analysts predict a cut coming up it's tuesday, november 27, 2018, "squawk box" begins right now. ♪ live from new york where business never sleeps, this is "squawk box. good morning welcome to "squawk box" here on cnbc we are live from the nasdaq market site in times square. i'm becky quick along with joe kernen and andrew ross sorkin. our guest host is ian shepherdson from pant hshg e tpo economics. let's look at the u.s. equity futures. we are giving back some ground we picked up yesterday yesterday the dow was up by 354 points s&p was up by 40 points. the nasdaq up by 142 points. this morning dow futures down by 55 nasdaq off by 36 s&p futures down by 9 points the rally yesterday was the best we've seen in three weeks for

the dow and the s&p 500. it moved the s&p 500 out of correction territory though the nasdaq and the russell 2000 remain there. we'll continue to see what happens with this. the dow and s&p having their best day in three weeks. also look at what happened overnight in asia. you will see the nikkei ended the session up by 0.6% stocks were weaker in both the shanghai composite and for the hang seng with stocks barely down for the shanghai. the hang seng off by 0.2%. if you look at europe and the markets trading there, mostly red arrows the dax is down by 0.2%, so is the cac in france. the ftse down by a quarter percentage point stocks in italy weaker but stocks in pain up by 0.20% treasury yields in the united states, the ten-year 3.057%. the story of the morning we are watching shares of apple that stock falling after

president trump telling the "wall street journal" that he expects to move ahead with boosting tariffs on china and that could mean slapping tariffs on all chinese imports including the iphone ylan mui has more on this developing story >> there were really two critical words in that interview with the "wall street journal," highly unlikely. that is how president trump described the chance that he would hold off on raising tariffs on chinese goods from 10% to 25% on january 1st. highly unlikely that anything would stop that. beijing had been hoping those tariffs on 2$200 billion of chinese products would be on the negotiating table at the g20 in that interview president trump signaled those are baked in. instead if he and president xi cannot reach a deal trump said he would forge ahead with tariffs on the remaining 2$265 billion of chinese imports at a rate of 10% or 25%

president trump also did not seem fazed by the prospect that iphones could be hit with a 10% tariff he said consumers could withstand that easily. president trump sounded more combative than he did earlier yesterday when eamon javers asked the president what he thought about xi >> we have a good relationship here's the bottom line china has to treat us fairly they haven't been. they have to treat us fairly >> the worst-case scenario where all the threatened tariffs take effect on chinese goods, autos, aluminum, households would face an extra $2,400 on higher costs, lower wages and lower investment terms in the first year. those numbers were according to a study commissioned by the koch brothers >> ylan mui, it's a heck of a story. tim cook will be watching. we talked about whether apple would be the sort of symbolic

one and the one to watch apple's premarket tumble is knocking it out of the position as the world's most valuable company in extended hours trading. microsoft currently has a bigger market cap than apple. those gifts on tws on twitter ol gates doing the dab. >> i'm uncomfortable for some reason when i see that i don't know why >> i have a video of my son trying to teach my mother the floss over the weekend >> that's this >> no. >> very funny. >> i need to watch that in slow motion before i would ever -- >> how did that become a thing >> it's not in this story that i just preread, but i will talk market caps here this is interesting. you know who we used to compare united technologies to they were so similar --

>> ge. you know what their market cap is at now? it looks like ge already split into three united technologies saying they will split int three separate companies by 2020 those will be united technologies which will continue to focus on aerospace, otis elevators and carrier heating and cooling. i figure that's residential but also industrial. it doesn't necessarily not go with elevators i could see how you would split all three, right i know why you're laughing, about wapner not all residential houses have

elevators. >> took me a minute. >> utx also completing it's -- i didn't think of it andrew started laughing. >> i wasn't. now i am >> utx completing its 23 billion acquisition of rockwell collins. this is something activist dan loeb was pushing for back in april after he disclosed his hedge fund built a significant stake in the company. at the time management disagreed but always said it was open to shareholder input. utx up a percent and a half in premarket trading. up $2 to $130. that market cap 102 billion. >> before these gains today. >> yeah. >> let's tell you about other stocks to watch.

tesla's sales in china fell 70%. the passenger car association telling reuters tesla sold just 211 cars tesla which imports all the cars it sells in china said tariff hikes in auto imports were hammering sales. we continue to monitor gm today. yesterday the automaker

announced it will shut several plants in america and canada and cut about 14,000 salaried jobs >> we have a lot of pressure on them they say the chevy cruze is not selling well i say get a car that is selling well and put it back in. i think you'll see something else happen there. i am not happy about it. i have no doubt in the not too distant future they'll put something else in. >> mary barry met with larry kudlow yesterday afternoon so far no details have emerged on that discussion. the question is when he said that, was that just public pressure or did he know something? he said they'll put something back there -- >> that is his public pressure

>> the union still has to approve this from the stock was up yesterday, people say they want them to consolidate. this is a public relations -- >> the company has to do what it has to do. they never downsized -- >> save the tape >> they never downsized the way they needed to they have to get with the program. they're making the wrong things. >> however on a year where taxes were cut for corporations and the president says there's been a lot to done for gm -- >> i've never been a statist i've never been the means of production are controlled by the government you see what happens in china

when you do that you're funding things sthat shouldn't be done. >> i'm with you on this. >> i'm very uncomfortable, too something just crawled down -- >> this is the new reality they should be able to run their business how they have to run their business >> that said, i understand what he's doing it's true. if you look at it in a very nationalistic way, gm has benefited immensely from lar large -- have you read the commentary, people that worked at these plants for 30 years it's heartbreaking that it's happening. >> and in a year where you got the biggest corporate tax cut that came through. and they had record profits in the last quarter >> what does it say about mary barra as an indicator -- >> people are saying they're not seeing anything. though --

>> part of it is those cars. those cars you're selling, you have to do something >> production was down to one shift a day. >> peak production doesn't last forever. a lot of people are thinking -- >> the question is how much of a political challenge it comes for the president. does it become a political problem for gm or for the president? >> both. my guess is they'll have to reach some sort of an agreement where both sides walk away saying they got something. >> manufacturing has been strong 300,000 plus jobs have come back this goes the other way. interest rates rising. you know, president trump has told us who to blame there it's powell and then mnuchin or whoever recommended the guy. what if there's no inflation you don't raise it just to raise. just so you can cut. >> when you look at gdp growth -- >> we all re-evaluated what's

normal when you actually get back to neutral. neutral used to be 7%. it's not 7% anymore. let's get perspectives on the ongoing volatility in the markets. joining us is julian emanuel also our guest host this morning is ian shepherdson from pantheon macro economics. julian, what do you think of yesterday's rally. do you feel there's a consolidation coming or a head fake >> you had a consolidation for weeks now. >> we saw consolidation but then the bottom fell out again. >> exactly if you look at the last month you've been bouncing between 2600 and 2800. if you look at the index year to date they're unchanged so you can really make the argument that both the bulls and the bears are a bit frustrated and exhausted. however from our perspective two things first off, when you're going to

legislate on automotive manufacturers, when you're going to talk about slapping tariffs on iphones, when you talk about putting the fed front and center in the debate, what you can expect is that multiples will come in. that is happening this year. multiples could come in more however -- >> you don't think this is necessarily a dip? this could be the new reality. >> when you look at between now and year-end, the point is that the frustration of the bulls and bears has caused positioning to get very light, very defensive, and if you think about it, saying that you're going to go through with 25% tariffs in january sets the bar very low for progress this weekend. so the president may be doing this to deliver upside for us, you know, that increases the probability of a year-end rally. >> that's an interesting perspective. i did not think through the double secret probation aspect of it >> double secret, triple secret.

a lot of back and forth going on >> ian, a lot of this is the late cycle talk. is this late cycle is this end of cycle >> we're late with a twist because we have a big fiscal boost. you look back at history you will find pages blank when you try to find a similar experience i agree with julian, i'm not surprised to hear the president yesterday ramping up this aggressive rhetoric about the tariffs saying they'll do the 25%. vice president pence a couple weeks ago with that aggressive speech on china as well. this is what he does before making a deal. the nafta deal, it was all falling apart until it wasn't. >> if all three of you saw it that way, is the market thinking this is just rhetoric? >> if china doesn't believe he's not ready to do it, they don't take it seriously, they don't negotiate unless they believe it i thought he gets there and then it gets -- i don't know.

maybe that doesn't happen. a lot of people think this is a 20-year problem. >> there is a strategic issue with china and also a tactical issue. this week is about delivering a win. not necessarily a huge win nothing that changes the big strategic position with china being a bad actor in asia, but for this weekend we don't need much everybody is so scared and so nervous. >> that also sounds like a binary situation, where if there is progress that's shown, markets head up. if there's no progress and it turns out this is for real, do markets dive and go down deeper? >> not necessarily in the near-term. again, the positioning is light. the seasonality. the message for 2019 is totally different. if this really is the start of a retracted economic cold war, multiples are coming in. >> coming in to what >> we did some work that compared the cold war multiple, 1960 to when the berlin wall

fell in '89 versus 89 t'89 to nw and that difference is four multiple points. >> we have already come down two or three points already. >> we have come down three points but we're basically at historical averages. if you start drifting to that other regime, you are talking about downside consistent with past trade wars of around 2,300 on the s&p >> ian, what do you think about the fed and what we'll hear from it at this december meeting? >> i think they'll hike. if they don't it will look like the president told them not to hike and they said yes, sir. what about messaging for next year >> they softened a bit talking about the global growth story. they're waiting for january and what happens right now those tariffs which are 10% on 200 billion, they go to 25% and if china retaliates it goes to everything. from the fed perspective, you

think if they do this we get a massive inflation shock and slower growth at the same time when the labor market is tight and you get inflation shock like that, you have a hike. yet the growth numbers will tell you you don't want to hike >> so you're saying they would have to hike because of the inflationary pressures >> yes if the consumer price index jumps by 1.5% because they put tariffs on everything, the lesson of the '70s is you can't wait for it to work out. we tried that and it ended badly in the '70s. so they're hoping we get a deal this weekend otherwise we're in a sticky position next year >> what do you think about that thought, the fed being forced to hike as consumer tariffs come in >> from our point of view, we would prefer the fed take their foot off the accelerator we tend to think there's not much inflation there's some wage price --

>> but ian is right on this. if he comes into this -- if they come in and there's a huge consumer spike in prices, the fed would be looking at inflation, that's its mandate, right? >> everything we have seen for the last several months tells you those price increases may get passed on, but people will buy less we heard a report about buying fewer cars in china. you look at all measures of inflation away from wages, they're pointing downward. >> but they wouldn't be if we're talking about a 25% tariff on $5 billion. >> that may be the case, but if you have people buying less as a result, those prices may end up coming in and the companies are eating those kinds of increases. >> either way it's bad for the stock market >> correct >> there is no good outcome from this we can see it already, we're hurting already. you look at business surveys out of the u.s. and china, they all rolled over in the last few

months this is not because of china's long-term slowdown this is tariffs. if you look at what businesses are saying in the u.s. surveys, manufacturing, ism survey, tariffs are the big worry. we're not even at half peak tariff if the president does what he says he will do. >> julian, thank you for coming in today ian will be with us for the rest of the hour. coming up, the top water cooler stories including the return of cincinnati's own jerry springer great. also word that china's top capitalist is a member of the communist party. shocking as we head to break, a look at the premarket win e aners and lr in the dow this isn't just any moving day.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today.

