ground to recover. "consumer reports" out on the first report on automated driving. we'll get you the results right after the break. i can tell you in advance, at least for me, they surprised me. later, 5g is coming. head of at&t communications is here to discuss the outcoming rollout and what it means for consumers. stay tuned, you're wchating

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welcome back to "squawk box. the futures right now are lower. and a couple days ago, remember, they looked like this. they were worse. up 100 points we'll see. and that 3.2% ten-year yields, so this is a little bit different today. who knows.

it is 10-4 good buddy day. it's 10-4 and national taco day. >> a lot to take into account. >> for sure. and then eli lilly they pested an experimental die beelts drug midstage trial it showing meaning full blood sugar reduction and weight loss. and the key rival is novo. shares of novo is up "consumer reports" out with their first report on automated driving systems. joining us with results, jake fisher, the automotive testing director for "consumer reports." jake, there's a lot of nuance to this after looking at the report so, what are we trying to do exactly? what does automated driving mean at this point? because it's not what people

think. and i understand that the good systems actually have feedback to bring the driver back in, and not let him get too detached from the actual act of driving explain the results, who won and what are we looking for? what's the best system >> sure, sure. i mean, honestly, it's kind of like the wild west out there, right? everyone is talking about self-driving cars and fully automatic cars but they're not here at all. there are autonomous -- well, somewhat automated driving vehicles and they're all over the place so, we looked at ones on the market right now and some -- well, they try to do too much, but they really around capable of what they're doing. in the worst situation, you're in a vehicle and they're driving along and they steer the wheel for you, but they're not that capable. and sometimes, you're in a situation where you almost overtrust them and really you get distracted the best systems out there and maybe the biggest surprise, it's

not tesla in the news a lot. it's actually cadillac which has a lot of capabilities but safe guards that tries to keep you safe it actually has a camera that looks at the driver's eye to making sure they're looking at the road ahead of them that's a game-changer and we're hoping to see a lot more of that going forward. >> interestingly, tesla, that's all we talk about, that's the hook of the story that gm beat tesla, cadillac, at this point had a better system than tesla >> yeah, cadillac has a better system than tesla. in terms of absolute ability, in terms the ability to steer within the lane and do speed control which is really the primary task of these, tesla is very good, too but the problem with tesla, is allows to you use it in situation where is, honestly, you shouldn't be using it. roads that aren't controlled roads that might have pedestrians or stopped vehicles. and they don't do a good job of

making sure you're actually continuing to watch the road >> jake, just explain, the one thing i don't understand about this, on roads that you shouldn't be using autopilot on, does the cadillac version of it stop you from doing that and how does it do that? >> yeah. well, it's actually pretty clever what gentle motors has done, they've actually mapped all of the roads across the country that's it's able to operate on in a safer way so, it's divided highways. they've actually done a very high-definition lighter mapping of these roads and those are the ones it operates on. if you're on a road that it's not as confident with, it's going to lock you out. it's going to give you a message and tell you that it can't be operated in that situation on the other hand, you have tesla which you can be honestly on a curvy background with one lane that's not that well defined. it will engage but rate erratically. >> jake, my concern was not that

gm came out much better than tesla on this, my concern is all of the issues that you brought up with tesla, and safety concerns and tesla is still number two on this list. is this not a one and two race there are a lot of other names that came in below that. >> if you look at tess letter, it's still very capable -- >> my point is there's going to be a whole lot of self-driving automobiles that are not safe? >> first of all, none of these are self-driving -- >> when we look at volvo >> right all of these if you look at nissan, if you look at volvo, their capability isn't even there either. so, it's almost the primary tank almost doesn't give you much of a use at all i would suspect most of these people driving these vehicles wouldn't even operate is it other than convenience with tesla, they do give you

convenience, stop and go traffic on a highway, it actually works really well. not a safety feature, but at least gives you something for the system >> do you think that all of these are being mismarketed? i think all of these version, tesla and cadillac version is all sort of fancy cruise control. that's about all i think it is >> in a way, sometimes, yeah, in a way, it's fancy cruise control. that's really a much better metaphor in terms of the steering, it's almost fancy power steering in some of the vehicles but, yes, it's marketed in a way on many of these vehicles that it almost sounds like it's autonomous, it's very confusing. >> jake, it's not mine, but i drive it, on the highway, when i'm trying to switch lanes, it resists. i'm trying to switch lanes and, all of a sudden, i have to do it hard because it's pulling me back in the center lane. i think if i turn my turn signal on, i think it doesn't resist,

is that the way it works now, it's got me turning my turn signal on. >> you're talking about a thing called lane-keeping assist, right? it's supposed to assist you in terms of steering. >> it doesn't. i almost wreck >> it doesn't know what you want to do. like reading your mind >> i'm trying to switch lanes quickly and i don't have time to turn my turn signal on >> and you're not alone. we find that these systems are fighting each other. either i steer, either i drive the car or the car drives the car. you can't be both. it's very disconcerting. >> this goes to the whole point of google, when waymer started doing this, it was the interception with the human or car was the problem. you either want it all human or autonomous not in between >> they could have a fake steering wheel

i'm not getting in a car white house a steering wheel >> cadillac, it is the only one that separates that way. it's very clear if you're steering or the car is steering. >> a nice white carmela soprano escalade, remember her anyway, jake fisher, thank you, automotive tester for "consumer reports. >> you're welcome. >> maybe it's good, it kind of forces you to -- >> forces you to follow the rules of the road? >> yeah, yeah. >> good news >> and it cuts out at about 65 when we come back, we have much more from today's guest host, former federal governor kevin warsh. and amazon is bumping up the minimum wage for its workers but it may not be good news. and the ten-year note at its

highest yield since 2011 3.225% we'll have more when we come back amazon workers getting a raise, but it's not all positive news the e-commerce giant is now getting rid of pay centers for fulfillment workers. this after amazon raised its minimum wage to $15. the employees will no longer be able to earn bonuses or stock

rewards if they meet certain goals. retailers are gearing up for a bump in sales. they say holiday sales until november and december, when you exclude automobiles, gasoline and restaurants are expected to increase between 4.3% and 4.8% this year. that would reach a total of $729 billion. this year's forecast by the nrf isn't predicts as much growth as last year. growth between 4.3% and 4.8% would be above the average >> and embattled zbret maker juuls wants to crack down. it filed alleging that the companies copy the design of juul's products. juul is part of the fda crackdown on the top offic of e-cigarette use by kids. the fda seized thousands of

documents from juul's headquarters that happened on friday. you can read that on cnbc.com. coming up, the ceo of at&t communications joins us. to discuss the rollout, the company's ceo and much more, john donovan after the break and 57 on thdoe w. put your data to work on the cloud that drives business. the ibm cloud. the cloud for smarter business.

