we'll bring you the update on the storm's path on this tuesday october 9th, 2018, "squawk box" begins right now ♪ live from new york where business never sleeps, this is "squawk box." good morning welcome to "squawk box" 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. yesterday a bit of a seesaw ride for the markets. the markets sold off early in the day. the dow climbed back to end in positive territory ended up by 39 points. the s&p down by one point. the nasdaq off by about 52 points >> i think i saw it down almost

200, then up 10. then back down a couple hundred. >> right >> it made a couple of moves >> all kinds of technical levels that the markets were touching things they were bouncing off lows a lot of things happening. dom shaking his head >> i watched it all happen >> the s&p closed at a one-month low. the nasdaq closed at a two-month low. >> the nasdaq got ugly what was the low on the nasdaq well over 100. >> it was like 112 something like that. >> battled back to manageable. >> just in time to look this morning at red arrows across the board. we'll watch this throughout the morning. overnight in asia, stocks there closing at their lowest levels in about 17 months the nikkei down by 1.32% and the dow down by about 85

points right now already seeing weakness across the board here, too. the biggest decliner is the dax, which is down by more than half of a percentage point. you can see stocks in italy off by a half percent. treasury yields, yesterday the bond market was closed you got a bit of respite from those ever-rising yields that we were watching through the week this morning the ten-year note is sitting at 3.246% 30-year at 3.428 and the five-year 3.073. >> hurricane michael has intensified. it's a category 1 storm right now but it is expected to build as it moves through the gulf of mexico evacuations are under way along the florida panhandle. michael could make landfall as a category 3 storm several oil rigs in the gulf of mexico have been evacuated as

that storm approaches. as you can imagine we're keeping an eye on oil. wti crude at 74.75 now, new this morning in corporate land, this will be fun for those who want to go to space, richard branson says virgin galactic is closer than you think to its first space trip here's what he told mnancy hungerford >> we should be in space within weeks, not months, and we'll be in space with myself in months not years. we'll be in space with people not long after that. >> branson predicted he'll be in space by april of this year. when he said if he had concerns about space travel, he said 8 out of 10 people would love to go to space, with the caveat if they could afford it. >> count me the two who wouldn't >> joe >> i think it's a generational thing. >> if i could afford t i'm

interested >> really? >> 100%. >> this is the greatest planet in the universe and beyond >> i'm not even going for the instagram. i'm going for the experience >> wow >> count me in >> you're not a nervous flyer? >> i am. >> you want to go to space. >> life experience touch the base, try something new. check the box. >> you're sure when push comes to shove -- >> you are so yolo >> that's it fomo yolo >> that's why i'm staying here >> he talks a good game about being yolo >> i went bungee jumping years ago out of wanting to yolo >> i jumped out of a hot air balloon and i would never do it again. dumbest thing i ever did >> i completely agree. >> you want to do something dumber >> dom would sky dive. >> no way. not doing it got to come together

not go apart >> you have to put your money where your mouth is. >> you're a nervous flyer but you're going to space. >> i'm ready to do it. >> i don't think there's first class cabin space. >> are there babies in first class? >> imax, space camera, here i am i'm in space that's good. doesn't look that much different than in imax >> would you ever do one of those planes that do this -- >> carl did that >> float a bit >> definitely vomit. >> would you do that >> i would do it i'm not dying to do it >> we'll do it we'll bring gopros, we can turn it into a -- >> instagram moment. >> tv segment. >> for people that are on instagram. stocks to watch, shares of pp gshg falling sharply.

the company warning both its third and fourth quarter results will be hurt by higher raw material costs as well as lower demand from china. ppg saying costs jumped the most in two years. don't know if that's tariffs, oil or what. >> china demand is down, and they make car paint, and things have been sitting around this a big concern for what we'll hear through the rest of earnings >> you know what ppg stands for? >> pittsburgh plate glass. >> yeah. google reportedly dropped its bid for a massive cloud competing contract from the pentagon bloomberg says the company is citing conflicts with its ai principles that ten-year deal could have been worth up to $10 billion google also shutting its google plus after the account information of 500,000 users wa

exposed. there is no information that the data was improperly misused or accessed >> oxymoron. >> i was thinking about that improperly misused i thought about it microsoft is investing in grab, that's the ride hailing firm based in southeast asia. the deal will allow them to work together on a project regarding ai and big data. microsoft has not disclosed the investment amount. grab said it plans to raise roughly $3 billion this year trian fund mangment agements considering a takeover of papa john's papa john's has been exploring a sale amid a bitter fight with john schnatter who was ousted as

chairman back in july. schnatter still remains on the board and has a 30% stake in the company. both sides have been in a public battle over who is responsible for a decline in sales nelson peltz wanted to discuss a deal with wendy's. it's unclear whether wendy's would buy papa john's or trian would buy and operate the chain separately if you check out papa john's shares, up by over 8%. that stock had been down 7.5% since schnatter resigned as chairman inflation expectations are on the rise. dom chu is here and has been reading the signals from the bond market. tell us about those signals coming to you. >> i need a receiver for space travel and everything else if you look at what's happening with the interest rate market, it's been the biggest driver of

what's happening you mentioned the multi-year highs for the ten-year and 30-year long bond. if you look at some of the reasons why some traders are feeling as though we're due for a pause, it's because on the extreme left-hand side of the screen is the last time we saw a rise like this in long-term rates, that was the beginning of february so if things play out again like they did, we should see a leveling out of that field one thing to look at as well as the 30-year treasury note, the long bond, it's reaching some levels that some traders or statisticians would call very rare they're trading two standard deviations it says this doesn't happen often. the speed and velocity of the move to the upside without a pause at least so that 30-year long bond is something to watch if you look at the ways it's been playing out in the stock market -- >> you saw without a pause in the bond yield moving or a pause in the stock market correlated to -- >> no. no this is straight up the bond

yield. this is the price action on the bond yield bond prices should fall or rather bond prices should go up and yields should fall back down towards what people call more average levels in this case we're looking at that magenta line as the 50-day average yield of the 30-year long bond. >> which one is magenta? >> the purple one. >> why didn't you say purple >> the blue line is above that upper boundary if that's the case, maybe we see a pullback >> i like magenta. >> sounds so much more sophisticated. if you look at the way it's playing out in the stock market. we've been seeing more action in places you would normally suspect sbreinterest rate sensitivity to be. even in this environment we saw a bid towards real estate, consumer staples yesterday over the course of the past week it's still been stable if things play out, hot spots in

the market that could see more action involve real estate related home construction, one of the etfs that tracks the home construction market, the ishares dow jones home construction, itb, has been on a downtrend for a bit. we saw a bit of short covering, it's been at an eight-day losing streak we were talking about technology yesterday. we did not see a lot of relative strength in the semiconductor chip stocks. you would suspect if we saw a bounce maybe they would catch a bid. they have been hurt bad over the past couple of weeks we did not see that play out becky, you wanted to talk about those support levels the s&p 500 yesterday was hovering around its 50-day moving average the russell 2000 small cap index around the 200-day moving average. that longer term traend linend e if you're talking about a

battleground for the stock market, it's here, because those technical levels are things traders are watching >> this could be a key inflection point >> it's something to watch as we view the price action around here >> stay here let's talk more about what's been happening with interest rates. >> a lot of people have already volunteered -- >> a go fufundme site? >> send andrew to space. how hard is it to start? >> you can start it now. i would appreciate that. >> so would a lot of other people >> 20 bux i'cks i'm in >> i would do it for a charity thing. would you up it for charity? >> would people pay you to go so you could turn the money over to charity? >> how much does it cost >> that's right. that doesn't really work that way. >> i will start just to get it going, 500

>> 500 >> so generous >> yeah. >> dom, you're in for 20 >> i'll put in 500 >> really? you like me that much. you got to understand what the rational is here >> no rational you said you want to go. i want to give you what you want dom is paying 20 bucks for this seat >> this could be weeks away according to branson didn't he say weeks? >> weeks to be up there. branson will go in a couple months i can go a couple months after that >> branson said he wouldn't go up first because he's nervous. >> this is not a roundtripper thing. >> oh. >> there's a catch >> no. no i'm kidding. >> unfortunately, so you know, virgin galactic, it's not like it lands on the moon, it gets up there -- >> i didn't think you were going to the moon. that's rare. i don't think we've done it that many times >> there's a movie coming out

about that >> you could be tenth man or something. >> universal picture >> all right how do you do this can you get us started on this >> gofundme? >> yes >> we'll work on it during the commercial break >> i have three or four different people who said -- >> these are people with money >> yeah. you tonight need individuals with money >> why can't they be both? >> i think logically they just can't. >> let's get back to the talk about the markets and what to do with all of this anders garcia myer is from zoey financial. keith parker is the head of u.s. equity strategy at ubs what dom touched on, the idea that housing prices have stagnated because of this pressure on interest rates you've seen the demand for cars come down. cars, you need a mortgage like you do for a house

are higher rates getting to the point where they will impact the economy and the stock market as a result what do you think? >> i think if you look at the most cyclical parts of the economy, which tend to be housing, car sales, we're no longer in the first or fifth inning, we are closer to sixth to ninth, it's very hard to know -- >> sixth to ninth in terms of what >> cyclical sectors by definition tend to overshoot in the way up and overshoot on the way down they have overshot on the way up but i don't know if we're in the sixth or ninth inning. i don't think where interest rates are now, that by itself as a variable will turn the economy different directions usually what it ends up being at the beginning is confidence. if you look at valuation, consumer confidence, we don't see turns from that perspective. >> keith, how about you? >> if you look historically, the level of interest rates, whether

it's the fed rate or the ten-year yield ahead of every recession has gone above the level of nominal growth. if we're sitting here 3.25 ten-year, we just printed nominal growth last quarter, that's over 6% we don't see that headwind on aggregate for the economy. you're seeing some softening, i would call it flat lining in home sales over a two-year period some thoof frof that from risin, some from lack of supply overall corporate spending, retail sales comping strong is at a disconnect from the weakening in home prices >> you would tell people to buy stocks here? >> i think so. we're transitioning mid to late cycle. mid cycle returns when the curve is flattening to 29% of peak historically >> you're talking about big gains you expect not just this year but into next year? >> we're still positive on the stock market given the fiscal stimulus that's helped i think to offset that negative from rising rates,