♪ welcome back to "squawk box. china's best known capitalist is a communist party member jack ma head of alibaba was previously believed to be unattached by peoples daily revealed his membership and a list of 100 people it said helped drive the reform process. >> i don't know what that means. >> he's been pressured >> what's the other party? if you're not a member of the communist member -- >> you're unaffiliated >> do we view china as a communist country anymore? they have some statism but they po borrow a lot of tenants of capitalism >> qi just assumed he was a

member >> it means the leadership is cracking down on some of the big corporate leaders there to say you will be there with news this fight with the u.s >> i think it might be significant they're outing him i don't think it's significant that he is >> to me, i read the signal in this, like he said not long ago, this will last for decades, this trade war. i think they're using him as an envoy to the united states he's on our side, ramp the pressure up. >> pry ior to this he wasn't? >> who over there is not a member of the communist party. >> you're in prison if you're not. >> yeah. >> i think it's significant they are touting this i know everything about jerry springer most people know he had a talk show he was mayor of cincinnati >> yes >> but --

>> but actually this will be great. nbc universal is bringing the veteran talk show host back as "judge jerry." springer will preside over legal disputes, render his verdict and leave viewers with a dose of classic springer wisdom. >> you know how he used to bring people in, give them paternity tests and lecture them >> are people going to throw chairs >> probably not. >> how old is this guy you have to hand it to him >> they had security >> he's a lawyer >> by the end of it, if there was not a brawl on the show each time, it wasn't a show basically. >> no fight, no show >> prees prhe's pretty funny. he is smart. springer said it is the first time in his life that he'll be

called honorable. some people in houston have extra spending money for the holidays after an atm mistakenly dispensed $100 bills a customer went to the machine instead of getting $20 he asked for, the machine spit out $100 bills. that machine was soon kroefr cro overcrowded by people looking for free cash. bank of america blamed the issue on a vendor who mistakenly stocked the machine with $100 bills. the bank said any customers who got extra money were free to keep it. >> do the mans not look to see what kind of money -- each stack has to go in the right place >> that's probably what it is. >> think about it. every day people have to put the money in the right place >> surprise it doesn't happen more often >> not all of them do the different denominations. i go to certain places, you pick

what you want. >> here in the u.s., all the bills are the same size. in the uk, they are different sizes. >> that's annoying >> it's for blind people good for blind people. >> you're right. yes. >> is that why they do it? >> yeah. >> interesting we should probably do that then. >> it's hard doesn't fit in the wallet. use the money clip, i guess. >> that's interesting. >> you just use your apple -- don't you just use your phone? >> sometimes i do. you just double click. >> you venmo sometimes >> paypal, venmo, bitcoin. i don't use bitcoin. but we'll talk about bitcoin bitcoin prices are falling again this morning now down more than 40% just in the last month you're looking at $3,600 we will talk to an investor who is still bullish on the

cryptocurrenc cryptocurrency >> buy all the way down. >> let's look at yesterday's s&p 500 winners and losers air velocity is reading at fifteen fpm. why would you need to learn every detail about a company? firmness... nine. it's how ibm services helps retailers around the world drive growth and save millions. he's very into this. yeah. is that the standard amount? yes. feels good. when your partners are obsessed with business and technology, you can put smart to work.

welcome back. you're watching "squawk box" live from the nasdaq market site in times square. good morning among the stories front and center, apple shares are falling, giving back most of yesterday's gains after president trump threatened tariffs on iphones from china. trump telling the "wall street journal" that he expects to move ahead with upcoming tariffs on china to 25%. united technologies is planning on splitting into three separate companies it is splitting up its aerospace, elevator and air conditioning businesses. united tech expects the separation to be finished in 2020. and cybermonday sales hitting a new record adobe analytics said yesterday's online sales are projected to hit $7.9 billion, up nearly 20% from just last year

equity futures down 88 on the dow. that gain held yesterday, it wasn't gang busters. today we're giving system of that back. nasdaq down 42 the s&p down under 11. it has been ten years with three bear markets of an 80% price drop, we're talking about bitcoin, not the market. joining us is discuss the cryptocurrency is a partner at placeholder. welcome to the program the thing we are all trying to figure out, is there a bottom? where is the bottom? what would be the rational for the bottom where do you stand >> certainly it's something we're all trying to figure out. if we go to the commodities world, typically the bottom is the marginal cost of production. >> right >> there was talk in 2015 of 200 being that bottom for miners

in this 3,500 to 4,500 range >> $200. >> in 2015 >> that was the cost to mine one bitcoin for the servers, electricity. re >> rent, all of that here we are in 2018 having the same conversation, different price range, but with people saying miners will go offline anything below these prices. since miners mint a large new amount of bitcoin every day, this could have a price effect does it cost more to mine bitcoin than the actual value of bitcoin? many miners are paying 6,000, $7,000 to bmine each bitcoin right now. is that the first time we had this >> knc miner in 2016 went out of business

either because of paying for electricity or poorly managed operations right now this is one of the most unique times in terms of miners across the board being worried, but it's not all miners there are miners who potentially in china or other regions get massive cuts on electricity. >> why did the cost of production go from $200 to 7,000 when oil is $50 or whatever? >> the way bitcoin's network is supported is by volunteer machines around the world which clear and settle bitcoin transactions for doing so they get minted new bitcoin every 10 minutes as the price of bitcoin goes up, so, too does the incentive to mine it. as the price margins go up, more and more computers flood the market >> you would think the more people come in, the cheaper it would be >> in this case there's -- >> i understand, but that's

weird. am i supposed to think now it doesn't cost 200 to mean now, it's definitely 7,000, so we're getting a 50% discount then we should buy it if it's a 50% discount >> i think it's in the 3,500 to 4,500 range. >> people could come offline, decide they won't mine -- >> bizarre >> completely crazy. then it is cheaper it's cheaper to mine >> i get it. >> think of it as the market for bitcoin security the number of computers securing bitcoin's network is -- >> except we need oil. >> we do need oil. >> if it got as transparent, who owns what, it no longer had any appeal to those who are needing the transactions, is it still -- i've heard we're in a digital world, digital currency will be worth a lot. but if it was totally regulated, taxed, like everything else,

does it have an innate appeal? >> yes >> is it less appealing? >> i think the story of those transactions are behind us there's been great stories put out by university of london that go through different eras. early on it was geeks, then sin activities, now it's legitimate enterprises. >> they're shot just buying fake i.d.s. >> no. >> what do you think has led to the downturn in terms of the price of bitcoin and to the extent you're still bullish -- >> i am. >> what will lead from a philosophical, psychological change in the marketplace that will lead it back up again >> if we go back to december of last year when we peaked at 20,000, that was an overheating market we had seven per per periods wh bitcoin more than doubled in a month. >> do we know if it's the same

investors who come back or always a new group do they wash each other out? that will be an important component to this, given there was a lot of volume on a relative basis back when we were talking about 20,000 if you have a whole generation of investors washed out of this who say this was too painful for me, i can't do this again. this is beanie babies or whatever it is -- >> yeah. >> -- who will come in to pick up the slack is a new generation of investors saying i missed it the first time, i have to do it now? >> it's been mostly a retail driven market to date. what was interesting last year and with our fund we got institutional lps dipping their toes in the water. that's continued to happen >> we had a guest on yesterday who suggested institutional investors are not buying through these exchanges, so the price of bitcoin is not properly reflected. basically the point was that some of this is being bought -- >> otc >> -- otc. >> so we have no idea what is

really going on. that's interesting if true >> yeah. there's been a marked shift if you talk to the otc desk versus exchanges. i have not seen the numbers from otc desks, but volumes are supposed to be on par. so double the volume as it appears. what are they priced at on the otc market >> about market. maybe 1%, 2% to market if you're buying an exotic asset -- >> i said tulip bulbs yesterday, people were mentioned. you mentioned beanie babies? beanie babies? they have to send the tweets to you now. >> beanie babies they don't come fair to tulip bulbs. >> i wasn't around >> i wasn't either if we go to beanie babies or -- >> that's low. >> if we go to beanie babies or tulips, when you look at the activity around those markets, there wasn't the earnestness going on like there is in these markets. the hardest thing now is we

don't have fundamental models to value these assets we just use relative valuation techniques, like comparing network value to network value, that's all relative without an anchor but if we look at equities it was a long time before we had fundamental values >> it's a longer conversation. i'm sure we'll have more of it thank you. when we come back, crude oil under pressure on word that saudi arabia is pumping oil at its fastest rate ever. we will talk to energy policy expert dan jurgen. and at the top of the hour we will talk to mohamed el-erian and later we'll talk about the administration's new effort to lower drug prices with alex azar stay tuned, you're watching "squawk box" on cnbc 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. the global investment management businesses of each day our planet awakens but with opportunity comes risk.

and to manage this risk, the world turns to cme group. we help farmers lock in future prices, banks manage interest rate changes and airlines hedge fuel costs. all so they can manage their risks and move forward. it's simply a matter of following the signs. they all lead here. cme group - how the world advances.

this is moving day with the best in-home wifi experience and millions of wifi hotspots to help you stay connected. and this is moving day with reliable service appointments in a two-hour window so you're up and running in no time. show me decorating shows. this is staying connected with xfinity to make moving... simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. welcome back to "squawk box. ibm's ceo ginni rometty speaking out yesterday in brussels. without naming specific names

she called for targeted regulations on transparency and a crackdown on handling of data. >> i do think that if there are those specific companies that misbehave, there needs to be some action taken. that can be in the form of -- when we talk about some dominant consumer platforms, it's an individual consumer that doesn't have leverage to deal back, you could look at liability when it comes to things like terrorism, when it comes to things like hate speech, when it comes to things like child sex trafficking as an example. these are known issues that if you knowing i will have, yly these are known issues that if you knowing i will have, yl havo address those. >> rometty is calling for a fact sheet on how data is used, decisions made and ethical gu e ethical guidelines this is pretty aggressive.

