♪ sweet caroline ♪ good times never seemed so good ♪ 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. our guest host for the hour is jason trenner. he comes from strategic partners thank you for coming in. >> thank you for having me. >> andrew, thank you for coming in. >> i'm feeling better. not 100% >> i still hear it in your voice. >> yeah. >> let's take a look at the u.s. equities markets the bulls are staging a slight comeback emphasis on slight the dow few furs autures are ind up after the carnage, there's a lot more catching up to do s&p 500 up by 21 both the dow and s&p 500 are still negative this year even with the gains this morning.

nasdaq up by 91 points it is indicated positive for the years. they have gains of about 3%. the nasdaq for this month, the month of october, down 11% that's the worst month it has suffered since october of 2008 overnight inasia, let's take a look you're going to see that the nikkei was down just slightly. down by over 1/10 of a percent hang seng up and the shanghai composite, troubles still exist. down by 2.1% that's where it closed, 56 points in europe and some of the early training -- the ftse up by 1/4 of a percent you see bigger gains for italy and for spain with italian stocks up 2 1/3% let's take a look at the treasury yields in the united states yields came under pressure

this morning it looks like the ten year note is yielding 3.083%. top corporate story happened yesterday. ibm buying red hat for $190 per share. 63% premium. it's valued at $33 billion it will become a unit of the hybrid collection. it's a challenging transaction we'll talk all about it. lots of questions about it also about the culture of integrating both of these companies and this comes after a huge number of transactions in this space you don't want to miss it first on cnbc interview that we're going to have shortly with ibm ceo ginni rometty and jim whi whitehurst. >> happen to notice what ibm is trading for? >> down by more than $6. >> just in general

before this was announced. >> that was its own challenge unto itself. >> when we talk about the back and forth about where you buy, where you sell, what are you going to do, 150 to 180. last week was at 125 today it's at 118 down, you know, almost 5 1/2%. the market cap is closing. >> 113 before the decline. >> still a little over 100 just for the heck of it i checked ge the story is that ge may have to cut dividends did you see that they're 98 who would believe ge and ibm -- i can name a number of companies that haven't been around that are above 100 billion. some are a trillion. >> the other interesting part on the ibm story. >> well, because of this transaction they are suspending

the buy back plan. it's helped the stock. >> the dividend will stay. we're going to talk all about this. >> because buy backs haven't helped revenues. >> that was one of the things they liked, buying back stocks >> the stock every quarter until there were two or three. >> three in a row until the most recent. >> then it started back down again. >> caruso cabrera would be good to talk to she was talking about this a shocker with this guy, he's like trennert, global political news this morning. brazil's far right candidate, mr. bolsonaro. >> it's jaier. she corrected me >> i didn't say it >> i thought it was not

pronounced with the j. >> pretty goodwin. 56% of the vote pledging to reform government finances, crack down on crime. won't be as much as initially the index is up 6% following the reaction msci brazil. continuing not breaking news for angela merkel. german chancellor angela merkel facing tough results in a state election the social democrats saw heavy losses very affluent, wealthy group from the center block and left and right wings of the political spectrum, it's already building

a fragile government coalition the euro has dropped a section low. >> you saw german stocks were up. >> this following reports that merkel won't stand for re-election. she wants to give up the leadership of her party but remain chancellor. when i first looked at that i thought europe was down. >> no, we just checked a moment ago. >> okay. >> it was up significantly. >> we were down earlier although it's hard to tell if you're not looking at -- >> you can rely on it. >> icebox probably annette, good day. >> reporter: yeah, it's an interesting day in germany because it's really the start of an end of an era with angela merkel not standing for re-election as chair mman of her own party, chair woman i should say, because she always said in the past she wants to have both jobs, the chancellor ri and the

chairwoman in one job, in her name, she's not standing in for that re-election it's materializing for her top job. it's a complicated process in germany to have new elections. it's not that easy but most likely according to everybody i've speaking to in berlin, she won't last for the full term. there will be a new minority government replacement this is why the euro drops today. she was always perceived as the anchor of stability in europe and with her going away step by step, there might also be a power vacuum in europe with that, back to you. >> thank you thanks, annette, for that. we appreciate it been a brutal october for stocks the dow's down more than 6.5%.

the s&p down more than 8 1/2%. the s&p in correction territory down 11% dom chu jumg ped off the worldwide exchange set and put a different hat on going to look at the volatility. >> i'm not wearing a hat they don't let me wear a hat here have they let you wear a hat you're joe -- >> some people refer to my hair as a. >> it's real human hair. >> i've seen it before in person. >> i can vouch for it right now. anyway, like you said, it's been a very rough one week span it's a bit of a bounce and it means according to howard silverblad that the s&p 500 just last week alone lost $918 billion in market value.

that's how steep that drop was for the s&p 500 companies out there. nothing to sneeze at if you take a look at the year to date period or just like the last month or so if you look at the last month or so the week was 918 if you take a look at the overall month of october, we are still down by about -- you can see here, look at that, about $2.1 trillion with a t that's how much market value has been lost at this point. as we talk about people value hunting, a lot of stocks trading below the respected long-term averages something to keep an eye on as well the utilities are outperforming as well. the only positive sector in the s&p 500 versus consumer discretionary driven by amazon's disappointing results. a 2 point gain or utilities and 12 point loss on discretionaries.

from the overall technical standpoint, we've looked at this 200 day moving average for quite some time. this idea that you could see a bounce if you take a look at the s&p 500 during this time span, this 200 day moving average going all the way back at least through time, this move here lower that we've seen is the furthest down we've dropped below the 200 day moving average since the beginning of 2006. joe, gang, we know what the bearish parts of the market are but that might be one reason the bulls are saying this represents a good point to get into the market rally from the lows of 2016 were pretty subsansal. back over to you. >> dom chu, thank you. probably the predictions about the future, we know how hard they are we may see you in the next couple of hours? >> there might be a chance. >> the chances are good. >> chances might be pretty good. >> excellent we'll talk about the broader

markets. joining us is paul schatz, president of heritage capital and jason trennerf talk to us if you've looked at the tent tackle. >> we absolutely look at them. we spend a lot of time on it i think there's probably -- this probably isn't over in my opinion, the market indigestion. i think part of what's being discounted is the potential for this making a policy error having said that -- >> you think the policy error is increase >> if they go too quickly. having said that, the chance of the u.s. going into recession in the next year or two are exceedingly low. the economy is in excellent shape. the fed is far from tight. we essentially have a new fed chairman and we have to figure out how that works we're using something in around

15.70 range as -- excuse me, 25.70 range, 25.75 range as kind of the bottom range for the s&p 500. frankly i look at this as an opportunity to buy cyclical stocks. >> cyclic calls. >> yes. >> you're not buying tech, for example? >> i would buy tech, i wouldn't buy communications i'm of the vik we have a different view than most of the street we think we're more towards the middle of the cycle than the end. i think the fed largely disto distorted it. >> how do you know we're far from neutral that wouldn't be tight given where inflation is >> we're far from tight given where the real feds fund rate is zero let's say 2 1/4 is the fed funds rate it's not tight. >> what the heck is the market thinking >> the market almost looked like

it was almost saying, you're right, mr. president. >> my own opinion is -- i don't know if i would have expressed it this way, but i think the president has a point here that pace -- >> markets seem to listen. >> maybe he shouldn't be putting tariffs on the economy at the same time. two things are slowing the economy, one is the fed and one is the tariffs if we're doing the tariffs because the economy is strong -- >> it's a chicken and egg. maybe the fed shouldn't be -- >> they don't have a strong economic position. >> if we're doing something to china ever, this isn't a way to coordinate it. >> the fed doesn't coordinate. >> the trade situation looks far better than it did six months ago. >> meaning good site for china >> no, what's happened in the united states and they've agreed not to have a -- >> getting to a deal reached with nafta however, i think china it looks like a much worse situation.

i think we thought that was a negotiation and now that you look at it people are thinking this is more of a -- >> if you thought now is the time to do it because we're flush with the economy if we're ever going to do it with china. >> if we're flush with the economy why are we upset with the fed raising rates? >> paul has been patiently waiting. are we winning, paul cliche of a question we're talking about what inning we're in weigh in >> i think of the recovery, i'll push back a little bit on jason. i do think we're -- i've been saying this for six months i think the session began sometime between q3 of '19 you can see it in auto loans and delish wednesday si. i understand tax reform and to me a lot of things are leaning up for a more consumer market.

be i was on with you guys a couple of weeks ago calling for the mid to upper single digit in stocks i think most of the price damage has been done. we're going to thrash around for another week to ten days, two weeks as we get to the election. i don't know how the fed raises rates in a normal cycle if there even is one anymore. how is that raising rates too quick for the market the market is not the fed raising rates that really is spooking the market. there are other factors and i think we're using the fed as cover. the fed is going to cause this recessi recession. i've said it for six days, six weeks, six months, six years. >> okay, so, paul, if you're right, the recession is coming, what's the schatz family doing with its money >> so we still have a projection to dow 27,000 and i think once this pull back wraps up in the next, again, week or two weeks, i think we've got at least one

rally left jason mentioned, we've done a lot of technical damage. however you want to look at it, the amount of new lows, stocks below the 200 day moving average. you've seen a lot of down side action to be determined whether the markets can correct themselves over a poord of weeks and months if the market cannot correct itself, you did see the last in october of 2007. >> if you think it has to correct itself, what kind of number are we talking about? >> no, this has been a sharp decline. could we have a dow 24,000 sure it's not that big of a deal on a percentage basis, but the key is after the decline is over, we're going to have a rally. whether this is a bear market or a bull market, i still subscribe we're in a bull market too many things you see at the beginning of a bear market are not in place but i think the market's got to repair itself. you've done a tremendous amount of damage.

look at, banks, semis, discretionary, transports. my four key sectors have been decimated. you need some kind of strong leadership to emerge then it may take some time, at least some sideways movement, up and down thrashing around in a larger trading range it will take some time to repair the damage regardless. what would i do andrew the schatz family? we are absolutely going to buy -- i think we'll have a short-term rally from here for a couple of days or so we'll have another decline around the election. then i think we can have a much better rally last seven weeks of the year into 2019. >> very definitive >> you get the final word here take it on >> there's no reason i think in my humble opinion and with all due respect to our other guests, i don't think there's any reason why you have to have this >> fed is usually the proximate cause of the recession having said that, the fed is far

from -- in my opinion, far from tight. fiscal policy and regulatory policy are extremely positive and you have not seen the supply side impacts of the tax cut that were passed last year. so that's very much on the common. >> you think the tax cut is not in the market? >> inno i don't think the supply side impact and productivity isn't in the market. >> you haven't seen it in capital spending because you haven't seen capital spending. >> it takes time to get capital spending, andrew it's not like share repurchases, right? that can happen right away capital spending will happen i believe -- >> you don't think companies are sitting there mapping out their plans forever saying -- >> no. >> -- if i had this money i would do x >> no way. no one expected the tax cut going into december. that was seen as a surprise last year no one thought it was even remotely possible. >> people didn't think they

could get it down the stretch. as rates rise, companies are starting to make choices with what to do with their cash flow. one of the unintended consequences of keeping rates so low for so long on the part of the fed in my opinion is an encouraged financial engineering. it did not encourage capital spending the capital spending is far more, in my opinion, far better for the economy longer term. >> paul schatz, thank you. jason's going to be sticking around >> thank you. coming up, jobs week again in america we'll talk about this friday's employment report. i can't believe that and last friday's gdp market lanhee chen will join us after the break. here's the winners and losers. we'll focus on the dow be right back.