that's still filtering through the economy. >> one thing that's important to note is that if you look at interest rates, if we look even at the last 12 months, interest rates have gone up long-term interest rates, short-term interest rates, and the market has gone up if you look historically overwhelmingly the biggest driver for equities is the starting level of valuations where the level of interest rates are has had no statistical significance >> what changed the market's perspective on this is last week when the head said we're not at neutral rates, jay powell, and we will keep rising to neutral and beyond we're nowhere near that right now. >> yeah. again, in the short-term the volatility of the bond market, could it affect the equity market sure if you're thinking a year out, three years out, five years out, the expected returns that equities will give you, the level at which you're starting

for interest rates has not told you anything about forward returns. >> hearing from ppg, is that a ppg specific story, is this an industrial story or a broader concern for other companies? >> i think from our perspective we looked at pricing power and margin trends across industries. for the most part pricing powers is increasing for those industrial companies and materials did stand out as having greater margin pressures against a back drop of steep margin expectations ahead rising trade tensions so we remain underweight that sector >> we talked about brazil yesterday because of the election people again were talking about the difference between how stocks here perform versus emerging markets it's a huge gap. the idea was -- i think your ideal estimate was maybe now you still think emerging markets might be the place to go if rates are going to continue

to go up here, that doesn't seem to pore tend goteportend good t. the valuations are better there. they have underperformed the last two years, but is now the time to get in now i want safety and stability. >> so the biggest driver outside of just earnings when it comes to international stocks is the dollar i've done a lot of research to see what affects markets, interest rates are not the biggest driver when interest rates in the u.s. are starting from low levels and rising, historically emerging markets have done well where they don't do well is when you have a rising dollar a stronger dollar by far has been the biggest detractor if we're raising rates and nobody else is, that's a stronger dollar. >> absolutely. that's reflected in the dollar

the question is the dollar has been appreciating for the better part of seven years. it tends to go into the seven to eight-year cycles. so is it now time to say we have another seven years or is it likely the dollar rally is getting closer to an end from that perspective going back to joe's earlier question, i still believe from a relative valuation standpoint international markets look more appealing. that does not mean you don't own u.s., but it means that the reversion to the mean when it comes to valuation makes em more appealing than u.s. equities >> okay. gentlemen, thank you both for being here dom, thank you, too. >> this is not true, is it it's #sendandrewtospace. is it already in the $3,000 level? >> is someone up to 3,000? thank you. thank you so much. >> how do you find it? does someone need to -- >> someone needs to set up the page >> you can't d

do #sendandrewtospace. >> you can write it off. >> i can write it off? >> say you're up there studying climate change if you're looking down, seeing storms -- >> you want to come with me? >> when you were thinking about that i think about the normal things i'm afraid to do. >> like roller coasters? >> i'm not going on those anymore. no way i used to all the time haven't you seen all the stuff that happens wheels falling off how about walking down, someone comes up to get you, you walk down the thing from those heights. >> you get stuck at top. >> yeah. yeah >> no. i'm not doing that a lot of things i'm not going to do >> all right coming up -- >> bungee. >> including reading the tease >> i'll do that. if you want to work in the tv business, you might consider moving to new mexico netflix is planning a major expansion there. >> you'll have a goodfundmesite

to move me there >> yeah. >> as we head to break, a look at biggest premarket winners and losers in the dow. what do advisors look for in an etf? don't just track an index, help me meet a client's need. is the fund built to sell or built to last? etfs are only part of a portfolio. so make it easy to explain. give me a quality fund that helps me get clients closer to their goals.

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>> sounded like it >> there always is >> typically kanye west headed to the white house. you looking at me over here or over there we can look at donald trump and kanye together the rapper will meet with president trump and jared kushner on thursday. the paper says kanye wants to discuss job opportunities for former convicts and manufacturing jobs in chicago. kanye is a spoert of tupporter president. on saturday after "saturday night live" he gave a speech in support of the president that was cheered by some and jeered by others. anthony weiner -- >> you were waiting for that. >> may be coming home early. anthony weiner may be released from prison early for good behavior he's serving a 21-month sentence

at the federal medical center in new york he has been described as a model impact prison records show him scheduled for release next may instead of the initially planned date of august >> will there be another ante weiner comeback? >> there's been several. >> it won't be documented. >> i don't think he can. >> some of those -- actual details are -- >> vile. >> with a kid. >> it's terrible but he's -- not that he's managed, he tries. >> how many strikes and you're out? >> three usually coming up, earnings season kicking off it happens on friday we have reports from three of the world's biggest banks. we'll tell you what to expect. as we head to break, a look at yesterday's s&p 500 winners and losers

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welcome back you're watching "squawk box" live from the nasdaq market site in times square. good morning among the stories front and

center, the imf slushi islashins global growth forecast saying trade tensions between the u.s. and trade partners is hurting economic activity. global growth is at 3.7% this year, down 0.2% from previous years. and david rubenstein weighing in on president trump's trade policy with china. speaking in singapore he said that the trade dispute will be more of a skirmish not a war if that sounds familiar it's because jamie dimon used the same term in an interview last month. rubenstein said he expects a resolution similar to what happened with nafta, a back and forth that led to an agreement he said both china and the u.s. want a deal. mike pompeo called on the government of saudi arabia to support the investigation of a missing saudi journalist

the prominent newspaper editor went missing we've talked to hi ed ted aboutt been heard of since entering the saudi consulate to receive marriage paperwork he is believed to have been killed inside the saudi consulate in istanbul with groups saying there were saudis flown in, 15 of them, and flown out. mbs was asked about this, and he said he believed that report was not correct. we'll track this u.s. equity futures at this hour, dow off about 78 points. nasdaq off about 16 points s&p 500 off about 8 points. the earnings season will kick off this week the first reports from big banks always hit us hard at the beginning. you know, kind of all relaxed, then the most complicated financials come out.

here to maybe help us with a preview is robert albertson, chief strategist at sailor-o'neil. can we talk about the behavior of the equity markets in the last week given what seemed to be an eventuality for all of us that rates would eventually go up so i don't know why it was a surprise >> eventually is here. >> is it something to be concerned with >> it is the first thing i want to see is probably a correction coming in the market in the vicinity of 8% >> the stock market. >> the stock market in general.e go up. we have 400 on the ten-year, about an 8% retraction so i start from there when i look for things to invest in >> okay. even though -- so the valuation, the headwind of valuation for

bank stocks outweighs the yield curve possibly >> i think what you've seen since may is enough retraction in the bank index that you could conclude they're already discounting something of a recession coming lot of worries about deposit costs what people are missing, and where i think you get the second leg is twofold. you will get probably a longer runway in the economy. i think larry kudlow is somewhat right here that tax act is still working its way through, particularly on the business spending side that will drive lending. lending is the key when you look at banks, you look at what will start reporting this week and early next, the big complex ones, you're looking in the wrong place on lone growth total lone growan growth. you go to local lenders, it's more like 10%. >> it's happening from the ground >> it's shifted to those big lenders, the large banks have higher capital requirements,

they would rather do fee income. >> is that because the people borrowing money are further down the line are we talking about smaller businesses that are starting to get in and they would be more likely to go to a local bank >> more the latter, but in reality there's a shift in terms of capital allocation which makes large banks stay awas from lending if they can do it other ways number two, they have a much greater fight on their hands with long bank lenders in the consumer area. if you want to see things that can beat that 8% hurdle over retraction in value, you want to focus on banks with 100 billion in assets and down sort through who has the most commercial versus consumer, put a portfolio together and you beat in the only in relative but in absolute terms s&p. >> the late cycle sort of behavior that you're speaking

about, is it a fact other not that expansion doesn't die of old age? >> i love the phrase it's absolutely true >> is it >> yeah. what do you see inflation-wise that actually brings about, i don't know, the fed going up too quickly, too fast, and actually causing a recession? what on the horizon indicates we're headed for recession >> we're overdue for the -- >> there you go again with overdue. >> people think it's always every eight years. >> you just said they don't die -- is it true they don't die of old age >> something else happens. when you look back at the last five recessions, the something else is usually external to the cycle. >> not inflation >> not inflation what will happen this time everyone has a guess i will make a guess the impact of much higher rates >> but that's from inflation, it seems like >> not from inflation necessarily.

simply that we're so far from normal, you can parse jay powell's comments. we know they'll not stop at 3% so there's something else coming down the road. that would be my guess but i don't see it for another year or two. >> if inflation stays low it will be a good -- that will be a good place to invest your money. >> would be hard to see inflation stay that low. i think it gets -- >> wages finally start coming in to the overall picture of inflation, which would be sort of good. >> it started in 2014. it was a small growth, i understand that. but you got job growth at 1.6% year over year you have labor force growth at barely 1%. you got to have more wage inflation. >> all right robert, you typically -- over at sandler, if you come -- jimmy dunn watches you and you start predicting equity market corrections in the overall market, does he say what the

hell are you doing >> i'll find out in a few hours. >> you're allowed to make any calls you want to make >> i'm trying to figure out how the banks fit in with the local market i think we have to go through this valuation change in the s&p to reflect rates how much and how fast we don't know yet that's the thing to keep in mind >> it's a theme that we're -- since wednesday, the market has acted differently. someone gave me some figures because we were talking about it earlier. the dow at one point yesterday was down -- let me see did he send it to you, becky this was one of our guys dow down 224 at the lows nasdaq got as low as 134 yesterday. those are big comebacks but headed back down today, which makes sense. you never -- the volatility is increasing, which there was none for about a couple of months or so robert albertson, thanks up next, a new read on the health of small business in

america. then we'll talk venture capital with an investor who backed companies that were later bought by twitter or google in the case of nest ben narasin will tell us what he's backing next. in the next hour, linkedin's founder reid hoffman will join us and talk about regulation, jobs in america and his new book stay tuned, you're watching "squawk box" on cnbc something is transforming and our world..