she is effectively saying they should be held libel for what is taking place she is also in the business-to-business space, so it is easier to make these comments >> could be some market cap envy there, too, right? ibm is -- not deliberate, but, you know, some of these other companies that the old line tech did not get into, they all have that issue, right? they were there, well-funded >> years ago >> here you kind of hear the circling the wagons on this. there's going to be more and more talk on this from washington >> i'm not totally opposed to it i realize now how much my -- they're not paying -- any way, crude prices have fallen more than 30% since october 1st we'll talk to dan yergin about the potential moves that could

come from next week's opec meeting. as we head to break, a look at european markets right now all red. small losses we'll be back. at&t provides edge-to-edge intelligence, covering virtually every part of your healthcare business. so that if she has a heart problem & the staff needs to know, they will & they'll drop everything can you take a look at her vitals? & share the data with other specialists yeah, i'm looking at them now. & they'll drop everything hey. & take care of this baby yeah, that procedure seems right. & that one too. at&t provides edge to edge intelligence. it can do so much for your business, the list goes on and on. that's the power of &. & when your patient's tests come back...

our new, hot, fresh breakfast will get you the readiest. holiday inn express.

book now for at least 20% off during our annual sale.

we're watching crude prices this morning after a report that saudi arabia is pumping crude at a record pace. analysts are expecting an opec production cut at next week's meeting. joining us now is dan dan yergin this is the supply side we want to get to, dan but you also made the point that the selloff in risk assets, whether it's equities or wherever you want to look around the world raises global slowdown fears in the face of rising interest rates with the fed. and that that's also part of this at this point, what is it? 50/50, 80/20 in terms of supply? where are you on that? >> two bhig things are happening. one, the overall economy trade wars and the other is, in fact, these high numbers you've seen in terms of production and the expectation of more. but i would say in addition before we get to the opec meeting, we have the g20

meeting. some of those meetings are not consequential. i think this one will be very consequential because people will look for signals. trump's meeting with president xi and you're also going to have president putin there and presumably the saudi crown prince and in 2016, it was on the side lines of the g20 meeting that they started to get together, russia and saudi arabia, on oil prices so i think people will be looking very carefully at those meetings then after that, you get to the opec meeting >> how long do you expect this kind of news to keep hitting about saudi arabia maximizing their output it's not in their best interest for that long. >> this was pretty strange because, of course, the saudis have been talking about going back to the production levels that they were at before they stepped up production to deal

with iranian sanctions there are two explanations for this one is that they wanted to demonstration that they really do have the spare capacity if there's a disruption they can put oil into the market. the other is they say their customers were asking for oil because of cutbacks from iran. but i think that increase really took the market by surprise and you've seen the effects in the last day or so of that >> dan, the third being that they're doing this to show a little bit of political fealty to the trump administration because they don't want them making a big deal about khashoggi. >> well, i think there's that aspect of it and i think also going into the opec meeting that will come up just a few days after the g20, there are two things they'll be focused on one, they'll be focused on what looks like rising production in 2019 and the other as you suggest also, they're going to be worried about tweets from the white house. >> very quickly, steve liesman

has a question for you he's wondering with the u.s. producing so much oil these days are lower prices good or bad for the u.s. economy >> i think it depends where they are. the whole shale oil complex has been a big boost to the overall economy because of the supply chains all that money being spent in the economy. so it's kind of in the middle range is the best answer good for consumers but also this has been a very important driver of capital investment in the united states. >> hey, dan. in terms of the continued relationship between the united states and saudi, obviously congress is now looking at a bill that would effectively re-investigate in a very public way and potentially censure the country over the killing of jamal khashoggi in a way do you think that's realistic? do you think that's coming >> i think it is i think this isn't over and when

the congress comes back in the new year and also with the democratic house, these issues will continue to be out there. >> but how will that impact the relationship between the country -- the countries, rather, and also the price of oil? >> i think there are two things. one is the overall relationships between the countries. there are a lot of dimensions to it i think it will create rancor as it continues and in terms of the price of oil, i think that when they -- we'll see them still trying to kind of stabilize the price of oil because their budget's at stake. you know, if oil continues to fall, that's a huge hit. and i think the producers both saudi and the non-opec russia will try to continue to make a deal if you're in a low price period >> on the demand side of things, as you were watching, did oil crack before or concurrent with or after the equities?

if oil cracked first, you could say equities are trading off that if equities cracked first, you say it's a risk off and oil is going to go down how will that work was oil telling us something >> i think there was a very high sort of geopolitical spike in oil. you know, the first week of october, oil was at $86. and people were saying it was going to $100. now it's at down at $50. i think it's been part of the overall risk off right now in terms of oil the longs are all gone but i think it's part of -- i think you have to also see it in this larger economic context the specter of slowdown and this uncertainty around trade >> we don't know just like everything, things predict ten out of the last two recessions so you never know. >> and you can see the u.s. producers are now redoing their budgets for lower prices and that will have some impact on the growth next year. >> yeah.

bitcoin producers, too, dan. i don't know if you saw that but we cover it all here >> we left out bitcoin >> we did. >> thanks, dan dan yergin let's get a last thought from our guest host this morning ian shepardson what do you think oerl the economy, the oil prices being part of this issue >> u.s. production hasn't slowed yet. oil's come off so much in the last few weeks no shift yet, no sign yet that capex in the oil business is weakened it's a matter of time. dropping from $80 to $50, there's going to be a significant hit. it's great for consumers right now. consumers have more cash, great. but there's a price to pay for it >> thank you, ian. pleasure to see you. >> thank you two big hours ahead. our guest host for the next two

hours, mohamed el-erian. we'll talk what the fed will do with market volatility next

markets in the state of business mohamed el-erian is here to give us his latest calls and predictions for the end of the year apple under pressure thanks to trade tensions with china we'll run you through some of the best and worst case scenarios with a top rated analyst. and it's giving tuesday. >> why should i tell you >> maybe this will help. >> i still don't think this should help. >> can you spot me a 20? how about now? >> i'll find out if you're telling the truth. >> how warby parker is looking to change the way you view the world one pair of glasses at a time

the second hour of "squawk box" begins right now ♪ live from the beating heart of business, new york, this is "squawk box. >> good morning. welcome back to "squawk box" right here on cnbc we're live at the nasdaq market site in times square i'm andrew ross sorkin along with joe kernen and becky quick. take a look at futures at this hour dow looks like it would open down about 76 points nasdaq would open off 42 points. and the s&p 500 would open off about ten points let's get to your big three stories at this hour we are just days away from the g20 summit and hopes are dimming for a trade deal with china. president trump's latest tariff threats hitting companies like apple. we'll get you caught up on what it means for your investments. the dow breaking a four-day losing streak. they all had their best days since november 7th

this morning the futures are lower. we'll talk to the economy and the fed with mohamed el-erian. and united technologies announcing plans to split into three different companies. that story and more with your corporate headlines coming up. few stocks on the move this morning. tesla sales dropped in china 70% in october compared to a year ago. the china passenger car association reports that tesla sold only 211 cars in the country last month that'd be good it could kind of match production you know, get production and sales -- no. they're doing much better. cvs health getting an outperform rating app cantor fitzgerald noting the company has the cape about of integrating and spirit airlines gave upbeat guidance for the quarter including higher revenue united technologies said it would separate into three

different companies. this split which would leave aerospace under the banner is expected to be complete in 2020. greg hayes says as stand alone companies, united technologies, otis, and carrier would be ready to solve our customers' biggest challenges, provide rewarding career opportunities, and contribute positively to communities around the world take a look at shares of ut dmoerngutx this morning they are up on this news let's get over to dom chu this morning who joins us on what is moving markets this morning. >> good morning, andrew. we are keeping a close eye on some of those big sectors that bounced yesterday. we got a couple of names we're focusing on particularly with stocks and technology. that is apple and microsoft. because as things stand as of earlier this morning, we would have apple poised to fall to second place in terms of market cap to microsoft as of early this morning, apple

was worth just around $819 billion in overall market cap. and microsoft was worth around $820 billion we'll see if that pre-market action holds, but you can see for right here apple shares from their peaks earlier this year have lost around 25% of their value. meanwhile, microsoft has only lost around 8% that's the reason why you're seeing that market cap dynamic play out right now other things to watch right now within technology. a key part in industry group here is the semiconductor stocks because those semiconductor stocks have been seen as perhaps a leading indicator for the tech sector and the broader markets those tech shares have fallen still by around 20% since their highs earlier this year. a little bit of buying yesterday. still got a long way to go there. and of course that goes into the broader theme of whether technology and services stocks like facebook, apple, netflix can assume a leadership role for right now on a year to day

basis, you can see the communications services all moving lower those big moves to the downside here underlining that communication services, internet, and commerce and media stocks could be part of this overall theme. so again, tech, com services we'll see if that leadership can be assumed back over to you guys. >> thank you very much let's get to our guest host this morning mohamed el-erian from allianz he's joining us for the rest of the show what we've been talking about all morning long and for weeks and months at this point is what is happening to the economy right now. you say you're seeing signs of the slowdown and the fed should take a breather. however, that's not necessarily what you think they will do. >> first, the slowdown is overseas from the u.s. particularly in europe so the main worry is that we get spillback onto the u.s. economy. so for the u.s. economy on a

stand alone basis is fine. but the u.s. economy cannot overcome head winds from the -- >> divergence becoming convergence. we've talked about this before >> my view from day one and you've covered it, three hikes is what i thought they should do this year. they signalled four and reiterated four. so between what they should do and what they end up doing is different. it's hard to go back to three hikes for this year. >> the market has baked in the idea there will be a raise in december. >> if they don't, they will say the economy is either much weaker than we anticipated or the fed is much more open to political intervention than we thought. so i think the fed has put itself in a bit of a box and they're going have to go through with four hikes. but my preference from the beginning of the year was three and then see how the global economy evolves. not just the u.s., but the global economy >> it's not just the global economy.

