>> announcer: live from new york, where business never sleeps, this is "squawk box. good morning and welcome to squ "squawk box" on cnbc i'm melissa lee with andrew and mike joe and becky are off today. trade turmoil sparking a major global sell-off this morning, china allowing its currency to fall against the dollar. it is seen as a response to president trump's latest tariffs and a signal china may be abandoning hopes for a trade deal we'll get a live report in a minute first, things have been ugly pretty much every morning. equity futures red arrows across the board. s&p looking to lose more than 33 at the open. nasdaq down 117 at the open. dow jones indicating a lower open of 275 points treasury yields, take a look at this, remarkable levels. 10-year yield, 1.768%. we are seeing the lowest level since october of 2016 on the 10-year note

we should also note that yield curves around the world are feeling the pressure as well we did have on friday the german bund, the 10-year, falling to its lowest level ever. as for the asian markets, the nikkei down by 1.75% hang seng also pressured by what is going on in hong kong in terms of the protests there, down 3%. shaun hi shanghai down 1.6% in europe, red arrows across the board. dax is down 1.35%. ftse down, as well we have a stronger dollar against the major currencies weaker crude, wti down 0.7%. brent down 0.75%. >> couple safe haven trades working this morning, gold prices are up. they actually have been on a great run. they were under $1300 about two months ago you see them up only slightly, little less than 1%, probably

because they had been so strong lately not a lot of oomph year. bitcoin also getting a little bit of a boost right here. obviously, a lot of capital and motion across borders. that could help the sentiment toward bitcoin you see it up 7% at 11,750 let's talk a lot more about the catalyst this morning for some of these big market movers. last night, china allowing its currency to fall below the key 7 per dollar level for the first time in more than a decade want to get over to beijing this morning for more on the ground with this big decision or shift, if you will. eunice >> reporter: yeah, thanks so much, andrew it was a big shift the chinese yuan has cracked 7 that's the way the chinese currency traders describe it that has been raising a lot of questions here as to whether or not beijing authorities are now purposefully devaluing the currency as a way to offset the potential impact of president

trump's next round of tariffs. in a statement on its website, the chinese central bank explicitly linked the depreciation to the trade war, saying the losses today were largely due to unilateralism, trade protectionism, and tariffs on chinese goods, though it didn't mention the u.s. by name. now, for the past decade, the authorities here have been very careful to keep the yuan stronger than 7. the authorities here, as most people know, very heavily control the currency and the value. now, they've been sending the signal they're going to allow further weakness that signal has been received very well by manufacturers who have been telling us they've been concerned the 10% tariff is going to have a big impact on their bottom line and hit pretty much everything. it now would include another $300 billion worth of goods. there's also another risk that people have been talking about here, that it could potentially anger the white house. the signal to the white house would be that beijing is now

willing to give up on trade talks all together that it potentially is seen as a way that beijing can weaponize the y uan. there is another big risk factor for the chinese themselves and their own domestic issues, and that is it could potentially trigger capital flight this has been really interesting. the public reaction has been huge, and the hashtag rmb crack 7 is a top trending topic on social media, with 410 million views so far generally, people are expressing doubt that the central bank and the authorities here will be able to protect the value of the currency by that, they interpret it as the value of their money guys >> eunice, i don't know if you've seen this, the other piece of this is the bitcoin piece. whether you think some of this is a flight to that. did you see this

>> it surged as much as 12% since friday >> is that a result of this? >> absolutely. >> money leaving the country >> i don't know if it is money leaving the country. >> i want to know what the chinese government is going to do. >> viewed as a hedge. >> i want to know if china will do anything about that eunice >> reporter: it is difficult to know the authorities here do crack down on bitcoin. it is a lot of the trading on the exchanges has been illegal there's still an underground market for bitcoin a lot of chat rooms of people who do trade in bitcoin. it's difficult to say exactly what the government will be able to do to try to clamp down on this there is a concern that you will see capital flight out of this country. we have -- i mean, we've talked about this before, 2015/2016, when the government here had decided to depreciate the currency, that led to a lot of money flowing out of here. a whole lot of confidence being lost in the currency by the chinese people so the government has opinibeenn the past couple years, very

careful to put more capital controls on, to try to manage this very carefully. it is a big question mark as to whor whether or not they'll be able to do it >> eunice, thank you eunice yoon in beijing she mention 2015 s/2016. summer of 2015, muscle memory, your stomach wrenches because you see the devaluation of the yuan and think when shanghai lost as much as 30% in the span of three weeks you think, are we seeing this once again >> in terms of u.s. markets, we were in a somewhat similar position, where we were testing new highs. had been range bound for a while. the other thing is the treasury yield story, right >> yes. >> back then, we were saying how low can the yields go? now, they're basically back there. >> right europe, by the way, during that timeframe, lost about 9% it was a sell-off around the world that could not be escaped. you wonder this morning if we're seeing the opening shots of

that >> i mean, if we thought we were in a trade war before, now we're really in one, right >> yeah. i'm waiting for that twitter feed for donald trump's response. that will be fascinating to see how he perceives it, especially as he has been harping on the strong u.s. dollar here. china is able to, overnight, devalue. >> you can place it within a story of deglobalization no-deal brexit seems more likely the hong kong protests are flaring up and continuing. it seems as if there is a narrative behind it. whether it is really going to take hold or not, that's causing a little risk aversion this morning. >> a little bit of risk aversion a lot of risk aversion. >> not yet. >> you have the swiss rank against the euro at 25-month highs. it is risk aversion for this moment at least. coming up, much more on the currency move that's driving markets. we'll talk about the impact on your money and potential portfolio moves you should consider after this break. as we head to break, take a lock at the biggest pre-market

