we'll get you ready for the corporate report cards on this monday, october 22nd, 2018 "squawk box" begins right now. ♪ ♪ live from new york where business never sleeps, this is "squawk box. good morning, everybody. welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. let's check out the u.s. equities futures s&p futures are indicated up by 5.5 points nasdaq up 2 by 46 points the dow futures down by 47 worth keeping in mind that last week you were talking about both the dow and the -- both the dow and the s&p 500 i should say breaking three week losing streaks. nasdaq was down for the third week in a row. if you're looking at the broader terms for the month you are

talking about the s&p 500 and nasdaq on pace to post their largest monthly losses since january of 2016. we'll see where we get headed. we've seen a couple of wild weeks with some big downdrafts and big updates, too we'll see what happens dow futures indicated down by 25 s&p 500 and the nasdaq positive. take a look at what happened overnight in asia. mixed series for markets across the board. you're going to see -- the shanghai ended up by 4%. hang seng up by 2.3% in europe this morning with some of the early trading that's already taking place you'll see at this point green arrows across the board it looks like the biggest advancer of the major averages is the ftse which is up by close to half a percentage point the dax is up by 1/3 of a percentage point the cac is up by .2 of a percent. treasury yields this morning, you'll see that the ten year note is yielding 3.196%. just below that 3.2% that we've

been hovering around. saudi arabia changing its story about the killing of jamal khashoggi at the consulate he said he was killed in a fist fight. he insisted the crown prince had no knowledge of that incident. this could have huge implications for our defense sector and what comes next take a listen to what kentucky paul said on fox news on sunday. >> i think it stretches cred due lit at this to believe that the crown prince wasn't involved in this i think that's the way they're going to write this off. i think we need to discontinue our arms sales to saudi arabia and have a long and serious discussion about whether or not they want to be an ally or they want to be an enemy. >> a big discussion there on arms and president trump has talked a lot about the need to keep that relationship in part because of the defense companies that have depended in part on saudi arabia want to go to riyadh this morning. hadley gamble is there she joins us where the fii conference we've been talking

about for the past couple of weeks is about to get underway tomorrow, correct? >> reporter: that's absolutely right, andrew. here in riyadh the saudi government still offering and an evolving narrative let's listen to what the foreign minister had to say over the weekend. >> reports we're getting from turkey did not comport with the reports that the team had provided to us after their return to saudi arabia the king then directed the public prosecutors to launch an investigation which he did nine days ago he discovered there were discrepancies. we discovered that he was killed in the consulate we don't know in terms of details how. we don't know where the body is. the public prosecutor put out orders to detain 18 individuals for questioning and possibly facing trial and the king also dismissed a number of senior officials. this has to be the time to

determine all the facts. >> reporter: it was only last friday that saudi authorities actually admitted that jamal khashoggi had been killed, you remember, after almost two weeks of silence after they had said again and again that they had nothing to do with this and that he had length out taped out ther 18 saudi nationals have been detained and we know two members of the crown prince's inner circle had been removed and were being blamed for what happened at the consulate. the inflicting narrative is continuing at one point we were saying this was the result of a fist fight he had put up a fight and this was an interrogation gone wrong. then we were hearing from the foreign minister there some further details. they say they don't know where the body is. later we heard more information from a reuters report that was basically saying a saudi

government official anonymously quoting this guy saying he had basically said now we understand that the body was wrapped in a carpet and given to someone else to dispose of. so they don't know where the body is. conflicting narratives continuing to pour out of this government and all of this 24 hours away from the fii summit this all has major implications not for what's just happening more broadly, saudi/u.s. relations. the saudi market has lost a billion dollars since last week. >> hadley, before you go what has been the reaction on the ground there are a number of reports just from the citizenry, people who have been prout of him and now they're saying how frustrated they are. is there any sense he's losing support on the ground? >> reporter: not necessarily, andrew, because as you can possibly imagine, people here

are being very, very careful with what they're willing to say. at the same point i have to tell you having covered this region for ten years and coming to saudi for the last five years and having observed the rise of crown prince mohamed bin salman and all of the enthusiasm, the older generation certainly horrified by the media reports that we've been seeing and the idea that the saudi government seems to have lost control of this narrative the younger people as well quietly telling me, many of them, that they're extremely disappointed with the way the you saudi government has handled this >> hadley gamble there dick parsons, as you may have heard by now, is resigning now from the board cbs, just about six weeks after joining as interim chairman. in a statement he says he's been fighting multiple myeloma and

some new complications have led his doctors to advise that he reduces his workload the former time warner ceo and other things, he had been brought in as a steady hand after les moonves was forced to resign in early september over allegations of sexual harassment strauss zelnick just joined the board. one of the top priorities for him and the board will be to pick the next ceo. chief operating officer joe ianello was named acting ceo last month >> i assume we can now speak about it dick's been sick, we should say, for about the last three years, maybe a little bit more. i've seen him on and off it's sort of gone up and down. my understanding the last couple of months have been more on the down than the up. we wish him well my understanding is not that

something has taken a terrible turn for the worse in the past week or so, but more so that he has spent a lot of time working on this particular situation he's very close to shari redstone my sense is he has done his duty and he needs to spend time fighting this and spend time with family. >> there is not a cure for multiple mile people but you can live with it it's probably very important that he focuses on your health. >> nothing like rest and not burning the candle at both ends especially if you're fighting something like that. >> right >> we wish him well. >> we do. some other stocks to watch today. fiat chrysler is selling the auto parts unit to japan's kalsonic for $7 billion. that's the first move for mike manley who took over after sergio marchionne.

the health care technology company is blaming currency headwinds. orders were up by double digits. the new york city police department is pulling the body cameras after one caught fire. it was formerly known as taser axon said it is working with the nypd to investigate. your lottery update. the first part is that the sorkin family did not win over the weekend. that's because no jackpot winners happened including the sorkin family, quick family, or i don't know who else played anybody play back here how many hands we have some people who needed to pay for the dream that's okay. the mega millions has surged because it hasn't paid out yet, record $1.6 billion which the sorkin family is very happy to participate in

powerball's jackpot is $620 million. so we're over 2 b, $2 billion. next drawings are for mega millions and powerball i know we can't recommend doing this. >> very exciting if you're more excited about not winning 1.6billion than 1 billion. >> that's sort of the view. >> if you do a quick pick that you up your chances. did you see that nobody under stands dsh does anyone understand that >> it's a stat. >> 90% of these people who win -- >> touf more of a chance winning the lottery -- >> they were playing one of the top offenses in the fl. >> there's 50,000 twitter

comments about the bengals in primetime. >> here's the bengals mascot, it's a rug, a tiger rug that people can walk -- but i don't care it was 45-10 the over and under was 54 1/2 points they got it exactly right. did you watch the -- >> i did snap infraction. >> redskins. >> pushed it back five yards so it hit the goalpost. dom chu is here. i can talk to him about these things the market's about to absorb a massive amount of quarterly reports. 149. >> 149. >> some of the biggest planets in the known universe. >> housands. >> dom chu, you bought a lottery

ticket >> i did >> bought one. >> i've heard the arguments. >> it's a tax on the poor and everything else but i did. i did buy -- >> a tax on the -- >> seriously it's a tax on the stupid person. >> i am stupid because for me the lottery tickets have been an integral part of my personal financial plan. >> not saying poor people are stupid. >> no, when i say it's regressive $2 for people who don't make a lot money. i buy $2 it's like $2. >> you know you're silly. >> i know i'm silly but i still bought five of them by the time -- i spent 10 bucks >> i didn't. >> i know. on the market side of things, what's important to know about this is like joe said, it's going to be a huge week for that earnings season. 149 companies in the s&p 500 if you take a look at the names that we're talking about, ten of them are dow components. they'll be huge drivers of that average going forward. 66 companies in the s&p report on thursday alone. that's going to be byfar the

busiest day of earnings so far we've had this season. if you take a look at the big names we do have reporting, we talk often about the financial tilt in the beginning of this season it's going to shift a little bit more industrial and then more tech as we get later on in the week and communications services we're talking about names like twitter, alphabet, later on in the week ford, at&t, mcdonald's, 3m, coming out with their earnings this week. what's curious about the results that we have so far is something that the spoke investment group pointed out. very early in the season with less than 1/5 of the companies in the s&p 500 reporting and a smaller portion of the smaller midcaps out there, that chart that you're seeing now shows an average one day decline for stocks on earnings season. for the stocks that the spoke tracks up about 3/4 of a percent decline. that's the average one day move. what this implies is that there

is at least early in the season a sell the news mentality. meaning we've kind of ramped up with expectations into earnings season these guys report. if you factor in all the beats, matches, misses, the average stock falls by about almost 3/4 of 1% from the opening till the close for that day >> "the wall street journal" points out today of the 85 s&p 500 companies that have reported so far, 35% of them have missed the street's expectations for revenue. >> right. >> for revenue that's the biggest we've seen in a while if this pace continues. >> it's not just that. it's not just the revenue side of things. remember as we a floechd earnings season it was not so much about the earnings and revenues, how they were going to be fairly bullish on the expectations side. that company says that even with earnings expectations, we're still due for earnings growth of

22% if everything comes to fruition revenue top line growth up around 7.4%. as we take a look at the earnings picture overall, what's more curious is that the expectations are still there for a very strong earnings season and decently strong revenues season people continue to at least early on sell the news what, refinitive. >> thompson, porter -- >> when did this happen? >> refinitive. >> it's the name. >> it's definitive twice. >> no, it's like refudiate. >> it's part refuting and part repudia repudiate. if it wasn't a word, it should have been a word but refinitive. >> it sounds fancy. >> it does it used to be thompson reuter. >> spend some money.