concerns of weakness overseas washing back on our shores we have the self-inflicted things to worry about too. those are tariffs. if we do what the president suggested yesterday is very likely and raise tariffs from 10% to 25% and make it $550 billion worth of goods we're talking about what are the impacts of that >> so first you have to make a judgment whether these tariffs are part of the journey or the destination. my view has been they're part of the journey. that just like korea, mexico, canada, china will understand that the right reaction in this world is not a tit for tat the right reaction is to make concessions and acknowledge that there are issues with forced technology transfers, with intellectual property theft, and aim for the fairer trading system that's still my expectation but every time we delay it, there's concern. in china saving face is a bigger issue. and in the u.s., this has become

a national security issue. washington has discovered that economic tools can be used for broader national security goals. so, you know, it really is important that we get a positive signal out of the g20 meeting between the two presidents >> why do you think that china is likely to blink because that has not been the signal we've seen at all >> correct because the alternative is much worse. same reason why mexico blinked, canada blinked, and europe is going to blink if the u.s. is willing to incur the cost of a trade war, which it is, okay? then the implications for the rest of the world are much worse than for the u.s. >> this is in your 70% scenario. it's going to be a small win for us, small win for them, nothing really changes, business as usual but both sides get to pretend -- this is not the -- what was your potential for a really big deal? >> so the 65% is you tweak it a

bit like you did with nafta. you tweak it a bit and go back to business as usual >> and you think that's still likely >> it's still likely there's a 30% chance of a trade war which would throw parts of the world into recession and slow us down >> we're in a skirmish we're not there yet. >> no, no. and there is what i call the reagan moment is when you start a strategy that ends up redefining the landscape that's what ronald reagan did in the '80s at the time now, there was a possibility that you can actually reconfigure the possibility. it's not an overwhelming possibility. but it's on the radar screen >> that 5% chance is what you're talking about solving that national security issue. the most likely scenario is even though washington may look at this and say there are real security implications that come out of the trade practices that evolved over the decades, most likely scenario is that doesn't

get fixed in your opinion. >> no, i think what will get fixed are first the joint venture requirement. >> meaning that if you are an american company, you need to have a chinese partner going in. and you have to transfer all your technology and information. >> business models, business strategies and that's the cost of doing business, but companies are discovering it's a very high cost. >> but companies were the ones who agreed to go ahead with that from the beginning >> they did because everybody is still seduced by the notion of the biggest market in the world. >> $1.3 billion. >> and going through the middle income phase and spending more plus china is redefining parts of asia. the asian infrastructure bank. so there is -- companies are right to look at china and say, wow. largest market in the world potentially. and it is redefining an important part of the world. >> so it's going to be 70%, not

30%. >> 65%. >> it's a possibility. it's not a probability >> that give yous 70%. not the bad 70% chance of a good outcome. >> but the more we continue with this and that's why i keep on saying this weekend's g20 is not about the g20. the fact that now we're just hoping they can come up with a communique shows you how far we've gone in terms of backwards in terms of multilateral what it's about is the sideline bilateral meetings few people pay attention to but this one is going to be critical >> we had a discussion earlier this morning trying to figure out what the market implications are just of this weekend i know it's very tough to predict short-term moves in the market if there is some communique that comes out that sounds like there is some bridge towards an

agreement, most people agree that the market will go up significantly. but if there is not, will it trade down significantly >> so on the way up, you said it if you look at various parts of the markets and dom chu did a great job. we technically oversold. you could have -- especially in tech you could have a relief rally based on that. if the bilateral meeting breaks down completely, then what we're going to find is there are still certain people that are over-exposed off benchmark positioning. you will see those people finally shaking out. >> panicking >> panic is a strong word. i think what has surprised people is that the downward movement in most sectors was so severe and so sudden that the tourist investors haven't had time to get out yet. so there's still trapped money if -- >> not just that if you're really looking at this if this is our last best hope of finding some way of avoiding

those tariffs coming in in january, those massive tariffs and what that would mean overseas and what that would mean here, if this is your last best hope and that doesn't happen, ang lot of people on wall street would have to shift their opinion from thinking that this is the journey to this is the destination. >> correct and you should feel sorry for both the chair and the vice chair of the fed who have to speak ahead of that. so they have to signal ahead of that whether they're still on for a december hike and whether they're still on for what they've signalled about next year and they've got this big uncertainty. >> if the tariffs come on, you think the fed would not raise rates? >> i think they themselves will realize that the prospects for the economy are not as bright as what we have right now >> that was my guess on all of this too but ian shepardson said in the last hour if the tariffs are gone, the fed would be under more pressure to raise rates because you're looking at big inflationary flames that we'd be

facing a bad scenario. he said in the '70s we waited too long you couldn't do that you'd have to raise rates. >> i don't think i agree they will say this is a once and for all impact on the price level. not inflation. the price level has been well below where it would have been had we met 2%. and they would use that as an excuse of saying we're looking at the price level as well as the price changes. so i don't think they would overreact. i think they would be very cautious they'd say let it play out but in the meantime, we're not going to make things worse >> do you -- how do you calculate sort of the president's rhetoric and commentary about the fed and how it relates to the psychology of the fed? >> i think they are most likely ignoring the comments wishing that they hadn't -- >> but occasionally you hear people say they have to raise otherwise they'd be giving into the president and they'd look like they weren't independent and all of this becomes the sort of -- >> i said in the beginning, for them to back off now, a hike in

december, is problematic for two reasons. one is the economy remains relatively strong. they do not want to appear to be sensitive to political interference >> even if they say they're not paying attention, they're paying attention. >> they can hide it with being data dependent and saying what do you do when the facts change, sir. that was kaines. your hero. >> this fed has signalled it's a different fed. they have looked forward and said they're beyond data dependence in the last week or so, the word data dependency has started coming back. this is going to be a big chance after whether at the first sign of market volatility they flinch like the bernanke fed. >> he's got a tough -- a lot of them have had some pretty -- you know, they can look really good, really smart, keep the punch bowl he's got the toughest job. he could end up going down in

history as the guy taking the punch bowl away and bad things happen it's tough i don't know if it's worth that. how much you make is ahead of the fed. how much you make. not that much. i don't know if it's worth it. the weight of the world on your shoulders. >> but every fed had a major challenge in the first 12 months >> what was yel someone. >> yellen was the whole thing about how do you recover from the taper tantrum? >> that seems minor. >> greenspan >> right >> mohamed, thank you very much. he's going to be with us for the rest of the program. when we come back, it's giving tuesday warby parker's buy a pair, give a pair campaign is helping people get eye exams and affordable glasses the company's cofounder and ceo will join us after the break and later, the best and worst case scenarios on tariffs. apple stock hitting after seeing

the tariffs that could be imposed on its product stay tuned you are watching "squawk box" right here on cnbc you ok there, kurt? we're about to move. karate helps... relieve some of the house-buying... stress. at least you don't have to worry about homeowners insurance. call geico. geico... helps with... homeowners insurance?

been doing it for years. i'm calling geico right now. good idea! get to know geico. and see how easy homeowners and renters insurance can be.

♪

welcome back to "squawk" thor this morning we want to welcome dave gilbowa. he is the warby parker co-founder and ceo great to see you we're speaking to you on giving tuesday where everyone is trying to be a bit more charitable, if you will one of the things you've done from the beginning is give away a pair of glasses for every pair of glasses that arepurchased we've talked about this before people i think are always interested in, do you think when people buy a pair of warby glasses they even realize or that inspires them why they're buying a warby pair? >> you'll find if you walk into one of our stores or website, we don't lead with our buy a pair, give a pair messaging. we realize most people when they think of buying glasses, the first thing they think is are

they going to make me look good, is the price point one that makes sense. and we have kind of our messaging himessage ing hierarchy in that order. people don't realize it about the buy a pair give a pair until they pick them up. for us we think it's the right way to build an organization it's the right way to attract talent for people that want to work for an organization that does good in the world to date, we've distributed over 4 million pair of glasses through the program. but we don't think -- >> speak to that a lot of people don't think about -- there's a lot of companies -- tom's for example, part of the marketing is you buy a pair of shoes, somebody else gets shoes you decided not to do that and you think you've been able to hire more talented people and attract a better culture inside the company which is a different approach to all of this. >> for us we see by far the

biggest benefit in attracting the most talented people in the world that want to work for a mission-driven organization that want to feel like their work in the office or in our stores or in our lab every day has a broader impact and that's where we kind of see the roi on our long-term investment we think of it much more in that regard than kind of a consumer facing marketing message >> how far do you think you can go in terms of your philanthropy and the issues that the company supports the reason i ask is because we had the founder of tom's on last week talking about a company that is a very public give or get kind of company. they've now put a lot of muscle and money behind an initiative around gun safety and gun control. and it's an interesting issue. because it's a politically

divisive one i'm curious what you as an organization think of the issues you can and cannot support, how you think about that >> yeah so we're in the business of making and selling glasses and we also recognize that uncorrected vision is the most prevalent disabling condition in large parts of the world and amongst school children here in the u.s. so that's really our area of focus. and in addition to our buy a pair, give a pair program where we have great non-profit partners in dozens of countries around the world, we've recently kicked off an initiative here in the u.s. called people's project where we recognize that out of 1.1 million school children in public schools in new york city, over 200,000 of them lack the glasses they need to learn so we kicked off a public private paip with the department of education to go into schools, provide free vision screenings

and eye exams in those schools then any student who needs glasses, we're providing them for free through that program we've now screened over 200,000 children, given away over 50,000 pairs of glasses. and so we feel like there's still so much that we can do within the world of eye care give i giving children in particular the opportunity that they need to be able to learn and succeed in life. >> we got to go. i have one last quick question though you're now doing kids glasses for the first time why? i thought for a long time you thought the market was too small? >> it is a small market, no pun intended but we're excited that we now have kids glasses available in all stores we have over 85 stores across the country now. we're excited to be able to offer glasses for adults and children alike >> okay. well, one of our sorkin boys is a glasses wearer and we're wearing warby.

appreciate it, dave. thank you. >> i bet they all have kids now, too, that's probably why when we come back, cyber monday sales are still being counted but the early numbers are in and they are shocking we have the details right after this break and then tariffs, trade, and your investments what will be the impact on apple's stock and other technology names we're going to hear from bernstein's tony sakinagi in a few minutes. a big day for the markets yesterday giving back some of the gains this morning dow down 100 points now after being up over 350 yesterday. s&p tudofures wn by about 13 points, nasdaq off by 52 we'll be right back.

welcome back, everybody. cyber monday sales setting a record adobe analytics says it's projected to hit $7.9 billion. that's up 20% from just last year coming up, tariff tensions for apple investors. bernstein's top analyst on the stock is going to join us to lay out the best and worst case scenarios for the stock. before we head to break, take a look at the u.s. enquity future. we're back in just a moment. and seamless experience across web and tablet? do you want $4.95 commissions for stocks, $0.50 options contracts? $1.50 futures contracts? what about a dedicated service team of trading specialists? did you say yes? good, then it's time for power e*trade.

the platform, price and service that gives you the edge you need. looks like we have a couple seconds left. let's do some card twirling twirling cards e*trade. the original place to invest online.

unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything.

leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. ♪ good morning and welcome back to "squawk box" here on cnbc we are live from the nasdaq market site in times square. among the stories front and center this morning, we're going to see how much the stock market's recent slide has impacted consumer confidence later this morning the confidence board will be releasing its consumer confidence index at 10:00 a.m. eastern time economists are looking for a two-point drop we'll also be getting a fresh read on home prices in 90 minutes when the case shiller

report is released home sales expected to show an increase and viewer interest in the tiger woods/phil mickelson pay per view match vastly exceeded expectations signups may have reached as many as 1 million people although refunds were issued to just about everybody because of a technical glitch >> both of us, right >> i got the e-mail yesterday. >> i don't care about my money -- getting my money back but i was sitting there on friday like, they're not the two best golfers right now in the world. but why wouldn't i -- what am i going to do on a friday afternoon? it's like, i got $20 >> can we talk about the money if it had worked, it would have been $100 million in a day the question is, they had to -- >> why a hundred million >> from the cost -- >> it was 10 bucks a person. >> it was $20. >> so it was $200 million.