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welcome back time for the executive edge. today we get a new read on small business optimism. kate rogers joins us >> the nfib is out with its monthly read on optimism showing a dip of 1.2 bringing the index back beloet aw the all-time hig. this is a look at opt mihm fimi the full-year. the group noted the biggest grops were in the hard components of the index including plans to increase

intoi inventories and plans to increase growth. the biggest gains this month were in those who were expecting higher real sales, current inventory and expected credit conditions la labor quality remains a stubborn issue for business, in the number one spot this month as the biggest issue followed by taxes and government red tape and regulations this has been the case for most of 2018. doesn't seem to be improving but also is not impacting optimism or holding back the positive sentiment that these small businesses continue to have >> if quality of labor is the number one concern, do they ask them or do they say what they plan to do about it? do they pay more >> that's a great question plans to increase compensation and people who are already reporting that they've increased compensation are at or near record highs that's one good-bye product of the tight labor market >> meaning you will get paid more to stay so you don't quit

and find another job >> if you can't find people to fill these roles, you want to pay them more so they stay on your team. >> thank you coming up, an investor with a track record of success. ben narasin will join us and he'll tell us what he's backing next after the break right now a look at what's happening in european markets. at&t provides edge-to-edge intelligence, covering virtually every part of your retail business. so that if your customer needs shoes, & he's got wide feet. & with edge-to-edge intelligence you've got near real time inventory updates.

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welcome back to "squawk box. in a booming startup environment our next guest says the players in the recent chventure capitalr changing but dollars are increasing what is going on in the vc world

and just this idea -- i think really led by masa son and softbank that is pushing valuations higher and just the size of funds much higher. there was a report literally two days ago that the saudis are going to give another $45 are go give another $45 billion to masa-son what does that do to your business >> i've been in various parts of this and what i've noticed is there's a never-ending march upward upward in terms of size around and amount of dollars deployed so certainly masa is doing quite a bit. he's built a pretty impressive team we've seen them from time to time they've looked at multiple companies of mine. you've got a lot of players. sequoia came out and said the reason they did that was they didn't want their entrepreneurs to feel pressured from large

groups that felt threatened to give it to biggest competitors when you go earliest stage, you have to be able to make decisions. >> we were just talking off camera when i first met you was the late 1990s that was clearly a bubble. i don't know if it was a bubble to everybody but in retrospect but does this fell like now? >> this doesn't feel anything like that at all remember sort of '98 there were half the public companies that there are today. the companies public today are significantly larger we've seen two companies pass the trillion-dollar valuation mark everybody's hooked on growth you know, public markets are paying 4.5 times earnings. right now venture has to pay more, we have to get ahead there's not a discount for buying private there's a premium. >> there's a premium to buy private. that's interesting

>> if they were to trillion, no earnings might be different. back then they were at $600 billion. but they didn't have any underlying earnings. and then in the last year, you know about the ipos. highest ever level have lost money in the last year 84% are money losers and they all have done well that's not anything like what we saw? we're not in the seventh inning of something like that >> well, i don't know what inning we're in. i would argue this we're unlikely to see a bursting of the bubble. we may see a deflating of inflation. >> isn't the new capital -- i mean, look isn't there an argument that size actually is the enemy of good returns >> in a lot of cases that can be true i'm not going to argue that at all. i think that, you know, you look at -- so there are funds that have multiple funds doing lots of different things. right? nea has a large fund, but it's to do all the things we do

we do tech investing, med tech investing. that requires ipo level investment >> i think of it in the broader context of the markets there's been so much liquidity, we're talking about how interest rates are starting to rise up and the impacts that's having all over the place what effect does that have in the vc world will there be less money sloshing around and will that ultimately be a good thing >> that's a good question. haven't talked it through any depth yet. as a saver i'm super excited to have my cash make me something versus 90 basis points i think when you have different -- as bond yields or anything else increase, then capital that would have taken risk, all of a sudden the money comes out of one market, it flushes into another but we're long-term investors. you know, an investment you make earlier or later it's a seven to ten year journey. if you get too obsessed with

near term economics -- >> maybe it's a good thing there's less money flowing in from other places. >> that's fair this is also sort of the culmination of something that started about five years ago when you saw the large mutual funds coming in for the first time they bought the last round before the ipo if you look at the data, they did nominally well then everybody caught onto it. >> you're talking about blackrock -- >> all the way to fidelity their returns were quite good. that in many ways allowed other people to see, wait a minute there's a trade here of value. it's not about the trade itself. >> it goes earlier and early down the -- >> and that pushes everybody else back. there are companies that used to be growth stage only that i remember one of my portfolio companies before i joined nea had a classic growth stage investor the founder once told me all i need is for you to get to $25 million of revenue and we can

bid. he's bidding on a company with $10 million of revenue and losses >> separate question you've invested in all sorts of different businesses there's not, like, a classic sector that you spend your time in but right now what's the most exciting thing that people aren't paying attention to >> i doubt there's anything left that people aren't paying attention to my world is pretty simple. i want entrepreneurs to make me say wow. they usually do that by showing me something i haven't thought of before. >> what's the thing you've seen in your portfolio or not that made you say wow recently? >> there's three companies in this portfolio i'm madly in love with there's branch metrics it's sort of the html of mobile. think of how deep linking created google where you can get everything now do that for mobile today all you can do is look at the app store and find a site and it's simplistic and stupid transfix

it's in the city you've reported on already there's a massive limit on how much we can move around this country because we don't have enough drivers everything on the planet other than babies is delivered by truck. then enigma. does big things with big data. >> thank you thank you for coming in. we'll have to do this more often. >> there's nothing else coming we've thought that for years >> exactly that's going all the way back to -- >> yeah. they shut it down in 1860. okay i feel like i'm pretty up to -- you know, social media's big i got that right >> pretty quick. >> that finally goes down because it's like the end of the world. i think that's why we're in this mess >> it's fascinating when facebook got so much grief and nobody left it then a quarter later -- >> all right coming up, our discussion about rising interest rates just getting started. we'll be back. obvious.

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rising rates stocks look to open lower this morning as treasury yields hit multi-year highs what investors, consumers, and companies need to know straight ahead. a "squawk box" news maker. reed hoffman will join us life his new book is a must read for the c-suite. how to build a massively valuable company plus unveiling our upstart 100 list an exclusive group of fast-growing new ventures. the ceo of one direct to consumer bra company called third love will join us as the second hour of "squawk box" begins right now ♪

live from the beating heart of business, new york, this is "squawk box. good morning welcome back to "squawk box" here on cnbc i'm andrew ross sorkin headed to space. that's what this is about. becky quick and joe kernen with me as well we have a gofundme page. we have it yet we're working on it. richard branson telling people space travel not months away but weeks away we'll see about that >> you're with your fomo >> your what is it yolo and fomo. >> it's merging and we're going to make it happen for you. >> thank you i'm looking forward to that. >> gofundme, i don't know. people just send money they got too much money or something. this is going to take off.

okay take a look at u.s. equity futures because they might be down people are selling their stocks to pay for my gofundme page. dow off about 42 points right now. nasdaq off 9.5 points. s&p 500 off about five points. i think that's a fair trade, by the way. giving the selloff to pay for my trip treasury yields right now, let's show you what's going on on the 10-year and the 30-year note at the same time. 3.25% on the 10-year if you want to do a 30-year fixed, 3.432%. i don't know if that's a good deal or not right now. let's get to some of your other top stories. the imf cutting its growth forecast just slightly 3.7% that's the number. among the reasons, the organize citing trade tensions between the u.s. and other nations keeping the u.s. growth expectations steady. that number at 2.9%. not everyone, though, we say

agrees with that call. mohamed el-erian saying growth better than the forecast he says there's nothing on the domestic front that could knock it into recession. that's some good news if you want to go with him there. on the topic of trade and economic growth, private equity billionaire david rubenstein agreeing with jamie dimon. telling cnbc earlier today that the trade dispute will be more of a skirmish, not a war rubenstein expects a resolution similar to what happened with nafta saying both china and the united states want a deal. that would be the rational thing to do. the question is where politics land in all of that. in corporate news this morning, google dropping its bid for a contract from the pentagon citing conflicts with its ai principles the ten-year contract could be worth up to $10 billion. separately google is shutting down its google plus social

network. a bug in the developer platform exposed the account information of 500,000 users google said it found no evidence that it had been misused but this is going to be a big question in washington obviously they didn't release that news earlier. and then ppg warning that its quarterly results will be hurt by higher raw material costs and lower demand in china. the company says that it has experienced me higher level of cost increases in two years and that stock is now down by 9.2% another hurricane we're tracking this one is michael. it's a category 1 but it's expected to build as it moves through the gulf of mexico and evacuations are underway along the florida panhandle. forecasters say that michael could make landfall as a category 3 storm as early as tomorrow several oil rigs in the gulf of mexico have already been evacuated as the storm is

approaching. and oil prices as you can see, wti up to almost $75 a share michael. it's called michael. >> from one michael to another >> i was always hoping it's a common enough name, it doesn't really stick in the memory as a hurricane hopefully. >> it's kind of a back story of the -- >> i want to get back to today's top market story slumping as treasury yields hit multi-year highs if rates are rising for the right reason, shouldn't that be a positive for stocks? santoli is here with more. >> makes the peace with the new yields the yield was at about 1.7%. now it's at 3.25% market up more than 30% if the conditions are right, the stocks can do fine in this

environment. and right now, it is real yields going up for the most part it's not just expectations rising that's kind of good. that does relate to growth rates in the u.s i do think, though, that you can't get away from the fact it does pressure stock valuations at some point. it raises the costs of corporate credit it obviously knocks some companies out of the financing box. that's why i think on a sector basis, there's a lot of give and take here. what are some of the wrong reasons it could be going up if there's a perception it's a supply/demand issue. or if because of foreign exchange is very expensive to hedge out dollar risk right now. so global investors are less able to just buy treasuries and capture that yield spread. that's all mechanical kind of capital markets noise. and it doesn't necessarily compensate you for the fact that the cost of money is going up. so we've had this in the past. when we crossed above 3%, the stock market took the opportunity to back off. after fed meetings, the stock market backs off

there's kind of no way to get away from the fact that as rates go up, it does put one element of pressure on stock valuations. >> i think it's that there's a feeling we're underestimating wage pressure. >> it's anticipating more inflation. >> it's so tight people are saying the workforce is still -- participation rate is low, all that we can get more workers from there. there's more and more industries >> small business optimism what you heard from kate rogers earlier is the number one concern is still the quality of the labor. >> there's a sensitivity to the idea that into 2019 is at least a risk that the economy decelerates. whether it's true or not, that's what the market is kind of watchful of right now. and i think the idea is now we're at 3.25% on the 10-year. housing market has slowed down are we going to be slowing into this situation >> you know, we're going to talk to our guests now.