they have quite a bit. >> big time. >> let's talk about all of this and bring in monica han sell she's the head of u.s. equity strategy at jpmorgan private bank and jeffrey strauss at raymond james. you heard the stats that becky was talking about in terms of revenue beat around the 35% that didn't and also really just how people are thinking about how they're projecting and forecasting what's coming next you're thinking what >> two things. the companies we've heard from are not necessarily representative of the whole market i would say it's a little too early to extrapolate and say this is going to be the trent for the week are we at the end, can this continue into 20 >> of the stocks you've

reported, which ones do you look at as bell weathers? >> i look at a bank and say what are they saying about credit card spending. that tells me about consumer spending. >> in which case you'd be bullish? >> yeah. we're going to have 30% of the s&p market cap this is a definitive week to make a call over what's going to happen in the next couple of weeks. we've seen a lot of volatility at the end of the dpa we bounce back from the technical levels that tells me i don't think we're at the end of the cycle. we have a couple of years left by the way, equities still perform well. >> you're talking about the economics. >> jeffrey, you want to make a call this morning? >> yeah, i think she's spot on i think we're knotting late cycle. i think the recur of was so muted until a couple of years ago you're still in mid cycle. i think you have a few years to go i agree it's too early in the earnings reporting season to make a definitive call i think earnings will come in pretty good around, i don't

know, 160 for the s&p, 180 next year, 200 for 2020 and i think the market bottoms >> do either of you worry about the slowdown in china about whether you think that's going to have an impact going forward here >> my view for equities is predicated on growth if you believe what's happening in china or europe stalls growth in the u.s. then, yes, because i'm not expecting multiple expansions everything is going to come from earnings growth. i don't know what's happening with china is going to be enough to completely derail -- >> i would add the china story is interesting because it took a massive amount of rhetoric and sab saber-rattling to say they're going to support and that will be straight up government interventions to make sure things don't crash if that is the case, you're talking about one of the biggest balance sheets in the world looking to support a stock

market if that is the case, then maybe you can say that the u.s. companies may not be as impacted that's the bullish view at least for right now. the bearish view is china has been due for this kind of a slowdown for a while. >> jeffrey, give me a sector you like and a sector you don't like in terms of a function of earnings that have come out. >> i like the energy sector. i think the valuations there are about the same level when crude oil was 26 bucks a barrel and crude oil is over $70 a barrel i like the energy space and i like the financials. >> what have you turned to know that over the past week or two >> it's not just in the past week or two. not real happy about utilities and not real happy about consumer staples think they're expensive. >> we're going to leave it there. do you agree >> i do. you want sectors that have real growth >> monica, thank you jeffrey, thank you dom, thank you. when we come back, consulting firm mckenzie over

fire under reports that the saudi government used reports to silence them quarterly results from hasbro. we'll find out if the toys "r" us bankruptcy is hurting their bottom line and what it could say about other stocks, too. let's take a look at the biggest pre-market winners and losers in the dow. intel is in second place upgrading ip intel to a buy. ally' get to that. the meeting of the executive finance committee is now in session.

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unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, 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 to "squawk box. mckenzie reporting to a story that they're targeting dissidents on twitter and other social media mckenzie said it was never commissioned to prepare a report of any kind to identify critics. the firm, it says, is horrified by the possibility however remote it could have been misused in any way joining us with an in depth look

at mckinsey is the author of "the firm, the story of mckinsey and company. you wrote about jamie dimon i remember before the financial crisis or during the financial crisis, mckinsey is the harvard of consulting firms in america and now they've gotten enmeshed in this scandal. they were involved in a scandal in south africa recently during the financial crisis they had their own scandal with the insider trading at goldman sachs. what is going on here? >> you know, it's interesting. when i was working on the book, which was five, six years ago finished it, one interesting thing i realized is they were never in the press they were never being sued there was never any negative news about enron. >> they worked for enron too. >> in the last couple of years from south africa to recent coverage in the journal and the times about stuff in u.s. federal bankruptcy, these guys

are all over the place i think they lost the compass. >> they lost the compass but is that going to affect the business i corresponded with a couple of ceos over the weekend that use mckinsey that seemed to suggest they should rethink that. >> if you look at their denial and if we take them at their word, they're horrified. you didn't have people deliberately putting together some list. it sort of is getting a little tiring right now that these guys keep claiming they're working on work that they don't know what the ultimate purpose was. >> that's what i don't understand this was an internal memo. who was the client >> just asking each other about what's up with saudi arabia. >> who are the krit diks and lets - critics and remind me. >> one thing i haven't seen, this is so reminiscent of michael porter and monitor working with libya they accidentally did some work for a dictator and then they had to backpedal it all. they said, oh, we thought this

was an emerging democracy. >> the fii, this is a conference which cnbc and myself and every other media organization, so many other ceos bailed out on. who is still in? mckinsey all of the consulting companies are still on the website, still supporting this event unlike virtually every other major company in the world what -- is there something different about the consulting firms? ultimately do the big american companies that actually walked out on the conference walk out on these firms >> i think it's amazing that, you know, back when rajat gupta was arrested i spoke to a number of -- >> bring you up to date. he used to be the managing director at mckinsey. >> who went to jail for insider trading. >> on a goldman sachs tip. >> that he was passing to roger rotnum, the hedge fund manager when he got indicted and arrested i talked to some ceos and said, are you still going to work with these guys their entire promise is to keep

your stuff confidential and here he is selling it out the side door to the hedge fund manager the ceos said that's a rogue employee that's a rogue employee. not my guy at mckinsey this is starting to look institutional. this is looking like the institution is failing. >> inside mckinsey is there any sense they want to change the system meaning i assume there has to be different factions about sort of how they approach the world. >> you know, when i -- in the golden passport, my book on harvard business school, the conclusion i came to was that the only real impetus for change here is going to come from the students because the institution it ossified. the students need to demand change what factions? i bet you mbas who are thinking of taking a job -- >> that's what i was going to say. these companies rely on the mba students, young people, all who seem to have pushed technology companies and other companies to sort of approach this with a

higher level of value or more value, does that change at the consulting firm? >> i think it -- like how can it not? like if you -- all of the consulting firms, client first, client interests first, right? in a sense mckinsey is saudi arabia when it's working for saudi arabia you have an mba coming out, should i work for uber they seem to be up to some sort of underhanded techniques on the top level there. or, you know, should i work for mckinsey/saudi arabia. suddenly that's an interesting question where are your morals going to be kept? >> more broadly, is there something about the consulting firms? >> i think it's -- you know, it's -- >> is this just about mckinsey i'm looking at the screen. oliver weimann, pwc, the only companies that really have not committed to getting away from this thing in saudi arabia tomorrow -- >> i talk "the firm" about what the ultimate issue i think with

mckinsey's business model and other consulting firms would be what happens when you have power and influence without responsibility, right? you have all of these guys that are lined up behind this conference and they feel they have no responsibility to it they're just support staff. >> right. >> i don't think they can see the forest for the trees yet that they are part -- >> you think the blackrocks, jpmorgans, blackstones, all of who have used firms like mckinsey say, you know what, i'm he going to walk away from you >> i think it gets harder to walk in front of your board this week and say, hey, guys, good news, we hired mckinsey to help us solve this ethical prob zblem duff, thank you. author of "the firm" and "the golden passport. >> we'll hear from the head of the banks. he's here. he will join us on set first as we head to break, here's a look at friday's s&p 500 winners

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of journalist jamal khashoggi. treasury secretary mnuchin says it's premature to comment on sanctions yet against the kingdom until we learn more. saudi stock market tumbling today down more than 2%. and thin -- almost three in corporate news, dick parsons resigning from the board of cbs four weeks after being named its interim chief. parsons says his departure is personal, health related fiat chrysler is selling the auto parts unit to kalsonic for $10 million. it's the first big deal for mike manley who took over for sergio marchionne who passed away in july in u.s. equity futures now are green across the board we had seen the dow down a little bit diverging from the nasdaq and s&p which were both higher now we have the s&p up 10, nasdaq up sharply at 56 and the

dow up about 16. if there was any question or speculation about whether apple would design a self-driving car, apparently they actually are a car that was being used to test apple's autonomous driving system was involved in an accident it happened in california. it's only the second such accident of one of apple's test vehicles a human was driving the car at the same time. apple says its vehicle was sideswiped by another car, it was a toyota camry that had crossed into its own lanes there's no known accidents where apple car was at fault the public has to be notified of every accident by way of comparison google, weaymo has had 38 incidents or accidents since 2014 apple's program uses a lexus suv outfitted with a host of sensors and each car carries two drivers in autonomous mode the most important piece of this news is in fact that the apple autonomous vehicle system is

actually being tested. i think there has been a big question whether they were doing something like this. this report a lot of tongue swag in tech land. toy maker hasbro out with earnings missing on the top and bottom lines hasbro reported quarterly profit of $1.93 a share that compares to the consensus estimate of $2.23. hasbro's blaming this miss largely on lost revenue from the toys "r" us bankruptcy and liquidation and that had been the big question what was going to happen with toys "r" us, which is a huge outlet for hasbro sales. also what does this mean for others in the industry who's going to pick up that slack. we've heard recently from target that it's going to be adding much more space to be selling toys hopefully gearing up ahead of the holidays. right now you see again hasbro missing earnings with $1.93 versus the $2.23 the street was expecting. that stock looks like it's up six cents.

more than 1300 bankers in town a state of the industry address from the head of the american bankers association. rob is here with us on set to talk to us about this. thanks for being here. >> what's the state of the industry 24 is a huge question for the markets right now. >> we've heard from top bankers. the bank of america, things look pretty good from their perspective. >> absolutely share brian's view we kick this off the health of the industry it's strong. we have been rebounding. we have returned it's very, very positive there have been 2 trillion dollars. it's extended over the last five years. that's a demonstration of health of the overall economy certainly the industry we think obviously the

regulations have strengthened in the industry, made it more safe, sound, secure. we have a positive message to tell about the role that the u.s. banking sector is playing in terms of job creation, prosperity and economic growth exciting time. >> how come some of the financial stocks haven't risen is that good news? and yet the stocks haven't kept up pace? >> banks are doing better. every bank has its own individual circumstances one point i would want to touch on, becky, as banks are doing better, it's because the overall economy is doing better. that's a good story to tell. obviously each bank has its own circumstances. when you look at the overall health of the economy of the banking sector it is a great story to tell. that's one of the things we talk about at this convention we have a great lineup we'll talk about with kathy bisson we'll talk about ai, diversity, leadership and inclusion. >> i want to dig deeper into this whole issue as i mentioned brian mown na han, a lot of the other banking c oh os say the economy looks

great. then you also have people who watch the markets so closely who say they are concerned about what we've seen in mortgages, what we've seen in auto loans. can they be right and the ceos be right or what's the situation? >> we -- i'm looking at this more of a glass half full situation, becky yes, there can be in particular asset areas. there can be areas that we want to look at i will say this, too we are another sign of the strength and health of the industry is how customers and consumers look at banking. one of the things we're goings to unveil in an hour and a half or so is some new survey work that we did with morning consul which shows that americans are as happy with their bank as they ever have been in terms of the customer service of their bank, overall satisfaction of the bank and one thing i think is really important that jumped out at me is they view banks as the most important trusted partner in terms of keeping their information safe and secure.