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jobs growth. the white house confident that the republicans, so they say, will continue to control the house and senate joining us now hoover institution lanhee chen. a lot of the things that we talk to you about prior to coming on did have to do with the mid terms. one of the things that in the fine print here pertains to what we were just talking about see a lot of positive things but there are some distant warning signs. for example, we have -- have we exhausted business investment after the tax cuts of 2017 jason just told us we haven't even started >> yeah. i think this is the big question i think a lot of people think we have i think going forward, the issue really is this there are all of these potential drags that are out there we keep talking about the warning signs, but the question is are we ever going to get there, right trade is another perfect example. >> have we exhausted the business investment? >> i don't think so. >> has it started yet?

on friday that was a problem with the gdp numbers, right? >> it started. >> that was the short fall that people pointed to. >> driven by consumer confidence. >> not driven by business. productivity if we're going to continue to grow above 2%, you need that is it coming -- you're saying it may have already been exhausted? >> yeah. i think there's still some left out there. i think a lot of it has come off the table already. my sense is that we've still got some left. is it enough to continue driving 3% and higher? that i'm skeptical about. >> why do you think it's come off the table? >> what leesds you to that conclusion >> i just think that we've seen -- you know, we've seen a lot. i think we've seen evidence of it already i think businesses have been out there saying that this is something that we're engaging in as we go forward, i'm just -- i'm skeptical that there's so much more. >> the san francisco fed came out with a paper in i believe it was in september and they said most of the cash flow from the repatriated profits has gone into share repurchases and most of the press -- print

media ran with that. the other conclusion though is that it was too early to tell on cap exgiven the nature of cap ex, given the nature of the planning. >> that's what i mean. i would expect it to take a little longer to get here. then you wore yoi about ceo confidence is it stronger to continue to push forward i would expect that we hadn't seen it yet. >> yeah. >> i don't know if that actually ever materializes. >> right then, right. then there's a question about whether there was enough there to actually get people off the sidelines. >> confidence levels have come down they're still incredibly high. >> still pretty high i think fundamentally that's been a lot of what's driven where we are to this point the question on the consumer side, there's all of this talk of tax cut 2.0 the question is whether that consumer stimulus is needed. >> normally the old saying that it's the economy, stupid, would work, but this is different. i guess it's donald trump. >> right.

>> people have strong feelings about president trump. but you look at just the unemployment rate. we're finally at 3% or above or at least we had been that would normally bode well for the mid terms although i was reading this over the weekend, jason, since 1824, 41 out of 47 mid terms the incumbent president loses seats. obama lost 60 seats. >> yeah. >> at this point taking everything into account, you say the democrats are likely to pick up more than 23 but less than 30. >> yeah. >> in the house. so they take the house but the senate maybe the republicans add two or three seats you told me which states which you see that happening. is that going to be what -- will we find that out next wednesday? >> yeah. the senate map was always very difficult for democrats coming into this election there's been no change to that over the last several weeks there has been an increase of republican enthusiasm that will drive turnout. if you look at the states where

fundamentals are -- these are trump states you're thinking about states like indiana, west virginia, north dakota west virginia will be tougher for the republicans on the margin but on the senate side, tough map for democrats. i see republicans taking a few extra seats. the house side you have a lot more of the national factors at play some of these districts trump just isn't very popular. you talk about orange county, california, you talk about some districts in florida, new york, much more difficult for the republicans. >> supposedly the republicans are having to defend safe characters and the democrats are starting to expand into places where they didn't think they had a chance which sounds like what they were saying about 2016, too, when hillary was going to texas and arizona. that didn't pan out very well. >> the financial question that i have is how do you think that changes either regulation, policy, what do you think -- >> nothing. >> what do you think happens or is there something that yo think was supposed to happen that wouldn't otherwise happen >> well, yeah.

the talk about tax cuts, i was skeptical we would get there it sounds like a great talking political point. it would be in my mind foolish to think we would see any activity. >> gridlock for two years? >> yeah. we'll see investigation upon investigation. people are lawyerering up now because they realize that's what the next couple of years look like it's inconceivable on the regulatory side this administration's agenda is what it is. they're going to continue executing on that. nothing about what happens in the congress is going to impact this. >> nothing the house can do to block certain things that they wouldn't otherwise >> no. not from a regulatory perspective. the question then becomes do we actually think congress is going to get anything done anyway? >> skeptical. >> the only thing that worries me is if democrats win the house and they focus entirely on investigations, entirely on political recriminations, what does that do to business

confidence or does -- i don't know the answer to that you wonder whether people say, well, this is just a side show >> yeah. >> i'm not going to worry about it do they go merrilly along, this is a tax cut, cash flows >> i feel like -- i feel like people tend to seewhat's -- they tend to tune out ability of what's happening because they see it as so politically motivated. not a lot of substance to these investigations can we catch members of the trump administration in a got cha moment this is not about the fundamental arc of fiscal policy let's do entitlement reform. no one is close to talking about those issues what we're talking about is politics >> the mid terms were always about local. didn't have anything to do with national until 1824. turns out that john quincy adams was elected by congress to be president after andrew jackson won a plurality at this in both.

it wasn't a majority they picked john quincy adams. people got so po'd the mid terms became a national referendum on how they had handled that and the rest is -- >> history lessons. >> watching ken burns, huh >> no. this was actually in -- now i just -- i wasn't alive for that. >> i thought that's where you were going. >> no. no i know you've been watching a lot of ken burns. >> i have. i cry at -- no, this was in "the journal. great piece about when mid terms became politicized not that new thank you, lanhee chen when we come back, new data on closing the gap between men and women in the entertainment industry big deal news at the top of the hour, ibm buying red hat in a $33 billion deal ceos of both companies, ginni

rometty and jim whitehurst will be joining us to talk about it. we'll get to all of that, but as we get to the break take a look at friday's s&p winners and losers will it feel like the wheend of a journey?p working, or the beginning of something even better? when you prepare for retirement with pacific life, you can create a lifelong income... so you have the freedom to keep doing whatever is most meaningful to you. a reliable income that lets you retire, without retiring from life. that's the power of pacific. ask your financial professional about pacific life today.

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good morning among the stories front and center, ibm buying software company red hat for $190 a share in cash. that's a 63% premium to friday's closing price and the deal's valued at $33 billion. this is ibm's biggest acquisition ever and ibm ceo ginni rometty and jim whitehurst will join us. indonesian passenger flight crashed into the sea off of the island of java shortly after takeoff. 189 people on board. it was a lion air flight a boeing 737 max 8 manufactured this year. it had only been in operation since august 15th. a suspect in saturday's massacre at a pittsburgh synagogue is expected in court robert bowers faces 29 federal counts related to a shooting that killed 11 worshippers that

included homicide and hate charges. they're seeking permission from the justice department to pursue the death penalty. this week's business agenda, a couple of things going on. plenty of data on the way. personal income and spending due today. we get the k. schiller home prices tomorrow. coming up on wednesday, we get the adp private payroll report on thursday we get jobless claims and productivity. all of this leads up to the big number on friday when we get the october jobs report. also on the earnings front, there will be a lot of numbers to chew on ge, pfizer, facebook general motors and young brands. thursday we get dow, dupont, apple, starbucks friday alibaba, chevron, exxon mobil. apple has the big news tomorrow that will move people in some way or another u.s. equity futures, dow looks like it will open higher, 168 points higher. nasdaq up 178. s&p 500 looking to open 28 points higher. cnbc's second closing the gap survey done in partnership

with linked-in examines gender gaps in the entertainment industry after a year marked by me too and the time's up movement high profile firings across the film and television business we surveyed more than 1,000 people to try to understand where problems still exist in the industry and to find potential solutions. julia boorstin has the details >> reporter: both men and women working in entertainment see gender gaps in the industry. 1/4 of women and half of men say they think men and women are paid the same. slightly more than that say men and women are promoted at equal rates. there are obstacles in place that make it challenging for women to advance according to nearly 80% of women and more than half of men we surveyed the biggest issue, unsupportive or biased corporate culture according to half of both men and women surveyed other challenges include a lack of female leadership and mentorship our survey found widespread optimism and 2/3 of men and

women say they expect the times up and me too movements to have a lasting effect whampt will it take to close the gap in entertainment? the single most important thing is for industry leaders to speak about about the importance of diversity and inclusion in the workplace according to 1/4 of men and women surveyed also a key, diversity and recruiting and casting caroline fairchild is here to talk about the findings what struck you as something that surprised you in the findings >> at linked-in we're all about starting productive conversations among professionals that matter the most with me too and times up we wanted to see what workers across the industry were saying about this what was surprising to me is these are issues that impact people in front of and behind the camera workers across ages and across the stages

they think about this and they see it moving forward. >> what impact have both the me too movements and the time's up movement had to this point were you able to determine that in the survey? >> respondents told us they thought there was going to be short term and long term when you talk about long term, they're not sure i'm seeing my co-workers change the way they speak to me they're saying they see guidelines changing for how people deal with sexual harassment on set, but for these little changes they're hoping will become bigger changes moving forward. >> what are some of the solutions that were put forth that you think are most likely to work and most likely to be enacted. >> if the number one solution is for leaders to be thinking about these. >> when you skpar that to we did a similar survey in the finance industry in june the number one answer was paternity leave. entertainment workers are saying