>> it was only a million people. >> oh, i'm sorry >> i'm so confused now it would be $20 million. >> so this thing is a real bust for them >> they had a lot of other things going on. they had to give away $10 million on the prize >> the question is will they do it again >> my sources tell me they will do it again. >> oh, good. >> they chock this up to a technical glitch it wasn't as if there weren't sponsorships you can get for it. >> that's the other thing, too, sponsorships that's a big part of what's going on >> people complained there wasn't enough back and forth between the players. >> other people complained they didn't like the announcers talking over the players >> and the back nine, you know tiger's putting on his -- you know what he's like when he's

competing. but listening to him -- tiger is pretty cool to watch as a golfer he's the greatest golfer ever, but watching him talk to his caddie and say this, that, this. i was fascinated but i'm hard core. >> it's interesting you guys as golf fans. you've got to give at&t credit for pulling together a media product that didn't exist before the irony was it was a technical problem that led to the snafu here at&t came in buying time warner saying we have the technical expertise to wrap it >> but you're hearing it's going to happen again? >> yeah. that they're going to attempt other types of things like that especially in golf other matchups, other types of one offers >> what are other -- >> i don't know. you're the guy -- >> i would watch justin thomas and jordan spieth. i would watch dustin johnson play brooks koepka there's a lot -- >> any other sports though would you watch --

>> our producer says golf is not a support. >> joe is a golfer and a golf fan. i am not >> but you still paid. >> i paid because i like tiger woods. >> and you enjoyed it, didn't you? >> i did >> i watched all five hours. >> i want to see serena williams and roger federer. with mikes on. that to me would be fascinating. i think you could do interesting things >> you could do a three-set sort of -- yeah >> anyway, we'll take a commission on that >> maybe you get to go or something. >> no. i was just -- >> just go you're cheap >> we have news for you this morning. president trump saying it is highly unlikely the u.s. would

hold off on -- >> president trump was really making two different threats in that interview first he said as you mentioned it's highly unlikely that he would hold off hiking on $200 billion of china imports on january 1. second, trump said that if he and president xi can't work out a deal this week, he will push ahead with another amount of tariffs on the rest of the goods we import from china they would also get hit with a 10% or 25% tax you also mentioned apple and the iphone clearly that stock saw a big move after the journal posted its story. it's the reporter who brought up the iphone as a potential target president trump responded saying maybe it would get hit with tariffs. depends what the rate is a 10% rate, people could stand

that very easily still that is sounding alarm bells in the tech industry already the tariffs have cost them an extra $350 million that's according to the consumer technology association the group says that's proof, guys, that u.s. tariffs on chinese products were paid for by americans and not by the chinese. back over to you >> thanks, ylan. joining us now, toni sacconaghi from bernstein the aforementioned ed lee, "new york times" reporter also a cnbc contributor. toni, at this point, you've got a nuanced view, i think. apple can handle some of the tariffs maybe better than others but that's not all that china might decide to do in retaliation against apple. they could do other stuff. if they really wanted to hit us where it hurts >> yeah. i mean, there are two issues here

there's a tariff issue for apple that would likely affect 80% of apple's revenue in the u.s so 25% of apple's revenue, call it $50 billion would be subject. many folks aren't really thinking about the issue of what's the potential tit for tat response from china. ultimately when trump placed the first $50 billion in tariffs, china responded immediately. then he put $200 billion in tariffs and china doesn't import $200 billion so they're -- you know, they're trying to negotiate and say, hey, how can we reduce that tariff on the $200 million now if the u.s. goes even further and raises the tariff to 25% or says we're going to include all these other categories, the question is how's china going to respond can they try to disrupt apple's supply chain in some way could they not authorize new phones for sale in the country

there's many things china could do that could ultimately be more devastating. >> ed, have you thought of all this do you have questions? do you want to be an expert or do you want to be an expert interviewers >> i can do both just like you >> i think you can >> i agree with all the points there. i think the other thing to note is the greater china region is now the slowest growing region at least year over year. the september quarter it was the slowest growing region i think right now apple is facing this issue of does everyone who -- everyone who want an iphone already have one? so growth is becoming that much harder you slap the tariffs on it, makes it that much more difficult. people in the upgrade cycle, a lot of these are happening through the sort of apple plan where they sort of up front the money for you and you're paying on a monthly basis that helps the average selling price go up. i don't see the vision -- i don't understand in terms of the tariff war here how in any way,

li like, if you give up on this you gain something later those are things they're trying to fight for i don't see how apple benefits in any of that washout because they already sell in china. it's not as if they don't have access to the china market another big part of the online economy that drieves it is the app store itself so i don't see how the tariffs ultimately can favor apple if trump wins something in this concession >> and ironically, apple is deemed to be an importer into china as well. that seems unusual because apple manufactures the phones there. but they're in a bonded region and effectively from a transactional perspective, they export to ireland, capture the low tax rate so ultimately even if china just said we're going to match the tariffs, then effectively all of iphones being sold into china would also be tariffed and that's -- you know, before some of the other potential

political or business disruptive issues that china has. >> can i ask a broader question? this is a question i think a lot of u.s. companies that have manufactured in china for a long time are thinking about today which is was it a mistake for so many u.s. companies to create effectively their entire supply chain in china because when tim cook, by the way, and everybody else went to china, this was a view they'd be able to be there for the next 50 or 100 years do you think that people are actually going to sit around at some point and question the r h rationale of having done it from the get go >> apple talks about not being dependent on a single supply vendor in the chain. but if you step back and say boy aren't they dependent on a single country and it's sort of ironic because apple's been so cognizant historically to try to diversify its supply base, you know, long time with hanhei, et

cetera but, you know, that initial assumption, we're going to do it all in one country, may come back to hurt them. >> but also the relationship between u.s. and china was not only good, it was going to ultimately actually get better over time rather than worse. >> but look. you could say that about a supplier we had a great relationship with hanhei they had a million employees working for us it was ultimately portfolio risk >> and they got access as well that was a huge part of it but in terms of supply chain, i guess one of the questions i have is they've invested a lot more in india as a potential manufacturing center also as a marketplace. do you see that as a way to sort of hedge what these china problems could turn into >> yeah. i mean, look i think there are other low cost frontiers where there's available labor and low costs where china can migrate. it's very difficult to be able to do that in a reasonable time

frame to be able to react to tariffs or other issues. again, you're talking about probably 1 million to 3 million people in china who are working directly or as part of the apple -- directly on manufacturing or as part of the supply chain for apple in china. so part of the reason that has developed is you know you have this whole effect where everything has been done in china. >> we're obviously focusing on china, but how much of the selloff in apple shares is related to china how much is related to other issues we brought up are those big worrisome issues whether people stop by every two years? whether they're too expensive or need to make cheaper phones which will hurt margins. what about all these other issues that suddenly no one thought about six months ago, but now we talk about them every day now. are you worried? overdone >> i don't know if they're overdone i think ultimately most of the

retreat in the stock had been concerns that the iphone growth is slowing and may go negative growth and this has always been the fear about apple we've seen this a couple of times historically that hardware is a very tough business and iphones are typically hardware typically prices go down, replacement cycles elongate, and margins go down. that's what we've seen in the pc business when we start to hear about dramatic cuts from the supply chain and iphone production, people start to think oh, boy, the iphone now is five times more expensive than the average smartphone sold globally the average iphone sold is $800. the average smartphone outside of apple is $170 and so the fear is apple has priced itself ultimately out of the market it's a mature marketplace. anyone who can afford an $800

phone already has it that's the worry and because it's 60% of the profits of apple, if that business looks like it might go down, that has significant implications >> and at $800, they're not moving manufacturing to america. it's not happening president trump is suggesting that, oh, they need to move manufacturing to america or the americas to kind of help out -- help us out and deal with the tariff not going to happen. >> my battery strength is like 88 now >> you still haven't traded it in >> do i need to? >> depending which model you have, there were some that had a problem that you could bring it in the store and -- >> you can replace your battery. >> until the end of the year it's $29 >> i can get someone else to do it >> yes you can go to the store. >> can you do it >> i can't do it i will mess it up. >> you can't or won't? >> both. >> thanks, ed lee. toni sacconaghi. thanks when we come back, our guest host mohamed el-erian on putting

money to work as we head to the end of 2018. and top of the hour, modernizing medicare alex azar will join us to talk about the government's plan to lower drug costs and increase transparency for patients. "squawk box" will be right back.

ron! soh really? going on at schwab. thank you clients? well jd power did just rank them highest in investor satisfaction with full service brokerage firms...again. and online equity trades are only $4.95... i mean you can't have low cost

and be full service. it's impossible. it's like having your cake and eating it too. ask your broker if they offer award-winning full service and low costs. how am i going to explain this? if you don't like their answer, ask again at schwab. schwab, a modern approach to wealth management.

welcome back to "squawk. we want to get back to our guest host this morning mohamed el-erian from allianz. we are going to be at an event in just a little bit talking about bitcoin. i thought we should do a little bit of it on tv together for a second where do you stand having watched the price of bitcoin fall as far as it has? >> so first, it didn't come as a big surprise you had me on last time. i said that i think the price was then about $7,000. i said maybe below $5,000 i'll look at it and i am looking at it i've opened an account i've tested it >> what does testing mean? >> i bought a tiny amount to see how it works and see -- >> less than one >> yes less than one. i'm impressed how many decimal points you can go, by the way, on that. look what we've seen in bitcoin is what we've seen with many, many innovations. the first phase is

over-consumption people suddenly can do something they can't do before then you get the adjustment. and you got to find a floor. the hard thing about bitcoins right now is defining how that is created there's no intrinsic value so you've got to find a technical floor. have it on the radar screen. when it starts stabilizing, i think it'll be an interesting opportunity. >> is it a commodity or a currency >> it's not an asset clause. it's part of the commodity complex. it's not a currency. it's certainly not money if you think of it in terms of medium of exchange, it's the token. it's a token among others. and so that is a critical adjustment because the enthusiasm that took it up to $20,000 was this is money. this is a currency it's not and so this is an asset. >> now >> not now but will be in the future >> it will be a token so it will be part of the ecosystem but a currency implies all sorts

of things. it implies not just a medium of exchange, whether it's at stable value which it doesn't have. so it's -- >> and backing of a government >> and some sort of backing or some sort of intrinsic foundation so it's hard but it doesn't mean it's going to disappear okay i've been -- you know, it's there. it's going to exist in the ecosystem. it's a capital structure if you want to invest in that area, blockchain technology is the top of the capital structure. >> are you investing in blockchain right now >> i'm looking at different companies. and i think that is very exciting and we are going to see so many different adaptations of this ledger technologies. blockchain is just one of them i think that's really exciting it's going to spread both in the public and private sectors that's top of the structure. bitcoin is much lower down so as you go down, expect a lot more volatility.