>> you think that's because we're able to do online banking, app banking, all of those situations. >> that's part of it i would say our industry has taken immense stops safeguard everyone's data. we have for a long, long time. this is not a new endeavor not a new effort this is something we have been very my on pickically focused on the banking sector is the leader among all other sectors and data security. >> two questions, one -- maybe both hard to answer given the seat you're in where do you see the risks in the system, in the banking system >> sure. again, i would say the banking system right now is safer than -- >> that's the good flues i imagine you have a better insight than most. >> i'll at the time you. right now i think the policy response following dodd-frank and some of the changes we've made have made, andrew, the banking system more safe, sound, and secure where i'm looking is economic activity and financial activity outside of the regulated banking

system i think the look that the regulators have in the u.s. banking system is pronounced and very clear and the regulators are saying we like what we're seeing within the u.s. banking system i think the risk, andrew, to the financial system at large are elements outside of the u.s. banking system that would be my answer. >> the other question is of the american banks that are part of your organization, we've been talking about saudi arabia all morning. >> right. >> a lot of them have business in saudi arabia. >> yes. >> what do you advise them do they consult with you >> so we've had some of those conversations as you would imagine, particularly with more internationally active members of the aba aba represents all banks from small community banks, large globally active banks. a number of those folks have made, for example, the decision not to attend that conference coming up. we respect those decisions we certainly respect those decisions. >> rob, thanks for coming in. >> thank you. rob nichols the president and ceo of the american bankers association. coming up when we return on squawk, lawmakers calling for

restrictions on arms sales to saudi arabia after the killing of journalist jamal khashoggi. we're going to talk about potential impact on defense companies. later, get you ready for the busiest week of earnings season. 149 s&p companies set to report. we'll tell you about what to u' wch yoreating squawk right here on cnbc ♪ ♪ protect sensitive data from millions of kinds of malware, with a cloud that's secure to the core.

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welcome back to "squawk box. time now for the executive edge. this morning lawmakers calling for new restrictions on arms sales following the killing of journalist jamal khashoggi what it could mean for the big defense companies. morgan brennan is here. >> saudi arabia is the top foreign buyer of weapons that's why president trump argued friday night to keep selling the systems to saudi surrounded by ceos of lockheed martin, general dynamics, boeing, others take a listen. >> we're talking about something where a particular company ordered, you'll never guess who this is, about $110 billion worth of equipment and i assume you'd like to keep those orders. >> some of those biggest

potential orders, chinook helicopters, f-15 fighters from boeing combat ships from lockheed raytheon tanks and armored vehicles from general dynamics which have also been caught up in the saudi/canada tensions. some prospective sales have been delayed because of saudi's involvement in yemen we've had critics including lawmakers calling this latest incident potentially a tipping point. analysts, especially wall street analysts, aren't concerned they have grown international revenues aggressively in recent years but saudi still only accounts for about 5% of overall sales at the big defense companies. that's according to capital alpha. that's really just a drop in the bucket versus the pentagon which we know has been increasing its spending nonetheless, the stocks have been hit over the past month you can see that chart right there with all the big names while none have commented on all of this so far, we do have

earnings kicking off tomorrow with lockheed martin i would expect there to be questions about it. >> we saw rand paul, i don't think we showed the tape if there was a vote to block sales of weapons to saudi, that it would pass overwhelmingly >> and i think there's a very strong possibility of that i think senator -- you know, senator paul has been opposed to sales of arms to saudi for a while now in large part because of the civil war that's playing out in yemen we've seen that in terms of the sales slowing and even being stalled over the years because of everything going on in yemen. so the idea that this murder of this journalist could be a tipping point is something that folks are coming out and talking about. we'll see. >> i was looking, one of the comments is with regards to jobs, i don't think arms should ever be seen as a jobs program

if that you view takes hold, it puts him at conflict with the president and so many other years. >> like it or not we're going to see an explosion of military sales under this administration. like it or not, when you talk about weapons production, just like any other type of manufacturing, it's a game of scale. so the more we sell, the more we sell to our allies, the more it brings costs down here yes, it does absolutely support jobs in the u.s. there's a lot more debate on how it does directly but it does the other debate, president trump is right to bring it up. if we're not selling our weapons systems to saudi arabia, which is one of our key alleys, we've got the potential for russia to step in. turkey has been under fire but also because they were buying a missile defense system from russia. >> morgan brennan, thank you. >> complicated >> it's complicated. coming up, continuing our series of better investments and

lottery tickets. >> trading cards. >> is there anything worse than that up next, we're going to talk about the market for sports cards, mainly they're still mostly baseball cards. changes that have come in this industry for collectors in recent years stay with us at&t provides edge-to-edge intelligence, covering virtually every part of your finance business. and so if someone tries to breach your firewall in london & you start to panic... don't. because your cto says we've got allies on the outside... ...& security algorithms on the inside... ...& that way you can focus on expanding into eastern europe... ...& that makes the branch managers happy & yes, that's the branch managers happy. at&t provides edge-to-edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when this happens you'll know how to quickly react...

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the world series begins tomorrow night good series. dodgers taking on the red sox who are looking to win their fourth championship in the last 15 years after, you know, seemed like they would never win another one. key parts of the game for some fans and some investors is the baseball card business joining us now, david liner, global general manager of top sports and entertainment we talked about it a lot of times, david for those of us that haven't bought any baseball cards in awhile it's not that different. it is to some extent but we're not in a paperless society. i thought you could go online and save your baseball cards online is that done at this point >> yeah. i mean, today we have a vibrant trading card business. >> i want physical still >> yeah. a lot of collectors are. we have eight different apps as well so people can collect and trade

cards digitally also there's kind of both options no matter how you want to collect >> you've combine it with a lot of things. there might be a piece of a bat on one of them or an actual autograph. >> we get game-worn jerseys after the games. we cut those jerseys up, we put them in the card >> are they more valuable if you cut them up than keep them whole? >> there are people that hate to hear we cut them up, but it's more accessible. it's cheaper than buying the entire game-worn jersey. we insert those. we do a lot of autographs. we contract with hundreds of athletes across all sports, different celebrity talent as well and we insert autograph cards as well >> it's a comeback recently. but still not to the levels of the hay day that was the late '80s early '90s. >> there's been a lot of new

innovation topps has been leading a lot of that change. we've invested a lot into our apps as i mentioned. and we launched a new product called topps now where we make cards based on last night's moments available on the website for 24 hours only. you get them in three to five days >> isn't the issue about making them collectible and making them worth a lot. this box here is only two cards in that box and it's $125 for the box. what do you get in that box? >> two autograph cards in that box. >> are there other cards in that box? >> not in this box there's base cards and then what we call the hit cards, autographs and game-worn cards this just has the hits if you're a collector into that -- >> how many autograph cards would you produce in that group, for example, for the season? >> any given product -- across the entire season we'll do millions of autographs across all the different baseball players from the minor leagues to the major leagues and across

some of our other sport -- >> who am i guaranteed to get in there? a guy 3 and 14, i don't know him. >> it's a lottery. >> i'll take that more than -- what happened with the nfl what'd they tell you go fly a kite? >> we had a 50-year partnership with the nfl they chose to go a different direction. >> which direction is that >> with one of our competitors disappointing for us, we were long-term partners but businesses make their decisions. >> we got to go, but you're psyched about dodgers/red sox? >> i'm super psyched for the world series coast to coast, boston/l.a it should be great >> thanks, david liner >> thanks for having me. >> give me just one thing. >> here. these are fun to open. >> thank you when we come back, it is the busiest week of earnings season.

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monday morning markets china having one of its best days in years. a huge week for earnings on wall street what you need to watch straight ahead. tariffs, trade, and sneakers the ceo of brooks running shoes is here to talk earnings and the state of the consumer. plus it's the story that's got everyone buzzing today the mega millions growing to an insane $1.6 billion. 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 we're live at the nasdaq market site in times square let's show you what's going on dow looks it would open up about 30 points higher s&p 500 up about about 11 points higher for the third quarter -- revenue also missed street forecasts key factor according to hasbro with the liquid daation of toys us also papa john's founder john schnatter wants -- the provision negative ly impacts

them from a possible sale of papa john's. if you didn't win the mega millions jackpot on friday, neither did i or anybody else. the drawing this week is now at $1.6 billion with a "b." likely to grow larger. you add on power ball with another $600 million and you're over $2 billion. we can dream elon musk making a new -- >> elon musk making news with a tweet that -- >> is that you go for it. >> you got so excited about the lottery. >> i did >> the company founder and ceo says the first hyperloop -- actually, elon musk is a true lover of -- where are you on him now? >> i am still a believer. >> still a fan boy >> no, what i've said over the time is i don't want to bet against elon

that's like betting against humanity i'm not happy with some things he's done. >> it's like betting against humanity >> i think so. >> the hyperloop tunnel soon going to be open for public rides. the first los angeles tunnel opens on december 10th he did some other crazy stuff on twitter again recently what was it? some argument about fortnite >> i didn't read that one. the last one was the s.e.c. i read >> he wants to get rid of fortnite. >> why >> it looked like a weekend late night type situation again that's all i thought >> yeah. i did see it he calls fortnite gamers eternal virgins in a twitter spat. >> it's just getting weird >> coming from the -- i see him tweeting and i just wonder about what was the last one? the s.e.c. is the short sellers enrichment commission or something. >> here then he had twitter is

dark souls of social media, reddit is blood born, insta is zelda. >> all right in the meantime, saving humanity what did you say >> it's a line said on cnbc where he said if you're betting against elon musk is like betting against humanity. >> that's a big comment. >> yeah. it's a big comment >> okay. all right. >> okay. mr. santoli is here to talk markets. what's going on? >> what is going on? plenty going on. last week for context, seemed like the market did the minimally acceptable amount of rebound. held its gains from the prior week a lot of talk about this is maybe finally we get this rotation from big growth stocks into value strategies. i have a piece on cnbc.com looking at this. the message of the markets in th

whole phase has been a turn towards defensive stocks whether this is enduring or not is not clear i think the fact that housing and auto and all of these kind of domestic cyclical sectors have been at their lows. even retail is causing people to question just exactly what is the market trying to tell us that's the context where it's tough for the value trade to come back unless we get some clarity, this end of cycle fear is not actually imminent so look at the chart of this is basically s&p 500 growth index against the s&p 500 pure value index. pure value is statistically these are the cheapest stocks in the s&p 500. it's about a 35 percentage point performance spread over five years. so this has caused a lot of people to say finally maybe it's just due to have a little bit of a value resurgence what does it mean though what would it mean for these types of value stocks to work. you're buying kind of the disrupted company. in addition to them being cyclical, they're also old media, the entire auto supply