we need to talk about it right now. >> when i think of the me too movement i think about women not just being harassed but some pretty horrible things happening. is it fair to say that's not happening to the same extent because people are talking about it right now i think you need to separate the two issues. >> yeah, of course >> the impact in the workplace versus being paid the same as your male colleagues >> right so about 1/3 of women that we surveyed say they've experienced discrimination or harassment and 1/4 of men surveyed said the same thing when you look at things about unconscious bias, nearly 80% of respondents say there's unconscious bias that lead to things like pay gap, opportunities for promotion. that seems to be a prevalent problem. >> solutions on that front are the same i mean, again, it feels like we're lumping a lot of very different issues. >> yeah. so solutions there are really about getting more women into leadership positions we saw that they want more female directors, more female critics. those are things that survey respondents, more women than men

are more proactive we see that in the survey as well. >> is there any sense that these movements can have dell will he te -- deleterious effects? the reaction can't be too great in some respects but in other issues is there a possibility that that hurts women? >> we did a survey on that, but we did ask survey respondents if we thought women were afraid to speak out and become part of the issue. a vast majority said, yes, women do have some fear of speaking out about these issues i think there's some people who are scared about that. >> caroline, just on the methodology. this is 1,000 people surveyed. what levels were you talking to? >> yeah, so 1,000 members across linked-in, across ages and gender we survey people in a statistically significant manner when we were comparing costs we could say these are statistically significant findings it was across all levels

we focused a lot on age. what we found was most interesting to me is that mil n millennial men, men younger than 32 years of age, they were the most optimistic. >> thank you very much for coming in. >> thank you. >> we appreciate your time. by the way, folks, for more on results on the survey including statistics on sexual harassment and discrimination and more on perceptions of gender gaps compared with those on wall street, check all of that out if you go to cnbc.com coming up when we return, a lot more to talk about a big morning ahead. at the top of the hour, you don't want to miss this, ib ibm ceo ginni rometty and red hat's ceo jim whitehurst then kevin has ssett is going to join us. he's chair of president trump's council on economic advisors lots to discuss with him later north island's chairman

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welcome back to "squawk box. it's time for the executive edge i don't know if you saw this over the weekend, this is crazy

what's going on. tesla ceo elon musk going on a tweet storm. he actually said that the $20 million fine he had to pay over his august funding secure tweet about taking the company private was in his words, quote, worth it he also then called the justice department's probe, and there was a report on this late friday, into whether the automaker misled investors about model three production he said, quote, total bs. all of this raises the question if you remember as part of that settlement with the sec that at least what was described as for material tweets, he was supposed to -- all the tweeting was supposed to go through some kind of general counsel or office of some sort. clearly at least in this case i don't imagine that this stuff went through that. i'm not sure saying worth it might not have been a material piece of it. saying total bs to the fbi report, even if that's what you

believe, i would think a lawyer would say, no mas. >> i would think a lawyer would have told him not to send that tweet. >> three days after the settlement >> so anybody who was looking for major change here -- >> but the question i have is if you're the sec, are you not on the phone to elon musk's lawyer? >> look, there's an argument to be said that none of this is material. >> he's walking a fine line. >> right >> i love it >> i have pretty strong opinions because i think the public markets are not a game >> right >> and i really -- i don't think this behavior, i don't know where it's coming from i don't know where it is on this the board should be very much more involved. i think this idea that you're going to be very blaise about a genious that's trying to save the world, everyone has the same rules. equal justice under the law. if i said something like that

they would throw away. >> most people on twitter -- most people at tesla have convinced themselves that as long as they hit the numbers but beat the numbers, this is a numbers game as long as they produce, they don't care about anything else. >> gene muenster said it would have been over $400 if it weren't from self-inflicted wounds from elon musk. >> the black model 3 looks best. i can either not -- i can see one and say, god, that's ugly. see it and go, god, i like it. it makes a difference what color. that's my contribution i like his tweets. you're a wimp. >> less -- >> don't be afraid >> when we come back -- >> the other option is -- >> not afraid. >> you can get it but you have to pay more. you have to pay more for it. >> after november 1st. when we come back, we have a big hour coming up starting with the ceos of ibm's biggest acquisition. ginni rometty and jim whitehurst will be joining us

take a quick check of what's been happening in the european markets. they've been up across the board despite a disappointing election for angela merkel. we'll be right back. coming up, it's jobs week in america. the countdown is on to friday's employment report. we'll talk jobs, economic growth and market turmoil with kevin hassett, chairman of president trump's council of economic advisors that's coming up at the top of the hour "squawk box" will be right back. 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.

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let's take a look at the technicals behind fixed income joining us now jason hunter from jpmorgan a lot of times wie have katie stockton the last question is always the 10-year. for you it's going to be the first question so in a perverse way, higher yields causes the market to sell off and markets selling off causes yields to come back down. it must be hard to figure out in advance, you know, what is the real number of, you know, sans

the equity market, where should we be? >> the belly of the treasury curve becomes the beta instrument that defines how things go moving forward it's about timing the equity bottom at the moment it was higher rates first, the steepening of the treasury curve that caused the market anxiety and volatility once you move on, equity volatility takes hold, then it becomes where the equity market starts to lead >> is it all right for them to panic over 25 basis points >> calling an overreaction it is what it is we saw this already earlier this year but if you go back, coming into the year, we used for our outlook 1987 as a good outlook of how this would play out commodity markets are being -- >> take that back. what >> so the crash part, leave that aside for a moment if you go back to '87, you saw two periods where interest rates started to move higher even as the fed was raising rates. normally if you go back and look at the past tightening cycles,

you see something 10 to 15 basis points of trough to peak amplitude in terms of restiffening try 2 trying to get into these steep curves at the time above 20, that's something for equities to get nervous about. coming to this year, coming into what we thought would be a late cycle market, commodities rebounding from the tough time they had a couple years ago. and fed already starting to raise rates. >> is the new range 3% to 3.5% >> our thought is 3% to 3.4% that move unfolded we're actually now the other way on the yield curve if you look and the belly is on the curve now with that trade

working out, that requires an s&p bottom here. >> i'm going to go home and play this back and memorize exactly what you just said and use it as cocktail parties i am because i think people are going to gather around me -- did you hear that? >> yeah. i'm working on it. >> so as a manager, you would not change your outlook based on 3% to 3.4% would syou? >> '87 went from six to nine market was 30% in between. >> yeah. >> the other important thing to also remember is '87, that 10% correction that happened from august through october that was rate driven, the crash was a completely separate issue. >> all right jason hunter, thank you. coming up, big merger news of the weekend we'll talk to both ceos about that deal.

big blue betting big on red ibm acquiring red hat for $33 billion in cash as the company looks to expand their cloud business the ceos of both companies will join us on an interview. and kevin hassett joins us and a scary month for stocks what you need to watch as we close out the month of october your monday morning market check is straight ahead as the second hour of "squawk box" begins right now. live from the beating heart of business, new york, this is "squawk box. >> good morning, everyone. welcome back 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. and in studio with us for the hour shares his thoughts on the markets and much more, jason trenert of strostrategis. taking a look at the equities. the nasdaq still down about 11% for the month of october dow own the s&p both negative for the year at this point in our headlines on this monday morning, ibm is making its biggest acquisition ever it's buying red hat for $33 billion in cash or $190 a share. we'll talk to the ceos of those companies in a bit we'll also be getting september

data on personal income and spending in just about 90 minutes. economists think incomes will be up by 0.3% one of tesla's biggest shareholders says it would be willing to put more cash into the automaker if the company needed a partner at the firm told the times of london that if ceo elon musk needs more capital, the firm is willing to provide it. bailey gifford is the third largest shareholder. elon musk is the biggest shareholder. >> they have about $230 million coming to them this month. then the bigger numb of $900 million-plus in the spring that is if the stock is not already at $380. if it is, they can convert the stock. news just crossing the wires now. german magazine focus reporting angela merkel will remain chancellor through the end of her term she said she would not run again

after 2021 of course, she could be ousted as chancellor before then if her ruling coalition loses power take a quick look at the euro right now on the back of that news right now 1.13 ibm is acquiring open source software developer red hat in a $33 billion all cash deal. joining us now are the ceos. ginni rometty and jim whitehurst we appreciate your time today. ginni, you have said that request this is a traditional deal that this is something that is a game changer for ibm talk to us about why this is the right move and why you're making this deal. >> this is all about for us -- i should say good morning. for us it's all about resetting the cloud landscape. and this is to create the number one company that will be the number one hybrid cloud provider and if you look at this with our clients, right now if everyone

moving to the cloud, 20% though i call that chapter one, they've already only moved 20% of their workloads. chapter two is the next. that's to move the next 80%. that's what this is about. but to move that 80%, they are going to need what this combination brings them. and based on the hundreds of notes i know jim and i have both gotten, clients see this very clearly. chapter 2 is about hybrid cloud. this is how they move the remaining 80% of their work to the cloud. you have to be hybrid. you have to be able to handle multiple clouds. you have to be open technologies you have to do multi-cloud management and that's what we can do. i mean, as you guys know, we've been investing in cloud a long time $19 billion cloud right now. and this is what makes us number one for this next chapter of the cloud. >> you bring up a good point about the open source and that being important to the industry. jim, make you can talk about that red hat has always been open

source under this acquisition, you'll still remain your team will remain. you'll report directly to ginni. in terms of keeping that open source, how do you guarantee to your clients we're still going to be operating the same just with bigger leverage >> first off, ibm has been one of the largest supporters of open source for over 20 years. in fact, one of the reasons we've been so successful is a long time ago ibm committed a billion to lennox. ibm is one of the largest contributors will be one of the largest to open source software we will remain distinct because we want our customers to understand that red hat coming in is a neutral sell that works across all platforms we'll coordinate within ibm to drive a lot of value on top of that but one of the reasons we're talking about being distinct is so customers recognize what we do as open choice -- or open

source it's about maintaining choice. it's about running across all platforms. then we'll work with ibm to both leverage the distribution -- so this is all about growth but also to be able to build unique offerings from ibm on top of that neutral platform. >> if you think about it, this is a $1 trillion emerging market that's what we're going after. this gives them a portable answer here. and they want to be able to run on their prim in a private cloud, multiple public clouds, that's what we do together i think the world doesn't realize that lennox is now the number one platform not just on prem it's the destination in the cloud. so now we own the number one starting point and the destination. >> jim, how long are you planning on staying and what safeguards are there to make sure your team stick around too? >> couple things i'm in this for the long run i'm young. i plan to be here for the rest of my career i think we have such a huge

opportunity together you know, in terms of my team, you know, of course there are financial safeguards but most importantly the team is passionate and excited about what we could do together. we've been excited about our future for a long time but we've been constrained on what we can do because we don't have the commercial scale. within ibm we can do that so my team is really jazzed and excited about what we can do inside of ibm. >> joe is that you >> andrew. >> andrew. >> can you wespeak quick to thi. your multil. it's a high price ultimate that this tedeal will have to grow into >> this is a fair deal jim's built a great company. unlike others, high growth, high

profit, and cash this is why i think really the most important thing for our investors, this is about lifting all of ibm it is accretive to our high value model. as you know, we have a high value model. so this is about being accretive in year one for free cash flow and gross margin in year one and most important, we are still going to go ahead with a strong growing dividend that is key to our shareholders. we have got the flexibility to do this acquisition and our dividend will continue to grow >> what do you think your stock is down by 5.5% this morning then >> this is early we've got to now -- as we explain this to the market, i believe they're going to be very, very confident i gauge by the hundreds of letters from clients this makes perfect sense this is what these clients tell me day in and day out they need for chapter 2.