there's a new report this morning that says china used tiny chips in a hack that infiltrated u.s. businesses including amazon and apple those two tech giants are denying the "business week"

story. joining us, shawn henry, a former fbi director and now an nbc news national security and cyber security analysts. shawn, you're somebody who knows your way around this stuff what do you think about the report as it stands right now? >> well, i don't have any specific information about the particular report and the allegations made within that report but what i will say is that the u.s. government has been well aware of concerns to the supply chain. it's something that we've seen in terms of software being downloaded that contains malicious code and the concern about hardware being implanted with certain chips that a particular nation state, china and others, may have access to, that would provide them the ability to collect intelligence, to potentially manipulate data, et cetera so, the supply chain has been a major concern for at least a decade that i'm aware of >> so, apple and amazon are both

denying the specifics of this story. but what you're talking about is a much broader problem just the idea that the government nose about this and has for a decade is that an argument for making things making computer hardware onshore, instead of offshore >> well, it's something they've certainly had concerns about we've seen in the past, electronic equipment coming outside of china the government has put out directives that they will not choose in government structure, wowwei, the manufacturer and certainly, outside of that, they've made specific action and directives to prevent that type of equipment from getting into the environments >> what you're talking about, these public statements that we've heard in the past that was always concerning chinese

companies not u.s. companies that happened to be using manufacturing facilities overseas you're saying, though, that for over a decade, the u.s. has known any american company using overseas manufacturing was potentially at risk for this too? >> well, the u.s. government has been concerned about it's supply chain at large >> these are pretty outrageous claims you're saying that the u.s. government has been concern, or they knew about particular incident where is this has happened >> i'm saying there have been discussions about the need for the supply chain and the integrity of the supply chain to be checked this is not something that was secret it's been publicized the u.s. government pout oye a comprehensive study of cyberinitiative back in 2008 in that initiative, one of the tenets of that, one of the major initi initiatives was the integrity of the supply chain so, certainly, the federal government was aware of that

vulnerability of that. we've seen the software, it's got malware in it and provided access to a particular adversary group. the particular concern about hard ware is a similar type of concern because of the range of access an adversary might have if they had access to the manipulation of hard ware. >> it makes an awful lot of sense. i want to clarify for somebody tuning in and just waking up and hearing this the government has had concerns. it makes a lot of sense to have those concerns, but you're not aware of any incidents where it was actually taking places, and where u.s. whatevmanufacturing operations have been compromised? >> i'm not aware of that at all. what i will say, though, as we look forward, one of the concerns from my perspective is how these types of things are interdepicted or intent fied the concern is networks are all

interconnected that's the reason that they work and the type of data put into the networks the way the networks are used to run our day-to-day lives, it's certainly fragile, and suss semable to sem ab susceptible to attack. we have to define government to government, what's acceptable and what is not. how do we make these type of treaties to make sure the networks are safe. and people can go about their lives to make sure networks are not disrupted. >> shawn henry is a former fbi executive assistant director, and we thank you for your time meantime, you recall this, too, as well telecom giant at&t will be the first carrier to launch 5g john donovan is the ceo of the at&t communications. he's responsible for the bulk of the company's telecom business service. the business is upon for $150

billion, with a "b," of the refus revenue. good morning we've been talking about the progress and the question is when is it really coming it is now here >> yeah. >> what does that mean >> you know, i think we're in the part of the curve that, you know, leads to a out la of speculation about what it could mean i think this one is different, you know, in my 35-year career, i haven't seen one that was this game-changing. there's a lot of ways to think about it, but i think that networking in the 5g world is going to move to realtime. it's going to fundamentally change ashgts textuchniqu archis the example i use, instead of virtual reality using a helmet, it will look more like glasses >> put a time line on it fors, s that we will actually see it we're here in new york and i know you're headquartered

in austin. how quickly will we see that with an iphone sort of as the beginning of this? >> so, if you look back and say, where did we start verizon announced this week that they're launching a home broadband service. that service we had up last year we had that up in waco, texas. and that service is really just a test environment but what everybody's really waiting for is when it becomes mobile and, so, this year, we're going to have 12 cities up and those 12 cities will have a capability with a pock that will be mobile. >> when you say it's a puck, like a wi-fi puck that you'll walk around with >> that's right. >> it won't be in the phone itself >> not yet that will occur in 2019. we're in a race for that it's really interesting because verizon is kind of making their claims first and we're saying, no, that's not first. there's real first and then

there's television commercial first. but the myfi puck will allow you to take that network and extend that to devices around you and 5g will be in the chip sets in hands of consumers next year. >> can i ask a selfish question, if this is getting rolled out at the beginning of next year, should i not be buying a new iphone this holiday season because it's going to cost me a thousand bucks >> no you're not going to have to upgrade if you look, this year, we've taken 200 markets, and we've increased the speed of the 4g network to, in some cases, 400, 500, meg, depending on the availability of band width, so we're in a period of there are