one of them brings up the point good news is bad news again. if the we go to where it just moderates a little, wouldn't that be -- that would be goldilocks again. >> you could moderate, have the fed change its tune slightly and it's kind of backwards >> let's bring in the aforementioned -- thanks, michael. sarat sethi is a cnbc contributor. i was sort of channelling you, sar sarat. common sensewise, reading what you view is really the situation right now, we shouldn't be surprised. rates have gone up that causes people to recalibrate. so initially there's some churning around as the environment has changed. but then when that works itself out, you come back to what's the best relative value and you probably arrive at stocks again. >> we talked about it before

3.25% is still not really a high rate you get these algorithms that move into stocks and bonds and cash temporarily when you see things like reits go up, the market is signaling maybe this is a slowdown but in our view, it's more of a reset. if you look at real growth, look at consumer confidence, business confidence, all this to us is leading to a better if not good economy which should let the financials, cyclicals, other stocks and sectors do well plus you got earnings season coming higher input costs >> ppg -- >> and delphi last week. that's going to give people a bit of pause hey, do we have another alternative here we're not just at zero interest rates. down the road, that's more positive than negative >> good news is bad news, those were your comments we're back in that environment but you point out historically rising rates aren't necessarily

bad for equities that can actually be good but then if it is good, small beats large. value beats growth cyclicals beat defensives and commodities and real estate out-perform. those are all things you're predicting now these will be features of the future >> i think they'll be features of the next leg of this bull market what we can't avoid here is higher rates there's a lot of arguments out there that say treasury yields can't go higher because of whether it's aging baby boomers or because you've got all this sovereign debt outside the u.s it's going to put a cap on the 10-year treasury yield i don't think that's the case. i think we're in the early stages of a secular market in bonds. we could see the treasury yield at 3 357.5% to 4% over the next months easily. what outperforms in a market where you do get secularly higher rates

if you go back to the '60s and '70s with that pressure, it was assets that could either grow faster like small cap over large. or it was segments of the market that had pricing power like cyclicals over defensive investors continue to allocate as if we're in this environment of limited qe and lower rates. but i think what they have to wake up to is we've got real inflationary pressure that's out there. wages is the epicenter of that >> joe, nobody else is really thinking that at this point. if you look at the russell 2000, it's attempting to fall below that why is nobody else seeing this >> if you look at, you know, the bond market in june of 2016 the 10-year treasury hit its all-time high price. 1.35%. so all-time low yield. since then it's gone from 1.35% to 3.25%

investors have pull -- put over $600 billion into fixed income investors are looking at this environment thinking stocks are bad and bond yields are going to start to go back down. so i think it's investors have this recent buy and they're not willing to acknowledge that these are the conditions in which to be bullish. >> there were people that have told me that you buy stocks because you get a dividend and over time you look at what show year over year so if you -- the dividend environment really hasn't totally changed from where it was 10, 15 years ago you're still 2.5% -- >> 2%. but it's very close. >> but it's not that different so 3%, 3.25% or a 10-year is up. stocks are still more attractive than fixed income.

>> but it's that many more years before you get the equivalent in yield. >> but it's not like 7% on the 10-year -- >> no. it's not a big difference. i think we've got a market that got valued based on the premise of parity of dividend yields and bond yields. you talk about people selling out of stocks. let's say two years agoyou had a 60% stocks, 40% bonds portfolio. given what the market has done, stock value goes up. you're at 68, stocks 32 right now. what does the allocation tell you to do? rebalance out of stocks. >> but i think the inflationary expectations are so low to your point that people don't want to invest in stocks knowing rates may stay this low. if inflation is going up which i think it is going up, you want to be in stocks and pricing power. >> otherwise you lose your money, it gets dwindled away >> you're actually losing money by holding bonds and then what happens? you look at your bond portfolio and say not only am i losing

money, i'm not getting anything in return. i think you get selling all that as well. >> sarat and joe, mike santoli, thank you. when we come back, linkedin's cofounder reed hoffman joins us we'll talk about his new book. stick around we'll be right back.

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x1 help. another reason to love x1. say "teach me more" into your voice remote to get started. oh welcome back are we live? we are welcome to "squawk box." futures right now are weak and they've been starting mornings like this in this rate environment where there's some trepidation. down about 82 on the dow down 22 on the nasdaq which has been or a relative basis after being much stronger than the averages for months and being up almost 50% since the election, lately it's been much weaker our next gst uest is reed hoffman. cofounder of linkedin and author of the new book "blitzscaling.

so much to talk to you about what it takes to start a big company and make it work let me ask you this. to say you need to move fast and break things that's what it takes to blitzscale and yet you look at yes there's success on one end we're having a larger conversation about society and politics and all of it and whether ultimately because of, perhaps, that approach, it creates the need for regulation. >> well, so i think there might be a need for regulation but i think you first have to figure out what it is we're actually targeting and you want to make sure what you're doing is building for the future, not trying to enshrine the past and so that zuckerberg quote is a good encapsulating of it

move fast with stable infrastructure which is what the value shifted to both of which are scaling speed and innovation, but it is changing how you take risks. >> historically has been an unregulated wild west in the best sense of the word is the danger that because, perhaps, if some of the behavior or incidents that there will be regulation and it won't just apply to the big guys, it'll apply to everybody >> well, there's a lot of different challenges to bad regulation it can be something that is more handed to the rest of the world. you could restrict start-ups versus existing companies. there's all these risks that are really serious >> but are those risks being tempted by the behavior you're talking about in the book? >> well, to some degree, yes

just because what happens is you get big fast, taken sop risks. with risks there'll be some falls. to say understand that when you're small and as long as you're not taking big risks with customers, you can take broader range with customers as you get bigger, try to contain those risks and make sure there aren't things that are particularly bad so i think it's a risk factor but it's not just a risk factor of the companies it's a risk factor to all of us with the tech industry for the future >> you spend your time trying to find great entrepreneurs you have found a number of them along the way. when you look at the traits of the most shoot the moon style entrepreneurs, i'm thinking of elon musk. is there something about them that lends themselves to not just being visionaries but people who by default need to break the rules? >> well, i don't actually look

at it as breaking the rules. i look at it as trying to redefine the rules opposed to saying, hey, let's have decades of committee process trying to argue a different rule let's try to demonstrate how if you change the rules, the world would be a better place. now, you still have to be controlled about which risks you're taking, what damage to society may do i don't look at it as rule breaking i look at it as a proposal for rule changing. >> but i can think of instances where you're thinking of that. with airbnb challenging state industries, with elon musk coming up with brand new ways of thinking of things but there's the other side of that too i know you know elon well from your days at paypal. what he's run into lately has been unforced err ro foors all r the place. >> it's classic for people trying to say we're going to create something from nothing. we're going to create this big thing that hasn't been done before so i will learn, oops, that risk

we shouldn't take. i think we're in a process of seeing elon and other folks, oh yeah we shouldn't do that kind of tweet that's not instructive >> i thought he learned that until he tweeted last week about the short sellers. >> what do you think is going on with him >> so, i think what he's focused on is saying i'm trying to build something. three, five, ten years in the future i don't want to be kind of like, oh, well what does this month look like or this quarter look like so he's interpreting it that way. part of his grit and determination to get to that long future is to push back against these obstacles. i just think it needs to be a different pattern than those tweets >> changing gears completely to politics because andrew and i are here together every day. i loved reading about your discussions with peter thiel which i thought was classic. i immediately thought because you're saying president trump lies and then peter thiel says well, obama lied and he lied about these things >> you could host the show with peter here every morning.

>> but did you see the debate back here where cuomo was with cynthia nixon? he said to her -- she said to him you got to stop lying. and he said back to her, i'll stop lying when you do is that not the greatest answer for a debate anyway, this is the same kind of discussions that we have here. you're still friends with peter, right? >> very much >> see and we're friends too. >> it's a microcosm of -- >> but do you think there's an issue about political leanings in the valley? and do you think that that is going to ultimately harm the industry >> so i think there are political leanings in any industry, any region so it's not like everything is a perfect microcosm. so i think the valley has this -- we want to build and construct the future that being said, look. just as i have a political leaning doesn't mean i reject

counter points of view we argue and we learn from each other all the time and so i think that the fact that the valley has this kind of future oriented slant, like for example, very pro-let's do something about climate. and people are like, that's political. no, that's scientific. >> let me ask you a separate question then. >> wait a minute i'm not going to talk about that, but social issues i can see that but in terms of entrepreneurship and small government and letting risk takers have more of their money, that all seems like conservative values which is what made silicon valley so successful all the entrepreneurialship. it's getting bogged down in social issues. there's two ways to be a conservative you could be a social conservative or a free market private marker, earn success >> this is the thing silicon valley is a whole bunch of how do we invent the future through capitalism