chain, you own it if you own this index you own all of chain mall retail and so it's -- and you own, like, 25% of it is financials including the entire insurance industry so what do you mean by value >> yeah. it's hard to think that -- >> i think it's quality. people think stability and quality is the thing to do here. but look at today, right we're going to bounce in the morning in the u.s. because we got this big china bounce. nasdaq up twice the percentage of the s&p right now right? so if we get a fourth quarter rally, it would be really weird if the big growth names that had gotten us here don't participate in a full way. >> all right let's continue this conversation joining us right now is mike thompson he is president of s&p investment advisory services and steven de sanctis from jeffreys mike, let's start with you a lot of this has to be coming from earnings. we're going to look at earnings

and try to figure out what to make of it what are they learning so far? >> it's a great earnings cycle we're coming in just under 22% right now. and it's -- all the sectors you want to see are doing well year over year growth for the third quarter. it's got great strength. you've got 11% growth in discretionary. 40%-plus in financials put aside energy which is 90% which skews it but it's a good earnings report. and yes, you know, we may have hit high water mark in terms of earnings then you drop to 8-7 those are the expectations we think those are low the real question is valuation and what happens with interest rates. earnings basically lifted us up out of that bad news with the 10-year driefing stocks lower. and it was a robust -- you know, i think there's going to be a robust quarter i think the next couple of quarters are not going to be as

modest as they are right now >> what about the outlook we're hearing from companies is it something they're stepping away where they don't have the clarity or are they forceful where they're headed in the next 6 to 12 months in. >> what i think is i've heard they're underpromising i think they don't want to get caught but i think a lot of it is predicated on what kind of economic growth -- what i like to see is the revenue growth the numbers have been by and large pretty strong. >> although revenue has actually been missing expectations. 35% of the 85 of the s&p 500 companies so far >> expectations were high, but the numbers are actually quite good what we've seen over the last cycle. we feel pretty good about that the other thing, there's a bit of an accounting lever we're going to see you're not going to get the big boost because of tax reform. you are going to get the capex deduction. that will allow companies a bit of maneuverability when they're

shifting their earnings as the next couple quarters come up >> if you hear those things, does it make you feel like there is more room to run for the stocks >> yeah. so i think we've had a nice pullback here. it's never great to have a pullback or a correction when small cap stocks are down. but if g temperatudp stays up, g to put up 20%-plus earnings growth for several more earnings to go with 5% or 6% revenue growth and so i think given where valuations have come down to, broadening out of earnings, i think we get a nice bounce in november and december. we always have a market pullback in september and october as we start to worry about, you know, the next year's earnings nour numbers. so announcements will likely run higher than average. if you look at pre-announcements for third quarter, wasn't any worse than second quarter or

third quarter. i agree where companies are underpromising and they're going to beat numbers to fourth quarter. >> can i throw another headline into the mix i'm curious if you think it's going to matter to markets or if people believe -- we haven't talked about it this morning this announcement over the weekend. >> president trump >> president trump and also steve mnuchin that there's going to be a tax cut for the middle class before the midterm do you think that's going to get factored in today? >> there's mixed reaction. i think the republicans are having a hard time to decipher this i don't see how we're going to get an additional tax cut. i'm sorry? >> you'd need 60 senators. >> yeah. and i don't know if anybody has a clue as to what we're looking at this point. >> it sounds like -- i don't know it just sounds like something for the midterms to focus on the economy. >> capex is starting to pick up.

companies are budgeting for higher capex that keeps the economy kind of moving along you get mid-teens to 20% earnings growth. that seems pretty good to me >> sounds like, you know, put more senators in, keep the house, we'll give you a tax cut. >> the suggestion was there was a plan they were going to put -- >> right >> there's nothing that can -- >> i mean, brady was in here talking 2.0. >> but they're saying this is different than 2.0 they're saying it's another plan >> right >> if you think there's even a chance for this to happen, wouldn't that be something that people would think about in terms of what that means for the market that people think that nothing's going to happen. >> i think it's too many steps ahead for the market to really -- >> anything that will push up will push up rates as we have more borrowing to go forward we're going to have to issue a lot more paper so we'll see how the bond market reacts the bond market has kind of been

relatively stable here and so with that, you know, it's just a nice little pullback in equities here. >> so you're saying that people should buy right now based on the weakness that we've seen >> i've been pretty optimistic yeah i think we have upside here. we get through the noise of the -- you know, the first couple weeks of reporting season quite frankly, it's less than 10% of the companies that have reported we haven't seen those companies that put up the good earnings numbers. >> what about the concern that a lot of people have raised? jim cramer and many others about seeing weakness in autos, weakness in housing, potential weakness in some retailers whap what is that telling us? >> first of all, the housing stocks were really good in '17 we're even -- >> forget about the stocks let's talk about the overwhelming issues in the economy. if this is a signal of weakness to come and the fed is raising rates at the wrong time. >> i think with the housing stock, you pull forward a lot in '17.

we get to '19, things will look a little bit better. i understand housing we're getting a bit of choppiness but again, the economy with consumers having jobs, getting paid more money, with companies with capex looks liex gdp is above 3% for the next few quarters which companies can benefit from >> okay. want to thank you, gentlemen, for being here today mike thompson from s&p investment advisory also steven de sanctis and mike, thank you. coming up, hasbro reporting a short time ago we're going to speak to an analyst about the sector ahead of the holiday rush. as we head to break, here's a check on oil stay tuned you're watching "squawk box"n bc o i consulted with your grandmother's doctor.

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i am a techie dad.n. i believe the best technology should feel effortless. like magic. at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. toy maker hasbro out with third quarter earnings just a short time ago the company reported profit of $1.93 a share. and that was adjusted and the estimate was for $2.23 a share on a gap basis, the company earned $2.06 versus estimates of $2.23. and revenue is actually down 0.6%.

the company is blaming the miss largely on toys r us in lost revenue from that company's -- you know, when they would deal with hasbro. not selling nearly as much because of the bankruptcy and liquidation. who in the analyst community didn't know about toys r us, eric if it really is just lost revenue from that, why didn't analysts factor that into their expectations for the company >> well, i think it's a number of issues. company does not provide guidance you know, when you look at what happened, a lot of the liquidated inventory went to the heavy discounters like five below, ollis and those type of companies. but really when you look at those numbers, a lot of the weakness that was seen is a result of international business particularly in europe

just didn't have a good read on it >> obviously, yeah the last thing you said was we remain bullish on hasbro heading into monday morning. stock's down significantly >> stock's down about 7% today but we upgraded the stock in august with the view of, look, this is a lost year. the impact ofys r us, certai issues with europe, this is going to be a tough year for the toy industry but really our upgrade was predicated on a stronger outlook in 2019. when you look at 2019, there's a lot of good news coming for hasbro you've got the next "frozen 2" movie coming out you've got the last movie of the "episode ix" for "star wars" coming out you know, there's several other unique factors for hasbro that

we think are going to drive a lot of revenue growth. this year what the company can do on its own, it's not a product problem for hasbro it's more of an industry macro issue. >> i don't know what they do without movie tie-ins, obviously. but for disney, a live action "dumbo." how they get that elephant to fly -- you have any idea logistically what that's going to involve at this point, eric there's live "lion king" too dangerous. and also "aladdin" which there's no way a person will come out of a lamp is there >> will smith as a genie, we'll see there. if you look at what "beauty and the beast" did live action, it generated a lot of revenue and resulted in a lot of toy sales and i think "aladdin" and "lion king" will be quite big for the

brand. >> and "spider-man" too. half a billion dollars of incremental revenue 2019 from those in your view >> potentially but one of the things to watch is a card battling game they have is magic the gathering arena. >> didn't know what that was >> so you're taking a traditional card battling game sort of like a pokemon type of game with the cards and taking it to the digital arena. that's a $2 billion market dominated right now by activision's game harstone you have 8 million people right now playing magic the gathering. this could be a $400 million prukts li product line >> kids aren't stopping playing with toys because of toys r us out of business. how are they making sure they're in places people can buy their

toys >> toys r us have been a declining partner for years. you've seen a lot of share gains from amazon. and i did think it was interesting in the press release, the company talked about they were unable to meet demand to new retail partners at the very end of the third quarter. hopefully that helps the fourth quarter a little bit you've already seen toy catalogs from jcpenney. you've got kohl's that's getting involved you have a lot of smaller retailers getting into it. target is going to be there as well. >> thanks, eric. eric handler quick programming note brian usually comes on our show. he's on with jim tonight which should be great. brian goldner on "mad money" at 6:00 p.m. eastern time when we come back, the latest developments on the death of saudi journalist jamal khashoggi. saudi stock market under pressure it was down by 2.7%. details after this break and later, market historian and professor of finance at the

wharton school of business jerami siegel will be our guest. we'll be right back. you'll only pay $4.95. fidelity. open an account today.