now leapfrogs. >> when do you anticipate, for example, apple ioffense or android phones will have 5g chip sets in them, not just a super fast 4g network? >> yeah, we're going to see handsets next year probably more in the back half of the year. and each of those companies will make decisions based on when they feel they're going to have the right combination of hardware to do something extraordinary. >> it may be several years down the road >> i don't think it's going to be several years >> let me ask you a question, the third andfourth players in your business are trying to merge. >> yeah. >> one of the arguments for the government of why they should be allowed to merge is base they can provide 5g service, develop it faster and push you and verizon to move faster than you otherwise would. >> yeah. >> what do you make of that argument >> well, i hope it doesn't sound like, right now, i'm operating a freight. because right now, we're trying to beat verizon. verizon's trying to beat us. you know, superlatives in the

wireless industry matter, fastest, biggest, best, first. and it always has. if you go back to each of these generations, whoever gets out first has an advantage so, the race is on and we don't need a third and fourth player to get together and do anything to get ourselves moving and that also includes how we view things relative to competition with china we're moving ahead we're moving ahead as fast as we can to deliver this network. >> now, you -- when did you graduate from -- what's your electrical engineering? >> 1982. thanks for dating me, joe. >> but, but how different are things now are you equipped to understand current technology do you need remedial training do you keep up with it? >> yeah. first i want to thank you, because two years ago, you referred to me as the swigly line guy, when i went to the office that day, my name plate has been changed to swigly line

guy. >> i was talking about how full-length movies can travel in air and you can watch them and i asked how. you said there are swiglely lqu lines. >> and you go back a hundred years and people think it's magic but we now know it's not magic. it's in the physical era i don't know know in 30 years that we can imagine is possible in the physical universe you can answer, please >> the quick answer of that is the story of a loving spouse every once in a while, i go to my wife and say, honey, i'm going to need six months the world is changing and i'm going to get deep into this. she is always supportive the good news there's a lot of tools to relearn >> i have to know which buttons to press on the phone. you have to design it. >> the fixed line wireless, this

idea that you will be effectively be competing meanfullying against the cable operators of the world >> yeah. >> what's the time line for that, i think investors are trying to understand cable versus what you're doing >> yeah, you know, taking a brand-new technology like 5g and all of its promise, it doesn't feel to me, particularly compelling to say i'm going to be the next broadband provider, as opposed to automation taking technology national chot crystal clear but super light wtae the weight there is it the technology when you look at deploying this, you already have fiber in the neighborhood >> you think it's five years >> i just don't think it's that. >> becky was talking about this

chip issue that amazon and apple seem to struggle with. >> yeah. >> what is your thought about that and to throw into it, there was a period that you were going to use a wowwei phone i think you remember that. >> you wrote about that. >> a lot of us did and there were considerable concerns at that time, national security concerns about what was going on inside those phones how much do you worry about this, what do you know about it? >> well, i think the u.s. government is right to be concerned when anytime a network changes. because you have not only cyber security and the risk profile of either offense or defense, but you also have the economic ecocenter. and that's why i think it's really important to a country's economy and to its security, that when there's a new technology coming out that you be first and you have companies that are really pushing the envelope for you. and, so, we're committed to having that not happen, staying in front of the chinese from a

timing standpoint. and i think that's that's going to be the best defense we can have you know, have a lot of the technology deployed first. >> you not only displace broadband, you displace the entire travel, if you want to go to venice or italy you just -- >> yeah. >> you can just go >> my grandfather used to say, have you ever seen europe, i used to say, no, because i was a kid. >> he said you know what you need to do, you need to wake up in the morning and you'll see you're up. that's a grandfather joke. >> that's a good joke. >> honestly. you're up. >> your grandfather had a sense of hieumor, at least what happened? >> it didn't travel to me. >> john donovan, thank you >> thanks, john. when we return, kevin warsh

on the latest bond move sand the fed. let's check on yields. oh, my, i saw it this morning, i thought i was looking at some other -- italy or something. i don't know ndtures at this hour are haling it kind of okay the dow's down 67 points we'll be back.

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♪ kevin warsh is our guest host and one of the concerns and it's so much of a concern, and it's such a consensus, that i'm not sure it is a concern or not is china. and what the next ten, 15, 20 years looks like and it could be a negative, or it could be a positive they've got a lot of people to sell things to i don't know whether it's good or bad for us. >> we are probably on the precipice of a brand-new relationship with the chinese. i would say the relationship between these two great powers is probably as poor as it's been since nixon and kissinger opened

up this relationship not just at the level of government-to-government, but business-to-business and could we be at the beginning a ten, or 20-year cold war that has huge implications for the treasury department and economy. >> how does that play out. i can't imagine down the road it doesn't become some mutually beneficial arrangement or might just be too much of a -- am i looking at things too positively >> well, i'm an optimist, but i would say, in 1914, the global economy was reasonably integrated trade and the rest were integrated it wasn't that integrated again until 1980 the last 30 years we've been living and breening globalization, as if it's an inevitable force but my vision is, we now have the chinese and the u.s., which are the world's two great powers that need to establish a great power relationship

and great power relationships are not how much soybeans are you going to buy, it's about core interest. >> and core interests wear out, don't they don't things flow downhill where the least amount of capital is required and we benefit from that >> an integrated global economy, integrated global supply chains would be good for all of us, but as we've just heard about in the story before us, tensions government to government, spying on both sides. we might see two poles a chinese centric world and american-centric world >> you say the chinese government, and my worry, one day the chinese as part of its trade war to prove their mettle will not show up >> they've stopped buying. >> no, no, they could stop

selling and be painful for them. as i said, i get shot down where do you land on this? >> so, in the old days, the buyers of the treasury department were buyers that looked at price. since ten years ago, the big buyers are central banks and governments that have their own interests. that's what makes the volatility in the markets, the move-up on yields quite interesting if we found out that the chinese are not going to participate in the ex issuance, and the world were not to come to that vushgs that's different than pimco sitting out. >> well, we have to self-fund it anyway >> well, i think this is among the places if two great powers were to have a fight, it can escalate >> do you remember when people would put money into something where they'd get actually less money back, just because they'd get their money back >> return of capital >> yeah, return of capital >> they didn't care if they got interest they just wanted to park it somewhere where they knew it