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welcome back to "squawk box. stocks are selling off around the globe as china's currency sharply lowers overnight joins us is scott nations

president and investment at nation shares. scott, what are you expecting? i mean, this is early going. we're down a lot in the futures, but what do you think by the open >> melissa, i think the fact we're down just 3% last week, there were only 3% or 4% from the high, even when we get this ugly open, i think it is going to reassure some people. the fact that the chinese leadership was -- the quote i read was stunned by this move, certainly is not going to help it is interesting that not only is the yuan below 7, it is the lowest level, the first time it's ever been there since it's been allowed to trade offshore i understand -- i believe i understand what the president is trying to do, ybut these are no concrete suppliers from queens who will be pressed into a corner they have weapons, as well i think we're now to the point where they may just decide to wait out the president and see who gets elected in 2020 the only moving average that matters in the s&p matters because it is also a big round number, but it is a long way to

the downside, that'd be the 200-day moving average at 2,800. >> yeah, that is a long ways down deborah, we were just talking about the muscle memory and the reaction that, you know, you wake up this morning and hear these headlines and you think about what happened in the summer of 2015 how should investors be preparing themselves for not just today's trading day but the length of time, you know, ahead of us, before we have any other developments on the chinese front? >> certainly seems as though treasuries continue to be a flight to quality type of instrument the bond market, obviously, reacted to the fed, and the employment report last week. overriding all of that continues to be sort of what's happening from a global economic perspective. treasuries certainly can take the sting out of what's happening from an equity market perfespective in that regard. >> are you worried about bonds looking expensive at this point? >> well, we have a fed that is trying to find neutral i don't think that interest rates are going back up very quickly at this point.

hopefully, they're staying sort of where they are without too much movement. in that environment, i think bonds don't really look expensive at this point. they look pretty much average. spreads, you know, continue to widen on riskier types of assets which is, i think, what is expected at this point in the business cycle with treasuries, again, being sort of the safe haven, i believe they'll continue to perform very well. >> scott, you know, it seems there are two maybe conflicting impulses this morning from investors who have been through these -- this cycle for a while. one is, obviously, these new trade threats, the currency disruption, basically says, okay, we have a fragile global economy that might be tipped over into something worse. or, on the other hand, you say, it has never felt smart to sell on one of these trade headlines, one of these currency moves, because they've typically been relatively short-term corrective actions. what is going to win out >> i think that this is

different. now that the chinese have said, we have tools, as well, to the degree that -- eunice used the word "weaponize. to the degree they're going to weaponize their currency, they may not be the nuclear option. nuclear option is selling treasuries they hold but this is a very different sort of thing. again, they were surprised they don't like to be surprised. i think that if you have to pick around a sector here in the united states, you might want to do that for the reason you point out. it's never made sense to sell but, you know, some of these sectors are going to get hurt pretty good. one story that probably is underreported is the fact they've also said they're not going to buy a bunch of agriculture commodities. if you look at soybeans, they're down 6 cents, 1/2 of 1%. corn is down about the same, but it is bigger, 1.5% deere, caterpillar, probably going to have a tough time today. >> beijing denies the reports since it was initially reported by bloomberg

deborah, sounds like both of you are defensive on this. if you think treasuries aren't a bad place to be, i mean, how low do 10-year neelyields go then >> we think they've hit a low at this point, and probably won't go too much lower from a cyclical perspective having said that, they're better than inflationary rates. we think they are a good place and a safe haven to hide at this point. >> last week, the bond market didn't act well. it's been relatively firm as treasury yields have gone lower. are we in for more indigestion in the credit markets here >> certainly, i think in this time period, you're going to see some credit spread widening. that's normal for this part of the cycle. it is a very long business cycle. typically, spreads get wider as you get a little further down that path. we don't think that it will be, you know, the overriding issue in the marketplace, certainly global issues tend to cloud that we do think that there will

continue to be credit spread widening and hiccups along the path. >> scott, i want to go back to the trade issue. you think this is a fault line, something has just happened here, and it is fundamentally changing the game. what i don't understand about this is why you actually -- we're waiting to see what president trump says on twitter, but why president trump won't welcome at this -- he may feel he has his back in the corner and they're trying to box him in, and it is not a good thing either, but he doesn't like the stock market to fall he really doesn't. oftentimes, he'll try to do whatever this ecan he can to fit if he is criticized meaningfully, it'll be a different story for him and us. >> absolutely. to the degree he then starts to walk this back, that would probably be good for everybody we know he's tried to pillory every member of the federal reserve open market committee in an effort to get interest rates lower. the fomc had to have a head slapper on friday morning when they said, my god, we've given

the president cover to impose more tariffs i mean, to a certain degree, they probably had to think, oh, we gave scissors to a child and yelled "run. the president is not the only one that's impacted by this. i think he has to realize that if he wants to make a deal, and he supposedly is all about the art of the deal, if he wants to make a deal, then he has to realize that he has to take a breath and that things are very different now that they're going to weaponize their currency. >> i don't know how likely that would be after just raising the prospect of increasing tariffs >> i don't think he is going to run to make a deal right this second i'm suggesting if this continues after a week or two, he might find a way -- >> at the same time, what we've seen, deborah, i want to ask you this, the odds of rate cuts go up, don't they, in the back half of the year off all this >> certainly, the fed doesn't want to be the ones to be blamed for any type of global problems.

having said that, they did what they thought was the best thing, which was, you know, take what was the december rate hike out of the marketplace they took it back. it was an insurance cut in their mind the u.s. economy continues to perform on an okay basis certainly not where it did in '17 and '18. it is not going too far south. having said that, this action on friday, the counteraction over the weekend, certainly will cause some pause for various members. there were two dissenters. i doubt there will be going forward. we have two new candidates that president trump has put through from a nominee perspective if they're confirmed, those are additional votes more than likely in his camp fomc could be at a point where they are re-evaluating how they have to respond to the global economy in a way that's a little different than what they did last week. >> all right thank you so much both of you for joining us deborah and scott. we should note, dow futures

slightly lower, down 310 at this point. s&p futures looking to be down by 35. lot more coming up on "squawk box" this morning, we told you about the sell-off in global markets up next, the individual stocks moving right now, including earnings from berkshire hathaway and the shakeup at a european bank we have that and more when "squawk" returns after this. [leaf blower] you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad, because you have e*trade which isn't complicated. their tools make trading quicker and simpler. so you can take on the markets with confidence. don't get mad.