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welcome back to "squawk box" this morning saudi arabia changing its story about the killing of journalist jamal khashoggi at its istanbul consulate. hadley >> reporter: good morning, andrew you said it yourself it's going to be hard for big business as well as government to quit saudi arabia we've seen as much as a billion dollars wiped off the market since the start of last week right now the market here off about 3% 40 minutes from the close of trade and a lot of questions about what exactly happened to jamal khashoggi. let's hear what the foreign minister had to say over the weekend. >> the reports we were getting from turkey did not comport with the reports that the team had provided to us after they returned to saudi arabia the king then directed the public prosecutors to launch an investigation which he did about nine days ago. he discovered there were

discrepancies. discovered he was killed in the consulate. we don't know where the body is. the public prosecutor then put out orders to detain 18 individuals for questioning and possibly facing trial. and the king also dismissed a number of senior officials in this area. this is the first step of a long journey. we are determined to find out all the facts. >> reporter: saudi arabia's foreign minister there essentially saying what they knew at that point which was yesterday that jamal khashoggi was killed in that istanbul consulate and they didn't know where the body was later in the day, we saw a report from reuters citing a senior official here saying that that body was wrapped in a carpet before being handed off to an associate. further details continuing to emerge here. and tomorrow we're expected to hear from turkey's president recr recep erdogan. he is expected to come out with some kind of bombshell with

further details concerning this investigation. all of this just ahead of fii, this davos in the desert andrew >> are you expecting mbs to speak at this conference anymore? and do we expect other american executives -- are you hearing about who or who's not going to be there tomorrow? any new people withdrawing or going? >> reporter: at this point, mostly from the united states, mid-level bankers. and we're going to be speaking to the head of russia's sovereign wealth fund first on cnbc tomorrow morning from the conference we also know a lot of asian ceos are going to be there as well. really a different mix of people than they thought they were going to have. in terms of whether the crown prince of saudi arabia does come to the conference, it's anybody's guess. having spent years here, you can expect people to come. but whether they show up or not, bigger question. >> all right hadley gamble in riyadh, we'll speak with you more over the next couple of days. meantime, when we return, jeremy siegel will be our guest.

as we head to a break, take a isou at u.s. equity futures at th hr.back in a moment

good morning, everybody. welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. among the stories front and center this morning, a deal in the auto industry this morning fiat chrysler has sold its parts unit the buyer is japanese autoparts company kansai which is owned by kkr. check it out fiat up by just over 5%. super microcomputers says it will investigate malicious hardware against its chips earlier this month the bloomberg article had quoted sources that say chinese spies had hacked chips made by super micro and

placed them in computers of government agencies. and dick parsons has stepped down after a month because of health issues. he stepped into that role following the ouster of les moonves. parsons will be replaced by board member straus zellnick dom chu is here with the latest survey of ceo economic confidence >> it's echoing some of the themes we've talked about from a markets perspective all for the last two hours this idea that maybe it's late cycle. maybe other things are developing that's playing out right now in chief executive magazine's reading of ceo confidence. what you're seeing in that chart right now and for listeners on sirius xm, what it shows is the lowest level of ceo confidence tracked by ceo magazine so far this year. and about the lowest level we've seen in about a year's time. >> we should probably point out that these are incredibly elevated levels that you're

seeing >> this is what you saw over the course of the past six to nine months was that ceo confidence was higher because of things like the tax cuts and policy deregulation, that sort of thing if you look at the highlights, here's where we're looking there are themes developing. three of them that are the most important drivers of confidence slipping among ceos are not unfamiliar to cnbc viewers or listeners. they are fear of rising interest rates, the fed, so to speak. fears of inflation also the end of cycle fears that we spoke about and some of that's playing out in some of those revenue numbers you mentioned eed earlier in th 6:00 hour. if you look where we're seeing more or less confidence, it is large company ceos that are slightly more confident, if you look at a relative basis these are ones with a billion dollars or more in revenue they're feeling more confident, but still down from last year. where you are seeing a lot of

the lack of confidence is in small and mid-cap companies. >> not surprising. >> and the market's bearing out that way if you look at the russell 2000 or the mid-cap index, that's where you're looking where you're seeing more optimism perhaps surprisingly is in the construction-related ceos that flies in the face of the stocks that are hitting lows professional service businesses are the least optimistic and no surprise high-tech and telecoms are having the worst time right now >> what's interesting is what it means. if this is a self-fulfilling prophe prophecy if you spend less money on capital expenditures >> the other thing you want to bring up, too, is whether or not anything can change with that, right? if you do get it hypothetically another cut, maybe that changes the narrative a little bit and so this is a month-by-month

survey it's higher frequency so to speak. we'll see if that changes out. let's get a back to the markets. let's turn to a long-term bull but who has had some nuanced calls most recently. just last month i see professor siegel which was a great call but you are known and i'm going to introduce you professor jeremy siegel from wharton school of finance. your book, new edition is out. "stocks for the long run." this is a fifth edition. right? >> correct that's right >> first one was 1994. >> that's right. >> and i was going to go back to that just because we hit 27,000. in my career, i remember starting at merrill lynch when it was 800 >> yeah. >> so i could write a two-page

book about investing -- >> i remember because i'm older than you, joe. >> it should be easy to figure if it goes from 800 to 27,000, there is a long-term case -- there is a case to be made for long-term investing in stocks. i mean, that's the bottom line >> absolutely. it is the best performing asset. and i think it's going to be the best performing asset if we look out three to five years. i just think there are challenges that we face now. if you remember i was on your show early january, february, i said this was going to be zero to ten i was the biggest bear in this group of round table i still think it's going to be there. i think rising interest rates are going to be a challenge. i think corporate profit projections are too high you know, we had a great year this

i think gdp is going to look good in the upper threes but people now looking at fourth quarter, in the twos maybe next year, how do we get 12%, 13% profit increases, you know, out of a 2%, 3% gdp. and i think those interest rate profit challenges are going to keep stock prices muted for this coming year. >> i don't know, professor, if you remember you were on september 25th on "squawk box. you said i'm expecting a correction near term >> absolutely. >> that was a good call on september 25th you know, sometimes i've heard people, like, joke around that you're a perma-bull, but you said trade worries could cause a 10%, 15% correction. and you said that in september but then in 2019, you're not the jeremy siegel that you have been for 2019 either, are you >> yeah. >> you're looking for kind of a

flattish year? >> yeah. i'm looking flattish of course, you know, we got resolutions. we got the midterm election. we got interest rates. we got trade with china. i mean, certainly the midterms and what's going to happen with the trade with china, something's got to happen the next three months. how is the fed really going to engineer a soft landing, you know when you look at charts of unemployment spiking down, there's not many soft landings so there's going to be a wobble at best and with rising interest rates, that presents a thing of where am i really wanting to move in stocks you know, we talked about the fact that the selloff in emerging markets has, i think, presented unbelievable values i will admit i've been catching the falling knife in my fingers.

wow. what is it 10, 11 pe ratio there. so i think looking international, even though i know how it's done, may offer you more value looking forward than the u.s. in the near term until we see some of these rez l -- resolutions. >> just philosophically, we've seen if you think about it if we go back to either 1994 or my case 1981, we have had every different variety of president and congressional makeup that we've had. and around the margins and edges, it makes a difference i think reagan made a huge difference, obviously. but stocks, i mean, capitalist, the american spirit, whatever it is, it seems to flourish no

matter what happens over time. that's probably going to continue i think warren buffett would say the same thing >> the greatest bull market we had were during eight years of the clinton administration >> following reagan -- >> i think we got to say -- and i think -- >> reagan cultivated that. >> yeah. absolutely and he rode the ball listen i think the trump deregulation and the tax cut are -- were extreme positives for the market and we've seen it. you know, what is it now 25% since he's been elected. i think justifiably so it's just right now, you know, it's a 50-year low you know, the early call for the jobs figure is nearly 200,000 again. we're only producing a hundred thousand jobs through

demographics that cuts into that unemployment as an economist, i need to see how that gets resolved before i can see a clear way for another leg to this bull market. >> you know, professor, i didn't know you were coming on today. and i can't guarantee you that i'm going to be there to preinterview you down at wharton. we actually met for brunch on sunday at the white dog which is right on campus down there and actually we had a business proposal have you thought about that? about a possible financial literacy book that we can all sort of combine on since you're a best-selling author already? are you too busy what are we doing there? >> listen. i've been teaching for, you know, nearly a half a century all sorts of courses to try to get people to understand how important finance is and economics is to our well

being. and certainly if i have time in my crazy busy schedule, i'll see if -- >> he wants to write the book himself. >> i think that's the most important thing that we have >> we just got to -- and have we figured out what scrapple is have you had -- do you know what it is? >> i do. >> what's scrapple >> we asked the waitress and she said you don't want to know. >> it's pig intestines >> it's pork waste >> oh, yeah. i didn't catch everything she was saying i was so pleased to meet your family and your daughter who was thrilled to be there that makes me feel good. >> we've expanded our relationship now >> it was a great meeting. >> excellent thank you, jeremy. like i say, next time we're just -- i don't know we really can't -- i can't do that i can't spend that much attention on each individual guest. you know, my whole family.

but it was fun it was great to see you down there. >> it was wonderful. >> thanks. and thanks for today that's a little different than what you normally here from jeremy siegel. >> yeah. little bit more cautious still >> great thanks >> correction for you. it's pork scraps and trimmings combined with corn meal. >> you know what i almost got but couldn't get past the name was the pork belly eggs benedict would you go for -- is that good really >> i don't think i could get past the name either pork bellies >> there was no kale on the menu, andrew no tofu. >> perfect for you >> they had a churro flavored wha waffle at the white dog. how good would that be >> anything churro folks, when we come back today, the ceo of brooks running joins us to talk about

competitive sneaker market right now let's get a check on the futures at this hour been watching things and right now looks like futures are up across the board dow futures had been weaker earlier. now they're kaindicated up "squawk bo wl rhtac here. we perform over 50,000 operations a year in places like this. for the past 15 years, chubb has identified ways that we can strengthen our safety measures. and today, our hospitals have some of the best patient safety records in the country. now, we're constructing new buildings that will define the future of piedmont and chubb is here, insuring our expansion. two million patients a year depend on us. and we depend on chubb.

welcome back to "squawk box," everybody. we've been watching the futures this morning they have been picking up steam. you can see now they're green across the board dow futures which had been negative when we started now up about 80 points. and the nasdaq is indicated up by over 81 points. the apparel industry has been hit by recent tariffs and ceos are attempting to dodge the impacts. joining us now with quarterly numbers j -- is jim weber. >> we always report our revenue because the industry data is out there for everyone to see. we're having a great year this year we're having a phenomenal year >> i want to speak to that but also want to get you on the trade war here and whatever else you think is about to happen means. >> well, we think -- we're

preparing for a 25% tariff on our business and that's on top of 20% tariffs already on running shoes we're going to be at 45% tariff on a running shoe. and it's not a series of good options. you know, we have empathy for intellectual property. we have trademarks all over the world. some, you know, 25 years ago in china, antesports we think lifted our logo. so we're defending our logo all around the world including in the states from them but the tariffs are a tough way to solve that. >> would you ever think of changing your supply chain moving it? >> here are the choices we have. we can change prices but we're not going to be able to do that. big brands aren't going to raise prices the second thing we could do is eat it we're not going to be able to invest in much that's a lot of margin at 45%. so we're going to have to move it and assume it's long-term the conclusion we've come to is

move it out of china >> you assume the tariffs are long-term and can't get resolved. >> we have 50 employees some of them over a decade in china, nationals that are highly skilled. they're our people it's very interruptive to move but we don't do musical chairs in our supply chain. >> where do you move >> probably for us, vietnam. and the door will close there because of the labor shortages so you have to get through that. on small brands and medium size brands, i think these tariffs are really going to be a problem. >> what's the change because of labor construction meaning everybody is ready to jump to the next place. >> there won't be space. >> what is the additional cost of being in vietnam versus china? and what's the additional cost in terms of both labor skill, et cetera do you think they have -- is this a plug and play situation for you to move to vietnam