>> right it shouldn't be 99% liberals out there. >> there should be libtariertar. >> and conservatives can be socially liberal >> yes >> historically the valley grew up supporting the u.s. military. in fact, the valley grew out of supporting the u.s. military think of hewlett-packard and so many others. google just yesterday announced they were no longer going to be bidding on this pentagon contract because they decided it was against their morals and ethics and so -- and part of it, i think, stems from perhaps the political issues in washington right now. does it mean to be a patriotic company in america today when you hear so many of these companies think of themselves as nation states unto themselves? >> so i think the impulse within silicon valley is a good one say we prefer to be building a peaceful, prosperous future. and we have an instinct against weapons and those kinds of

conflicts. and so i value the instinct. now, i think it's important to say we're embedded in this country and have a responsibility to this country it's not just the privileges of being here but we have responsibilities i think it's important to reflect those responsibilities so i myself am on the department of defense innovation board with other folks who i think that that -- >> but i know there are people in the industry who probably tell you or think you shouldn't be doing that. >> look, there's always some of those folks. i think the important thing is to realize we have responsibilities as citizens >> reid, let's talk about linkedin you built linkedin and it's a network where people share their private information. linkedin is a little different than facebook and the others who have come under attack in being able to protect it. hearing what happened with facebook earlier this year and now just hearing about the google plus 500,000 people who potentially could have lost their information although google says it hasn't found any

instances of developers misusing that, it gets me back to what level should there be in terms of a law that says when companies have to fess up and say this happened or this didn't happen or just that faith that you have with consumers and not. because i think that that faith is what's being tested >> generally speaking, i'm very positive on there must be transparency if something happened, you got to tell consumers. that's one of the ways you're accountable and saying we're protecting your data i think that's actually extremely important. >> did google screw up in this instance >> i think broadly i don't know the specifics on this thing, but i think the general thing is when you find something, you should report it. you may kind of take a few days to make sure you got the facts straight and other kinds of things, but you should make sure your consumers know that they can rely upon you to tell the truth. >> venture capital question. all of these funds are getting

upsized. we're now getting to supersized. masa son at the supersize. every time there's been a vintage year where there's been these huge funds, it has not worked out well. what do you think is about to happen here? >> so i -- i don't know. i think we're all in this kind of new universe. but i do think one of the things that's happening that's good news for us is entrepreneurship is spreading not just within the valley but the rest of the world. and it isn't just entrepreneurship when small. that's our biggest and most focused hope on the future so a lot of capital devoted to creating new businesses is i think a good thing >> i'm imagining most of the investments you're still making and companies are looking at valley companies do you think that we're going to see the next google or the next

linkedin or facebook coming out of china or india or europe which hasn't had any success in that realm >> so i'm something of a tech kno n optimist i think all of that will be coming from anywhere >> you think there are certain areas that allow it to happen. one of the reasons it hasn't happened in europe a function of regulation >> no, no. much easier in silicon valley. much easier in china one of the things you have to worry about is versus the future if you're overly focused on regulation, keep it the way it is versus the big things >> tell us before you go, what's the coolest new thing you've seen, heard of, or know about that we don't? >> well, that you don't is actually challenging you guys are smart and informed. essentially more laws going to space. with the cheaper launches, you

get a next generation of compute sensors and everything else that will have almost a internet-like platform on what's going on in space. >> there you go. you can get there faster and cheaper. >> check them off personally >> do you think we'll all be in space during our lifetime? >> some of us will be. >> i'm not >> you're not going? >> i'd like to be the 10,000th person not the first. >> the singularity, i don't think it's happening for me. i want to download myself and live forever that may not happen by 2045. i'm counting on it >> i think to download yourself, a little unclear what that is. >> i want hardware for my software so that my neurons don't atrophy and die. i want -- >> but if the hardware showed up and said i'm you downloaded and you're there talking -- >> i've got to transfer my soul over six ounces, whatever that is >> six grams >> so i'm going to keep praying, i guess. just in case if i'm not going to -- better

not -- >> cover all your bases. >> yeah. >> okay. reid hoffman the book is "blitzscaling. it's out today go out and get it. we appreciate it >> thank you coming up when we return, fly me to space. been talking about it all morning. why sir richard branson says he is now confident this could happen in a matter of weeks, not months, not years. but weeks. take a look at the yield at this hour "squawk box" returns

good morning, everybody. welcome back to "squawk box" here on cnbc we are live in times square. among the stories we're talking about this morning, papa john's shares are rising on a report that activist investor is interested in buying the pizza chain. trian already owns a portion of wendy's. mic microsoft is looking to work with grab. and hurricane michael has intensified. right now it's a category 1 storm. but it is expected to build as it moves to the gulf of mexico because there's so much water

there. evacuations are under way at the florida han handle at this point several oil rigs in the gulf of mexico has been evacuated as that storm approaches. right now wti up to $74.74 fly me to the moon british billionaire sir richard branson saying virgin galactic will be in space in weeks not months it's been locked in with bezos' blue origin to get the first paid customers into space. here's part of his interview this morning >> i have a room full of ten people eight out of ten people would love to go to space if they could afford it. of those people who could afford it, again, it's eight out of ten would love to go to space. i think the market for people would love to become astronauts to go to space is gigantic i think it's up to us to produce

as many spaceships as we can to cater to that demand and of course we've got virgin orbit which is going to be putting satellites into space. that should go into space either december or january. and the demand for putting small satellites into space is a gigantic one there's nearly 4.5 million people not connected we're hoping that will do good as well. >> how much is it today and what will it look like ten years from now? will the costs come down significantly? >> initially the costs will go up it was 250 we're trying to work out what price to put it at that will then stay up i think for three or four years. then it will start going down again. ultimately we will be talking ten years time, maybe $30,000 to

put somebody in space. that compared with what it would cost for a -- >> perhaps that's why we see so many billionaires chasing this business pursuit of course you're not the only one. jeff bezos, i understand, is going neck and neck with you to get that first commercial space flight who's going to win >> we'll see i don't think either of us -- the safety is obviously a number one prieft -- priority. i think in reality, both of us are going to do extremely well out of it. the amount of people that want to go to space is enormous we're not going to be able to build enough spaceships to satisfy demand >> okay, for more on that conversation check it out on

cnbc.com 250 grand. >> that's a lot. >> that's reasonable >> we could do it with gofundme. >> he's kicking in some. he could pay the whole thing. >> we wouldn't have to mess with all of this stuff. in "squawk" sports news, did you see this new orleans saints they really sort of took care of the redskins in short order. drew brees broke the nfl's record for career passing yards. it was on monday night football. he eclipsed brett favre and payton manning the game ball headed directly to the nhl hall of fame and the saints beat the redskins 43-19 drew is -- you've seen him out -- we've run into him out at the tournament at the at&t nicest guy i was just struck with we're the same size, basically >> and here you are. >> the difference between someone that has talent and

athleticism. it's not i'm not big enough. it's just i don't have any talent really. but he's 6'. russell wilson is 5'11." sam darnold comes and you want a 6'5" quarterback >> how do you get over -- >> that's what i mean. but you're taller, actually. but that was quite a game last night. i was thinking the redskins were going to do better i'm not -- i don't care. i'm not jumping back on the bungals. >> that's why they're doing well stay off the bandwagon >> that's exactly why. when we come back, what the markets might be telling us tha the fed may be doing first as we head to a break, take a look at u.s. equity futures at this hour we are in the red. nasdaq off 28 points and the s&p 500 off about 11 you're watching "squawk" on cnbc

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a packed roster of fed officials speaking today the fed considers another rate hike this year. it's at the hutchings center, isn't it the name for glenn hutchins. the philanthropist i can't say it enough, i don't think for him. everything we've seen should not be that earth shattering for us. we knew eventually this was going to happen.

we knew that people will recalibrate asset allocations based on a move in interest rates. we can talk about it as planned. than to try and explain before they go up why they didn't. >> why did they go snup. >> i think there's a widespread belief that the u.s. economy is doing pretty well. the fed is on track to raise interest rates in december three, maybe four times next year and i think also as the fed is beginning to pull back from quantitative easing, we're seeing the return to more normal term premium the extra yield that people hold demand for long-term paper in this case there's confidence that the economy is coming back.

couldn't it be a good sign until we get to much higher levels that indicate it's an inflation harbinger of inflation that's going to be a negative i mean, i would think -- that's three or four points away before you're at that >> they'll have to slam on the brakes then the other risk is that they're moving too aggressively that with all the uncertainty in the world economy, the international monetary fund put out its latest forecast last night and they shaved the growth forecast for the u.s. and the world for 2019 in part because of trade tensions. it could be that the fed overdoes it. that's the tough balancing act that the fed has now they always have it at this time in the cycle how much is enough and how much is not too much? >> we may be underestimating how

quickly wage pressure can grow once again, and you're at brookings. given all the work done on income inequality and how much we want, you know, to share some of this prosperity with people that weren't participating for the past ten years, is that something to be worried about if wage pressure picks up >> if wage pressure really picked up and we were doing more than compensating for several years of years of lousy wage growth, yeah that's been very low it's been remarkable how slow wages have been to react unemployment is now 3.7% and wages are just barely -- you can barely see them. >> why is that when we hear of all these places that people are stealing employees and people don't like the job they're in, they're not afraid to quit anymore because they can get a job they want why aren't we seeing it? >> i think it's a great question i'm not sure we really know the answer there's some theories that -- >> participation rate, maybe, i

don't know. >> -- the employers have a lot of bargaining power because they can outsource. maybe it's the unions. one thing that's really interesting is wages are going up faster for the very least paid employees than for people in the middle. maybe because of the minimum wage going up in some states or maybe because employers really are finding that they need to pay a little more. $8.50, $9.50 amazon is raising to $15. >> we've got to go, but in your view we'll be at -- will we hit 4% next year >> i think it's unlikely, but i bet 3.75%. >> all right david wessel from the brookings institution. >> the hutchins center at brookings. >> this is why you're smart and well informed. >> i know. i was kind of looking at becky and andrew

>> i was going to ask you guys which one of the three of you was he talking about >> he was staring over all our heads as he said it. >> people do that. they come in and are nice to us. >> they say things like good question >> i feel good i did it thanks, david. >> you're welcome. okay coming up, some more good questions hopefully. plus cnbc unveiling this year's start-up 100 list today. it's an exclusive group of fast-growing new ventures. we're going to be talking about one of the brands, third love, that made the cut. its ceo will join us live next hi, kids! i'm carl and i'm a broker. do you offer $4.95 online equity trades? great question. see, for a full service brokerage like ours, that's tough to do. schwab does it. next question. do you offer a satisfaction guarantee? a what now? a satisfaction guarantee. like schwab does. man: (scoffing) what are you teaching these kids? ask your broker if they offer award-winning full service