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box. couple stocks to watch hsbc ousting its ceo john flint after 18 months on the job the chairman says the move is necessary to speed up growth plans, including for its u.s. business hsbc telling dow jones it plans to cut thousands of jobs and slow investment spending the company did report a rise in first half profit and announced a $1 billion buyback i just like the hsbc ads as they walk down the sky -- >> gangways. >> they do a very good on the marketing of that. i don't know if it is actually increasing business. operating profit for japanese telecom company softbank rising 4% in the second quarter. that's in line with estimates. you may remember softbank spun off the telecom unit last december and has been trading below its 1500 yen ipo price the company added 372,000 more smartphone users in the last quarter. it expects profit to rise 9% for the full year. some news out over the

weekend. berkshire hathaway's operating profit fell more than expected in the second quarter. insuran insurance under jowriting and td woes weighed on the company. it's been flat the last 12 months but underperformer lately. >> it is a tell in what he's invested in. it is banks and insurance, financials, not doing well, right? >> yeah. >> consumer doing okay it is really a tell of -- >> massive railroad. >> right exactly. >> that's the trade effect, as well. coming up, chaos in hong kong much of the city was at a standstill over the weekend, and flights were cancelled amid a strike we have the latest from hong kong's administer. that's next. take a look at friday's s&p 500 winners and losers

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>> announcer: welcome back you're watching "squawk box," life from the nasdaq market site in times square. >> good morning. our top story this morning, trade turmoil sparking a global sell-off that's happening as we speak. china allowing its currency to fall against the dollar. it is seen as a response to president trump's latest round of tariffs and a signal that china may be abandoning hopes for a trade deal want to show you what's happening in the markets right now. take a look at u.s. equity futures at this hour dow off 315 points s&p 500 looking like it'd open down about 38 points right now nasdaq looking to open about 130 points off the all-important treasury yields right now, let's show you what a 10-year is. we were saying the good news is on a mortgage, if you want to 30-year fixed, you can do it for a good price 10-year, 1.767%. 30-year at 3.308%. overnight in asia, as a result

of all of this movement, you're looking at the hang seng down nearly 3%. shanghai composite down a little over 1.5%. nikkei in japan down 1.75% european excac down almost 2% same for the ftse 100. dax a little better at 1.5% off. i tally ftse and spain, a little better but not much. we have another developing story we're watching for you this morning we are seeing chaos in hong kong amid rotests and a general strike more than 200 flights have been cancelled and much of the city was brought to a standstill. beijing back leader carrie lam out with a warning overnight, the protests are putting the financial center on a path to no return she said the disruptions have seriously undermined hong kong's law and order, and the city is on the verge of a very dangerous situation. what you're looking at right here is a live shot of the protests we'll continue to monitor this story and bring you updates as soon as we get them.

in addition to all of that, it was a very brutal weekend of violence in america. el paso, texas, a gunman opened fire as customers crowded into a walmart during the back to school shopping season saturday morning. 20 people were killed. another 26 wounded the gunman was apparently motivated by a hatred for immigrants walmart has released a statement saying, quote, we are praying for the victims and the community and our associates, as well as the first responders who are on the scene then in dayton, ohio, a gunman clad in body armor opened fire in an area popular for its night life, killing nine and leaving 27 others wounded. president trump expected to make a statement about the two shootings around 10:00 eastern time this morning. the president spoke briefly yesterday, extending his condolences to those impacted and praising law enforcement for its quick action doug mcmillen has had a tough week two others were murdered in a parking lot outside a walmart by

disgrun disgruntled employee he had a note he put out dare i say, we have an epidemic in this country. you saw tweets from people like tim cook who said, look, there's something wrong here politicians have not been able to fix it. as you know, i've been calling for a very long time on the business community to try to do something. i think it is appalling that we have not found a way to do something politically, but i do think there is a moral responsibility on everybody else to try to do something i think there are opportunities that are not being taken >> this will heighten the calls for walmart to re-examine its gun policy it's been known as the world's largest gun retailer, in addition to the world's largest retailer >> yes. >> so far, they said no change in policy because of these shootings. the public pressure, i'm sure, will mount. >> we should note a couple things one, the guns were not purchased at walmart. >> sure. >> the kinds of guns are no longer sold at walmart they don't sell -- >> assault rifles. >> large magazines or anything like that. they do, as you said, they are

the largest retailer of guns in the country. i would make a different argument i would make the argument that the responsibility and opportunity f y opportunity, if you will, doug mcmillen has today is not necessarily to stop selling guns but use the economic leverage he has over the gun makers, over the retail ecosystem, over the banks and the financial systems that support him, over the technology companies that supply him -- >> what leverage does he have over the banks that make the loan or the suppliers. >> you know what i've been talking about forever. >> i mean, walmart's policy is they have stricter controls than the federal laws mandate in terms of background checks. >> absolutely. the opportunity is to stand up and say, you know what, we'll create a coalition of companies in terms of how to retail guns in the future. we'll do it independent of the government because the government isn't doing it properly if the law was working, we wouldn't be talking about these terrible news events it is a longer conversation.

s >> it is. >> i hope this week that actually we can talk about more of that. coming up in volatile mar t markets, do actively managed funds do better than passive ones dow jones indexes will join us iso, i should say, will talk about today's sell-off later, bitcoin on the rise we'll tell you what is moving the crypto back over $11,000 this morning what circle ceo has to say you're watchi ining "squawk box cnbc