would be where are the chinese going to be >> so, they have other options, european risk-free rates german rink-free rates there are economic actors and there are political actors and in the bottom market, we need to think about them differently >> because they may do something that is counter to their own interests if they think it's going to advance their public interests? >> they know, yields would go up, they would suffer large capital losses but this is a fight not over the next day or the week this is a broader fight. and again, i suspect that will there need to be between president xi and president trump a summit between two great powers >> what's a european asset yielding? >> a lot less than u.s. treasuries german yields which are the closest european equivalent. >> how do they competitively go into that versus us? >> again, if it's about pure economics, it's one thing, but

if something, it would be another. >> sooner or later, the economics, i'm not saying you because you're very smart, money talks and then walks? >> sooner or later and moreover, i make one last point, the federal reserve has pursued the quantitative tightening that it much written about. the balance sheet is shrinking to the tune of about $50 billion per month. when yields spiked some time ago, the reporters called that the tantrum, the taper tants trum i wouldn't mistake this for a tants tru tantrum. and the central bank here in the united states should not overreact to this news but i will tell you if the yields intend to go up, my guess is the federal reserve decides to stop its quantitative tightening regime and end up with a balance sheet of $300

trillion >> so you think this is a cold war? >> i think we're at risk of a cold war and it runs domestically i don't think this is about president trump. whoever sits in that seat will have a bad time with china >> right on the cusp of middle class like we have here. although it's much larger, obviously. they better think long and hard about that and he's already getting criticism, xi, right they got to move quickly to become an economy society, not ate producer society, no >> getting where we are from the gdp to calpital. >> they better not mess it up. after the break, a masked bandit broke into a texas police station. we'll tell you all about it, back in a moment no. at cognizant, we're helping today's leading manufacturers make things that think and do automatically.

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coming up, much more from our guest host kevin warsh and then the changing land scale of retail. how virtual reality is shaping the shopping experience. "squawk box" will be right back.

government bond yields soaring to multiyear highs what investors need to know straight ahead breaking economic news one day before the big government employment report, we'll be getting weekly jobless challenges that's just 30 minutes from now. plus, all aboard what the transport sector is telling us about the state of the global economy and the markets as the final hour of "squawk box" takes off right now. ♪ all aboard ♪-i, i, i live from the most powerful city in the world, new york, this is "squawk box.

good morning and welcome back to "squawk box" here at cnbc live from times square confetti coming down >> every day there's a bell ringing and bell closing >> i thought -- >> it's for us >> one little piece. >> one little piece for the 8:00 hour i'm joe kernin along with becky quick and andrew ross sorkin the futures now, 70 now. 56 again, on the dow coming in on a new high. a little bit of consolidation, whatever you want to call it nasdaq has been weak on a relative basis s&p down about 9 treasury yields something that we'll continue to talk about don't adjust your tv, it really does say 3.22 on the ten-year note we've been waiting it seems like three or five years. it will arrive at least to

3.25 -- i don't know when -- let's talk about it, the markets and the economy, the countdown and the big employment report tomorrow joining us for that, marion bartles, the new head of exchange bank strategy the bank of america, merrill lynch. is it a strategy that helps avoid the upcoming disaster in ntfs or just ntfs in general >> i'm very biased from that standpoint, from bank of america, we launched coverage on 109 trade exchanged funds with pinions. and we can do this now because of the fair act that got passed last year. >> we will talk moreabout that i want to introduce, at least, lou alexander, chief economist at newmora and former treasury secretary of tim geithner.

i just want to talk about where the yields are today we've had discussions just today about front end stimulus, short end fiscal stimulus, waning physical stimulus. that's all i'm reading in your comments here. that's going to wear out, economy is going to slow down. none ever this is structural none of this is beneficial to the private sector, deregulation >> deregulation is beneficial. i think lower tax rates have some beneficial effect frankly, i'd be more optimistic if employment growth wasn't so strong if i thought this was a productivity story, you would expect to see stronger employment growth. i think lower tax rates is important to investment. i think that is something that is going to extend for a while but i think if you're trying to build a case that there's some dramatic acceleration in productivity growth which has got to be the essence of the supply-side story, why is employment doing so well and i think that's the

fundamental problem you've got in terms of interpreting the near-term number >> you mean that employment is doing so well that we need to put the brakes on, and therefore, we slow no matter what >> i think there's a limit to how far labor markets ought to tighten. i think we heard that from powell that, there is a point that the risks of overheating outweigh the alternative. that's why they're gradually raising rate look, economists have a lousy rate of predicting productivity. >> we heard that earlier what do they have a good record of predicting? we couldn't come up with anything, because the future is difficult to predict >> fine. but if you're just reading the data and if you thought what was going on was a dramatic acceleration of productivity likely gotten in the mid-'90s, one of the things i would argue is inconsistent with that is how strong labor demand is >> next year, 2019, what, 2% in

gdp? >> a littleabove 2 >> a little above 2? >> a little above 2. i think next year is a transition >> a year ago, what did you think 2018 would be? >> a year ago, i had it in the high 2s but i did not have the magnitude in increase in spending that we got we did expect a tax increase a year ago, we did not expect the dramatic increase in spending. and just to make the point, the spending is the thing that really generates the immediate burst and then the fallout our estimates of the tax effects are beneficial over a longer horizon. although, i will admit, i'm on the mes pessimistic side of the debate of how fiscal affects things >> i remember in the early to mid-'90s, we did have a strong market the idea was those were lousy jobs they were not good jobs. that was the takeaway from that.