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welcome back, everybody. cnbc unveiling its upstart 100 today. all founded less than five years ago but wlr maalready making a for themselves joining us now is heidi zak of third love a direct to consumer bra company. thanks for being here. >> thanks for having me. >> before we dig into things, i want to talk about why you created this company

it's a pretty busy space, but you were working with google at the time and what happened >> so i was at google. i had to go and buy myself a bra last minute. i was in a victoria's secret when i went back to google i took the pink stripe bag and shoved it in my backpack i was embarrassed shopping there. i thought there's got to be a better brand and better product for the modern woman that's how third love was born >> you have an incredibly impressive board a former victoria's secret ceo, former spanx ceo, chairman of rei, and barry sternlich is an investor too you went about this very seriously. >> i think it was important for us from the early days to get industry experts on our side and really use their industry knowledge. >> and use your own industry knowledge too.

you are all about data >> in part why it's so broken is because of -- i was at aeropostale prior to there we use data personalization, product development, inventory planning everything. >> in terms of the number of sizes, you have something like 70 sizes >> that's right. one of the things that we found in the early days of third love is traditional sizes i'm personally a half size a lot of women were falling between traditional cups "a" and "b" and "b" and "c." we have 70 sizes your average bra brand has 30. >> so what amazes me most out of all of this is you say you are already profitable how is that even possible? >> we worked really hard on it i think we are building a sustainable business that actually makes money so we started turning profits earlier this year in 2018.

we've really focused a lot on not over spending and investing at the right moments in time >> great in terms of your relationship with the consumer as you continue to want to grow this business. as people talk about amazon and the power of companies like that, how would you think of that and would you find your product on another site? >> my answer right now would be no we really like to own the customer experience. in my mind, we own end to end. and we make sure she's going to find the right thing for her we invest in customer service. that's something you're not going to get kind of on another site or in another store >> would you ever create your own stores >> never say never it's not -- you know, it's not on our short-term to do list >> that's so interesting you look at a warby parker, their real success at the moment

is coming from the growth of the stores >> absolutely. for bras, it's different no woman likes to bra shop it's last on the to do list of 20 things. i'd rather empty the dishwasher than go bra shopping right? putting it online makes it much easier and convenient for a woman. she can do it late at night, on the weekends, whenever >> i have to say, you guys have been mailing me stuff at home for awhile i've got just the fliers to try to get me. it's been on my to do list it's not something i've done to this point that's not stuff popping up in my web browser >> when we think about marketing, we don't just do digital marketing. we do all kinds of marketing that includes tv, direct mail. kind of what i would consider traditional advertising. >> it is on my to do list and has been for months. i'll get there heidi, thanks for coming in. love the story we hope to hear from you soon. >> thank you. >> heidi zak

coming up this morning, stocks to watch including some upgrades or downgrades on a couple of retailers. so stay tuned. we'll be back. this isn't just any moving day.

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talking about in this case upgraded retailer upgraded from buy to hold can regain shared market gains as well as investment. however, kroger was downgraded not just to a hold from a buy but to a sell from a hold. used to be rare to see a sell. this is at deutsche bank that company argues that kroger's strategy will cost more than expected. when we come back, what treasury yields -- with treasury yields hitting multi-year highs what that might mean for the fed's next move. steve liesman has that story at u.s. bank, we believe one small change can echo throughout an entire community. that's why we proudly support, invest and volunteer in communities like yours. because the changes we make today... can you hear me? ...shape the possibilities of tomorrow. u.s. bank the power of possible.

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invest with confidence. oil and your portfolio with crude prices near multi-year highs, we'll talk opportunities in energy and manufacturing stocks top rated analyst tells us what higher oil prices mean for the oil industry new this morning, richard branson says he's going to space in months not years. and if our viewers are generous, andrew might be going with him branson's comments with cnbc are straight ahead and hurricane michael is faster and more intense than forecasters first thought. it could hit the florida panhandle as a category 3 as soon as tomorrow we will take you live to panama city, florida, where residents are bracing for the storm.

the final hour of "squawk box" begins right now ♪ live from the most powerful city in the world, new york, this is "squawk box. ♪ >> all right did "major tom." now we're doing "rocket man. we don't know how to fund it it's a quarter million at this point. and andrew specifically wants to go on one of the first three flights. >> that's not true but we have some well healed viewers. that if they really wanted me in space -- >> i stepped up immediately. >> you were up for 1k? >> no $500 but if it really starts happening, i could be induced to look through the couch cushions.

good morning and welcome back to "squawk box" here on cnbc. live from the nasdaq market site in times square, i'm joe kernen along with becky quick and andrew ross sorkin. >> fly me to the moon. >> get me an imax "first man" ticket and that's close enough for me the future -- you too liesman? >> unless it gets me to a place quicker. >> triple digit losses now down 102 or so. the s&p down 13 and the nasdaq down 35. treasury yields. we'll see whether the next step is straight up or whether we see some backing and filling that would not be surprising to a lot of people. that's usually the way markets work but maybe not. we'll see. 3.23% on the 10-year let's give an update on murk michael. it has now intensified it was just upgraded to a category 2 storm now gaining strength in the gulf of mexico michael could make landfall as a

category 3 storm tomorrow. we're going to get a live report soon in a "new york times" op-ed titled insider trading laws haven't kept up with the crooks, former u.s. attorney preet bharara says he will create and lead what he called the task force on insider trading to protect american investors. bharara will be joined by eight former regulators and prosecutors, judges, academics, and defense lawyers. they have agreed to put together proposals to update the insider trading laws a big part of the piece suggests effectively that the current laws are out of date make it too difficult, frankly, both for prosecutors to prosecute cases. and leaves too much room or wiggle room for people to even understand what the laws are where does the intent lie.

you remember the supreme court that overruled one of these cases then changed the dynamic about whether the tipee needed to be a beneficiary or not in the meantime, some stocks to watch this morning. shares of ppg falling sharply after the company warned both its third and fourth quarter results will be hurt by higher raw material costs and lower demand in china. the maker of paints an adhesives says it has experienced the highest level of cost increases in two years makes you wonder if there are going to be more stories like this as we get into earnings season right now that stock is down by $10. decline of over 9% heard similar things from delphi part of the problem with ppg has been the demand for autos in u.s. and europe. then take a look at microsoft. the company is investing in grab, the ride hailing firm in southeast asia the deal will allow them to work together on a project involving ai and big data. and then shares of papa

john's are trading higher. the trian fund has been considering. that stock is up by 8.7% today and surging interest rates raising a lot of questions about the impact on economic growth and the outlook for more rate fed hikes. steve liesman is back in the house. >> what did you guys do? >> what do you mean? >> i went on vacation. a perfectly managing 3.06% you tell me you got it covered and look what happened >> 3.25% >> 20 basis points now here we are. the classic debate being joined over rise in rates is it an inflation story or growth story and what it means for the economy. jpmorgan strong in saying rising bond yields are a symptom of u.s. strength and should not be feared except when it comes to emerging markets. with the unemployment rate falling to the lowest since

1979, it will be likely to slow but not derail the expansion hitting sectors like housing and autos the most but the list is long in factors pushing up rates here's some of the things being talked about better growth, unemployment. inflation now solidly above 2% on the core rate fed policy rate hikes and balance sheet reduction under $4 trillion now for the first time since qe began eventually end of qe from the ecb. tariffs also pushing up rates and the growing deficit increasing the cost or demand for money. the factors moderating increase rates are shorter. the impact on prices and the better tax motivatedcap ex-that pushes down prices but that takes time. what's it mean for the fed near term, probably not very much in the medium term, it could be less work for the fed to do.

81% chance now of that fourth hike of the year in december first hike of 2019 coming in march. 59% probability. then the second hike, 59% probability coming in september. the market now pricing in the fed funds towards the end of next year in the range of 2.75% to 3%. if the long end of the market is going to help put the brakes on the economy, that could mean the fed has less to do in 2019 and beyond to slow growth and eased the concern about overheating. i heard your conversation with dave wessel. think of the reverse the complaint from greenspan in early 2000s. we were raising rates but the market wasn't reacting i think joe had a nice comment earlier. this is what you would have expected to happen though it happens in a jerky kind of way. >> did you hear mark grant yesterday though >> i saw a news clip about his -- or something. >> so he thinks the economy is much slower than we appreciate and thinks you really can't -- >> and so does jim cramer, by the way.

>> that there's less economic growth >> yes >> based on what >> based on what they see in terms of housing starts. based on terms of auto demand. mark also laid out his concerns of what's happening in italy and other places >> you know, i never over the years looked at a single indicator that when something is an outlier, you look at the panoply of data out there. i look at the higher gdp growth rates, the cnbc rapid update and i'm not seeing some fourth quarter numbers in the 3% area it looks like a solid 3% that's a full solid percentage point above the long trend we had previously in the 2% range you have wages going up. you have all of these comments from employers about the scarcity of workers. this whole thing paint aspicts e this whole thing paint aspicts a picture to me. you have greater federal deficit spending and also from the tax cuts as well that should

motivate companies to spend. there's a strong argument for stronger growth. >> on friday with had us, it was said why don't you roll off the balance sheet first. and worry more about rates >> yes you could have that argument it's 6-1 half a dozen -- as far as the fed is concerned. >> as far as the fed is concerned but not as far as people who are borrowing for houses or cars or anything else are concerned. >> so what do you want to do roll off the balance sheet -- >> maybe that brings down any potential bubbles that had built up in places like the equity markets without punishing businesses and consumers who are trying to make loans >> i don't -- so would he accelerate the balance sheet reduction? >> i think so, yeah. >> and what would the impact from rates on that be? >> the liquidity situation -- again you're getting out of some of the emergency measures we've created in the last ten years. >> steve, stay where you are we'll continue this exact debate right now. want to bring in ian shepardson

from pantheon and gee labha. good morning to both of you. ian, you're listening to this conversation are you on the side of our good friend here, mr. liesman, or are you on the side of mr. cramer and maybe mark grant >> oh, on this occasion, i'm with steve i think i buy the strong growth story. i understand here the weakening in the housing market. but housing isn't what it used to be in terms of impact on the economy. it's doing its own thing right now. it's not a lead indicator. what we've got is a broad strengthening. the only thing i disagree with steve is i think the big driver of boom in capital spending is not the tax cut. it's the strength of earnings growth and the fact we haven't done much capex for a very long time i agree 3% growth for the foreseeable future, that's putting the fed in quite a tricky situation not because there's rampant inflation. there really isn't

but because of the fear if growth keeps going like this, it's heading below 3% and wage increases going crazy. >> gee, take that on >> well, i'd agree with that basic premany is the federal reserve is likely to hike a few more times. but i think the cracks in the activity housing and specifically autos are two sectors that are very consumer sensitive to the level of interest rates and we as a culture have stopped buying a $30,000 car we buy a whatever it is. $350,000 monthly payment and that psychology in considering how large of a seas consumption amount cars are for the country -- even though the hikes haven't made their way in yet. >> joe, your response to this, the market kind of thought it could have its cake and eat it too. have the strong growth and not

have higher rates along with it. so this is a situation where having listened to rick santelli over so many years, bonds seem to get into these ranges you get into this range, i think we're exploring the top end of the new range here >> but that's -- >> and the market needs to get used to it >> is it that or it's off to the races because we've been waiting and waiting and waiting for this to pick up >> we're still tethered. tethered to german bonds >> i think we more make the market than take the market when it coms to interest rates. i think they -- >> wouldn't you be buying the 10-year versus anything -- >> joe, one thing that's really missed with the bund treasury spread is the cost of hedging if you're a german investor of converting that to dollars in hedging, it blows away the entire yield differential. in fact, as of a few weeks ago, you had a higher yield than german bunds than in treasuries.