that 80% of their work can't move if we don't help them this now changes what it is to open to proprietary. and this allows them to move mission critical work safely and securely we can secure this from the firmware up. you talk a lot about cyber issues this is about making open source safe end to end, accretive to ibm's high value model, strong dividend everyone wins. >> can you speak to the idea red hat has long been considered switzerland. they've had partnerships with so many other companies whether it's microsoft azure or others and how that changes under ibm >> this is a good point because it doesn't change. back to one of the great things about the world is moving to open and it's multi-cloud. our clients have 5 to 15 clouds

already. they want to move workloads before that. that's what we do here our hybrid cloud combined with what red hat has built is taking them and moving them amongst the clouds and safely moving data. we welcome those partnerships. in fact, we already manage -- remember our global services business manages multiple clouds already today. and we're going to continue to do that. so whether it's aws, google, the work jim does, we will continue that and be neutral for them >> andrew, i want to emphasize that even more because of this 80% of workload that needs to move and we can help accelerate that and help our customers move to cloud, we will be able to bring more to clouds i think we'll be a stronger faster growing partner >> quick culture question. i know you'll remain independent within ibm interesting analysis online that says red hat has a policy in their employee manual that gives

their employees to act in the best interest of open source projects even if it's counter to red hat's interest that's always been part of your culture. goes on to say ibm is a history of engaging with upstream projects to gear them toward their corporate interests. how do you think about that you should this deal >> look. there's two ways to think about this we are the largest contributor at open source ibm is so when people say do we embrace it we have embraced it for 20 years. one of the fastest growing projects in linix, that we will appropriately put it into the red hat enterprise, everything that should be there we think this is part of the value of what we offer so it's both really being the champion of open source out there. with the two combined companies. >> yeah. just to emphasize that again, for us to be able as red hat and

open source to achieve our full potential, this is without a doubt the best way to do it. it gives us a dramatically broader reach. it gives a dramatically larger platform it gives dramatically greater investment into what we can do so we are passionate about what we can do. this is the best way we can scale it i'm very confident that our associates will see that as well >> i mean, this is about being number one now in this next chapter. >> ginni or jim, or both -- this is joe now are you seeing a, for talent, a rush to sort of out-bid in technology land? i imagine that really good stem people are tough to come by. i'm not saying you guys aren't the sexiest place on the block, but are you seeing -- will there be wage pressures on bringing in the best people to ibm or red

hat? >> this is interesting we already get 7 thourk,000 app a day. jim also highly sought after as an employer. we get the best of the best. an acquisition about this, it's about key talent i should have mentioned, this is all about revenue growth not cost synergies i think we have no trouble -- i know we don't. no trouble getting the right talent we get the best talent in the world. it's really because they're driven by -- as you guys know, we've been focused on ia, focused on cloud, and how to bring that into the business world. >> there's been a significant kind of wage pressure because there's a lot of different interest in cloud. and that talent is not in great supply the nice part about this is this growth in scale allows us to look at that this is actually a good thing to

address any concerns on stem or the lack or size of talent available. >> we're very large in raleigh and boston together we are the top here >> i know you've had a partnership for quite a while. ginni, when did you first start eyeing red hat as an acquisition target how'd it come about? >> well, obviously i said we started this partnership long before jim and i 20 years ago and we've been working on improving and improving. and really it was about april we sat down, had an interesting lunch about the real strategic alternative here and have been working it if you'd been watching, you would have seen we've been making more and more partnership announcements along the way, testing our theories here. again, they've been very, very well received by our clients so it's very clear this is the right match. >> can you talk just about suspending share buybacks as part of this too >> yes this is really just in our effort -- this is 20 and 21 when

we talk about doing that it's just about being prudent about our debt level i mean, we've got more than ample financial flexibilities. as you know, we finished last quarter $15 billion of cash. we've got $12 billion plus free cash flow. this is cash and debt we're going to do here we were strong investment grade. we are still strong investment grade. in fact, we target a really conservative, what i would call, a levered ratio. and therefore we'll be back at that in just two years so we said as part of that on our debt level, look at 20 and 21 we'll suspend our debt repurchase >> i'm just trying to get a look at how you view the economy and the future in terms of business investment and in terms of just the overall environment. because friday's report on gdp,

you know, we were expecting maybe better more optimism about that are you worried about things about tariffs or the next recession or about maybe things can't get much better than they already are? is this an endorsement of the future or insurance against an uncertain future >> this is both confidence in a future and it is as well insurance because our clients are going to continue to move to the cloud and they are going to continue to want both that flexibility and choice because it puts them in a better position, joe. so both ways i am not concerned about our tariffs right now. for us as a company, we're a global company we know how to move our supply chains around. but i do see with our clients, this is a move they're going to continue and it's in their interests irrelevant to what the economy is to continue that move. >> ginni, what does this say about ibm's either commitment -- not commitment maybe the challenge of watson?

so much of the growth prospects of ibm have been placed on watson is this a commentary that perhaps you need to push more into a different place. >> not at all. we have always said this is about ibm becoming a cognitive and cloud company. i've a said that a million times for i can't tell you how many years now. what this does, this unlocks even more for our clients on watson, analytics, open machine learning one of the biggest problems a client has and i know everyone listening knows it they can't get their data pulled together they can't get it pulled together to feed watson, to feed ai this is going to allow us to scale that so this is absolutely -- when i said it lifts all boats for ibm. i mean, i just walk across our portfolio. our hybrid cloud unit, private cloud, public cloud, global services has a huge cloud migration factory. 90,000 cloud architects, our ai,

our watson this goes on top of this in an open source role this is good for all of ibm which is why i'm confident saying this is great for our high value model revenue 200 basis points at our size is not irrelevant >> drilling down on the tariff issue just quickly specifically as far as china goes, both of you -- i mean, technology is paramount at both companies. are you gratified, fearful, happy, sad is it time to take a stand against the way china treats some of our technology companies? i'd like to hear from both of you on that. >> yes so listen, joe i think there is -- i would say we are very strong proponent of fair and free trade. and that's been very clear and it's been good for ibm it's been good for the countries we've participated in. when it comes to china, we've had a very positive relationship with china over the past and the tariffs have not had an

impact we run many of the biggest banks over in china. and they need our technologies to do that and so i look forward to it. i understand why we are doing what we're doing again, i'm a big proponent of free and fair trade. in the meantime, as you say, business around 170 countries around the world and the impact of tariffs have been i dde minimis to us >> we have a business model where all of our intellectual property is there. we also get business like open stack which is part of what we do coming from china so we have no direct concerns as a business around it and china continues to be a fast-growing business for us >> i'd like to hear a little bit more from each of you on the economy. just kind of drilling down a little bit on what joe had asked before we have this conversation around the table where we're trying to get a gauge of how ceos feel in terms of confidence and how that translates into capex spending

you two probably have a good idea of how much capex spending ceos are willing to commit at any point. i wonder if you could tell us if you've seen that drop at all or seen that change ginni, i'll start with you. >> yes, start with me. we have seen this be consistent now. i have not seen as joe said a second ago about a change. i see clients still very focused on as they move their portfolios forward and they're competing with competitors left and right. they're focused on modernizing their work lode and taking them to the future. >> i would say similarly i think beginning of the year we saw an uptick in spend in momentum in i.t. spending. that has persisted i wouldn't say it's gone up since the summer, but it hasn't gone down. almost every large enterprise is working through some form of

digital transformation we're seeing that persist as we go forward >> one of the great ratios, we talk about this is a hybrid cloud. one of the big banks as we move them to a hybrid cloud environment. they said to us, they said three times less expensive, that's why these clients are going to keep moving that's why this is a good thing. it's an inflection point catch it now they can't do this part now without us the average client's got a thousand applications. and it's in their interest to move to that sort of a paradigm. >> want to thank you both for joining us on this morning we realize you're busy and we appreciate your time again, ibm's ginni rometty and red hat's jim whitehurst coming up, kevin hassett on the state of the economy maybe some of the same issues. we'll be trying to get some

insight. he's our guest right after the break. stay tuned to "squawk box" on cnbc i am a family man.

i am a techie dad. 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. while gdp slowed slightly from sequentially although above last quarter, the results were

higher than economists predicted. the white house says this might take some pressure off the fed joining us now chairman kevin hassett. we've been talking about one of the nuances or one of the real details in that report on friday was that we wish business investment was up more do you have an explanation for that and do you expect it to improve more in coming quarters? is there a lag from the tax reform to when it happens? or are we already seeing the benefits >> we saw about a 10% increase over the first half of the year. one of the things that i was expecting because the academy literature is pretty clear on this is a lot of times as you get closer to an election, firms tend to hold off on capital spending we didn't see that in the source data if you go to the release you cover every day, talk to liesman about it, we had spending about