or how much more expensive it will be. >> going from 50% of our footwear in china to zero which is what likely will happen, the transition will cost us a lot. but once we get there, we think we'll set up competitively for the states and all around the world. the tariffs are lower from vietnam. >> is there anything chinese officials are doing to try to keep you there >> not really. we're smaller. so in the broader footwear industry, they've been leaving china for awhile >> you have conversations, i imagine, with warren buffett about this topic does he tell you >> it's one of those things whenever i talk to warren about that, he suggest i focus on my customer these issues are so big. they're so big and they're not controllable >> so the kaepernick situation,

we had adidas. adidas was on. ceo said he thought we don't want to do divisive things but then they tried to sign kaepernick before nike so i'm not sure about that we're in a market correction here and have been for a couple of weeks people are watching nike stock it's $74 now it went up after -- first it went down, then it went up to new highs after signing kaepernick any effects whatsoever with brooks because of that people not buying nikes? people buying more nikes have you seen anything at all? >> we haven't seen anything at the shoe or people level sports should be bringing people together running is that way. new york marathon, over 50,000 runners. how many ountries? dozens and dozens of countries you know, sports should bring people together. you know, nothing surprised me about that whole scenario, frankly. >> let's go quickly to your

sales up 29% you can't get that easily. is that coming through sales in store, online, where's the big mix? >> what's so powerful about our category is great product can reignite any brand right now we've got fantastic product. we're gaining share. we're up 29% in europe we're up 25% in asia, latin america. it's broad based >> before i let you go, you have a new shoe i know the marathon is coming up i need to ask about the nike zoom vapor fly elite this has the metal plate in the bottom that some people think should be illegal because it effectively makes it easier to run. they say 5% to 10% of the energy gets put back to you so people are wanting to run in this you can't run in it for a long time you can run like a marathon, little bit more. you don't train in this shoe what do you think of that shoe >> there's been springs in shoes literally for decades. so spring rate and energy return

is a real thing. you know -- many brands are working on technologies like that we will have them. >> but you don't think that shoe should be outlawed >> every sport has to define its rules. i don't have a point of view on it >> you admire that shoe, or you want to make a shoe like it? what >> we admire fast athletes and gear matters gear matters you know, i think if you put rocket packs on the shoes, it probably should be illegal but a little bit of spring rate over the course of a marathon, every shoe has it. it's just a question of how much our energize dna amp material has energy return. it's a question of how much. >> okay. jim weber from brooks, thank you. >> appreciate it coming up, we'll look at stocks to watch. we love stocks cat eugh tn'donoofhem. "squawk box" will be right back. call the insurance company it's them, calling us. it's going to be a week before they can get through on these roads shhh, sorry, i didn't catch that.

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unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, 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 to "squawk box. take a look at some stocks to watch this morning kimberly clark named chief operating officer michael zhu as its new ceo. separately the consumer products company reported a profit of $1.71 per share beating forecasts. halliburton reported 50 cents per share. that beat estimates by a penny halliburton saying it expects a rebound in north american

profits which were temporarily impacted by capacity constraints and complaints recreational vehicle maker polaris seeing shares rise in premarket trading. earned $1.86 per quarter beating estimate of $1.57. they also maintained their forecast and jacobs engineering has $3.3 billion they want to focus on higher growth businesses. when "squawk box" returns, rick rieder is going to join us for the hour coming up. ♪ daddy, mommy's on the phone!

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the market's wild ride we're going to find out if a busy stretch for earnings will spark another week for volatility china stocks soaring overnight. closing higher by 4% we'll talk about the country's slower growth. plus intel trading higher this morning we'll talk to the analyst who upgradesed the stock straight ahead as the final hour of

"squawk box" begins right now. ♪ live from the most powerful city in the world, new york, this is "squawk box. >> beautiful flag. 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 the futures right now are in the green. up 65 on the dow the s&p indicated up 15 or so. the nasdaq indicated up 81 strong session in china has a lot to do with what's happening now. >> they propped up the market. as the market was just come iin off of a four-year low >> you know why they did that over there >> is this a punch line? >> no. because they can and they definitely can. we've got rick rieder for an hour we're going to talk about this.

>> there's a fascinating new note he has on this. before we get to that, let's talk about what else is talked about today. dick parsons is resigning at cbs because of health statements he says he's been fighting multiple myeloma and multiple complications has advised doctors to reduce his work lode. he had been brought in after les moonves was forced to resign after allegations of sexual misconduct straus zelnik will take over retail news for you today too. sears chairman eddie lampert is in talks with a potential partner. the retailer is hoping to get enough funding to stay open during the holiday season. and one big earnings report to tell you about. hasbro shares falling sharply this morning after the company missed estimates on both the top and bot top litom lines.

the liquidation of toys r us is what they're blaming and halloween is scaring off the competition at the box office the film bringing in an estimated $77.5 million. joe trying to do his own sound effects now. that's what that is. >> was that too loud. >> yeah. it was a little too close. >> oh, the audio guy said thanks. >> second highest opening. he's got his telephone out is that a new watch, joseph? >> no. that's a universal -- >> i just remember when mark haines drew his own graphics >> you don't like me -- i mean, it is a great franchise. you got to admit this is a big deal people are attributing a lot of

political type stuff to this you know, kind of a rorschach. me too, all that stuff jamie lee curtis, this is the biggest opening ever for a female star over 55. $77 million, sorkin. embrace it you don't really like -- >> i've never been a true horror guy. >> i was until the first time i was pregnant then i kind of lost it ever since. this one i'm a little interested in seeing. let's get to our guest host today. blackrock's chief rick rieder is here and he's got some thoughts that you absolutely have to hear rick, you break things down by saying the markets right now and the economy is a bit of a jenga game you worry about taking the bricks away. why don't you explain that >> a couple of things to point out. the last few years we've lived in this extraordinary world of liquidity. now we're coming off and so

everybody knows when you exit quantitative easing and when the economy improves, you move your way out. what happens is what happens where we were two years ago is different. why you see the volatility in some of these markets. there's something important. it's not just as the ecb and qe. not only is the fed exiting qe the u.s. treasury is issuing a trillion dollars net supply. that drains liquidity from the system when you raise short-term interest rates and the treasury issues debt to fund the stimulus, we're putting a tremendous amount of debt into the markets which has to be absorbed wh that creates a dynamic this is what i do every week we've got a lot of debt. so you've got markets that are going to be more volatile going forward. >> are there sellers in this market you make it look like it's not necessarily the big problem that there are sellers, just there's a lot more supply and you don't have the banks buying that were

before >> not only do you have supply of treasury, the banks aren't buying as much a lot of it went internationally. a lot of it went to china. a lot of it went to japan. it's very, very mixed. so you've got to digest all this supply domestically. by the way, we will. but you push front end interest rates higher, this flows across the industry you know what else the 2-year note gets me 3% i don't have to take credit risk, yield curve risk 3%, life is good >> and who wants 50 basis points in germany >> so there's an interesting dynamic. i agree with that. however, if you're sitting in japan, you got to hedge the curren currency ironically, actually bunds are more attractive for japan. which is a funky dynamic today. >> not to mention the players in europe are forced into situations

>> that's exactly right. you have a dynamic that creates more volatility. >> so i love this theory, this insight you have to it it explains a lot of what we've been talking about the last couple of weeks. where you have the big banks who can say, look, consumer's strong i look at the mortgages we're issuing. i look at what we're issuing in terms of big lending to corporations it all looks great but you have people who marwatc the markets very closely concerned. maybe this explains what they're seeing >> there are parts of the economy that are not interest rate sensitive the way commerce works today, base cle the whole place was interest rate sensitive before now there are those that aren't. but if you take the industries that are interest rate sensitive, housing you've talked about it on the show you look at housing starts, mortgage applications, they're really soft. you look at loan rates for autos now. why are auto stocks coming under pressure that's one of the reasons. the interest rate sensitive

parts of the economy are starting to show real pressure the home builder etf is down from the highs part of the reason the fed is going to pause i think you'll go into december and pause. if you hit a mortgage rate at 5%, you're talking about tangible tightening. there's uncertainty about where is a neutral rate. markets hate uncertainty >> that's the last part of this we really need to emphasize. if anybody wasn't paying attention to what you just said, you hear all of this and you need to put on your bear hat >> listen, the fed is -- everybody's focused on -- and i thought some of the communication, we're not sure where the neutral rate is. markets can't stand uncertainty. it can be a number even if the number is a bit tighter. just give me a number. i don't know how far you're going to go. so there's one overriding which is right i think there's one overriding

fact the data is showing you something different than it was a year ago, year and a half ago. you look at your ceo confidence survey you see it down. by the way, the number i thought was mind blowing last week, the university of michigan inflation expectations five to ten year hit the lowest level it's hit since they've been doing that. >> that's the consumer confidence reading >> totally but particularly inflation component thereof. meaning the fed will react to the data if the fed reacts to the data, it will tell them something different. >> how much do you think the potential drag on mortgages and the moem market -- because you're starting to see that come down a bit -- is going to have impact effect in terms of impacting consumer come december >> so it's a great complex question but it definitely impacts the consumer one thing is fascinating net disposal income are coming higher but the interesting thing is more people are putting money in a savings now.