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welcome back to "squawk box. stocks set for sharp losses at the open u.s. equities at this hour, slightly more than 1% losses for the s&p 500 and the dow jones industrials. at this point, nasdaq looks like it'll lose more. it's been the out-performer after global sell-off after the chinese currency reached a key level. we're joined now by managing director and global head of

product management at s&p dow jones indexes. she'll talk about the active versus passive investing taking a turn this morning with all the volatility good to see you. >> thank you. >> it's sort of an interesting debate that has always been going on when a market gets volatile, people say, you know what, this is when active management can shine. this is a stock picker's market because not everything is working. what is the data saying? >> we saw that with the fourth quarter last year, right in the fourth quarter when there was a sell-off, and there was a lot of misconception that this is the time that active management can better risk control and do better than passive indexes. the data show s otherwise. we saw by and large, 68% of actively managed funds underperform s&p 500 2018 wasn't the only time. if you go back in history and look at, let's say, the 2008 financial crisis or the 2002 tech bubble crush, we saw time and again the data showed active

manage funds did not do as well as the benchmarks. >> an additional point, even among those funds that do well in a given year, that the outperformance tends not to last what is an investor to do? >> you know, i think it is very interesting because, you know, investors by tendency, we tend to go by the past performance. this is my all-star manager. it did very well last year if i pick him or her again, he or she is going to do well again. the data shows that is very random the likelihood of the manager continuing that performance or staying in the top over three year is almost as random, like a coin toss. you might as well throw darts on the wall >> i guess for an investor, you want to keep costs low and, of course, everyone is now flocking into indexes, but it would seem also that keeping costs low and having a transparent portfolio doesn't mean buying the whole index, right there are ways to choose

factors, styles, and things that might be better suited for a given environment. >> absolutely. we study factors extensively in a risk-off market like the sentiment we're seeing today, there are factors like low volatility or quality that hold up very well we saw that again in 2018, last year low volatility factor, outperformed s&p 500, lower than the market same as quality. there are factors that have proven time and again that in a period like that, they have these defensive properties >> how about actively manage etfspassively managed? there is a difference in performance in the tough times? >> i think the data is yet to be conclusive on the actively managed etf funds. what we have seen is that during the times like this, broad market sell-off, you know, is very difficult to do better than the broad market you know, a lot of active funds don't do well at all >> generally, as an investor,

you're just -- it sounds like the bottom line is, just invest in these passively managed, very low-cost etfs out there. why pay for an active manager of any kind >> i think, you know, if we look at the trends, right, in assets, the assets migration from active into passive, it really is evidence to what we are seeing the fact that, you know, it is difficult to outperform the benchmark. that's why were seeing investors, the assets flowing that direction, as well. >> you mentioned the ability of something like low volatility stocks or quality stocks to outperform in these periods. they've been extremely popular, even this year when the overall index has been doing right. >> that's right. >> do you have to look out for them becoming excessively popular, in other words, too many assets in one particular, you know, tilt to a portfolio? >> absolutely. we went through this a couple years ago when low volatility was very popular there was a lot of concern in the market are the valuations too high on

the low volatility stocks, what have you it is possible low volatility, securities, could become expensive and display those characteristics. having said that, time and time again, we go back, not just 20 years, but 40 years, and what we have seen is in times of duress, like what we're seeing right now, these securities will hold up and will go down lower than the market of course, they could become expensive, as well that's, you know, really up to the market to decide. >> one final point, is the idea or the data that says it is so difficult to outperform and cont to outperform, does it also apply to non-u.s. markets? there is a line that says maybe somewhat less official global markets are more suited for active management. >> we published this across nine regions, europe, latin america, asia pacific, as well. by and large, every now and then, depending on market cycles, active managers do better if you look over the five-year

or ten-year horizon, it is difficult to outperform the benchmark. the data is consistent across markets and regions. >> all right it is a tough game to play people are learning that, to beat the market. aye, thank you very much. when we return, global market turmoil we'll talk about china's use of currency as a trade war weapon, next as we head to break, the fang stocks trading lower after a miserable performance last week "squawk" returns right after this you should be mad at leaf blowers. [beep] you should be mad your neighbor always wants to hang out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad, because you have e*trade which isn't complicated.

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♪ the upcoming expansion of china tariffs still weighing heavily on global markets. "wall street journal" reporting the president made the decision over the objections of most of his trade team the report says the tariffs were opposed by treasury secretary mnuchin, economic adviser larry kudlow, lighthizer, national security adviser john bolton, and acting chief of staff mick mulvaney the piece says only peter navar navarro, trade adviser, didn't object during the meeting that lasted two hours the president stood by his argument, and the advisers helped draft the twitter post announcing the tariffs. >> is he up this morning >> maybe a little early. we'll see. >> a little early. i'm looking to see what he is going to say about this. the trade war is getting more complicated this morning overnight, china allowing its currency to fall against the dollar seen as a response to president

trump's latest tariffs and a signal china may be abe dandonig hopes for a trade deal danning in joining us now is axios' dan. >> china has been manipulating and devaluing the currency you've had mnuchin and the treasury department saying not true today, maybe it is true. trump says it for long enough, china says, well, if he is going to keep saying it, we might as well do it. >> you think that's what's going on do we think this is a new line in the sand? does this change the dynamic materially >> i don't think it changes the dynamic materially the dynamic has been stable now, to be honest, for almost a year. which is, you know, the united states and china say they want a trade deal, and they're not getting anywhere you sometimes get up maybe even close to the line or maybe really close to kind of the beginning of the line, but they're not really getting

anywhere this idea that china now views 2020, the elections here, as their line in the sand we're going to find out if we have trump four more years or if we can get past this, it's maybe what they're doing at this point. how many times can larry kudlow say on the channels, we're close, we'll have something, or we'll be close to something athe e by the end of the month. then there is nothing there. >> the political calculus at this point, if the stock market continues to drop for the next week or two, if not more, does president trump or larry kudlow or steve mnuchin, or the administration effectively try to come back to the table in a way they haven't thus far? meaning, could it be a forcing mechanism? >> it could be we kind of -- i have checked the timing on this, we kind of saw this when the stock market had the swoon a couple months ago. that's when we saw the trade talks theoretically start again. then we have a ridiculously good july, and nothing happens. >> do you buy the election story