11% up yet it was flat in the data. like forward to the revisions. >> the rest of the report was -- i mean, we'd kill for 3.5% every quarter. obviously. >> we'll take it, yeah. >> are we near the beginning or the end of this new environment we find ourselves in i think that's everybody's worry. you know, you look at the stock market it's a discounting mechanism it's not down that much. only the nasdaq is in correction territory. but is it -- are we towards the end of the 3%-plus gdp prints? or are -- >> no, no. joe, the way i think about it and let's first assume, like, suppose that in the third quarter we got the 7% to 10% capital spending which is in the source data. what we'd be saying is we're in the beginning of this because we have all this capital spending when they turn the lights on in those new factories, we're going to get output. we're going to get sustained

growth out of the gdp we're seeing what has people puzzled is even though the source data was strong, the gdp numbers weren't. and if gdp did start to be driven by consumption, that's le less >> do you take the title of this segment called trump-o-nomics, so do ju see other countries around the world adopt k the president's policies to the extent looks like the u.s. is trying to abandon monetary policy as the sole engine of economic growth. it seems like -- that seems like that's being exported. do you guys see that >> it's is really good point i think you can go back to very early communications before i ever came into the white house central bankers around the world, they were saying, looks

folks, we need the fiscal side to stimulate because monetary policy has done about all it can. it took awhile, but here we are. we've had tax cuts and have deregulated. it's had the impact on the economy that we were talking about last fall. maybe austan was disagreeing with us. one of the things positive outlook is as other people cut their taxes and push deregulation even more, that will increase the need for our exports. >> where are we in the interest rate environment right now are we a long way -- do we have a long way to go you work for the president is the president right >> since i work for the president, i'm supposed to respect it, the independence of the fed, so i can't give advice about the interest rate. as an economist, when you have

higher growth that natural rate gives you higher interests rates as well. where it's all ends up, that's up to the sfed we picked great people for the fed. it's not my job to give them advice sorry. >> okay. how about the tariffs? once again, you're on aei. everybody said, you know, we don't like them, but we're patient. we'd like to see something good come from them but we're not giving blessings forever. are we past the point of where you're giving your blessing? do we need to start reining it in for china >> i think the watch of the president and talking to him, i've taken a graduate art in the deal we've got a great deal with mexico and canada. we've started the notice period for free trade with japan and with europe. we've closed a free trade deal with korea there are all much better deals

that people would be dancing the jig at aei about and, you know, the nub is -- and it goes back to your discussion in the previous discussion of what's going on with china and other countries. that's why we're looking forward to a meeting with the g20. >> help end a debate for us. there was a brouhaha when you make comments a week or two ago that at least the corporate tax kuts you're speaking just about the corporate tax cuts had effectively already paid for themselves and just as a -- clearly on a absolute basis, tax revenue is higher than it was before last year >> i actually gave, you know, just to be clear on that, i gave a very clear definition of what i was talking about. i think steve moore even wrote a wall street journal article on that the gloet of your side of the tax bill, that's where a lot has

come from. we had 10% capital spending growth over the first half of the year if you just extrapolate that out over the next ten years and consider when you get gdp you get revenue from everything like payroll tax and everything the -- >> but what number are you extrapolating at the reason i ask that is if you look at the journal this morning, they talk about how it's going to 2.3% next year fed expects it to slow further to 1.8% in 2021. if that's the case, how can it pay for itself >> again, if you just assume the growth goes back to what the cbo said but take the extra growth this year, you get a heck of a lot of extra revenue the corporate side only cost, what about $400 billion on a static basis. it takes a very tiny increment to growth over ten years to get enough money to pay for the corporate side again, you get something like $6 trillion more gdp over -- >> people are saying -- >> so it's easy to pay for it. >> inflation adjustment, that

was austan's excuse on friday. even though it was a record for tax revenues for the past year, i don't know but if you're able to generate if it really did help generate the 3%-plus and it stays static, the corporate taxes go down but overall taxes are up or down i think that you just put that as a check mark on the win column. >> or another way to ask your liberal guests say there's about a trillion dollars less revenue in the next ten years but $6 trillion for gdp, is that a trade to take >> to put a definition around it, kevin. you're talking about this in the context of corporate taxes president not on the total tax package itself >> i'm just saying suppose the corporate revenue was the only thing we changed and it cost us $400 billion and we got all the

growth we've seen. if you add up that reeve knew like the normal revenue gdp, you get something like more than 400 times. and i think most of the growth this year was before the consumption spike. >> tell me what the fourth quarter will be and will it average 3% for one, two, three, and four will it finally happen you know, the naysayers say it still hasn't happened. >> so as you know, i've been doing this for about 30 years. and i was already saying it's 3.5% in the third quarter. there was a big inventory build in the third quarter it makes me think it's closer to 3% than 4% i think we lose a half prs >> that would put us as 3% for the year >> before you go, you wrote a piece on socialism that came out about a week and a half ago. >> was it positive or negative >> i was curious -- no, no

it was effectively i thought it was interesting. it was about health care and everything else. but how does that report get generated? >> thanks for asking president trumpdid not ask so at the cea we have all these economists professors to help us do stuff when we had our year ahead planning meeting with the staff that arrived in july, people complained kids these days, they call them socialists they're not really if you look at our paper, nowhere is there a word democrat with a capital "d. they tend to think of the nordic model. so our paper is mostly about the nordic model comparing it to the u.s. there's been at lot of response to the piece but i think what we're hoping is that people, you know, of all parties can read this to update themselves on the history of socialism so they think about what they want to call themselves when they're

advocating things far from socialist policies >> it hasn't been done right yet. >> we gave it a shot >> take one more shot and see if it works i don't know >> kevin, any change -- is there any chance we get indexing and capital gains from inflation >> i think there is. it's something that is under discussion right now i think that i can't go to a tax meeting with at least one that has larry kudlow in there and not have that topic come up. >> all right, kevin. thank you. >> kevin hassett, thank you. when we come up, it has been a scary october. halloween is coming. dow down 6.5%. s&p down 8.5%. the nasdaq down nearly 11% this month. we'll talk markets and find out if investors will be giving thanks in november take a quick look at u.s. equity futures at this hour we are in the green. dow much higher 239 higher s 5 u 117 points,&p00p 37 back in a moment

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all right. welcome back, everybody. let's talk more about the markets this morning joining us now is gene goldman he is the cio of seterra

financial group. welcome. chry krishna, you're here in studio talk about what is expected next you think we've seen the lows are is there still more to come? >> i don't know what's going to happen over the next day or two, but i would say if you have a long-term investment view which is what you should have, the markets have a lot more room to run. i think our theme has been the current cycle will probably last another three, four, five years. and if you -- >> current economic cycle. >> current economic cycle and current market cycle if you think about things in this market since the financial crisis, the way you have made money is by staying in the market more than anything else and i think that si plies today as much as it applied in '11, '13, '15, or '16. >> do you agree? >> yes this is normal volatility. look at this long-term, the s&p

has averaged 1% to 5%. this year we're back up to 25% just volatility. looking forward, the economy is doing very well. great numbers in gdp second of all, the fed is raising rates but a very gradual, measured pace third of all, corporate earnings corporate earnings are up we're seeing about 65%, 70% of stocks beating estimates. revenue up 60% and valuations the s&p is at 14.8 we're back to february levels. >> what about the underlying concerns about the pockets of the economy? not only pockets but major parts of the economy things like housing. questions about whether ceos are still confident. are those just head fakes for now as we watch global economic slowdown >> the likelihood the economy is going to get to a very high

level because of the tax cuts we never thought would materialize, it'll be strong but won't get to 3% or significantly higher than 3% level we are adjusting to it those sectors are supposed to do worse than the rest of the economy. and that's the adjustment that is taking place. >> so any slowdown taking place are in the sensitive act of places do you agree with people that they are moving too fast though. that they have moving faster than they should be in the interest rate a areas. >> so i think if this cycle is going to end, the market and the economic cycle, it would be because of a fed mistake so i think that's something that we need to watch for a lot however, i think looking at the fed numbers, there's enough knowledge and kind of doubts about the strength of the underlying economy for us not to give up too quickly. i think by first half of 2019, they'll be backing off quickly

>> gene, very quickly. if you're telling people this is a good place to buy, what are you telling them to buy specifically >> technology. we saw this over the weekend we saw one of the biggest acquisitions technology is very big artificial intelligence is the future of technology it's like electricity back in the 1890s. it's going to be big, we just don't know how big it will be. we like health care. lots of m&a activity and third of all, we like media. we also like consumer discretion because the economy is still strong >> the points you've heard on this that you agree or disagree with >> i tend to agree with all of them i think the most non-consensus idea is the idea that the economy is not near a recession. it's that the cycle could last a lot longer jay powell actually said there's no reason why the cycle can't last indefinitely. now, most of the time when the fed goes into -- when the economy goes in recession, the fed causes it.

that's normally the way it works. so they're going to have to walk a fine line. i'm in agreement with that >> we want to thank our guests for being here today thank you. coming up, blockchain technologies long been touted as an innovator why hasn't it been adopted yet we will discuss that next. esfothen glenn hutchins is our gut r the entire hour. "squawk box" begcontinues after quick break. and the decisions you make have far reaching implications. the right relationship with a corporate bank who understands your industry and your world can help you make well informed choices and stay ahead of opportunities. pnc brings you the resources of one of the nation's largest banks, and a local approach

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♪ ♪ the platinum card from american express. don't live life without it. you sleep in your bed and i sleep in...les. oh no, max, did you teach him puppy eyes? [ whimpers ] fine, this one time. ooo! [ grunts ] welcome back to "squawk box. hailed by believers as crucial to business but often deemed too risky maybe very risky blockchain is at the construction of this cryptoconversation joining us now with a strategy in blockchain is will mcdonough. he's also the founder ofproof of trust protocol. i want to start there with the proof of trust protocol.

one in particular is this idea that not only is it being used for money laundering, but one it can be used for money laundering is there's no real way to track it that's what you're trying to change >> look. it's impossible to truly track because the destination addresses and sources are just 26-digit codes unless you can allocate that code to a human being or an entity, that's the only tracking you can do what our technology allows for is the validation of those transactions so that you can take confident in the cryptoasset being where you want it to be right now the transaction is irreversible so if you find that the ultimate destination is not what you staugt it to b sought it to be, you can't elevate it to a network of people to ensure it's accurate >> okay. so there's two complications one, that's a huge benefit because people say i'm not going

to own a bitcoin if i could literally lose my bitcoin, it could be gone forever. >> that's our thesis. >> this would solve that but it seems to up end the entire idea of bitcoin the concept is it's supposed to be a trustworthy system without an adjudicator, without an individual judiciary that's actually making these decisions. and so doesn't that sort of change the dynamic here? >> it does you know, bitcoin or blockchain m maximalists say no institutions will adopt a protocol that there's no layer of checks and balances within. everyone saying the institutions are coming it ain't coming unless you have an adjudication layer. >> this layer gets layered on top of bitcoin some people will trade with it but i imagine some will trade without it