>> and i would argue the reading of the productivity growth, it was the second half of the '90s where that really took off >> but that seems to make sense to me, where you hire everybody you can, and then along the way, you're also trying to increase productivity but productivity seems like a tougher nut to crack than just hiring somebody to get in the door >> i would agree when i look at what's going on in information technology, that is the thing that makes me the most optimistic >> right >> that that has not seemed to come through but if i thought that were coming through, i would expect to see a different relationship between where i think the economy is in terms of activity, and what's going on in the labor markets. and when i say activity, the real stuff's hard to measure but the nominal stuff is actually pretty easy to measure. and, look, there's definitely upside risks to my view. but i keep looking at a labor market that continues to grow. >> all right we'll talk more with you

i want to get to marion. you're heading up this new unit and you're picking witching etfs. >> we're looking at the etf universe and the launch and the cap and the ten-gig sectors, and we want to broadly diversity we selected 109 to lynch by the end of next year, we hope to have 300 etfs under cover including fixed, commodities, so it's groundbreaking, first to put an opinion on a new etf. >> and what would it do for clients then, you'd say here's where you need to be >> so, we have actually opinions different from our analysts. and we're very cognizant of the fact that etfs -- some of them can be very similar. so, what we're trying to do is really separate out the ones

that are standout. and i think the groundbreaking work that we're doing, we're using bank of america, merrill lynch analysts' ratings on the stocks, as well as our macro teams use on sectors and industries so, we're really taking the capacity of bank of america as a research house and now applying it at the stock level, really getting down to the underlying securities and what -- and rolling it up to see what it really means to a shareholder. the industry traditionally looks at what is called the efficiency ratio, they're looking at nav, how well the fund tracks to its expense ratios what we found while we're in this element where there's a race to zero with fees what we've been able to uncover is that there are select, not many, but there are select opportunities where you may want to even pay a little bit more, because we think that the underlying exposure that you're actually getting is better than

the outer care universe. >> okay, we ran out of time, lou, when you leave, i'm going to ask you more so you're not even able to defend yourself. >> he was a governor, i was on the staff, i'm used to that. we were colleagues, i'll be very kind >> okay. i'd hang out in the green room >> and listen to every word. >> yeah. i do want to hear -- do you have comments do you agree or disagree >> i want to help louis, louis and i are rooting for the wages to go up we both think it's good news real wage earners haven't gotten a pay increase in more than a decade >> maybe it's happening finally. >> amazon say it's about politics or more about economics. it's about time wage earns get a little something too >> maryann bartles, lou, thank

you for your insight and to the markets, the other big story, generating lots of attention is a new report that says china used tiny chips in a hack that infiltrated u.s. businesses including amazon and apple. josh lipton joins us from san francisco with the latest. josh >> becky, the most significant supply chain attack known to be carried out against american companies. that is what bloomberg is now reporting. specifically that the chinese government inserted a tiny microchip into data center equipment. and the goal here, to access sensitive government networks, and corporate secrets including, as you mentioned from tech giants like amazon and apple bloomberg said the chips may have been introduced by a chinese server company called supermicro and here's how apparently this all worked the chinese military unit designed a microchip which was inserted at chinese factories.

and then made their way into data centers operated by dozens of companies now, the chip can then contact computers controlled by the attackers in search of further instructions importantly, the companies dispute this report. strongly, amazon saying it is untrue that aws knew about a supply chain compromise. an issue with malicious chips or hardware modifications while acquiring elemental, amazon wrote. and apple saying, on this, we can be very clear. apple has never found malicious chips, hardware manipulations or vulnerabilities purposely planted in any server. we remain unaware of any such investigation," says of supermicro bottom line for viewers at home now, no consumer data is known to have been stolen here of course, we know china has long been suspected in supply

chains companies like huawei and at&t have fallen under intense scrutiny in the past year. >> josh, those statements that you focused on were a little different than the denials we heard from the company earlier if you parse it, they're all saying they had no knowledge of a situation like this. does that mean it doesn't happen or is this something that we're going to have to hear a lot more from obviously, bloomberg business week not it was a big deal to put it on the cover of the magazine >> first of all, becky, with apple, sigh thougi thought the statement was pretty clear and direct saying, listen, we're never pound these malicious chips or hardware vulnerabilities. i read this piece, i thought it was a great piece of reporting and you were talking about, it seems to me this espionage campaign seems to have been found about three years ago. it looks like the victims, the

targets are denying this at this point, as i mentioned, it's also not clear to me whether any customer data was in fact stolen, that we know of as yet. >> thank you for that report coming up, picture your redesigned living room before you spend a dime a ceo of vr company partners with macy's to make this a reality. you're watching "squawk box" on cnbc

♪ whether it's a big thing, small thing, or something unexpected, pnc will be right there when you need us. because when it comes to your finances, if you focus on today, tomorrow has a way of working itself out.

welcome back to "squawk box. futures right now, taking another quick look, for most of the morning, based on the high yields we're seeing, 83 points on the dow down 12 on the s&p down just over 50 on the nasdaq. macy's is the first furniture retailer to roll out an in-store virtual reality shopping experience nationwide answer it's all because of markset. joining us now with the news offerings is the ceo, a virtual and augmented reality company. thanks for coming in >> my pleasure thank you. >> we're all familiar with the

augmented reality you can get, you can see how the furniture plays out. what's different about this with virtual? >> first of all, those 3d assets are the exact same assets used in the virtual reality experience as well so, the idea you build these 3d models and they're available for you in the home or in the store. with the macy's experience, you walk into the store. you meet an associate, they have an ipad, it's game and drop experience you put in the floor pan, awe tap the pad and all of a sudden, you're in your room. >> how does that work, i'm in my room with my walls, my paint, my everything or i'm just in the room with the dimensions i've given you? >> no the entire room. the idea, you sort of except out your space you bring in your dimensions it takes a 2d floor flan aplan d then transitions it into 3d floor plan, you change the walls, the paint