i think with people saying wages are up, i'm not sure that's right. >> they're putting money in savings accounts because you get more interest. >> you're a little concerned about what is my retirement package going to be. >> opposed to putting it in the stock market or opposed to going in and buying stuff >> depending on its the highest into stocks. it's a little bit different. i think the market is underestimated in the terms of the broader economy. it is the majority of wealth for most consumers in the country. and if you're worried about housing coming under a bit of pressure, then it does start to pull back on consumption i think a all of these things are at the margin. it's still in good shape, but that acceleration of growth is starting to level off. part of why the fed could say it's leveling off, inflation is not overheating as many suggests >> how much does the fed look at

china. whatever you think the slowdown was in terms of the numbers last week >> when you take this year's size of the way they grow, the fed has to really watch the global economy softening emerging markets are down a couple hundred basis points of growth the last six to nine months to the fed, it's one of the indicators at the margin, all these things global growth, housing, auto -- you know, at the margin it's leveling off it's not bad it's starting to level off and you're not creating exoe ining t inflation. >> so you tell people to what as a result of all of this? go ahead and invest in the stock market and what do you do with bonds? >> i'm a big believer and you run more of a barbell portfolio. what does that mean? if you were an individual, why would you own 30 year treasuries when i can own the front end of

the yield curve? gosh, i'll own two years not to take the risk. also buy some equities i do think that equities have some upside to them. if you look at free cash flows, still pretty attractive. it's a question of what do i own in the middle? stuff i bought for yield because i was at a high yield market not really anymore so i'll run treasuries, have some carry my portfolio, my savings is okay by the way, i think equities are going to be fine you said to me this year, you know, you got a little bit to get through and then do i think they'll end higher i think so >> how much is because of the pullback we've seen in the last two weeks? it would be there even without it >> price matters i think these valuations are attractive the other thing important, at the beginning of the year, we

thought it could go to 3.25% it hit that. i don't think interest rates are moving much higher from here >> so in investing the hardest thing to do is usually the right thing to do. who in their right mind would buy a 30-year? which makes me think that you might -- like, two years from now it's like i wish i would have gotten 30-year at 3.5%. unless something is different globally which is holding down, because to get that type of interest in something going up 30 years, you should have to pay a lot more interest. and you don't have to. why not? >> so pension funds and insurance companies, they need it pension funds particularly part of what's pressuring the equity market -- >> so it doesn't mean it's the right thing to buy >> if you're an individual, no why would you own it >> i don't know. because i don't want to. normally that's -- all right we have so many more questions for rick luckily he's with us for the rest of the show okay coming up when we return, chinese stocks surging overnight.

we're going to talk about the government intervention that sparked that rally then later, a big upgrade to tell you about intel shares trading higher this morning. we'll get the analyst call ayraight ahead st tuned you're watching "squawk" on cnbc each day our planet awakens with signs of opportunity. but with opportunity comes risk. and to manage this risk, the world turns to cme group. we help farmers lock in future prices,

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becowelcome back to "squawk" this morning meeting for the tenth time in two months the country facing mounting pressure on the trade tension with the u.s for the latest, i want to bring in leland miller thank you for joining us i want to go a couple directions on this. i want to find out what you think really happened overnight in terms of what you think the government did to this point, we set it up as a function of the slowdown and the trade war. my question is, is it the trade war or is it something truly just domestic? is it the leverage or

deleveraging that's taking place in china how should we read this? >> well, they boosted the economy for two years in the run-up to the party congress you are going to see steam off the engine but what trump did with his tariffs is pull a lot of the growth forward and really scare them in terms of what might happen in 2019 so people pulled growth forward and it weakened it afterward then they pulled more forward and they talk about the $200 billion and talk of $270 billion in tariffs so you have a weakening effect our data shows that manufacturing has been doing poorly >> how much are we supposed to read into the tariff situation versus what's happening on the ground in china? >> i think you have weakening but the tariff sictuation has created a bad potential problem for china this year. potentially in a big way first quarter. if this ramps up january 1st, the chinese economy will be hurting badly even with some of these other growth engines

>> when did the sniffles turn into a cold for the rest of us this turned into what'd you say? 40%? >> of dollar growth, yeah. >> i think january 1 is pivotal. if we see a pullback at the meeting next month, markets are going to be happy with that. they're going to see this -- it won't be a reversion to the status quo but it could be a de-escalation of the tariff ramp up on january 1st. if you see that, this will be reassuring to markets. >> the temporary measures taking over the weekend, stock now popping today. >> right >> what do you think they actually did >> well, they did what they always do. they just waited more time to do it if you look back in 2015, they had an active national team. they jumped in too soon. you had the greek mess hit so a bigger extraneous event had happened and it blew through the national team levels they waited longer than they wanted but this time they said we will

defend the economy and consumers and investors had been looking at that as a cue. >> let's talk about longer term, what these tariffs might mean. we just had jim weber here, ceo of brooks running shoes. they are now looking very actively to move out of china. he says they'll probably move to vietnam. once they do that, those jobs are gone they're never coming back. what are the long-term implications we've heard jack ma talk about long-term this could be a ten-year issue between china and the u.s. but what are the long-term impacts for china if those suppliers or the companies that source move offshore >> that's the problem. the long-term implications are a fundamental decoupling of the two economies. i think we can separate that from whether we have a trade deal pause of the g20. too many are conflating short-term and long-term deals whether or not we have a pause on tariffs next month, that's separate from the fact that the two economies are working. this is under president trump now. it will probably be under the

next two president of the united states moving away from having chinese sourced production and you will see this separate because we think that they're going to decouple the economies in very serious ways once you kbo that direction -- >> there's no undoing it >> we got to go, but how much of is that supply chain business actually comes back in the form of manufacturing in the united states versus what we just talked about with brooks going to vietnam >> a fair amount but i think there is a lot of appetite in southeast asia to take the low cost production that will go there but a lot of the technology things, there's an appetite to bring it here. you could see a lot of this be on shore again >> all right leland miller, china beige book ceo. appreciate it. when we come back, we'll talk to the analyst who made the call on intel. shares up 1.6% as we head to break, take a look an the premarket trade in the fag stocks "squawk box" will be right back. alerts -- wouldn't you like one from the market

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welcome back to "squawk box. news alert nomura upgrading intel to buy. joining us on the line is the analyst who made that call romit shah he is here this morning. tell us what made you push this thing from a neutral to a buy. >> yeah, if you look at the

stock since april, it's pulled back over 20%. the multiple's gone from 14.5 times to close to 10 times that contraction has been almost entirely due to manufacturing delays as well as, you know, the resignation of their ceo >> right >> both those things are going to get resolved soon >> is this a call intel specific or are you saying something larger about the sector? >> no. it's intel specific. i think the sector overall is under some pressure. you know, there isn't a company in our coverage that we think will be raising estimates in october or november, but i think intel is perhaps, you know, the only exception >> what's going to be the tipping point for this to get to $50? >> i think it's a combination of things i think you'll see them come out on thursday and raise estimates. i think that you'll see them talk more positively about their

manufacturing execution and the transition particularly as it relates to their server share. and then i think some time between now and the end of the year we'll see them announce a new ceo and hopefully that candidate's external >> so you're not happy with anybody internal right now >> it's not that the candidates internally are bad, it's just that intel, i think, needs of outside perspective. this is a company that spends 50% of revenues on capex that's high for a business, you know, not really growing more than a few percent a year. >> we got to go but make it interesting. who would you like to see the ceo of intel >> pat gelfinger >> appreciate it we'll keep our eyes on intel today. coming up, you didn't win the lottery over the weekend and you won't necessarily win this week either maybe. somebody apparently will, but i

round it down. i really don't think anyone does and they're miserable after they do win because everyone just wants something from them. we're going to tell you how big the jackpot just got how many figures is it >> i just read a whole piece about what you're supposed to do if you win >> supposed to be ten figures. as we head to break, take a look at u.s. equity futures 58 and the nasdaq up 81 s&p up 15. we'll be back. ou're awake! finally. you're still here? come on, denise. we're voya! we stay with you to and through retirement... with solutions to help provide income throughout. i get that voya is with me through retirement, i'm just surprised it means in my kitchen. oh. so, that means no breakfast? i said there might be breakfast. i was really looking forward to breakfast. i know... voya. helping you to and through retirement.

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♪ good morning welcome back to "squawk box" here on cnbc we're live at the nasdaq market site in times square ebay trying to cash in on a desire by consumers to trade up to new smartphones start a program called ebay instant selling. ebay says its program provides a 40% higher value for an old smartphone than current trading programs there's a number of them out

there that i've been participating in for years separately, fico planning to roll out a new scoring system. to debut in 2019 and will change how to manage cash in checking and savings. it's designed to factor in cash management that's interesting they're doing it themselves. also mtv rebooting "the real world" credited with inventing the reality tv genre in the early '90s only this time it's going to be appear on facebook's video on demand watch i think seattle was mine >> i don't think i've ever watched -- >> no. >> tweet me if you have a favorite real world season no jackpot winners over the weekend. the mega millions jackpot has surged to $1.6 billion and power ball's jackpot is now

up to $620 million the next drawings are tuesday for megamillions and wednesday for power ball >> i have a tip for everybody. if you don't want to go public if you win, you need to buy it in delaware, kansas, maryland, north dakota, ohio, and south carolina >> you're so convinced you would win, you buy there to buy tickets? >> if you didn't want everybody to know you're the winner. a lot of problems arise when everybody knows you're a winner. you have to set trusts and others >> if you read any -- people that come into a large amount of money, if you earn it it's a different feeling than if it were dropped in your lap >> if you drove to delaware, you might be earning it. >> so when i try to talk about, like, i don't know the patriots or -- you're -- dodgers. >> right >> you're watching "real world." >> that's why -- >> well, back in ae day. >> not anymore what are you watching now?

>> i'm watching my children. >> okay. >> my children i'm watching my children watching "spider-man." >> okay. but it's not the "real world". >> no. trust me >> that would explain it federal reserve is widely expected to raise interest rates one more time before the end of the year with president trump's criticism of the fed, it's possible there's even more attention on what the central bank might or might not do joining us now danielle de martino booth. i always wanted to ask you, richard always wanted to -- i'm talking about richard fisher who you advised for eight years. he wanted to raise rates because of asset bubble or asset inflation awhile ago and i wonder whether you think in hindsight and whether you were advising him since we haven't had much inflation and since the rest of the world, we've outperformed them, was that the wrong -- would that have been a mistake two, three,

four years ago or would that have been a time we should have done it and maybe now is not the time? how do you view that >> you know, i think that had powell's predecessors been a little less glacial and a little more measured and done maybe once a quarter for the past few years, remember back during the taper tantrum. the bond market initially got upset. then it said, fine, we'll deal with it. this is years ago we could have come in as an institution and the fed could have been a little bit more aggressive in the pace of raising rates remember, janet yellen was implemented at the slowest pace of tightening in the history 104-year history of the federal reserve. so i think we could have been a little more aggressive in the pace and that today jay powell wouldn't be struggling so hard to get former rate hikes off >> do you think that we're near neutral now or not >> i don't -- it doesn't matter what i think it matters what jay powell thinks