>> it will be layered on any blockchain more importantly it would be layered into a smart contract network. a smart contract would be you and i have five attributes over sometime and if any one of those junktures one of us wants to get to that the other party could halt it. >> stick with me on cryptoconcercrypt cryptocurrency >> please. >> how many are changed into an actual currency rather than a commodity? >> the irs says it's a property. the cfcd says it's a commodity the s.e.c. says it's a security. all people want is clarity around that. at the end of the day, a cryptoasset or cryptocurrency is what can operate this spectacular blockchain

>> bitcoin is about $6300 right now. you think that's still very cheap. >> i do. >> it's cheap in so far as to what happens meaning what has to happen for it to actually move meaningfully higher >> bitcoin is a fixed supply asset. so long as there's more demand for it tomorrow than there was today, that means it has to go up it's not a stable asset that there's a headline on cnbc that was excellent. it said last week the markets were down 3% and bitcoin was up 1% that's not what this is. but it's an uncorrelated asset if you're looking for a way to get exposure to an asset class -- >> all of this is only happening until and unless institutions actually get involved. and will they not get involved until and unless things like this happen? >> no question >> all right we've got to leave it there. nice to see you, will. thank you. when we come back, one of the biggest events for the

gaming industry taking place over the weekend twitchcon, that's josh lipton. he's going to be joining us with the latest >> becky, tens of thousands of gamers gathered over the weekend in san jose, california. an event hosted by amazon's twitch that is a powerhouse in live we o streaming game services. weerthere. we'll tell you all about it when "squawk box" returns i consulted with your grandmother's doctor. we can do the screening at her house. hi. this is the man that's going to check your eyes grandma. cognizant ai solutions are helping healthcare companies advance diagnostics and prevent blindness in patients with diabetes. everything looks good. you have beautiful eyes. ♪

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one of the largest gaming events took place over the weekend hosted by the biggest names in the video game live streaming arena. and josh lipton joins us now with more on the video game streaming wars and the companies that could profit. you saw the epic games valuation. is all they have fortnite? >> $14 billion after the most recent round >> saturday was red dead -- >> redemption. >> yeah. got the book got all that -- >> you watch on twitch >> i haven't seen it, but my son -- it's 60 hours of unbelievable -- i mean, "closing bell" ty-- cowboy type stuff >> if you've got young kids, do not watch this it's the language. >> it's a western shooter. it's a little different than fortnite. >> it's tough. >> yeah. so we were at this conference

this weekend and i was there there are not cartoon characters these are professional video game players and they are rock stars at what's known as twitchcon. this is this annual extravaganza that took place over the weekend in san jose, california. brings together tens of thousands of gamers. and they are there to meet those superstar professionals, play video games themselves they also watch these contests where millions of dollars of prize money was on the line. the event was hosted by amazon-owned twitch. that is an online platform where people go to watch other people play games in realtime it's a large spectator sport attracting attention from intel and hp getting in on twitch's younger demographic and help drive huge viewership numbers. >> we're streaming live concurrently globally every day.

we have over a million concurrent viewers at any point in time. that's the same audience as msnbc. that's a big advantage for us. >> amazon isn't alone here facebook, alphabet, twitter are also trying to capitalize as well they say, listen this is an attractive growth market, a young engaged audience generating almost $5 billion in revenue this year according to super data research. >> you know the guy with the green hair does half a million dollars a month. just playing coming up, glenn hutchins joining us aerheft t break >> jason, thank you.

breaking deal news ibm announcing its biggest acquisition ever it's buying red hat for $33 billion. turning to "squawk box" first. >> this is to create the number one company that will be the number one cloud hybrid provider >> our team is excited about what we can do inside of i be

rks m. a developing story out of europe angela merkel suffering a political blow in a weekend election now she's set to give up leadership of her party. why investors need to pay attention to this story straight ahead. plus a market standout if the market volatility has you sick to your stomach, we'll give you a dose of investing tums the final hour of "squawk box" begins right now ♪ >> live from the most powerful city in the world, new york, this is "squawk box. good morning 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 our guest this week, kurt rambis, former laker not really it's glenn hutchins. he's worth probably 10,000 times

as much as kurt rambis you get that once in awhile, but you're not 6'10," right? >> i would have given a lot to play in the nba. >> i don't know. he had something -- people have played him in movies because he was such a character >> your grasp of popular culture is vastly over mine. >> yes and no. depends on the time frame. let's look at futures. futures are indicated sharply higher 208 points. began the morning up a hundred and change it is a hundred points isn't what it used to be in the last three weeks. that's for sure. we can do that in the blink of an eye treasury yields have come down more below the 3.25% but 3.09% today. what's really come down is the euro for a variety of reasons. that's got a 13 handle >> angela merkel, some weakness there. we'll talk about that election and her party's losses

meantime, let's get you caught up to some of the stories that investors are going to be talking about today. ibm is buying linnix soft wash distributor red hat. ibm will pay $190 a share. that's the biggest acquisition ever ginni rometty said her company got a good deal. >> this is a fair price if everyone understands what we're buying jim's built a great company. and like others, high growth, high profit, and cash. this is why i think really the most important thing for our investors, this is about lifting all of ibm and it is accretive to our high value model. >> ibm shareholders a little less convinced this morning. right now that stock is down by about 3.3% this is off the lows of what we've seen we have seen this before they came on to talk about the benefits behind that still now, ibm shares down 3% to

$121 red hat shares still trading below the $190 in cash ibm is offering $177.06. auto stocks are on the rise this morning after china is announcing a cut into thinker tax to cut car sales you can see across the board auto stocks are higher also some key economic data on personal income and spending coming up at the bottom of the hour economists are projecting personal income have riz sen by 0.3%. a few stocks on the move this morning let's show you general electric are bracing for a cut. the company reports earnings tomorrow that's according to analysts who spoke to "the wall street journa journal" they might take action on the dividend as a good sign that the company was working to conserve cash so we'll see whether that is taken well or not. apple is allegedly falling

behind on money it owes to qualcomm $7 billion in the hole on royalty payments that claim coming in court on friday just the latest chapter in the legal fight between those two companies. and in financials, hsbc reporting a $5.9 billion in earnings helped by stronger business in asia and cost controls all right. now to the broader markets in one of the brightest new spots at cnbc. frank holland joins us -- wait a minute one of the brightest spots in the s&p 500. i'm sorry. i thought we were talking about you. one of the brightest spots welcome again. i know you've been on before, but still relatively new joins us from the newsroom out there about what consumer, tech, what >> listen. great to be back, but we're going to get on topic now. we're talking about the consumer discretion during a turbulent month, stocks

in this sector -- wrong chart right there. but we're talking about philip morris up 9.2% walmart seeing a 5% gain walgreens up more than 4% even after mixed earnings results earlier this month overall really a great month for consumer stables but not all of them are created equal. colgate has been one of the worst performing in this sector this month missing this quarter estee lauder down 14%. procter & gamble having a strong month despite a dip on friday. some of the best sales gains in the last five years. and the stock on track for its best month in more than five years. great results there. looking forward, investors will be watching if these consumer giants could continue to move up the momentum mondelez reporting after the bell today kraft heinz reporting after the bell coca-cola reporting on tuesday

the soft drink maker dealing with consumers who are moving away from sugary drinks. back to you. >> bunch of laggards i thought earnings season was supposed to be over. isn't it almost november something to look forward to and maybe trade off of i'm not sure we got the trading from earnings season we were expecting this time around thank you, frank >> thank you german chancellor angela merkel is set to hold a news conference within minutes. she reportedly told conservatives she won't run again in 2021. she's not the head of the party anymore, is she? >> she is. but she's not going to run >> she could be ousted as chancellor before then >> the expectation is that this morning she will announce she will not run again for the head of her party in december that's been the speculation.

hopefully this will clear things up let's get to our guest host for the hour glenn hutchins is a director at the new york fed it's great to see you this morning. >> great to be here. >> all right weigh in on a topic we've been debating all morning long but also for weeks at this point we're trying to figure out what's happening in the economy. you sit at the new york fed, so you've got some idea of what's happening. is there some weakness popping up or is this is a strong economy? >> i'm here talking more myself, by the way, but not the new york fed. >> but because you have a lot of input that comes your direction. >> yeah. so look, right now economy is very strong. and i'm not concerned about data i don't spend my time listening of day-to-day issues i'm worried about the long-term prospects. and i think my concern right now is the way in which we've got this economy going which is largely in my view a

result of debt finance tax cuts. the -- and i would emphasize, too, that tax cuts are not tax reform those are two completely different things i'm very much for tax reform but if you look at the hutchins center at brookings, put up an interesting interactive tool this week. i recommend people look at it. it's on government spending in the economy over time if you look at 2011 through 2015, the cycle took about 1% out of economic growth that was a time period when the democrats were being criticized for having dampened economic growth and in 2018, fiscal policy has added 0.75%. that explains almost the entire increase in economic activity. i noticed you rolled out kevin hassett this morning we would be in sort of a miracle that we haven't seen before.