>> if steven mnuchin announced the government was going to come out can its crypto version of the dollar, would that be a good sign for crypto-land or would it flush out the rest >> i think it would be the former >> it would validate it? >> it would validate it. and people would start thinking, yes, we have the the co-existence >> we'll have more from mohamed throughout the show. coming up when we return, stocks to watch ahead of the open as we head to break, take a look at the big movers in the dow "squawk box" returns in just a moment

let's take a look at some stocks to watch this morning the company said a combination of two cancer drugs did not extend the lives of lung cancer patients in late stage trials. another drug company ireland-based amarin is also lower this morning after placing a secondary offering of its shares amarin will get about $200 billion in proceeds which it will use to commercialize a new drug which is designed to treat patients that have triglyceride levels that are too high

accessories retailer the buckle is taking a hit this morning earning 42 cents a share in the latest quarter that was 4 cents below analyst estimates though comp store sales also fell 1.4%. also sliding this morning, shares of athletic footwear and apparel retailer hibbett sports. analysts wanted 16 they also cut the full year forecast a small cap stock even though the company does have more than a thousand stores in 32 states we'll see if the numbers affect the others in the sector such as foot locker. still to come this morning, health and human services secretary alex azar on modern sieg -- modernizing. and then alicia glen she played a key role in getting amazon to new york city. we have that interview straight ahead. "squawk box" will be right back.

tackling drug costs. the government looks at changes to medicare as it trying to rein in pharmaceutical spending we've got the director of the department of health and human services live. president trump threatens tariffs on more chinese tariffs and now the iphone is in play. and bitcoin body blows

down 40% this month. is now the time to buy into the cryptocurrency 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 and welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square i'm joe kernen along with becky quick and andrew ross sorkin the futures have been down all morning long these are i think the worst levels we've seen. down 135 now on the dow. the s&p down 15 and the nasdaq now down 57 or so. 10-year yields -- now we're hearing people say the 2-year is more important but the 10-year at 3.06% this morning. we're also watching three big stories this morning one, shares of apple under

pressure in the premarket trading. president trump telling "the wall street journal" that if negotiations with trade with china are not successful, he will put more tariffs on chinese imports. that would include the iphone. two, united technologies calling it splits. they are announcing they will split into three different companies. aerospace operations will remain under the united technologies banner and three, key economic reports are due out later this morning the case shiller report on houses is expected to show a month over month increase for september. also at 10:00 a.m., oo we'll gee latest read from economists. a programming note for you make sure you join "squawk on the street" this morning at 9:00 a.m. for an exclusive interview with united technologies' ceo

greg hayes numbers rolling in from yesterday's cyber monday adobe analytics pegging total sales for the day just under $8 billion. reuters now reporting that tesla sales in china dropped 70% last month. those numbers were compared to sales a year ago and come from the china passenger car association. tesla sold just 211 cars in china last month finally, at&t's pay per view match between woods and mickelson drew far more interest than they anticipated. the signups may have reached 1 million. though most have provided refunds due to a technical glitch that hit the broadcast. they have to split it with the cable providers. it's interesting in an effort to reshape

medicare, the centers for medicare and medicaid announcing a proposed rule that would help lower prescription drug costs and reduce out of pocket costs joining us now department of health and human services secretary alex azar. this is an obvious place to look, mr. secretary. that is medicare and we hear more and more not only about pbms and middle men, but also the way they gain the system against medicare will this help transparency? help bad actors not be able to do some of the things they've been doing >> well, what we've proposed today is really historic changes to the medicare drug program to allow these drug plans to actually negotiate against drug companies in what are called these six protected classes where right now we're getting only 6% discounts. and in the commercial sector, we would be getting about 30% discounts just using the normal negotiating tools that your plan

and my plan have we want to bring those to medicare so seniors get that benefit and help the program's expenses. >> this is something people have been talking about for years the size of the buying group in medicare should be able to negotiate some good prices what's been the problem in the past where was the -- why is this new? why are we just figuring this out now? >> i think it takes a president with the courage of president trump to actually drive forward on changes here. you've got these six protected classes, they're called. these are important protections for beneficiaries to make sure that we have drugs in key areas and they have access to them they're retaining that access. right now the farm sooul suit kal companies have been able to take advantage of those rules and say you have to cover my drug no matter what. therefore i don't need to give you a discount what we're saying is you, drug

plans, these insurance plans, you can actually use the same types of tools like prior authorizations and step edits that you have in the private sector you can use them here to make sure you get the appropriate discounts. and we've got extensive patient protections to keep patients at the center and it's important to remember plans are only going to adopt the types of controls and cost containment measures that their beneficiaries want because every year, you can pick a new plan if your plan's not meeting your needs, you pick a different plan they're quite savvy at how they can set these benefits up to meet their patient needs >> this sounds like a market based solution but what i don't understand is how some type of government rules prevented market-based forces from acting in this case. >> it's a great way of saying it when we created medicare part d 12, 13 years ago, it was novel

it was cutting edge. it was market-based. and what's happened is over the last 12 years, the private market has actually come up with novel techniques to control drug spending and negotiate against drug companies and medicare part d like government programs didn't keep up with the developments in the commercial sector. we're bringing the plan up-to-date to bring the best negotiating tools to medicare. >> the -- i'm sure you saw that piece a couple weeks ago on "60 minutes. that was like an eye opener. did you see it, mr. secretary? it had to do with a $5,000, i guess, answer to an opiate overdose there are $400 answers available, but pbms wouldn't pay for the $400 one but they'd recommend the $5,000 because the medicare was mandated that they would have to pay for the -- i mean, it was a

convoluted mess that it -- and i -- you know, you try to hold the drug companies ceo to the fire and he's like this wacky system we went from helping 20,000 people now 300,000 are helped. but you're just socking it to medicare and taxpayers are paying for it. >> well, i think you used the right word there wacky system and that's what's driven by this whole rebate system of behind the scenes concealed discounts that happen that create very, very perverse incentives in the system because the way the system is bui built now, the higher the list price of your drug, the more you can give as a rebate and discount to the drug plan, to the insurance company. which they can keep a portion of and profit from. so you actually -- there's a financial incentive often for you to have a higher priced drug but to give a bigger rebate. that's why i have been so out there speaking about the need

for us to address this whole rebate system. i personally would like to see a system where instead of these back door concealed rebates, patients get the benefit of discounts right up front when they go into the pharmacy. it's all transparent and therefore you end up with a disincentive to these prices i think you'd see list prices go down >> mr. secretary, who was opposed to that? when i've spoken to drug company ceos, some of them have been in favor. i had one ceo of a major company tell me he had actually tried to make that happen by just offering one list price, no rebates. and it was derailed. so who do you really have to put the pressure on to make that happen >> and that's really the problem is any individual company, it's very hard for them to change the nature of the incentive system i think that's why there's a role for government in changing the rules of the road to just reorient the incentives. the incentives are towards high

list prices with high rebates. and i think we're going to need to change the rules of the road in order to break that open so you allow lower list prices and allow patients to pay less out of pock when they walk into the pharmacy as a result of that. >> is it the fault of the pharmacy benefits managers, the fault of the pharmacies, the fault of the health insurance companies? >> you know, i don't think it's terribly a productive exercise to say fault they're maximizing their, you know, their business model within that system i think that's why it's important for us to change the rules of that system and address this question to back door rebates to bring transparency and the benefit to the patient up at the forward and reverse this weird incentive system. >> mr. secretary, one of the questions, though, is how much of the effort is really an effort actually to push the prices lower right? because by just as a function of

the disclosure, right? it might force the companies to just lower their price on their own. how much of those do you think are connected? >> i think it's both it's both. i think transparency is good in and of itself on drug prices, but it will also i think shine light on that and help create pressure for those to come down. because these list prices are so artificial it's like the rack rate on the back of your hotel room door the problem is unlike the rack rate on your hotel room door, most patients are paying out of pocket some form of a percent or all of that rack rate depending on their insurance benefit design and so it's very unfair to them even if massive discounts are getting paid to the pbms >> what do you say to the critics or we'll call them members of industry who say if you have to disclose these prices that basically make no sense to the customer, you're just confusing them? >> well, the simple fact is that almost every single senior citizen in our medicare program is paying out of pocket a

percent of the list price of a drug in one form or another on their benefits 47% of us have high deductible plans where we off the list price. the notion that their list prices are not relevant to patients is completely and demonstrably false we need to stop it their list prices matter and they have to be dealt with >> the other question i had is what is your own personal feeling about advertising for prescription drugs >> well, i think there's a role for advertising when it comes to educating patients listen if as a result of advertising a patient realizes that they have a serious medical condition and it prompts a good fruitful transparent discussion with their physician, that can be a very important public health benefit. but my position is that needs to be a accurate, truthful, not misleading information provided to the patient that's why i believe and the president believes that these

ads ought to show what the price of the drug is because before a patient goes into their doctor schedules an appointment, pays hundreds to see a doctor, they ought to know whether the drug they're asked about is a $50 drug or a $15,000 drug they can't afford >> do you have support from republicans in congress on this? >> absolutely. i have chairman grassley as a stalwart backer of this direct to consumer advertising as just one example. so yes, i think people want this type of transparency and they want to just have an informed patient in the driver's seat. >> is this a bipartisan issue? >> very bipartisan in fact, i've worked close with senator durbin on this very issue. so it's -- so much on this drug pricing area is where republicans and democrats can actually work together and agree if we keep the patient at the center, we reduce out of pockets, reduce list prices, enhance the negotiation of our government programs where we

aren't negotiating effectively as we're doing today these are things we can all agree on >> secretary azar, thank you we appreciate it and making that all clear for us talk about -- what are those things called? a rube goldberg. to open the door and it goes all -- that's this wacky pbm system there's got to be a better way there's got to be. right? >> i want to drive towards a better way here and that's what we're doing. we are marching through the president's blueprint. this is a very complex system. and we are tackling each element of the system to achieve those objectives lower out of pocket, better negotiation in our programs, and reducing the spending and ending foreign free riding. we're taking historic steps in each segment of the drug program. this is really revolutionary, what we're doing here. i think people haven't really noticed just how revolutionary

what we're up to is. >> right all right, secretary azar. thank you. appreciate it. we'll see you. okay coming up in just a moment, city ace cross the country vie to get amazon's second headquarter. but not everyone in new york city is apparently happy about half of the hq2 that's going to be in queens we're going to talk to new york's deputy mayor for economic development on why amazon should be welcome in the big apple and how it all happened. stay tuned you're watching "squawk box" right here on cnbc i don't know what's going on. i've done all sorts of research, read earnings reports, looked at chart patterns. i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here,

i've done my job. call for a strategy gut check with td ameritrade. ♪ our new, hot, fresh breakfast will get you the readiest. holiday inn express. book now for at least 20% off during our annual sale. ♪ ♪ move to the enterprise-grade cloud

that's built to handle all your apps. ♪ ♪ the ibm cloud. the cloud for smarter business.