it has a 3d option of windows and doors and then you're decorating. >> that makes sense from the perspective, if you've ever tried to buy furniture, is there really enough room for this couch to be sitting next to this table and not look crowded i get the use of this. is this anywhere this expands? >> well, outside of furniture? so, one of the -- you have to find a market where there's a limited turnover of products you have to create these 3d assets things like furniture, they're big ticket items they turn over 20%, 30% a year small categories might have smaller categories you have to figure out the amortization >> what's the cost >> $30 to $100 depending on the category. a chandelier may be much more expensive. >> and i would thing, shouldn't that surprise come down? >> absolutely and that really is

the right question which is the whole space is about to unlock as, you know, billions of dolladollar s will be going go into 3d modeling >>f fuif you upgrade on your phe on the ios, they now have a measuring stick so you can measure anything in the room >> yeah. >> the future is you're at home, you place augmented reality. you wave it around you build your space or browser on the app you come into the store. you can pick out the furniture put on a headset and you'll get this omni channel experience which is part of the macy's vision >> this particular deal is for 69 stores, is that right >> it's actually been more than that 69 is what we've installed this year it's been about 13 months since we started and we've added 60 stores in the last two months and additional stores next year.

and one of the cool things that jeff talks about -- >> jeff is the ceo -- >> right not only are we putting it in store where is they have furniture, but they have a law the re a lot of real estate >> can aare they page a flat fer putting it in? >> yeah, we're very much a sales model where there's cost per content. and we charge a monthly fee plus a 3d cloud plus the storage level fee. >> beck, thank you for coming in. >> thank you lots more to come on "squawk box. transport stocks to watch. and the spike, we'll talk about that and much, much more you're watching "squawk" right here on cnbc think your large cap equity fund has exposure to energy infrastructure mlps? think again.

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we've got breaking jobs datas adp up by 230,000 >> it's just going to get hotter >> when you really look at what's powering the market, scott, it's old school tactics it's been ibm, cisco, intel on fire a new record close for the dow jones industrial average >> this is a hot market and you, i suspect, may be getting richer welcome back to "squawk box," everybody. we've been watching the futures after an update for the markets yesterday although they closed their sihighs you're seeing giveback the nasdaq down close to 50. it's probably because of blah you're seeing at treasury yields which continue to yield. the ten-year is 3.1%

and five-year at 3.048 and two-year at 2.86 the yields across the board hit the highest level for the year yesterday. walgreens and birchbox, they plan to build up birchbox retail in some locations. the test will start with 11 stores in december part of the deal is walgreens will also acquire minoritiest from in birchbox for more on that, check it out on c nbc donbc.com. maybe you've seen this, a masked bandit. a raccoon. he breaks into a police department in texas. he fell through the ceiling of the bedford police department. the video shows several officers chasing the critter throughout the building you can see them as they try to

close in on the raccoon. the voiceover by bruce willis, i think. finally after nine long hours, they capture the creeature and set it free in the park. >> he'll be back tonight. >> i was expecting a heist story. i love a good heist. >> that's why they're so good at getting into stuff >> they can lift food on the trash can and get in and push it on the way out >> yep >> i figured out how to do it. i put one garbage can on top of the other, prevented them from getting in there they're sneaky little guys >> not as smart as you >> no i'm smarter than a raccoon. we're just minutes away from breaking economic news jobless claims are out and we'll get the instant market reaction, when we come back. we're putting ai into everything, and everything into the cloud.

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back here on cnbc live the nasdaq market in times square stories front and center this hour eli lilly posting experimental diabetes drugs it shows meaningful blood sugar reduction and weight loss with people with type 2 diabetes. and novo stock falling and snap because of key analyst calls this morning and often a guest on this show, they expect another quarter of daily sequential daily averages or declines for the company. among other things he cited a pressure or lukewarm design. and citi grougroup's mark may i

citing consumer trends and continued operating losses that stock has been challenged for quite a bit of time. we're just a few minutes away from weekly jobless claims. the dow has closed up a few sessions in a row. let's get to rick santelli standing by at the cme >> yes, thank you, becky 207,000, which is a drop of 8,000 on initial claims. of course, that's 215,000, is 1,000 more than was originally released last thursday if we look at factory orders for the month of august, factory orders were -- are not out yet sorry. we're looking for some of the other -- nope, not out on any of the services yet as a matter of fact, it's a weird morning altogether, because even continues claims hasn't got matched up on any of our services with continuing claims yet so it seems as though the data

is -- here we go continuing claims move from 12.6613 million to 1.65 million. gosh, these are really, really low numbers with respect to continuing claims. they're always weak until arrears. and i don't see any data yet, becky. but i do see a 3.19 ten-year it's interesting, 10s minus 2s we were nervous hovering in that 20-ish neighborhood, it's now at 30 trading at 32. the only reason i mention that is i think the steepening yield curve is probably best for the fed without disturbing markets too much as it continues to try to snug up rates for a little insurance for the next recession, maybe inflation out there. i'll throw it back to you. >> let me ask you a question, let me ask you a question just about yields why do you think we saw such a big move yesterday what was it that the market was

digesting or hearing or suddenly kind of keying on? >> well, i think the big move yesterday in many ways was technical. but the technical flood wtgates open for a specific region i think the tariffs with north america. the ever-growing notion that china is most likely going to happen after the midterms. yeah, i think the data but i also think the idea that the stock market activity is doing, what some of the economy and the metrics yesterday, especially for the service sector of the company are all very valid reasons for rates to shoot up. i think the important point to monitor is how overseas rates end up respond bund deals up at 52. last tuesday, they closed at 54. so, to me, the idea of what japanese and european rates sector is going to be critical

the dollar's gotten a bit expensive based on how the rate structure and interest rate differentials are broken down. so, that should keep the dollar index from rising too quickly. and i do apologize that is the 10:00 number i was looking for, so, we will cover it eventually. but i really do think that paying attention to the long end, for any ever you investors out there is, critical there's been a lot of false moves. this one in interest rate certainly isn't in my opinion. >> rick, thank you we'll see how our guest host kevin warsh -- if you don't have anything earth-shaterring to say be the data we just got, i want to ask you something else? did you notice anything in the date that caught your attention that you want to comment onny. >> so, jobless claims have been the lowest since 1969. the labor markets are booming. i think that's worth a headline or two and the truth is wages are moving up everywhere in the