but as yet, the revenues have not come into offset we're having one of the largest deficits we're seeing. >> correct me if i'm wrong, the last -- >> this late in the cycle is unprecedented and in my view, dangerous. >> correct me if i'm wrong, but i thought tax revenues were coming up about 1% it's sthe spending where we have the bigger issues. >> corporate tax revenue down. personal tax revenue is up a little bit but the deficit has ballooned. and if you're going to borrow to spend the way we have, then you -- and pay for it -- you need to see tax revenue increase that was the way it was sold to us we haven't seen that increase to offset the spending. >> we're still not a full year into watching with what happens. >> that's right. >> spending is up 18%. >> right >> defense, $700 billion the omnibus bill

the other side says it's a spending problem we've run deficits during the obama administration, doubled the national debt. the choice is do you double it and hope that somehow redistribution finds its way into economic growth which is it not? or do you deficit finance and hopefully gdp goes up and then you get higher tax receipts, you get more people working, you get some wage growth, you get all the things you've wanted which might be coming from at least some payoff. but that the spending is the side that has to be dealt with and i agree, since most of it's non-discretionary spending that's where we need to focus and we're not. that's probably the issue. >> i was accused of orthodox centristism. >> i would never accuse you of that. >> my point is i'm not taking a side i'm not saying -- >> i'm not accusing you of that

at all >> my general view is tax reform would have been a very good idea cutting taxes and borrowing some were depending $1.4 trillion >> over ten years. >> over ten years. taking that to $2 trillion university of chicago said 21 out of 22 said it would not add to the -- >> so far so good. you might be right >> but the one who said it would add 0.2% over ten years. and leave us with $1 trillion of debt >> time will tell. first four quarters pretty good. >> if you look at -- >> unemployment 3.7% but so far so good, glenn, or not? >> no. >> no? okay >> it's almost entirely a

consequence of something else. what we're doing is borrowing and spending this is a conservative point of view. >> here's the question jason trent eert made the argum that capital spending is not something that comes immediately after a tax cut and that's something that he expects is going to come in the future. >> right. >> where do you stand on that? >> i would be pleased if it happened let's give you facts in the early days another part of this tax bill was to repatriate the cash something i thought was a good idea it was a promise it was going to spur a boom in private sector investment and one of the reasons why we had slow growth was because there wasn't enough investment i was skeptical of that. i think corporate stock buybacks which are a good idea are up 40%. the largest use of cash by s&p 500 companies right now for the

first time in many, many years is corporate stock buybacks. that's not what we were promised i'm not saying it was a bad idea i'm just saying the consequences of these things were very different than the rationale >> i hear you, but what i'm wondering is will we see more corporate expenditures in the next year or so. they take a little bit longer to play out >> the issue in the past years around corporate spending was not the availability of cash it was the opportunity to invest for growth cash was free. and abundant as a consequence of policies around the world. the issue was on the demand side not the supply side. the demand side is largely driven by demographics and productivity not fiscal policy. and we need policies to address those things >> quick question because i know you're a tech guy. it also might relate to the conversation we're having now. this deal with red hat and ibm

do you look at big m&a deals coming as a result of the tax cuts meaning that's the piece that hasn't happened yet. >> i don't have any insight into their balance sheet, but i see that as a brilliant strategic move in other words, they're in the growing part of the global economy, technology, the transition to the cloud supported by open source is important. >> just to be clear, that stock was down about 6% in the pre-market it's come -- it's gotten better since then you're a fan of this deal. >> i don't have insights into the price. but strategically it looks like a smart move >> great glenn hutchins is our guest. he's going to be with us for the rest of the hour we have a lot more to talk about with him coming up, looking for shelter amid the volatility, we'll bring you a portfolio manager. we haven't talked about "halloween." $10 million to make. $170 million and counting. you know who made that movie >> universal

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welcome back to "squawk box. if you're looking for some stocks that are working despite all this market volatility, our next guest has a couple ideas we want to run you through. ben kirsby from thornburg investment fund. he's got a number of ideas, frankly they have been working a lot of us are always looking for some ideas that are working. let's walk through a couple that you think should be in every investors' portfolio right now >> well, thanks, joe so one of our favorite stocks in the thornburg investment builder is cme group cme group is the largest derivative exchange in the world. and it's a stock that's actually positively geared to higher volatility

so most stocks that we talk about is going to be negatively geared to higher volatile -- cme is a great business because they get paid for incremental volumes to the bottom line as i look around -- >> so ben, your prediction so we're clear, you think we're moving into a world of much higher volatility. the question is for how long >> i think that's a safe bet volatility has been muted for many years just because we're late cycle, there's a lot of tug between the bulls and bears and housing slowing and a strong economy it sets up an environment where volatility could be much higher. and that's a pretty interesting total return for a long-term shareholder. >> you got another one of the list i think is a little counterintuitive royal dutch shell. why?

>> so oil is often a late cycle play so we're bullish on oil fundamentals given the supply constraints we're seeing in venezuela and iran also out of the permian. more than that, shell is a specific company because they generate a lot of free cash flow today the dividend yield is high and they're actually buying back $25 billion in shares. the last piece is that shell is the world's largest lng player they have 20% market share in lng. that's a great market too. demand is growing at more than 5% a year. we think that prices for lng continue to increase over the next few years shell is a company trading at a low valuation. they have a lot of free cash flow they're buying back shares they have a big dividend they have a lot of other good things going as well >> we got to go, but two others on your list

china mobile and dutch electricity. >> i think they have 85% of the chinese marble market. so i think china smoebl a safe one. electricity de france is an interesting investment so the power price is about 50 the last time it was 50 edf which is the nuclear generator in france, they generate about 70% of the power in the country. the last time the power price was at this level, edf was current price. there is a possibility the stock goes to 25 to 30 >> ben kirby, we will maybe revisit this in a couple months. appreciate it. thank you. >> thank you when we come back, german chancellor angela merkel will be talking about her future why investors need to pay attention to this story. we have that straight ahead right here on "squawk box.

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welcome back to "squawk box," everybody. we've been watching the futures this morning and we have been in positive territory all morning right now the dow indicated up about 223 points that's despite ibm being a drag on the market this morning that after the acquisition of red hat. the s&p is also indicated up about 36 points and the nasdaq is indicated up by 110 points.

but remember, this has been a rough month for the nasdaq it is in correction territory. down 11% from its highs. down 11% that it's lost this month. we'll keep an eye on this closer to the closing bell. let's also look at oil prices which have been plunging in the last week or two themselves. down to $67.52 for wti merkel commenting. after the elections, we cannot continue business as usual this is a turning point. those elections for the coalition government she takes responsibility for what happened since last year. angela merkel says the government has lost credibility. i believe we need to turn a new page as a result i am not seeking re-election for her party as party chair. >> she will also not be seeking for her post -- >> this is my last term as chancellor let's go to annette ta standing

by what else? >> reporter: yeah. it's a big surprise that angela merkel has actually decided to announce her, yeah, sort of gradual departure from politics as of today. she's calling it herself a risk. because never before was the role divided being a chairman or chairwoman of the party. and being the chancellor of germany which might actually render her tok be a lame duck as the chancellor in germany. for europe that means nothing positive because there is clearly a power vacuum if she is seeding power it remains to be seen whether she will actually serve for the full term. she's saying he ining she's rea it, but that does not mean she's going to do it

there's one alternative also that her coalition partner can actually pull out of the coalition as soon as next year and that would mean new elections. now the big question is who's going to succeed her back to you. >> thank you for that quick turnaround, quick analysis we appreciate it coming up when we return, breaking economic news a fresh read on the consumer personal income and spending data "squawk" returnsn mont ia me alpha seems more elusive today. is it because so many go after it the same way, chasing after short-term returns? instead if getting caught up with the crowd, the investment managers at pgim take a long term view. uncovering opportunities for alpha across public and private markets, while anticipating unforeseen risk, has powered our rise to a top ten global asset manager. partner with pgim. the global investment management businesses of prudential financial, inc.

welcome back to "squawk box. rick santelli here breaking news. september read on personal income and spending. we're expecting up 0.4% on income we arrived at half that. up 0.2% on income. up 0.4% on spending. so spending matches expectations we have positive revisions to both last month's income upgraded from 0.3% to 0.4%. spending from 0.3% up to 0.5%. real personal spending, that matched expectations up 0.3% to deflator up 2% year over year. if you look at core, up 0.2% month over month also up 2% year over year.

those numbers are about in sync with expectations. on the year over year deflator, that last look was up 2.2% so that did cool off a bit the fixed income markets haven't responded in a big way we were a little light on income maybe the biggest feature continues to be we're at a three week closing yield one of the stellar performers on the financial side for 2018 thus far. becky, back to you >> all right, rick thank you very much. steve liesman is also here on set with us for his reaction what do you think? >> not the strong numbers of 0.4%. the question is is the strong 4% quarter to quarter annualized number we saw in the gdp report last week, is that something that can endure? is it propelled mostly by jobs and wage gains or is it the tax cut

there's a lot of speculation about the tax cuts continuing. i'm a little more optimistic than that. i think your argument about it takes companies time to put products out there especially if it's greenfield stuff. maybe even some brownfield stuff. that that takes time to happen i do not think there was a whole lot of low hanging fruit in terms of investments that were foresta forestalled. i want to think of something entirely different we are halfway through the earning season cnbc scoured -- nicolas welles scoured all the earnings call so far to gauge tariffs 65% did not mention the word tariff in their calls. 35% did. let's take a look now. 19% said tariffs have had a negative or somewhat negative effect just 2% said it helped their business here's some of the commentary that we're measuring here.

this would have ended up as a negative over at harley. they say in total we now expect to incur approximately $43 million to $48 million of increased costs with relation the tariffs. we estimate roughly modest impacts in the tariffs, roughly $2 million to $3 million more will come in 2019 if we move to the 25% tariff total in total 45 companies mentioned tariffs in a negative or com somewhat negative commentary now, in a separate survey out today, the national association for business economics found 77% of companies say they have not changed their business in response to tariffs. very close to ours 23% had and most were negative take a look at the negative and positive results 10% accelerated investment 4% delayed hiring. you can see there mostly just

going down i'm not going to read them all for you there. 2% redirected spending most of the negative results were reported by goods producers where 10 of the 13 companies in the survey reported negative effects. about half raised prices 38% delayed investment so i'll sum it up. two-thirds to three-quarters, no effect of the rest it is negative and seems to be hitting the manufacturing sector those who are importing from abroad the hardest >> is that what you've seen as to what's happening realtime in the economy based on the tariffs? >> i think that's right. look, a tariff war helps no one. and rich or poor, labor, management, stockholders, employees. it's a blunt economic tool the raising price is interesting because it's tantamount to a

consumption tax. it's my view not the best way to go -- to try to stop china from stealing our intellectual property >> i didn't think it was a great idea for us to be wrangling too much with our partners to the north and south, our neighbors but china is a different situation. china has taken advantage of us for a long time. now it's at the point that you could argue they're a developed economy. they're the second largest economy in the world what should we be doing to try and cut back on some of their behavior that just doesn't fly when you're a developing nation? >> the point of the tpp was to organize china's trading partners, negotiate with them as a block. that was the key strategic effort and to abandon tpp with no concessions to china was to give up one of the main tools we had to deal with them. >> neither party was endorsing it neither candidate, i should say. >> we could come back to the nuance on that there was a way in which you