the ibm cloud. unstopand it's strengthenedting place, the by xfi pods,gateway. which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. welcome back to "squawk box. the futures right now -- i'm afraid to -- that's where they were i'm kind of looking the other way. down 136 the nasdaq indicated down 52.5 this morning the s&p indicated down about 15. backlash in new york city following amazon's announcement about a second headquarters being located right here in the big apple. both "the wall street journal" and "the new york times," two papers that rarely carry the same view sharing the same negative opinion about this deal joining us now is alicia glen.

she is new york's deputy mayor for housing and economic development. she played a role in getting amazon to choose new york city thank you for being here today >> thank you for having me >> you were talking about a huge bakeoff where you had hundreds of cities that were trying to compete to win what you have brought to new york city but we're now looking at a backlash on both sides of the political spectrum people saying this shouldn't have happened. how do you deal -- first of all, how did you get this and how do you deal with the backlash >> this is an exciting moment for new york city. we're talking about at least 25,000 jobs in the tech industry in the broader sense, it'll be closer to 40,000 jobs not to mention the spinoff effect could be an industry at large in new york city. i think to say everybody's against the deal is misinterpreting what's going on. there are folks concerned about large scale development. new york city is a notorious city of people with a lot of

opinions and continuing to diversify our economy but what it means for new yorkers who will now have an opportunity to participate in the tech economy in the 21st century. a lot of that initial reluctance will burn off and people will realize how good it is for new york city. innovative, diverse, open. that's why amazon chose to come here to begin with >> let's just lay out the math they're going to be investing and creating up to 40,000 jobs over the next 15 years they in return get $1.5 billion in tax subsidies how do you know they're going to live up to their end of the bargain? >> there are a couple of things going on first of all, the subsidies are end of right subsidies if you build in certain areas, you get real estate tax exemption. that's agnostic to whether it's amazon or someone making pencils. >> what would that number be >> that's about $400 million

>> of the $1.5 billion that's inexclusive about $400 million of what i call i-cap and the balance are reap which is a per employee tax credit which is about $3,000 per employee over a ten-year period. now, the state also added additional benefits, but the city's, both of our reprogram and reap program this was not a deal designed for amazon these are our basic economic tools. it diversifies our economy into the five bboroughs >> but the question is, look google is here i don't know if they got a subsidy like this. salesforce opened a block away from here with their new building i don't believe they got any subsidies. so people are saying why do we need to -- if the city is so great, right why do we need to pay? and especially why do we need to pay when virginia's paying significantly less >> well, a couple things

one, grade schooogle and salesf chosen to be in the heart of manhattan. that's not where we want to stimulate job creation we want to stimulate job creation in the five boroughs. if they moved to these areas, they would be entitled to the same benefits. number two, i think there's a healthy discussion around where these benefits should be and that's a legislative positive conversation we'll have over the next couple of years. i think the issue of whether or not discretionary benefits will be used to entice jobs is a legitimate discussion. but this is about job growth not job retention. people were paying to keep jobs here before. these are job growth plays they will result in at least $12.5 billion of tax revenue. >> what does the the projection look like? deciding how much these -- what does the ecosystem really look like in your projection? >> so actual tax revenue and not just the economic modeling that

people do that do the secondary impact, new york city alone will get over 25 years, $12.7 billion of direct tax revenue. we are incentivizing the company with tax expenditure these are not cash payments. these are tax revenues over the next 25 years. >> so both seattle and san francisco have discovered that a big challenge are the unintended consequences how are we thinking about this >> we're not just seattle or san francisco. neither has a robust housing plan we have the largest affordable housing plan in the country by miles. we have 300,000 units in the process of being preserved or constructed. in long island city alone, there are 6,000 junt -- units. where we've had an extraordinary history of providing housing

what's going on in san francisco is a tragedy because the people who run those cities did not anticipate or embrace the -- >> where do you think those kids are going to go to school? >> first of all, not everybody is going to live in long island city they'll be moving across especially with the ferry and other transportation, one of the reasons we're excited is you'll have people living in brooklyn and the bronx taking the ferry to work. kids are not all going to go to school in long island city one of the great things about the project is amazon will be building a primary school on their campus think about what that means for the future of new yorkers to know their kids are getting computer science training in a place that is really the epicenter of technology innovation over the long run, this is a huge endorsement for new yorkers being able to have the kinds of jobs that a lot of parents think they have to leave to move to the valley that's not going to happen anymore. >> alicia, very quickly. with some of the outrage that's

come including from some elected officials like alexandria ocasio-cortez, will this deal get done or is this a done deal >> this won't be stopped i can guarantee you that five years from now, all new yorkers will be thankful >> hang in there did you not want walmart to move into -- >> no, i want them here. the brilliance is by choosing two places, they can ultimately -- if the government starts saying they want to do this deal, they might play virginia off new york. and move one to the other. >> well, you're a cynic, andrew. >> thank you. >> they're coming here and they're going to be very good for the city of new york >> alicia glen, thank you very much coming up when we return, the fed minutes coming later this week. mohamed el-erian will weigh in

also bitcoin carnage we'll hear from an investor on the bitcoin lalivotity changing. stay tuned you're watching "squawk box" here on cnbc

you're still here? we're voya! we stay with you to and through retirement. i get that voya is with me through retirement, i'm just surprised it means in my kitchen.

so, that means no breakfast? voya. helping you to and through retirement. coming up, fed vice chair richard clarida scheduled to speak in new york in just minutes. we'll bring you all the tuadlines from thawh w t ene rern place, the xfinity xfi gateway.

and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods.

simple. easy. awesome. click or visit a retail store today. welcome back to "squawk box. federal reserve vice chairman delivering a speech this morning. steve liesman is here with the headlines. >> richard clarida for the federal reserve in what i consider a dovish speech and i'll get to that in a second, says rate hikes are still necessary. but the real funds rate is, quote, just below the fed's longer run estimate. we'll get back to that in a second as well the fed is monitoring the data

to decide the policy rate. says the labor market's healthy. notes that 2018 is on track to be the fastest growth of gdp of this expansion inflation running at the objective. he's checking the boxes here important to watch inflation expectations, he said. notes that the tips market is suggesting inflation expectations are running below 2% says productivity is increasing the supply side of the economy which means we can run, perhaps, above what they consider to be trend. also says there's still room for a higher job market participation or job market participation. says the fed needs to monitor a wide range of data and risks are more symmetric let me get to what clarida didn't say and what he changed he omitted saying, quote, further rate hikes are likely appropriate. he omitted saying, policy is still accommodativaccommodative. and he changed saying the real

funds rate to just below neutral. i am sort of sensing here perhaps a somewhat dovish tone maybe not for december i can't yet with the market at 80% probability, i don't see the fed backing off december but i think a lot of 2019 is up in the air we'll hear from powell tomorrow. question for the market is does powell push pause? i don't think he's going to push pause. >> is there any way december is up in the air? >> i don't think so. >> there's a lot of things he didn't say, right? you're just picking certain things you think he could have said that he didn't say? >> no, actually, joe -- >> we got until 9:00 >> it was more systematic than that, joe. >> okay. >> thing he is said last time that were headlines -- >> okay. that's clearer now to me >> what's clear is that you think i'm an idiot but go ahead. >> no. >> go ahead. >> from what i said just now, you don't know that. >> well -- >> so i think as steve said,

clarida ticked many boxes. and the message i would take away from this just from what you said, i haven't read the speech, is that december's going to happen. that's the word necessary. but next year they may well start convergent to what the market expected opposed to what they signalled previously. >> i think there's a trend here, mohamed. and the trend i think began i think with my interview with richard back in the middle of this month they've backed to data dependence. before that there was we've got to get at close or around close to neutral now we're at or near there and again, there's this wide 2.5 to 3.5 range on neutral. and it looks like they're deciding to end up at the lower end of that range. >> that's a big shift. >> but i was asking is this truly a new fed or was this going to revert back to the yellen fed question for you, this reintroduction of the concept of data dependency whereas beforehand we will normalize and

that's where we're going is it because of the economy or is it because of red october and the volatility there's a big difference why so which one is it and don't say both you cannot say both. >> powell said and i like to go back to the text he said that, you know, when you go into a darkroom, you move slowly and i think powell is a market guy. he sees a signal from the market, he's not going to ignore it and i think it's -- look here's what i'm watching for i am watching as to whether or not the powell fed helped by clarida is on the verge of what could be a monumental decision a la greenspan in 1996 do they decide that productivity is greater than the estimate so they let it run? i don't know they're there yet, but if you read clarida closely, he is thinking about that kind of decision. >> do you remember last time when you did talk to him do you remember what cramer said

after? do you know whether cramer's comments got back to clarida or you where he said they are not hearing from the people i'm hearing from they do not have interest in hearing from people in erms tf ceos you were privy to that >> i heard what jimmy said i know that's not true >> all right do you know whether -- is this different now? is it different than the last time he spoke? >> it's different from his last speech i think it's important that further rate hikes are likely important. i think we're still going to raise. he sees rate hikes as necessary. and if you think about it, the average for next year is three rate hikes from the fed. i think there are equal numbers at two, at three, and at four. that's how you get to a 3% average, but ut doesn't mean that you're -- and that's where you get a median at 3% what's your number >> the motion they're discovering that there's potential in the economy,

nothing has changed. the labor participation rate has been low so i think that probably being much more sensitive to what they did in october and the flattening of the curve than they are to some discovery on the economic front having said that, if they signal that they're going to be more dovish, i can tell you that we will be talking about the powell put pretty soon. so they've got to be really careful. >> i do want to say one other thing which is clarida and -- by the way, michelle bowman yesterday became the fifth person >> trump is trying to wash his hands of right now >> leave what the president said to the side and let's put the idea in that he's appointed most of these people on the board clarida, krawls are open to the idea that tax cuts have the ability to expand the economy. i think than the yellen fed would have been.

and i think that's one of the things in addition to the market selloff that i've been listening to them very closely talk about. powell talks about it. clarida is talking about it. i got to ask him about that directly and i know randy quarles is open to that. >> thank you mohamed had a lot of questions for you. we are getting a lot of questions for mohamed from our viewers. mohamed el-erian is our guest host today i want to start with a different one than i told you in the control room matthew bri will asks can he comment on the stock prices and move higher together they always seem to be in odds in one way or another. >> look at europe. the differential between the 10-year here and the 10-year in germany is now 270 basis points. if pt you want to have a long view on rates, you're taking a long view on europe. >> that will be what holds us?