>> does anybody think the price of oil is going to put the brakes on things >> i think it'll -- look first of all, oil is a different animal for the united states than it used to be higher oil prices -- >> should be good but there's got to be a point -- >> there's a break point, but i don't think we're there yet. i think the market will get used to these new rate ifs it has the earnings growth and the economic growth to go along with it if rates go up higher than growth would warrant, that's where the stock market is going to have a problem. i think you have a bump here 37 i don't know if you have higher levels >> guys, we're going to leave the conversation there thank you. >> are you trying to -- are you going to write off this -- were you, like, studying greek finances the greece, the yooeuro type st?

are you going to write off the trip >> i could now talking to these greek entrepreneurs, i got an earful i wanted to hear 5,000-year-old greek history. instead i heard a lot about the contemporary greek history guys who said they need to earn 120% of their revenue this year to pay their taxes >> did you see the acropolis >> they're redoing it. >> did you go to sanerini? >> no. we went to sparta and corinthi >> oh. >> and then athens and the acropolis. great quote from one of my guides she said, this is an early middle aged wall this is a roman wall and this ugliest of all, a communist wall. >> it is >> so now i can write that off, right? whole thing. >> andrew going to space, funding secured.

>> the problem there is that means it's not >> exactly >> you're staying here >> i have to attribute that to someone. but i like that. when we come back this morning, it's the fall and that means airline stocks could be ready to take flight we're going to speak to the top rated airline list and later, what's working in oil and manufacturing with crude prices near multi-year highs a lot of ground to cover here. you're watching "squawk box" on cnbc most kids today will have jobs that don't exist yet. the engine management systems coordinate with autonomous vehicles. financial data, so now we can predict the future. our new flexible propeller design. by collaborating with public schools on a program called p-tech, ibm is helping students build the skills they'll need for tomorrow. revolutionizing. aerospace industry. it's an entirely sustainable approach. any questions? when you rethink education, everyone can put smart to work.

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past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. welcome back, everybody. institutional investors out with the team of top analyst. jamie baker at jpmorgan is ranked first in the airline sector and he joins us right now. jamie, i guess this time of year traditionally is a pretty good one for the airlines as we head into that holiday season when people are booking flights all over the place but is this year different because of what we're seeing with oil prices? >> yeah. it's actually better because of what we're seeing with oil prices you know, the market doesn't want to see -- or rather than airline investors don't want to see cheap fuel it leads to a breakdown in discipline

it leads to too much growth. it leads to, you know, reckless competitive behavior what we're seeing is that with oil prices rising, that contributes to our thesis that margins are set to expand next year for the first time in four years. so when you couple a strong economy, higher oil, lockdown labor costs, and tightening capacity, this is the best fundamental setup that i've seen since probably autumn of 2014. >> so what i'm hearing from you is it's no longer wages which used to be one of the most important issues with airlines it's no longer fuel which was the other most important issue this is really about -- i won't say mow nnopoly, but something e that you could get a real foothold and be dealing with real competition >> fundamentally it comes down to supply, demand, fuel, and labor. and we feel exceedingly good about all four of those critical inputs the other thing we would point

out, you know, the autumnal season is one in which more often than not airline equities outperform the market. now, you could always go back and say if i bought low in the fall and sold high at the vernal high, you would have outperformed even if you bought poorly in september or october and sold poorly in april or may, chances are over the last 11 years, you'd outperform the s&p so the calendar is on investors' side and the fundamentals are exceedingly on investors' side at the moment. >> when i look at your price targets in place, prices you're expecting these stocks to hit in the next three months by december of 2018, you're looking for some big jumps on delta, american airlines, and united you have overweight on all of those. for delta, $72 when the stock's trading at around $59 now. >> we think the equity prices right now are fundamentally mismatched with how strong the outlook for fundamentals are

we'll see if they reach those targets. but either way, we think it's an exceedingly strong time for investors to look at this place. reflective of a stroke econong y but that's helped us with oil prices >> delta is at 52 dpl$52. that's a $20 jump. you really think that's realistic? >> we've seen it in the past unfortunately we've also seen it to the downside. but we think the market has matured past those times when we would be identifying that sort of downside risk we think everything is skewed to the upside at this point >> as i said, you've got overweight on delta, american airlines, and united what about southwest you've got a neutral there >> southwest is always a very easy name. particularly for first-time investors to get comfortable with at this point we don't see the glaring valuation deficiency the

way we see -- fuel hedging potentially. if the economy slows down or there's any demand shock but when you're living in a van down by the river, you need flood insurance. we're on a mountain of liquidity. talking about the airlines here. looking down and you could barely see the river you don't need that sort of hedge insurance. think back to the, you know, mid-year 2018 when in response to higher fuel all of the airlines cut capacity. they would have behaved differently and that would come at the disadvantage. >> jamie, thank you very much. again, these are some pretty bold calls looking for them to

trade up by double digits and in many cases more than 20% just in the next three months. so thank you for your time today. we appreciate it >> you're quite welcome, becky >> i think we can't say funding secured. i thought of something langone. >> wow >> langone would send you. >> he'll send me to the moon >> he'll send you to space if we ask him. >> true capitalist that he is. >> you're never here when he's here anyway. right? >> true. i don't know why that is he has a view. coming up, google gets a black eye. its social media network called google plus may have exposed the personal information of hundreds of thousands but the real pain could come from washington. we'll talk social media regulation coming up whoa. this looks worse than i thought.

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. coming up when we return, hurricane michael is gaining strength as it approaches the florida panhandle. it was just upgraded to a category 2 storm residents are scrambling to prepare for a storm that looks a lot worsthe an initially forecast "squawk box" returns with that

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welcome back to "squawk box" this morning couple things to tell you about this morning the big one, hurricane michael is now intensifying in both speed and strength in the gulf of mexico. it's expected to hit the florida panhandle tomorrow courtney reagan joins us from panama city, florida good morning to you. >> reporter: good morning. we are here at a lowe's. this area is under mandatory evacuation orders as of about 90 minutes ago. this lowe's opened at that same time as that evacuation order went into place at 6:00 a.m. there were lines outside the door folks trying to get in this location has already run out of water and generators. it is waiting for another truck to come and bring those crucial supplies however, most of the folks that we talked to were able to get what they were looking for >> i'm out here looking for generators none to be found

>> we're kind of late to the party, i guess you could say >> we decided not to wait because we believe we're high enough we're going to be okay. we're preparing. >> no, this isn't the first one. but it's the first one i've prepped for. >> why >> i think it's going to be a little worse than the last few >> reporter: lowe's did activate its emergency command center on sunday this is a pretty fast-moving storm expected to make landfall midday on wednesday. so far lowe's has deployed 200 trucks to 50 stores in the hurricane's path with more on the way. you mention it at the top. it's now 100 mile-per-hour winds and a category 2 expected only to strengthing from here for now back over to you guys. >> thank you, courtney reagan. stay safe for us, please meantime, we've been talking about getting to space all morning. might have a chance to do it faster than thought. richard branson staying virgin galactic closer than you might

think to his first space trip. here's what he told cnbc >> well, we should be in space within weeks, not months and then we'll be in space with myself in months, not years. and then we'll be in space with people not too long after that >> branson had predicted he would personally travel to space by april of this year. when he was asked about demands for space travel he said eight out of ten people would love to go to space if they could afford it add me to that list. becky and joe are the two that wouldn't want to go. >> you ready to go >> of course sign me up >> ed lee is here. >> seriously >> yes >> you guys have kids. what is wrong with you >> i'll do the training. whatever it takes. you know, to go into space come on. yeah >> you don't think the imax

experience would be close. big screen >> despite this whole sort of belief in the tech world, yes, i want to be in the real thing i don't want to do the virtual the real stuff. >> we like experiences >> i love it down here don't you? zble >> earth there's so many places here i haven't seen. >> short hills is your sort of go-to. >> short hills mall. >> the mall. >> that's not -- going to a mall for me is like going to space. i get very clammy and everything >> it's a lot easier. >> oh. tech and media heavy hitters have yet again been in the spotlight and under intense scrutiny here to break it down for us is ed lee wannabe space traveler you heard what we said about andrew send andrew to space gofundme account. fully funded >> are you fully funded already? >> as fully funded as that -- you know --