exit from that, but that's the first thing. the second thing is to conduct a a -- this kind of negotiation with china and expect them to capitulate when the elephants fight, only the grass gets hurt. >> what's the road back? what would be the solution you would lay out at this point if there is one now there's all of this talk about a new cold war with china that could last a decade or longer >> i think we're into it the solution we had i thought was to organize the trading partners what i would do is try to re-engage with tpp in a way that would be politically acceptable. >> president trump actually kind of brought that idea up. >> right and then have that block to go and negotiate with china. >> president trump has brought that up, but the other tpp partners said we've moved along on this. is there another way to get back at it? >> that's the only idea i have right now given the situation we're in right now

i just think a tariff war and consumption tax is a blunt way to conduct economic policy >> the danger, i think, is a lot of u.s. manufacturing, a lot of u.s. business is oriented towards china being its supply chain. okay >> this is an important point. >> and so it's not that adjustment cannot take place it's just that the general thing that you look for when there are recessions when there is slower growth is the idling of resources. there's a story in the journal a couple weeks ago they were geared up to -- now they're not doing that because they're rising the price of the frames from china. so it idles. there's a transition process there's also to my mind a goal dysfunction here i don't quite understand is he putting the tariffs on china in order to get them to exceed to our technical -- our

demands on technology? or is he putting tariffs on china in order to bring that manufacturing back to the united states there are two very different li lengths that are required here >> the answer to that depends on who you ask in the administration >> i know. but if you're going to try to bring manufacturing back to the united states, these have to be permanent tariffs that get people to -- >> but the other piece of this and we had the ceo of brooks on. he's not moving it to the u.s. he's moving it to vietnam. >> that is an issue. >> so unless there's another tariff put on the rest of the world if manufacturing in america is the policy. >> so if the second one is the answer that you're doing this to get manufacturing in the united states, then the tariff has to change to be on the good, not on the country. right now steel and aluminum, i think it's clear the administration needs to bring

steel and aluminum manufacturing back to the united states. on the other things, if they're going to have that permanent effect, you're right you're going to have ballooning deficits from vietnam -- >> it will hurt china. it will hurt china and if we're looking -- cramer after pence's speech goes all the way back to 1947 that we were trying to orchestrate a regime change in china which would bring an economic change since we're not going to get it from president xi so if you watch the chinese stock market -- >> now grant that's a good idea. >> i don't know if that's a good idea i think that's behind the scenes navarro is a hawk. >> are you trying to bring sneaker manufacturing and all this stuff that china makes back to the u.s.? >> i think you're trying to make a much bigger deal than that with china i think you're trying to say, what we're worried about in 2030, we're not taking it lying down >> let's say we have regime change does that change the differential in cost >> i don't know. >> and nobody's made the

political argument that what regime change in china looks like >> he was talking about it last week when you were talking about. >> the other point i make here is we effectively have an industrial policy here we're tilting our economy in favor of steel, coal, aluminum >> and away from the users >> but the chinese, let's understand, are investing in artificial intelligence, computing, and biotechnologies if we wanted to tilt our economy in a direction, tilt it toward the future not toward the past >> than an interesting point >> i think there's a huge conflict here. which is these jobs that the president is trying to save are generally good jobs. they have higher salaries and have higher benefits at the same time, over the course of human history, nobody has ever really wanted to do them okay i know some people will write in and say i love my manufacturing job. and that's fine. and i understand that. but if you look at the

trajectory of human history, it is to create machines to do the stuff on the manufacturing line. or to send it to somebody else to do. >> this is the point we make right now 2.5 times manufacturing in the united states than we did 30 years ago. 2.5 times as much value with 0.67 with less people you're not necessarily going to bring these jobs back in that sense. there are a lot of productivity gains that would come to the companies -- that's about the technology productivity enhancements in technology, not about mining coal >> steve, thank you very much. >> pleasure. >> great to see you. >> glenn hutchins will be with us the rest of the show. we've been watching a developing story out of germany. angela merkel will remain as chancell chancellor the euro this morning on this

news has been trading -- has under some pressure. you can see it traded up briefly there. in the last hour or so, it is under pressure european equities have been up across the board this morning. german stocks up by better than 2% seems like a strange dichotomy jim cramer talked about how her leadership in germany had slowed down the economic growth if that gets unleashed, maybe you'll -- >> but you'd be looking at a whole other story. >> jim cramer has had the best explanation for it we'll get a chance to him coming up when we return, red hat shares soaring this morning after news ibm is buying them for $33 million. first as we head to a break, here's what ibm ceo ginni rometty had to say in the last hour

>> we've been investing for a long ime this is what makes us number one for this next chapter of the cloud.

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or the suit. or the shirt. voya. helping you to and through retirement. welcome back to "squawk box. today's top corporate story, ibm buying software company red hat. the price tag? $190 per share in cash we talked to ceos of both companies last hour. josh lipton joins us again with another look at the deal >> ginni rometty, she was on

"squawk box" this morning talking about what this $33 billion acquisition now means for her company. take a listen. >> for us it's all about resetting the cloud landscape. and this is to create the number one company that will be the number one hybrid cloud provider this is how they move the remaining 80% of their work to the cloud. you have to be hybrid. you have to be able to handle multiple clouds. you have to be open technologies you have to do multi-cloud management and that's what we can do. >> red hat is the largest distributor of linux, that's the popular open source operating system and developers when they're writing apps for the cloud often prefer open source operating systems opposed to proprietary ones because they can be more open and flexible. ibm's bet here, you buy red hat, win over developers, and establish a stronger beat in that market. i did catch up with patrick moo

moorhea moorhead he said if they do pull this off successfully, they are better positioned to capitalize on that hot trend of hybrid cloud competing. that's where companies store some in the public cloud and others in their own private data centers. that's where red hat is a big player, guys >> thanks, josh. good stuff >> thank you you were really listening. >> i was absolutely >> look. if the whole idea is you want open source so that you as a company aren't tied into one vendor, that's always been ibm's strong suit, to be tied in >> it's interesting. because they've already been partners already for a long time so i'm not sure that's much of the strategy i think the overarching question here is when you talk to analysts they're not thinking they're giving away something. or that they're taking on the hyperscale players like aws. the question is are you going to take it to the hybrid cloud. if you pull that off, that's the

share. who the big players there, the hpes, dells. >> we're going to talk about this in a second, but who are the clients they're going to pick up that they don't have now because of this? >> i think that's interesting. what is the cross-selling opportunity? what is the revenue opportunity for these two. they're already partners that have been so successful. you would be trying to pick off those corporate customers that already looked to cloud computing offers >> i also think they're trying to create a development environment. in other words, what ginni said this morning was only about 20% of what the market is inside the cloud. and so one of the things that will happen inside the cloud is usually people will build technology there having the technology tools available. i think that's one of the things they're trying to do one of the other points is the way microsoft has invented itself is to go open >> that's true and it's been huge for them. >> and the decision to go open and all of the consequences of that it seems like a similar approach i don't know if you agree.

>> i agree listen, certainly open source is -- if you were looking at the big themes of 2018, that's one of them. you see it here. you see it with microsoft and their acquisition of salesforce. a big theme this year. >> all right thanks joining us now chief investment officer from peoples united advisers. he joins now to talk about what's next for the faang stocks i certainly can understand falling in love, falling in love with these stocks. which i think you have but that's not clouding your decision now on whether to start building a position if you're not in this. that's what you think people should do right now. buy the faang stocks it's a great time to build a position there >> we own apple. we own facebook. of the faangs, the only one we don't own is netflix but we like those companies. we actually think apple's report this week is not only going to tell us about apple, but i think it could give a bigger sense of

what's going on in the tech industry there's been a lot of concern about the semiconductors i think apple's demand and their forecast could actually help the semiconductors this week also. we think at this point right now you should be adding them to your portfolio >> might be a little a little b terms of opportunity to buy things cheaper we gone through enough of a pull back where fang makes sense and maybe not netflix but with the others you are talking about this is the time to buy some more, buy everyon more >> absolutely, we want to wait to see the earnings report before we add more to our existing position. if you don't own the fang stocks, we'll say take them up to market positions. you should be market weight with these companies. part of it is a macro call a lot of your economic commentary goes between are we in a virtual cycle, 3.5% growth

forever or is this a sugar rush? investors are really going to be focusing on the earnings that the tech stocks are generating we want to build a position for next year. >> a sugar rush, would it be better to take some of the gains you had in these things over the last few years or do you have to be invested? >> if we have that virtual cycle, we think it is going to push the feds to clamp down on the economy. if this is a sugar rush and we with go back to the 2.5% growth, we think the economy got much more longevity to it we rather see it lengthen. >> exactly >> either way though you are in love with those fangs. will you ever sell i know how people -- a lot of times they marry their losers

and cut their winners too short and you let the winners go and cut the losers short a trillion dollars is a lot of market cap for every company >> we do cut back but we don't think this is the point right now. >> okay. we got you down. appreciate it john traynor you got five or six billion dollars in management, right >> yes >> i would be nervous. >> we'll talk to jim cramer, stay tuned, you are watching "squawk box" on cnbc lity. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus

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coming up, much more from our guest and later this morning on "squawk on the street" don't miss walt bettinger, he's going to talk about settlements. stay tuned, we'll be right back.

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our guest host this morning, glenn hutchens you got the casting motion down. >> that's not a joke >> i know. it does not work with golf so you just heard buy the fang stocks in your past, you bought tech companies when they were cheap you can tell whether the value is there is there values to the nasdaq

yet? >> i would say two things, getting down to the sustainable growth and secondly if you had bought at their peaked price before the internet bubble and the 2000s crisis, you would mak a lot of money >> if they survive >> the fang stocks, the ones that turn out to be a big winner, you are right. the a world leading platform that you can do a bunch of stuff. >> you are still buying stuff right now and seeing stuff that looked reasonable under that scenario >> i recently bought a bunch of at&t stock the primary place where i focus on my investment, i have looked

to go long on at&t volatility because i think it is -- >> you liked that cme call >> i thought that was a good one. i continue to invest in digital currency >> glenn, it is always a pleasure to have you here. next time, please come for two hours. that does it for us, right now it is time for "squawk on the street." ♪ good monday morning, welcome to "squawk on the street," i am carl quintanilla and sara eisen, jim cramer has the day off. results this w