in terms of who has more leverage before or after an election in the way the chinese are looking at this? >> you know, look, i'm not inside the head of the chinese government in theory, it makes some sense to me. they can obviously -- we talk all the time about china has having this much longer-term vision fro because they have a president for life they don't have to go for re-election every four years to a certain extent they feel they can take the pain longer. >> dan, we usually talk to you about deals, ipos, buyouts, all of that good stuff you see what could be a prolonged chill. you see the futures down sharply this morning do you think big ipos could be put on holds or valuations could come down because of this? >> depending on the company. one place i'm seeing deals is in the earlier side of the market in venture capital you have a bunch of silicon valley firms they have big bay shipping, shanghai offices they've been talking about doing

deals in other countries, firms that raise venture capital funds do half in the u.s., half in china. half in the u.s., maybe 1/3 in china, latin america or elsewhere in asia. >> do you think that's changed the valuation for the startup community? >> not yet the startup story for valuations is up and to the right everybody has to be unicorn. i think i saw something that was three minted last week that's a global thing. it doesn't seem to have had an impact yet if you can't get a billion dollar valuation you don't matter. >> it will hurt which ipo most >> i think the place where it is going to hurt, i think any -- it's tricky. any company -- we don't have a real great sense of what the calendar is. most of the big ipos will compost labor day. you don't want to price into august if you're substantial i think we have to look at anybody who sees china not where they're doing a bunch of business now but where they see growth business.

>> only china related as opposed to the companies that may be reaching in terms of valuation >> dan, i want to take the other side of that i'm thinking about uber. i'm thinking what took place the week of the uber ipo and it was very hard to argue that it was taking place in the markets, it was necessarily related to uber or uber's operational business in terms of people rethinking the valuation. it may have nothing to do with the interactions. >> or a wii. >> a wii company we work rather i could see if it's a tough time in the markets full stop, if it's a risk off world -- >> you don't want to pay as much. >> -- it doesn't matter, right >> andrew, on uber, priced on a particularly bad day, given the trade headlines in that day. lyft priced two months before that, a month nand a half befor that they have priced ballpark the same in terms of ipo price

lyft had a better day and they have traded down uber's had the last month of ridiculous bull market it still hasn't been able to get back to the ipo price. in other words, i think it went past trade. >> of the ipos you're looking at that are going to be bellwethers, if you will, for the fall, which one's the biggie >> we work is -- yeah, it's we it's the size. it is the fact that it is the leader in what it does its a relatively -- it's basically a real estate startup unlike a tech startup. that's the huge one. that's the one that investors, both public and private, seem to either love or really hate there's not much middle ground. >> there's sort of a tesla effect in this company in terms of the bulls and bears and the amount of debt around it this new idea, we're going to try to raise new debt ahead of the ipo. now they're going to raise debt contingent on the ipo. how's that going to work, dan? >> no one knows.

they've never doneit before. they're throwing stuff at the wall you made the tesla remark. somebody involved with we that when they go public the expectation even internally at we is they would become the second most shorted stock on wall street after tesla. they're expecting that. >> wow. >> dan, always great to see you. thank you for helping us with china this morning of course, we will be talking to you a lot this fall as ipo season is or is not upon us depending what happens here. >> thanks. >> thank you. coming up, we've got much more on this morning's big currency amount. it has big implications for the trade war and what could become a currency war steve liesman is fired up. he's off set bitcoin is up 25% in the last week is it safe enough to act as a safe haven trade every day, visionaries are creating the future.

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with sofi, get your credit cards right- by consolidating your credit card debt into one monthly payment. and get your interest rate right. so you can save big. get a no-fee personal loan up to $100k. breaking market news china weakening its currency overnight. we'll tell you why. red arrows around the world. u.s. futures are pointing to big

drops at wall street's opening bell. all those stories and what they mean for your money as the second hour of "squawk box" begins right now live from the beating heart of business, new york. this is "squawk box. good morning welcome back to "squawk box" on a very busy monday morning right here on cnbc i'm andrew ross sorkin along with melissa lee and we have our top story. you're seeing it there a global market selloff. it is taking place as we speak u.s. equity futures at this hour you're looking at the dow right now looking like it would open off about 334 points if we opened up right now. the s&p 500 will open off close to 40 points the nasdaq would open off about 135 points right now mike santoli is here to explain why. >> yeah. put it all in some context here

is why there's a new twist in the u.s./china trade war last night china allowed the yuan to fall below the key $7 value. >> we want to be a little careful this morning to call this the currency war because we're not quite there yet. when the actual shooting starts it will be time for that what's happened is an historical weakening of the yuan versus the dollar the reason to be careful is that the yuan moved in the direction you would expect the currency to move in the face of renewed tariffs from the trump administration by weakening the currency will offset the terms of the trade created by the tariffs it looks like we have a policy of omission by china a failure to keep the yuan from strengthening. we have to see if they actively intervene to weaken the currency that raises the question whether the u.s. would actively intervene to respond this would come as a possible

decision to sell dollars and actively buy other currencies, for example, the yuan. to weaken the dollar was rejected by presidential advisors but not importantly by the president and the president has complained about dollar strength across the board, not just against china now we have no information at the moment the u.s. will intervene in currency markets. a lot of wall street folks are writing today. probably work with the treasury on this. you're squinting, melissa. i know why you're squinting. i don't know that it would do so actively, but there's -- what the fed will do is address the potential economic impacts of that that would mean lower rates. that would be in line with what

the treasury would want it to do. >> that's working with the treasury. >> it's a dance -- it's like dancing with them but not touching or whatever you want to call it. >> right. >> it's going to be a very difficult thing for them to move. >> have we seen moves in fed funds before i came on it was very active this morning 100% chance of the cut in september. higher response, even october you kind of got to be on your toes here. we're pushing 60% on an october move >> wow >> we're not really pricing in necessarily that third cut i've got a 30% chance, which is higher but not a done deal remember, it had been a done deal and then it wasn't. >> right right. >> all right, steve. stay with us let's bring in as well victoria fernandez as krot dlgs mark level investments and managing partner and portfolio director