>> the ipo to take private >> oh. it's a musk-fully funded yeah >> ed, interest rates are sort of the -- what we've been talking about. it's not why you're here, but it seemed to hit technology and the nasdaq even more than the other averages even for a little bit longer than we've seen with the s&p. >> tech has been the leader, right? in the equities market so whenever you're seeing sort of the larger implications whether it's interest rates or tariffs, they're going to be affected first i think once earnings season comes around again and they look strong, they're just going to go back up. it's going do come down to the fundamentals of how they're doing as a business. of course facebook, google, aemsae amazon to some degree is not without their controversies. but as a business, they keep getting bigger it's hard to stop that >> someone said earlier this is different than '99 because some of these companies are a trillion dollars now i don't know whether that -- you know, that's not necessarily a positive unless it's backed up

with -- i'm saying it's traded -- don't put words in my mouth. i'm saying these are trading at eight and nine times earnings versus infinity times earnings just saying they reached the three or four close to reaching a trillion dollars doesn't mean you're not overextended at this point. it could mean the opposite although like i said, the fundamentals are much more positive and then we mentioned the 84% of the ipos in the last year have lost money in the last year. so they're coming to market and doing very well. >> but for every one that fails, if it's a next amazon or google -- >> but as a sentiment indicator, why isn't it a lot of companies losing money doing well as ipos, why is that not a sentiment indicator we're getting into bubble territory or getting frothy >> i don't disagree with that. i think there is a definite

frothiness when there's -- the other side of the effect is there's a concentration of power with the googles and facebooks of the world where they're snapping up the whole market place look at what happened with instagram. kevin instrom left even if he wanted to, he couldn't win now any sort of new social media development that comes out of it now, they're just not going to be able to compete against facebook >> max crawling around -- >> can i ask a separate question, though, about facebook one of the fascinating things that happened this year is it feels like at least for certain generations, facebook might be on the precipice, right? >> you mean for youngsters >> we always talk about how these big tech companies, they own the world, they're taking over the world they're this and that. you look at some of the companies we used to talk about being nation states 10, 20 years ago and they're not today. so maybe it takes longer maybe there's the generational period longer than it used to be in terms of the ability for a

start-up to enter the space. do you think we'll be talking about these companies or new ones >> i think we'll still be talking about these companies. and in the case of facebook in particular, i would agree with you except for the fact i still own instagram. that was one of the smartest bets they made young people today say i don't like mark zuckerberg or facebook, but i'm on instagram >> but they lost the instagram cofounders and this new regulatory environment is going to make it tougher for the big companies to buy the next up and coming thing. it will be tougher to make those acquisitions >> i think mark cuban has said this before. when you look at these anti-trust concerns, why wasn't facebook blocked from buying instagram? when they bought instagram, they were much, much smaller. i think the antitrust concerns were the calculus around that was difference at that time. a enwho knows if they would have gotten there >> what do you think is the

latest implication for google? >> it gives more meat to congress who wants to regulate companies are going to make mistakes they're going to have breaches >> can i take this out of google for a second it's sort of an interesting issue. if unction that there was a breach but you have no evidence that the breach actually breached anything, meaning that someone took information, that somebody did anything with it, it was like if a robber was in your store but happened to not rob the place and left without taking anything, though he's a known robber what do you have to tell this is the issue. >> most regulations rely upon that if there was damage done most of the state laws even in europe should the line be a different line >> what if they broke in, they took -- we're not so sure.

we don't see -- it may not manifest for months or years later. >> that's also my concern with the laws as they exist today because that is the standard in those laws and unfortunately that kind of puts the company in a position of not wanting to investigate too deeply if you don't know about it, you're not responsible the next leg of regulation may change that entirely >> i think that's fair >> do we also think it might get normalized not necessarily in a bad way. i mean, some people who use these password -- what's the -- password services, right if you use them -- >> wait, wait. what where they do what >> you put all your passwords into one service one of the things it does is any time there's an announcement or anything that says a password's been breached -- >> it makes you change it? >> if it knew that the google plus thing and you used this password in the google plus thing, it would ask you to change that password and

everywhere else. could you create a system where there's a seamless system where actually when these things happen, there's not a stigma this goes to a larger issue which relates to the stigma of it which is and therefore who's responsible for it if it wasn't stigmatized when these things happened -- so you want it to be stigmatized because you want people to defend but you don't want it stigmatized -- >> you've got to tell. it's like seat belt laws >> i think the thing is, it's an interesting idea your possible solution but it requires a level of interoperability that you can't execute against. i think the stigma is an issue at the same time i think a lot forgive especially if they're there >> reid hoffman was here earlier. his thought with regulation was -- in the united states

which we lead clearly. >> there's an argument on both sides of that. right? when you think about what net neutrality is, i know it's a favorite topic of yours, joe >> the world we're in right now. how you getting by >> if it makes it more of a level playing field for the next facebooks to be -- back to your earlier question about are we going to talk about these companies in ten years' time chances are less likely because we don't have net neutrality in place because the next facebook, instagram, google will have a harder time. >> going to move to california maybe they'll prevail. >> that's being challenged right? >> i'll also say the net neutrality thing is more important than i appreciate than a couple years ago the amount of bandwidth you now use for content --

>> 5g will take care of that >> the point is if you are a new start-up, the cost to compete against this becomes much more complicated and difficult. >> it's not just setting up the web page anymore there's more data required >> the capital deployers are not in the business of subsidizing all your shiny new start-ups either they need a return on their investment so you can benefit from all the great service that you have i mean, live in the real world it's the way things work come into the future >> has given some good returns >> okay. >> thank you, ed when we come back, crude prices rising. we'll tell you how to profit from it. our what's working series is next "squawk bo wl rt ck x"ilbeagba

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time now for our what's working series today we are focusing on oil and manufacturing in the united states our next guest thinks it's a good time to invest in the companies that make the equipment for those sectors. joining us right now is peter sododi peter, let's talk about this oil, manufacturing what makes you think this is the place to be? >> in general, first, the u.s. economy is improving very quickly. generally small cap companies have little exposure to overseas and currencies all these companies generate cash flow in a positive. in a rising rate environment,

they're not in a position where they need to raise capital they're not in a position where they need to refinance >> we've heard that argument from a lot of people earlier this morning, joe seidel was talking how in a rising rate environment this was going to be the place to be. how come you're looking at the russell 2000 and it's testing the 200-day moving average >> again, so much of what we do particularly in small cap is being affected by etf and things looking at short-term trading, it's really a difficult thing to do for short-term trading. i mean, fundamentally we think things are improving it's hard to explain three-month movements or one-month movements in equities. >> let's talk about some specific stocks you like exp enterprises. >> whenyou think about what's going on in the economy, you think about what's going on in oil and gas, you're seeing the numbers improve. you're seeing companies come from cyclical bottoms to improving quickly. >> and capex spending going on

at the same time >> yes you haven't seen this in a long period of time for instance in the march quarter, we're looking for earnings to be up 35 cents versus 6 cents a year ago. >> how closely tied are they to the price of oil we've seen oil prices today at about $75 a barrel if that comes back off, is it -- >> clearly there's not a direct lag. but when you look at capital spending, those decisions are generally made a year or two years before so now you're seeing the momentum start building. >> another name you like is columbus cmco. why? >> again, it's a similar company. they're the largest producer of hoists in the world. >> crane hoists? >> crane hoists, other hoists. again, as the u.s. economy's improving, that's been terrific. the other thing they're in the midst of restructuring they're driving down costs as well >> graham corporation ghm is

also tied into what's happening in the petro chemical business >> what's neat about graham is graham is a tiny company relatively market cap under $300 million. there's really low research coverage of it people don't focus on a name like that. when the earnings start turning around, you see dramatic improvement. >> do you have to go far in to find small cap names >> we defined small cap at $300 million and underneath today $3 billion and underneath. there are a lot of changes going on and you're seeing coverage disappear. >> it's a richer hunting ground? >> the market is opening up, yes. >> peter, thank you so much for your time today. >> thank you very much >> peter sidoti. when we return, we'll see our friend jim cramer live at the new york stock exchange. we'll get his take on so much going on this morning. interest rates in particular

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let's get down to jim cramer, he joins us now. here we go again looks like we'll have a soft opening and we are not out of the woods yet in the higher interest rates environment and the angst that's causing it. you have been around for a long time, how long do these periods take >> there is readjustment pu know i actually cover more companies than just housing. when you look at the announcement last night, you realize many parts are slowing i know there is more supply coming in and numbers are coming down fast. the oil came up too much and a lot of the industrial companies are going to be hurt i would love to say my work does not show that.

it is not limited to housing i want to make that point twice because that's a mischaracterization of my work >> did we say that earlier >> i didn't like the idea that it is just one silo. >> did i say that? >> no, just the opposite >> i appreciate what you said about me that was terrific. >> we have been talking about it all morning long i love what you said i think it is important. i want to watch football all the time but i can't, i have to do my job the ceos that i deal with everything from retail to oil and gas to steel, does not matter, it is bad and it changed. >> it scares me after hearing what you said yesterday. >> what a disaster >> we are getting ready to go to earnings season, what are we

going to see >> thank you, exactly what i am worried about. >> thank you for saying the actual characterization of what i have been saying >> what did someone say? >> no need to talk about on that one. >> okay. >> thank you >> jim, we'll see you in a couple of minutes and later on "squawk alley," don't miss the interview with kasper. and ahead with andrew, fully funded >> nice. >> we'll be right back i think that she's a very nice girl...

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netflix is headed to new mexico's streaming giant to buy abq studios, netflix plans to produce some of its original films in tv series in the area bringing more than a billion

over a decade.n netflix is receiving local funding including as much as $10 million from mexico and $10.5 million in albuquerque >> one of my shows take place there. >> "breaking bad"? >> or got to "call saul. >> i know exactly what you are talking about. >> i kind of caught up on "walking dead started" and i missed it. >> i am behind, too.

they got even better one guy can see it, you can see through his cheeks and what was on the other side >> that's pretty good makeup kanye west is headed to the white house. the rapper will meet with president trump and his son-in-law and jared kushner he wants to talk about job opportunities for performing convicts kanye has been a supporter of the president most recently at the end of "saturday night live" appearance when he wore a make america hat and gave a speech supporting the president that was not aired in broadcast the trian contacted the company to collect information, papa john's have been exploring that sale. he was ousted in july. both sides have been engage

inside a public battle over who to blame in the decliecne of sales. a quick look at the futures this morning. things starting in the red after most of the markets ending low yesterday. the nasdaq in positive territory and s&p is down by 23. that does it for us today. make sure you join us tomorrow we'll turn isov over to "squawko the street" right now. ♪ >> good morning, i am wilfred frost with jim cramer. carl and david are off today futures and nasdaq is down and s&p is down three points yesterday. nasdaq was down in terms of international markets and toda