u.s., except in government data. there has never been as big a delta between what we hear from employers and what the governments statistics say my impression is the government statistics will start to show that >> let's go back in time, it's "the bachelor," there are finalists. >> it makes me very uncomfortable doing "the bachelor" with you, joe. >> it may end up being "celebrity apprentice," that job was out there for trump. were you out there that you were that close to getting the job? >> i can neither confirm that or deny that but i've read that as well >> how many finalists do you think there were were there four or five? >> i haven't watched "the bachelor," i don't know. >> if you did have an interview for that with trump, would you have any opinions on the questions that he would have

posed to you at that point could you tell he wanted it to keep rates low because he has on the record afterwards you've seen some of those interview where is he says i don't like what powell -- >> he's always wanted rates low. >> so, i'm not a kiss and tell guy. this guy wrote a book on the financial crisis, and i wasn't a kiss and tell guy in his book. my own view is it's not a great way to make government policy. we read these books about contemporaneous events we read them about the crisis. they tend to be different than my recollection. only thing i can say this, the president is a very good interviewer. and he's interviewed thousands of people in his career, long before the presidency. >> and you probably think powell is a pretty good choice, i guess? >> so, jay powell is a good guy, i've known him a long time and i'm rooting for him. i think he's actually taking the office at a much more difficult time than people think >> if you were fed chief, would

we be higher than we are right now? >> so, i don't know, but i will say this, you've heard about this from me for years, what i would have done long after the crisis, where in the crisis i was a big believer in quantitative easing, i would have gotten out of this emergency business the idea that we're carrying around a $4 trillion balance sheet during an economic boom. today the economy is the strongest since 2004 but at the end of this year, we might say the economy is as strong as 1999, and we're carrying around a balance sheet as if it were ten years ago. >> but what would it look otherwise, right the counterfactual is, if the stimulus wasn't there, where would we be? >> so, asset prices without these big balance sheets around the world to be at a durable equilibrium. where the stock market would be, i don't know we do know it's on a reliable, durable pace again, my judgment is different than others. the central bank should be

focused on the real economy. let the assets market worry about everything else. >> would you have been raising rates at the same time you were getting rid of the assets on the balance sheet -- at the same time you were squeezing down the balance sheet? >> so, it's a committee but my own instinct would be to shrink the balance sheet first. that was my judgment in 2010, that's my judgment in 2018 we trot out in an emergency crisis you shrink the balance sheet and you look around. again, my suspicion is in the u.s. and around the world, we're going to have a lot of big balance sheets for a long time you're going to have quasipermanent quantitative easing what a septembcentral banker shs not be doing is worrying about this meeting to the next but what about the tail risks? i want to put those away >> and shrinking a balance sheet in its own way is a way of drying up liquidity. how do you look at that versus the impact of raising rates? >> i think interest rates work much more directly on real

economy. the balance sheet and quantitative easing work more directly on asset prices >> so, we could be talking about the inflated still being here, but the real economy being hurt, people on main street getting hurt from wall street? >> 52% of our fellow americans don't own any of these assets that we spend our time talking about on this show they're finally getting a wage increase i want asset prices to be worth what they're worth and what you see in the treasury department in the last couple days might be the beginning of that. we'll see how central bankers respond. >> i hesitate to ask you what congress will do that's your thing, central banks. but central banks have to deal with the effects of what politicians do and fiscal policies what would your priority be? now that certain things have gotten done, would it be deficit reduction? would it be infrastructure

do you have a wish list for what you wish policymakers would focus on to help central banks? >> i sure do congress is spending too much money and they should stop it. you're going to hear from most guests if government spends money, that's exactly what the economy needs to goose the man that is not my view. congress is spending too much. the dollar is the world's reserve currency we need to act like in the period of an economic boom we can make our own books balance. that takes pressure off the central bank and the central bank can get back to its job fiscal policy is way to expansionary at the moment >> for a minute, i thought you were stepping -- didn't it sound like -- >> yeah. >> i'm running away from it -- unless you're a grecian formula guy, you're pretty young still what's on the horizon for kevin warsh? >> i'm old, i'm jaded. i did ten years on the financial crisis i want to hear this new cast of characters in washington talk

about things are great they didn't go through the scars that we went through >> did you ever run for office >> never >> i guess if called upon you, you would serve as some kind down the road? >> it took me a year to get over the rejection of the president this is part of my 12-step program to come here and talk openly about this, and you're trying to send me back into that >> one of those steps is making amends would you like to make any with us here? >> yeah, that's really important. becky, i'm sorry i haven't been on the show for so long. i didn't take your invitation. and i am even fine coming on show when joe is here. >> wow, that's big >> i remembered when you were going to come on that that i wasn't going to be here, remember that? >> yeah, when becky is the anchor of the show, i'm on >> i don't see -- i don't see

genders. i'm gender bias -- anyway -- we got a tease, but in terms of not spending 80% of what we spend is fixed. and i just wonder how do we handle that. it's easier said than done to try to stop the spending what do we got to do we got it do something, right, medicare, social security? >> presidential leader isthe key. this president now has a booming economy. he has accomplished a lot on tax and regulatory policy. and in the next two years, i think he and the congress, democrat or republican should take spending discipline seriously. >> all right kevin is our guest host. he's with us for the rest of the program. when we come back, we're going to talk about what the transport sector is telling about the state of the economy and the markets. first before we head to break, we're going to take a look at the biggest winners and losers on the dow taking a look at that. you're here on cnbc.