of douglas lane and a cnbc contributor. let's start with you to add a further bit of context. this idea of acting to weaken the dollar a stronger dollar relative to the chinese currency obviously mutes the potential impact of the tariff but it's not as if we are an export led economy where this will sink domestic economy if it gets weaker. how does it play in the markets? >> i think in terms of we go back every time something has come up with tariffs, the market corrects three times in the last 18 months. what's happening with the currency you have on top of that, it will bring earnings down especially with multi-nationals. 60% of the earnings of the s&p come from over seas. automatically we've already had weakening earnings you add this layer on top of that the s&p multiple looks more expensive than it did a week ago. what happens next is you have sellers, especially technical sellers coming to the market

bringing down equity allocations. that will flow into all of the large cap stocks. >> the move in the dollar higher off set against the s&p valuations >> exactly you get those two offsets. you get what's the true earnings growth going to be you bring that into question now all of a sudden people are going to look back and say, how do i get defensive >> can i go back to what steve said earlier it's not clear the chinese government is devaluing this economy. >> i'm listening to -- >> no, i want to be clear, andrew because by letting it go it's not intervening. >> right. >> i'm just saying it's not pushing it further down the steps. i think there's a difference between one and the other. >> i guess my question to you is does it matter is it -- if it -- if ultimately the outcome is the same thing. >> it matters because what you're seeing in the markets is let's just sell first and figure this out because every time this

has happened we've had a 5 to 10% drop since we're already up 20% for the year, i think the first thing especially for traders is to take money off the table. i would look at the other view and say, back in december, what are the opportunities in the market you might get more opportunities in the market too now. if you're going out fishing, look for companies like microsoft. >> when 9:00 rolls around, are you going to buy stuff today >> i'm going to wait a little bit. i want to see 5 to 10% especially for clients with cash i've been waiting for the last three or four months, these good companies i want to anybody in, there are other companies i want to -- >> in what sectors >> in technology, in microsoft it's run so fast i think that's a company with secular growth honey well which could get hurt temporarily with the foreign currency stuff those are good, high quality companies that have kind of run away from me at this point i'll still put money into the reads that are secular goat

stories. they're going to attract capital. >> those are american stories? >> yes. >> i want to ask you a story it strikes me as one thing you're leaving out of the equation is the uncertainty created. i was trying to figure out earnings and the fed and the economy. now i've got earnings, the fed, the economy and currencies if i'm an investor, it creates uncertainty. if i'm a ceo and i'm trying to figure out whether and where to invest, i have to take a step back, too. i might be factoring in a weaker economic outcome which is something that ricochets back on stock valuations as well as earnings. >> i think we've seen that for the last quarter even though rates are going lower, ceos are not saying i'm going to increase my capital expenditures everybody was waiting for the salvos the other side where we're also not talking about is we have a president who's going to look at his stock market as his report card we are going into election

season could they be a possibility that some type of deal happens? i'm not saying it's going to but we didn't have that. >> we've had a couple of 15 or 20% declines during the administration with the president who loves the stock market to go up. no saying it can't happen. victoria, at today's -- as we're indicated to open in the s&p, you're almost at a 5% decline from a high. how would you be approaching it today, especially when you have bond yields making new multi-year lows? >> sure. so in our fixed income portfolios we've actually been adding duration a little bit we continue to do that as yields fall when we look at the equity side, we've been adding names periodically we've been finding names mcdonald's is one of the biggest names we added a couple weeks ago we did edwards life sciences so we're not stuck in one particular sector we're trying to find individual names. as we go forward, we're actually looking at consumer staples trying to find some names in

there that will add benefit to the portfolio. find names that have had a bit of a pull back names with more up side going forward as there is more uncertainty in the market. find those places to add names that's what we've been doing. >> in consumer staples, victoria, do the valuations and this added dimension of a possible currency war give you pause? arguably they are maybe more exposed or the most exposed in the markets to a strengtheni ii dollar. >> no, that's true, that's something we would have to watch. you have to look at individual companies. don't take the whole sector and say, yes, it's consumer staples, we're going in full force with that try to find individual names that have had some reaction already to what's going on in the market obviously the currency situation this morning is new and we'll have to re-evaluate how that's affecting names. try to find specific names we do that through a multi-factor model that looks at return on equity, that looks at cash flows obviously the currency situation would play into that as well. >> sirat, we've been looking at

the 2015 to 2016 example, the chinese devaluation, it spilled into a lot of other things oil crash, high yield market, basically had a panic attack what would you look at as signs of financial stress? >> i think on the credit side, let's look at spreads. spreads have not widened yet so i think if you start seeing that if you see the capital markets kind of shut down, you guys were talking about the ipo market, if that starts shutting down, if companies can't go to get more debt, they can't refinance and oil coming back down if you wler oil hit $24, that everybody thought was going to be a good thing. it turned out to be a bad thing. >> back then. >> unintended consequences there, especially now with manufacturi manufacturing, those will be things that are signals to say, wait, things are slowing down a lot faster than we're seeing them.

>> mike, there were a bunch of reasons why economists thought the recent amount of tariffs was an order of magnitude different. it's going to hit the consumer came at a time of global economic weakness which the chairman has warned about being the number one problem the second thing is when they would hit is september really lousy time. companies doing their ordering for christmas. hiring for christmas terrible thing all of those reasons getting back to what sirat thought, you know what, he can't possibly do this today and what's happening now with the yuan i think changes the political dynamic that economically it's something the president probably wouldn't do, but as we get into this political escalation, you start to have to factor in can he back down how he would back down or how somehow they come to some kind of face-saving accommodation on both sides. that may be the most important investment calculus that's out there right now is the politics how both sides can save face

here. >> the politics. the overlay of the election is interesting, too, because -- well, i mean, at least for economic indicators. q2 gdp in the year of an election is shown to be the most important competing that will determine the fate of the election according to ray fare at yale. he does number crunching in terms of the numbers and the outcomes i don't know what the outcome is for stock market performance i'm guessing it's not this year, it's probably next year. >> what i have found in ten years of polling is that the public -- public confidence is much more closely tied to stock market levels than it ever was people take a sense of confidence in the economy from the headline of the dow even if it doesn't affect their pocketbooks or their wealth that much, it still is a huge indicator of confidence. they read stories about the dow doing x, y, z and they take a

certain confidence level from that. >> yeah. ceos, that's true. >> even more so. >> we are looking at the futures taking a tumble for the morning. dow set to go down 373 coming up when we return, this morning's top corporate story, and then later as global stocks drop, well, bitcoin is rising we're going to talk to crypto circle expert jeremy a layaillre you're watching "squawk box" on cnbc we're back in just a moment. moving is hard.