and i think that jay powell thinks neutral is closer and when you have others dovish coming out and saying we can hike above that neutral rate in need be over the interim, you saw them in the meeting minutes echo that same thing that there were a number on the committee that they could hike beyond neutral, that takes us all the way to the end of next year in theory based on what they're saying >> and some of your comments, it seems like you're saying it's okay for the executive branch that appoints the fed chair. it's okay for them to job own and maybe say, you know, i like -- don't mess up my economy by raising rates maybe the one thing you have a problem with how he did it because it could be self-defeating because powell is painted into a corner what are your feelings on how the president has been jawboning the fed? >> rick was talking this morning about housing. that's a bellwether, a leading indicator. we've got pending home sales

out. but we've got one more batch before that on housing data. what happens if it's a worse month than now what if he decides to pause in december that would seem to be a pr victory for trump just because it looked -- it would look like since he said the fed's crazy, he was able to have powell back down i think he wants to truly maintain independence at the fed and he hasn't said a word about any of the criticism which i give him creagreat credit for >> but this isn't the first time a president has publicly or privately done something. >> no. h.w. bush, the fed took the blame for that nixon was not -- nixon didn't have the same social media outlets, obviously, that trump has today. he didn't have a twitter account. but had he, nixon was fairly public in his disregard for the fed. >> got to think about that

to be on "saturday night live," if nixon had twitter >> oh, man >> i was just thinking what if president trump drank? >> that's what he says i think i would have been -- i think, oh, love to see bill clinton's twitter. would we not have liked to see that too he might have used social media for a totally different, but no. thank you, danielle. we appreciate it coming up next, our what's working series continues with some portfolio names that could make you some money. we're going to talk opportunities in pharma for profit education and gaming. we're back with that and more. >> swiping right a lot ur ride. ur ride. (bicycle bell sound) ♪ ♪ (bicycle bell sound) ♪ ♪ (bicycle bell sound) ♪ ♪ explore more with a guaranteed 4pm checkout

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welcome back to "squawk box" this morning take a look at futures they are up. dow up about 38 points now s&p 500 up about 13 points nasdaq looking to open about 71 points higher. all right. the russell 2000 which tracks small stocks has taken a tumble since it reached a 52-week high the end of august. our next guest is portfolio manager at william blair he sees some positive signals and is excited about a few stocks in this space he runs the william blair small cap growth fund up 11% year to date let's talk about why you think now is the right time to buy small caps >> yeah. hi, becky. how are you?

i think it's a really good time to buy small cap stocks right now. i think this is the pause that refreshes this correction we've had since the market peaked out in august. i think we're probably down about 13.5% since that time. and we're going into earnings season now september and october always tough months for the stock market especially small caps and, you know, so far i think that earnings growth is looking okay for small caps. >> let's talk about one stock you like in particular that's grand canyon education. what is it that you like >> yeah. grand canyon is a great company. it's been one of the best growth stocks we've had in our portfolio since 2008 what grand canyon is, it's both a not for profit university out in arizona as well as it's a services company they split the two businesses middle of this year. and grand canyon has about 90,000 students both online and on their ground campus in total.

and grand canyon education is a service company that basically provides marketing, admission help, back office, technology services to it and we'll take on other clients along the way. >> jim cramer's concern was people wait until after the election to see what happens he said republicans, these stocks tend to do well under republican leadership. but when it comes to the democrats, they seem to look at this entire category as sort of predatory. what do you say to that concern? >> well, i think that, you know, the for profit education stocks all took a beating back when they changed some of the laws under the obama administration but i think since the new administration has been here, regulation has eased up a little and a lot of the for-profit colleges have certainly changed their marketing modes. that's one of the reasons why grand canyon split into two businesses now that grand canyon university is a not for profit, it makes it

a whole different ball game. less regulations on that, so they're treated the same as any other not for profit college and the service side of their business is a very, very profitable piece that they can do for grand canyon as well as for other schools. >> mike, another stock you like a dave & busters entertainment is that a call on the consumer or is this specific to dave & buster >> i wouldn't say it's a call on the consumer but what we like about them, it's been one of the best growth stories in the restaurant and entertainment space. they grow probably double digits every year from here in terms of units. we think they can double the store base they have struggled on the comp stores side. they've had five consecutive quarters of down comps we think this quarter will be the last quarter then we'll see a positive inflection there and as far aswhat we like abou the business is a lot of their profits are driven by the entertainment side so it's a unique concept and with the new virtual reality

games that they've put in the locations, we're seeing a nice uptick in the business >> our guest host today is rick rieder i realize you focus more on the credit markets, but you have made a call that suggests it's a good time to put into money. what do you think of small caps in particular because they've come down much more? >> 100% right. small caps have really gotten hurt i was looking at it over the weekend. the potential upside of their bouncing back is significant the u.s. consumer is still -- and we have a 3.7% unemployment rate more moneys getting into savings, but they're still consuming at a good pace particularly things that are small luxuries that are actually -- you think about the dynamic of buying a house today. but, you know, what is regular consumption, consumers are going to be in good shape. >> we talked about ceo confidence while it's still high, it's come down lowest level we've seen this year and the bulk of that was coming from the mid and small size company ceos

>> the trade thing, the uncertainty around trade is significant. as you highlighted, you've got interest rates accelerating, wages accelerating all of those things tend to weigh on you but your point is, we're talking about we've been in what i would argue is a surging economy for the last year. and quite frankly, i think started in summer of '16 you put some stimulus in in significant regard allowed companies to spend on capex. only point being i think you're starting to see a bend and what is -- we're not going into recession for awhile but can you see the consumer still hold up the economy? can you see the economy level off from what are high growth rates? i think so >> let's talk more broadly about that if you did have concerns about the small caps, what would it be >> small caps have been on a great run over the last several years. especially on the small growth side smaller companies do tend to do

better when you've got issues that are going on overseas they don't effect small cap stocks nearly as much. i mean, you always worry about change in administration we do have midterm elections coming up and that could create some volatility around the stock market and small caps in particular but i think this is a got time to own small caps. they tend to have a nice rally especially after the downturn we just had >> all right, mike thank you for joining us today mike is portfolio manager at william blair and our guest host again for this morning is rick rieder when we return, jim cramer live from the new york stock exchange we're going to ask him quite a few things maybe about china. here are the futures right now he does have hasbro on tonight too. we might talk about that futures up about 53. almost 80 on the nasdaq. we'll be right back.

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let's get down to the new york stock exchange where we find jim cramer. jim, watching china again and i've read some of your previous

comments do they ever get to the point where they go, this is too expensive, we're not going to keep doing this? or can they do it forever? can they decide where their market is? >> i think that the problem with them is that they're not going to have to decide. because we've decided for them i don't think this is have to dl decide for them. it is not about economic or trade. it was initially about a new cold war and anyone who's still going to try to do a lot of business and china and has to recognize china has to become the enemy of president trump in many different ways and not just economics. i don't even know. listen to larry kudlow i don't know what the chinese can do to be able to get on the other side of the u.s., you know what, we are not your enemy? this is not about trade. >> this down trend, it looks like it could. it is not above of the line. >> the chinese can spend -- i don't know, they can borrow,

that'll be why not i think they would want to keep it 2500 so it would not be some sort of revolution i think we favor regime change in china that's what you will be hearing. next year is the theme >> jim, what does that mean for big american company like apple that has so much supply chain. >> they're in the cross firms. ty think regime change, i thin that's going to be the peter navarro theme regime change. it is going to shock people. when you hear that, china may pull back. regime change rhetoric is what could change china's mind. that's too hard for china. there is a lot of leading intellectuals who have more faith in china than the united states because they hate trump so much. i think they are blind about it, much more than trying to be able to sell on elevators over there.

>> i don't know if you heard this morning brooks running they're looking to pull out their sources there or go to vietnam >> everybody >> obviously they're small company, we have to hurry and do this before all the companies are full >> i totally agree nike said don't worry they'll move out of china. the whole theme was don't worry about china. they'll be able to pull out of china. they go right there. i actually think that people have to recognize that this is not about trying to make more money in china or less it is about you got to get out of china because we are closing the door on china. china may be able to do something about that this is about making it so that regime falls >> that's very compelling and i don't know if anyone is thinking about it that way. i know you have brian goldman on what the hell happen is it toys r' us ?

>> i think the toys r' us toys start to pierce in other places. in the end, i think people come through it i know matel does not want to sell because they have a new ceo. i think there is an endless amount of inventory. sears has a lot of inventory the fact is there is a lot of inventories kicking around and jc penney starts to read their problems i agree are rick, we don't know how much consumers are going to carry us reagan was to soviet union as trump wants to be to china that's trump's goal and it is working in terms of the fact that the -- whether you hate

them or like them. the elites lake the prc, they are more powerful than we are. i don't think trump likes that the elites said that we got to emulate china. i think we are sick of that. >> we don't need to talk about anything else, jim, if you don't want to. >> we are sick of emulating china. >> everybody's game was tough. our game is -- i left at the end of three quarter, i want to beat traffic. i should >> you never do that >> how great is al michael a lot of people are thinking of the number 56.5. he's great, is it? >> they're so easy to listen to. >> i know. >> i find them soothing. >> you like tony romo? >> i do like tony.

>> i think i don't >> the problem with tony is he's on cbs that's my least watched network at home. >> atta boy. >> i like hearing that, i will see you at the halloween of whatever showing you want to go. >> done, thank you guys. >> we'll see you in a few. much more from our guest, rick re re reider and we'll tell you of the battle in san francisco. "squawk box" will be right back. geico has over 75 years of great savings and service.

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welcome back to "squawk box. this is a future caantastifanta. mark benioff urging for jerez se jerez -- residents to vote for hess program benioff tweeted out in this but he has been in a spat, i don't know if you follow the whole thing with a number of big executives there is a heomeless problem in san francisco. jack dorsey prefers what he calls a long-term solution to the problem, he believes it is a

short term solution of the problem. it is possible that square will be taxed $20 billion so there is a lot of money on the line benioff tweets the 75 homeless people on san francisco streets, we can solve it now by critical funding and mental health help is the answer. a lot of companies are back on forth on this. san francisco has been fighting the initiative and benioff quite publicly i want to get back to our guest host this morning of blackrock, rick reed reer >> there is an amazing stat, all the metals combined and they're the largest importer, i think it is all about technology.

technology to shift in comers and some of the technology stocks, ultimately, this is not like the internet bubble when you look at the earnings that are coming out and at the top line revenue, it is impre impressive stuff >> rick is a tesla fan >> thanks. >> make sure you join us tomorrow, "squawk on the street" is next. ♪ good monday morning, welcome to "squawk on the street," i am carl quintanilla with david faber and jim cramer futures are capped by a ged number by friday the best day for china's stocks in three years as xi vows