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right now it's time for "what's working" so let's talk about how th sector is performing joining us is don broughton. good to see you. >> good to see you >> we're getting to that place around the holidays where a lot of shipping is taking place. and strong consumer confidence

leads you to believe there's a whole lot of activity, is that what you're seeing? >> we're seeing that in the container andtrucking data, absolutely >> so, what shows up can you quantify it? >> absolutely, absolutely. you have to put the backdrop that 2015 for container flow was extraordinary strong 2018 has been lapping what were very tough comparisons so, we saw a little bit of preshipping. people worried about the possibility of tariffs and so, we saw an 8% kind of volumes going into the ports in the may and june time frame. we saw a little bit of a pullback in july and august, because they'd shimmed early, to try to beat potential tariffs. since then, it's been reaccelerating and if i look at the truck markets, i look at the sonar data coming out of the l.a. markets you see the holland

index has jump -- >> what is that index that you just cited >> sonar, it's produced by freightways. it's almost realtime marketplace data that's used buy freight brokers and shippers and inve investors throughout the u.s it's a fairly new product. but it's a realtime -- almost realtime proprietary market intelligence on how many trucks are being offered. and what the rates that are being paid in realtime throughout -- over 130 major metropolitan areas throughout the u.s. >>touched on it a little bit people are concerned what the tariffs mean the activity before that and the slowdown after that. you sound, though, you don't think it's a last be impact if the numbers pick up sharply in october and november is that fair >> exactly that is absolutely true. i mean, there's two points really there to be made. one is if, i don't get the rate,

let's say out of l.a. to dallas, just as a proxy, the rate there since march has gone from $1.40 a mile to $1.80 a mile we've seen a 30% improvement in that rate. that's an incremental demand that's one two, i like to dissect how we get to gdp despite all of the pull-forward potential of might be having tariffs, inventories actually came down the second quarter they came down so much they were a full one percentage point negative to the gdp calculation. that's despite the shipping early trend. so, if gdp would have been 5.1% instead of 4.1%, if we had not brought down inventories so much so, the end use economic demand is way stronger than most people understand it to be. >> don, sorry, we have to cut it short today. that is great information. we hope to talk to you again soon. >> always a pleasure

>> don broughton when we come back, we're going to hang out with our friend jim cramer at the new york stock exchange. right now, take a look at futures right now. we are in the red still. sd uup 82 points naaqp 42 points, s&p, 4 points back in a few moments. a business owner always goes beyond what people expect. that's why we built the nation's largest gig-speed network along with complete reliability. then went beyond. beyond clumsy dials-in's and pins. to one-touch conference calls. beyond traditional tv. to tv on any device. beyond low-res surveillance video. to crystal clear hd video monitoring from anywhere. ♪ ♪ gig-fueled apps that exceed expectations. comcast business. beyond fast.

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let's get down to the new york stock exchange. jim cramer joins us now. feeling beach ball like up until today. is this going to be sustainable, this weakness in the markets today? >> as rick santelli was saying, the numbers are unbelievable. your guest, best number since 1969. so you can go to 3.3 or 3.4. who is selling the bonds are the chinese selling the bonds? we have to figure out who is unloading. while the numbers are strong we don't have a lot of inflation other than amazon and oil. i'm looking to see whether

everybody -- sell pepsico down. people look at these and they sell. they are machines. >> any of the individual issues today that you have been delving through and trying to look at the nuance of >> you know these stocks better than anybody, this could be break through. we can really change the face of the way people live with this drug. i see when you have invention your stock can go higher. >> jim, we will be tuned in. we should say it is the best number since the summer of '69.

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october tends to be a strong month for stocks with the dow, s&p and nasdaq gaining 2% or better. welcome back. our guest host has been former fed governor. before you go, we have been talking about this cover story on business week around this chip and the issue with china trying to hack our own systems. we have also talked about the trade war and what they could do in the treasury market. how do you think the chinese wake up in the morning today and see this news story?

and how people in the white house see this news story? >> i suspect the chinese saw this news story some months ago and have been preparing for it. i hope the white house has been aware of it. my guess is that the fight has been about soybeans and airplanes. my sense is the vice president will be giving a speech on china this week and maybe today. i suspect it won't just be about trade but about a great power coming in increasing tension. it's us and it's them. i suspect this is a pretty tough time for people who say we will do a deal with them the way we did a deal with mexico. >> just that we had a congressman on who said he was frustrated by the administration and letting china off the hook where they could have really had him. we let him off on that and the expectation was we were more concerned about north korea and

security. we can talk about a cold war but in the broader scheme, are we able to cooperate on other fronts >> if we had the right discussion at the right level, defense department to defense department, president to president, there are areas where we should have opposing interests and common interests. my guess is that is a dialogue that is not yet fully formed, that there is too much tension in the relationship. when president xi comes to the united states i suspect next year for a summit with president trump that will be an opportunity for work meetings in advance to have the broader discussions. these are the discussions great power should be having. i'm afraid they have been at a lower level. >> people say if interest rates are going up for the right reasons the market doesn't have to come down. when things turn with interest rates, risk assets get

recalibrated. in your view, we are getting close to a point where you have to start taking that into account that rates are headed higher. >> if interest rates move in a quick fashion materially higher my judgment is that is not easy for risk assets to swallow. in the old days the real economy in the stock market would move together. we put a wedge in between those things on purpose because the economy was racing away from us. we interfered into these risk assets to try to get them to move up. that was ten years ago. my judgment is we should get out of that. higher interest rates is going to be hard for the broader stock market to handle. >> people are like let's get on for the ride. you are cautious at this point. >> are interest rates going to be set in the private markets or will they decide that they don't like the spike in yields and they want to interfere with that >> what is the one thing you are

looking for as the potential tipping point? is there any metric, statistic, number that you worry about? >> i wouldn't say that if interest rates go to four percent that is the number, but it is the pace of change rather than the absolute level that will matter. >> make sure you join us. more squawk on the street is next. welcome to squawk on the street. futures are under some pressure this morning on this backup in yields. ten year did hit a seven year high as investors wonder if this is the game changer. it has been a tough overnight in india. oil shot above 76 despite the biggest inventory build in a year and a half. road map will begin with rate shock. stock future