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it's tokenized just the same way apple pay is every single time if you need the number, if you had to call like a magazine -- >> right. >> -- you'd have to actually go use your phone, it would give you a temporary number >> much more secure. >> that's the idea >> yeah. jampt p. morgan chase meantime will be leading a wework ipo it sets up jpmorgan with a plan for wework. >> this is crazy. >> what's crazy? >> well, no. >> a massive debt offering before the ipo. >> technically the way it's going to be, it's going to be contingent upon the ipo capturing a certain price. remember when people were worried -- would uber be at a certain price. would softbank actually get out? now it's whether would jpmorgan who would lead the offering, would they be able to get the price. yes, they're all incentivized in

some way but in a peculiar -- >> it shows you the degree to which -- for the underwriter of a debt deal to say the value of this enterprise is really important on the mark to market -- on the ipo date essentially is something i think wework -- the reason it's so signature as abell w bellwether psychologically. >> i can't imagine you loan them money on a rolling basis of what the price is over some kind of -- >> that's security. >> because they need the money >> right. >> that's the other thing that's different about this with other ipos. >> they need the money. coming up. when you hear flight to safety, you probably think of gold or treasuries, but bitcoin? well, the cryptocurrency jumping amid global market uncertainty we will talk to circle ceo jeremy allaire about thanet xt

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. welcome back to "squawk

box. bitcoin climbing over the weekend amid this news or i should say -- well, it happened anyway crossing the 11,000 mark meanwhile, you have this turmoil between the united states and china and the devaluation of the yuan happening all at the same time joining us to discuss the bitcoin market circle ceo jeremy allaire. >> thanks. >> let's start with the devaluation of the yuan and how much of that do you think is driving the price of bitcoin right now? >> i think very clearly the overnight moves and what we've sort of just, you know, seeing right in front of us right now, you can very clearly see some macro correlation there. i think the broader theme of, you know, bitcoin specifically, crypto more broadly participating in these global macro forces is becoming more and more clear rising nationalism, rising amounts of currency conflict, trade wars these all obviously are

supportive of a nonsoft, highly secure digital store value that's been the fundamental thesis for bitcoin and continues to play out and looks like we'll continue. >> let me ask you this how much do you think is capital flight out of kaiof china versu people in other countries thinking it should be capital flight out of china. my understanding is, it is very difficult to buy bitcoin in china. >> well, so it's clearly -- you know, the markets are global all around the world and very, very significant amount of the market activity is in asia. there are many very large off shore exchanges. in fact, with their fundamental headquarters in places like beijing and shanghai, but with the venues themselves in singapore or in other jurisdictions, so there's a lot of chinese national participation in this market

through these off shore platforms. one thing to note though, which is really important, is we have been seeing or at least from my vantage point a softening in the chinese stance towards crypto. we're seeing that in a few ways. we're seeing, you know, for example recently a major chinese court defended that bitcoin is, in fact, legal property in china, which is significant. we've seen the -- one of the very largest commercial banks, bank of china start to do proactive information marketing about the benefits of bitcoin, the risks of bitcoin more broadly its role in the world. one of the largest companies in crypto space, i believe it's domiciled in singapore, recently added a party committee to the firm suggesting that it may be getting more alignment with the chinese central government >> so at what point, jeremy,

would you say bitcoin is acting like a safe haven trade? it sounds almost crazy to say bitcoin is any sort of safe haven, but what we're seeing in terms of, you know, lack of correlation and the correlation war to global turmoil, to that extent it seems like it could be one. >> yeah. i mean, if you step back and you think about it, you know, humanity has now created a non-sovereign, highly secure, you know, mechanism to store value that can exist anywhere that the internet exists it can exist, you know, as we say in a brain wallet. it's unsensorable. unseizable these are powerful attributes that people who are looking at risk assets, looking at fundamental turmoil, it can be a very attractive asset in that context. >> jeremy, the other question

you just talked about in china, i know you think there's a move towards making it more allowable. most of this is happening off shore. it goes back to the question we've been asking for quite some time which is do you believe that regulators across the board, the g7, are going to ultimately step in on a bitcoin or not i'm thinking of what's happening with libra, which would be the corollary. >> well, so we're definitely seeing significantly heightened regulator and policy maker interest in the space. that is primarily a response to sort of facebook preparing to launch a global currency that's a response to the maturation of the market they're not normalized, say, across the g20, but i think what you're hearing is clearly there needs to be rules around intermediaries that deal with this stuff, security, consumer

protections. you know, the kind of rules need to be there and that's very much the case in the u.s. >> but given the decentralized nature of what bitcoin ultimately is, can you ever create enough rules to satisfy regulators, right? that's the issue and it's why i always thought for example, libra, people have questions and issues about libra, facebook, all of this, ultimately there's still somebody to call, right? there's a centralized system where you can call them and say, guys, we need you to do it this way, whereas in the case of bitcoin the best you can probably do is deal with the on ramps and how the money is managed. >> yeah. i mean, if you treat assets like bitcoin or aethereum or ether as digital commodities, these are digital commodities that exist there will be rules around the intermediaries that handle them. the fact that they exist as commodities is sort of fact.