>> correct and that's really important. you're not taking a view about the correlation with u.s. stocks, et cetera. you're taking view with the ecb. and it's a surprising thing to me that that differential has remained so high given that the ecb has signalled it is exiting. >> yesterday they said it again. >> yeah. it's going to be interesting to see how that evolves >> that plays into what we're also hearing from ryan howe. he writes in, even if there's a clean brexit, does he see any hope for europe in the next 18 months >> i think europe is facing difficulty they have not made the transition the u.s. is making from cyclical growth to more structural and cyclical growth so i think the -- first of all, i think if there's a hot brexit, it goes up significantly this is a sub-1% outlook for europe if there is a hot brexit. >> what do you think the odds

are there is >> i don't know. this is particularly about the conservative party in the uk >> can they find something they can all get around >> she gets it the second time i just don't think she'll get it >> and austan goolsbee asking how much of the auto industry problem does mohamed think is coming from the expansion of the subprime lending in the last three years going south? gm saying it's shuttering five plants what do you think about that >> i think uaustan's e-mail hint there is risk rating and we are seeing some adjustment i think the old industry is going through first a cyclical process. right? it is along with housing these are the cyclical indicators then it's handoff is different because there is major technological change

i think electric cars are here and this is reality. this will imply a major retooling of many car companies. >> and another question that came in from ahmed amal. is the u.s./china relation becoming important >> it is helping to drive oil prices lower it is very hard for a saudi-led opec right now to agree on massive cuts after president trump has basically given the kingdom a pass on the khashoggi affair so there is another regime change, if you like, going on on the side in addition to lower demand growth and output means lower prices are here for awhile >> not to mention the u.s. shale production taking place. >> it has doubled in the last four years that's amazing >> which weakens opec overall. >> right u.s. hasbecome a de facto producer i don't want to get nerdy, but

there is the cobweb theoreorem >> cobweb theorem. so somebody's got to be old? >> it shows the adjustment takes a lot longer >> mohamed el-erian is our guest host he'll continue with us for the rest of the program. coming up, bitcoin has been beaten down this month it's dropped 40% just since november 1st but it could mean it's time, maybe, to pile into the cryptospace. is this time different for bitcoin? ck" merit wk boxcos gh ba

welcome back to "squawk box. wanted to check in on the cryptocurrency space this morning again after a volatile few days here with us is barry silver founder and ceo of digital currency group we will be attending a cryptoconference in new york later today with mohamed el-erian we'll head over there right after the show but want to talk to you, barry, because you have spent a lot of time both speaking about this space and investing in this space. what i'm most curious about is bitcoin and crypto was supposed to be an uncorrelated asset class. that's how it's been described how correlated do you think it actually is, though, with tech stocks right now it looks awfully correlated. >> i think there's certainly overlap. so when people are feeling

bullish on tech stocks and making money in tech stocks, they've got more money to put into the crypto asset class. >> so you do think it's correlated then? >> look, today you have a finite pool of capital in risk return type asset classes like crypto those investors tend to also invest in higher risk type companies. both private and public. so there is a finite pool of capital within that group of investors. >> one of the things we keep hearing in the past couple of days is one of the most interesting things if true is that what you're seeing happening on the exchanges is very different than what's happening in the over the counter market and that institutions are not really buying or participating on the exchanges. they're doing them in a very different way. >> absolutely true. >> so that is true >> absolutely true. >> and how the investor watching this is supposed to understand what's happening >> the good news is the exchanges and the prices on the

exchanges is actually what is used for otc trading so genesis trading, one of our companies, one of the largest otc trading desks in the country uses an average price when pricing deals on the market. so they are informing one another. also our asset management business gray scale has funds to invest into which you can invest into as well so it's all related. it's all correlate there's not two different markets. there's not a dark market and a lit market it's all the same. >> so if that's the case, it will suggest that the carnage on the retail side is enormous. you have the institutional money coming in and if you have prices -- despite that, prices still continuing to fall, it means another sector must be really demolished. you must be suggesting a major, major shakeout on the retail space. >> i think there's been a shakeout across the board. but what i have seen over the

past few weeks are the deeper pools of capital, the institutions that are now starting to get involved in the space. they're starting to lean in. >> why isn't that stabilizing the market >> well, i think what we're seeing right now is the complete unwind of the ico market so i think we'll propel the price to the highs late last year was this ico frenzy which the ico market is dead, over >> over. >> you have the lack of demand finish icos and the sponsors of the icos that raise bitcoin and ether that are now starting to sell that. and you have the crypto funds that raise money and redemption questions are coming in. now they're trying to fund the dem redemptions. >> what does the bottom look like for you where you think there's some floor in this? >> all you can do is look at the past bubbles and corrections and you've had chris on this morning. he talked about we're five, six, seven times through this

you know, look the first couple times when you see your balance sheet drop by 80%, 90%, it's kind of rough on the stomach. by the third time, fourth time, you kind of get used to it now we view this as a fantastic opportunity. >> let me offer this other thesis this is, i think, one of the first times that there's been a substantial delta difference between how much it costs to mine or mint a bitcoin meaning people are spending a lot more to do it than they're actually worth. they're having periods before but never at scale the way there is today and what that does in terms of washing out part of the market >> i'm not a big believer in using the cost of mining as some type of benchmark to value this asset class. what's happening behind the scenes are companies are being built to enable the on boarding of a new category of investors which i think is going to happen in '19 and that's the institutional investors. so behind the scenes, nobody has

slowed down. >> wait a second barry, that makes absolutely zero sense the idea people will pay more to create something that they can get a return over an extended period of time just because you think there is a chance coming out of it? >> the miners are long-term investors. they have to cover their costs but the mining businesses that have been created over the past five years have accumulated massive amounts of capital they can mine at a loss because -- >> would you say the same thing about an oil company oil companies cut back they stop spending oil they definitely have capex plans where they say next year we're not going to drill as much >> they manage how they're drilling and how they're selling. bitcoin -- >> it makes no sense to me when we have bitcoin supporters say this is the reason for it. you're going to make money every time you mine it to say it doesn't matter when it goes the other direction? >> i never said that i don't agree with the premise

that bitcoin mining price should be used as a good entry point. >> as a proxy for anything >> correct >> that also makes no sense either there has to be some correlation, right >> why >> well, because the entire infrastructure correlation. >> why >> because bitcoin is based on the infrastructure and miners. if every miner in the world got wiped out and lost everything, the whole thing would not work at all >> so bit main was one of the largest and mining pools in the country in the world if you look at their ipo filing, they're massively long, bitcoin and bitcoin cash >> i want to ask you bitcoin cash which is now fort if you will >> bitcoin cash is a distraction and fort is a distraction.

>> it creates a confusion in the marketplace for those to understand there is something called bitcoin and different versions >> the industry did a disservice >> every time that happens, the whole idea that was a finite marketplace of something called bitcoin >> the other side of that is if bitcoin emerges as the winner. it has been battle tested and challenged by competitive crypto currency and internal strivean so the creation of crypto currency of whatever it may be, whatever are the winners down the road the five that we own and that are excited about, dcg, bitcoin,

z cash, zen, and tvirtual world that we talked about >> it is a much longer conversation we'll have it today at your consensus, we'll see you a little bit >> when we come back, m amjicrer will join us live from the new york stock exchange.

♪ ♪ put your data to work on the cloud that drives business. the ibm cloud. the cloud for smarter business. the ibm cloud. whai tell clients, etfs can follow an index, but which ones target your goals? it's not about quantity. it's about quality. 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 containing this information.

okay, let's get down to the

new york stock exchange, jim cramer is joining us now i heard steve's analysis, something did change peter wrote that he was talking on both sides of his mouth do you sense a change based on some of the stuff you pointed out last time when claire was on "squawk" >> yeah, i do. i think people in our own team should keep it to the locker room when calling someone out on air. that's not cricket i do believe there are people who are saying we got to do more work, we got to check more people and the information we have is not new. i don't want to criticize anyone on air who's on our team it is unfortunate. >> okay, so at this point here we go, one thing that you have

been right about is apple is like the roaches that we are finding underneath the sink and there are more roaches after you kill a few, you always know there is more coming, i guess. >> the stock is up two bucks the president talks about apple. given the fact that he seems to confuse interest rates with tariffs. it was a disjointed interview. i want to get some clarity he said apple could be exempted. he tells a lot of things that's conditional. i think it is a shame, it is a big creative job in both countries. it is a huge win for both and not like united technology right now the company is in the cross hairs of pretty much of everybody and presents values at twelve times earnings. if he's not concerned, i am not concern. >> the one thing i want to ask you about is you saw the latest

that president trump, right before he's going to be with xi and throws down hard core, definitely i am headed there you have said if there is some type of positive that comes out of the china thing that could reverse the bare cycle that we are in now >> yeah. >> it is important for the people in the stock market >> absolutely. i would say it is a dramatic change we had a good talk and it is 25%. i want to put it on hold it is not going to be automatic. if we get that, i come in on monday morning with a change given the fact that we have been through a lot of bare market already. if you are nvidia, you do not think wow, when is this bare market going to start. most of the big stock i follow is down 25%. i think that could reverse if we

get anything good out of trump/xi, i don't know if we are going get that that's obviously unknown those who think it is known don't know what's going to happen because it is not clear right now. all right, jimbo >> thank you for your question of whether i did homework or not? i don't get 3:30 in the morning and stay up and not do homework. i do homework and i am homework driven, did i say that >> you did >> thanks jim. >> trying compete to get up earlier than jim >> i read his tweets -- i am clearing this stuff out of my eyes as i am reading his tweets in the morning there is some people that can't believe that you can't believe that anyway, muhammad, you heard --

>> i get up at 2:45 for 15 years so i believe that. >> that's right, california. >> how else do you catch "squ k "squawk," right? >> we don't have a whole lot of time >> i would tell investors take volatility seriously and ask yourself how resilience is your portfolio to volatility. you will revisit a lot of assumptions of being passive and there is a lot of things coming up to the surface. that's my parting words. >> all right, as we said, moham mohamed, you will be back again. you had a 2:45 a.m >> 15 years. >> you will see that we are completely full.

>> thank you mohamed well got a little bit of a time left 1.32 now on the dow. nasdaq gaining back some of yesterday's gains. about 46 or so s&p is down 14 in change we'll be here with the 3:00 a.m. alarm clock tomorrow make sure you join us. "squawk on the street" is next ♪ >> good tuesday morning, welcome to "squawk on the street," i am carl quintanilla with david faber and jim cramer coming up, greg hayes. futures are weak, dow looks at 130. the president says it is highly unlikely he'll leave on chinese goods. watch bonds today,