i think the other big struggle is we're entering a world where sovereigns and nonbig actors can instantly have the reach of the internet for example, china in this discussion that we're having about trade conflict and currency wars and the like, china is mobilizing to launch a global digital currency based on r&b, leveraging some of the distribution power they have with major internet and tech enterprises in part as a response to libra but in part part of it's global strategy to expand the footprint with how trading counter parties, businesses, even consumers globally interact with china china is way out ahead on this i think the u.s. is falling behind. >> jeremy, it's great to see you. thank you very, very much. hope to see you soon. >> thank you >> you bet. coming up, the stocks caught in the trade war the names most likely to move on every headline coming out of

washington and beijing first as we head out, s&p 500 looking to be down by more than 1% or 44 points. dow looking to be down 366 nasdaq lookingo se tlo 150 at the open you're watching "squawk box" on cnbc key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.

still to come on "squawk box," the stocks most likely impacted by u.s./china trade headlines. the good, the bad and the ugly plus, protests breaking out in hong kong and china letting its currency drop overnight. could these two stories be tied? michelle caruso cabrera joins us next to talk about it. take a look at the futures we are in the red. dow looks like it will open off by 300 points. the s&p 500 off 43 points. the trade war may have just ramped up. you're watching "squawk box" on cnbc we're back in a moment ♪ keeping the night interesting, is all about setting the right tone.

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tyson food out with quarterly numbers. they earned $1.47 per share. the stock is looking like it's

up. it's a rhetoric between washington and beijing heats up, dom chu looks at trade war stocks. >> melissa, as we talk about where the premarket movement is predominantly heating up, it will be in those stocks that have traditionally been viewed as ones beholden to the trade war between the u.s. and china fed ex shares off by 2%. you can see here on that particular move. global trade is certainly a focal point for many traders nvidia, off by almost 4% at this point. same with wynn resorts with a large amount of its business at the macao casinos. general motors, the largest market in china. off by 2% as well. if you take a look elsewhere, it's not just single stocks. we're talking about certain parts of the macro market. i want to highlight two etfs this is the ishares long term bond etf in the extended trade, up 1.5%

for a treasury etf this move higher is running a six day winning streak that indicates a lot of demand for the safety of treasuries one place to look in place of the macro markets, the yen this tracks the currency moves the invesco currency chairs, xfy the taker up half a percent. statistically significant, he tried to say that's a move higher treasuries and yen one other place is the developing divergence between the u.s. and china, but a move differently here this is the ishares china large cap ticker and the etf you can see for most part of the year they tracked pretty closely themselves just about may we started to see a bit of a divergence. they got bigger here the issue, andrew, is whether or not this trade development leads to mutually assured economic turmoil. both of those moves now are much

more to the down side, although i would point out, andrew, the chinese markets look like they could be taking much more of a hit. we'll see if that plays out like they did in 2015. >> see who has the lerchl. >> the xfi is more of a state agency. >> k web is the internet sector out of china we're seeing some hard-hit stocks there. >> not just there. we could say the same thing with some of the stocks here in the u.s. that would be comparable to k web. we're talking about amazon, facebook, alphabet they're getting hit premarket as well not to the degree though, melissa, that some of these k web or chinese internet stocks are. for the large industrial types, the large technology names, those are the ones that are moving markedly and premarket to the down side. >> dom chu, thank you for that we are going to continue this conversation, this developing story out of asia. there is chaos amid protests and

general strike more than 200 flights have been canceled much of the city was brought to a stand still. beijing backed leader carrie lam said it is putting the financial center on a path of no return. >> the recent protests and marches have seen escalated violence and these worrying acts have gone beyond the fugitive offender's bill, particularly when i have already announced some time ago that the bill is dead such extensive disruptions in the name of certain demands or uncooperative movement have seriously undermined hong kong's law and order. and are pushing our city, the city we all love and many of us

helped to build to the verge of a very dangerous situation >> joining us right now to talk about this and the devaluation of the yuan and maybe a connection between the two, michelle caruso-cabrera is here. good morning. >> good morning. >> you think these are not separate events? >> no, not at all. the chinese yuan is weakening, however, do not discount the impact that the hong kong protests would be having on the chinese currency as well, primarily capital flight out of china for people who are worried about the stability and how this thing is going to come to an end because do not under estimate how extraordinary what is happening in hong kong is. a general strike is very common in france, it's very common in greece it is unheard of in hong kong. to face off against the authorities like this is an astounding thing and you have to ask how is it going to end. >> do you think that there's -- there's sort of a line in the

sand that they've gone past the point of no return at this point? >> in hong kong or the point of currency >> in hong kong. >> i don't know where this ends but i think that's why you would have capital flight as well because people worry about what -- how this comes to an end. do you, god forbid, have the pla, the people's liberation army come out and do something to these people? that's the worst case. that would be the ultimate escalation nobody's saying that right now, but you have to worry. >> flip it around and talk about the currency and devaluation one thing we were talking about with steve was it's one thing to let the currency fall, it's another to push the currency >> right right. >> does it matter? >> steve and i had the same conversation in the makeup room. i thought his point was a good one, that, you know, currency wars are historically about intervening and what china has chosen to do is not intervene. however, i think ultimately it's a difference without a

distinction, right they're letting it fall. in part and they've put it in print, right, in their press release that this is in part because of president trump, but the thing is, remember, it also trades off shore and before the on shore move, which is controlled by the government happened, the off shore move was very, very strong. so you can't -- that divergence can't last for long without them facing an enormous impact. >> if this is to further squeeze the chinese economy, obviously you're weakening the currency. >> naturally that makes a lot of sense, yes by the way, weakening the currency also hurts hong kong, right? they have this dollar pay. so it has the additional effect to saying look what you're doing to the economy if that's the message they're trying to send. >> to the degree you want to read political tea leaves in the united states, part of what's happening, they are trying to read the political tea leaves

and say is president trump going to be president trump at the end of 2020. do they have more leverage now do they have more leverage after an election even if he was in place? how do you see all of that >> i thought there wasn't going to be any deal until after the election in the united states, that the way the incentive structure was set up with the president, that having a trade war works pretty well for him as long as the economy and stock market cooperate. >> if you look at the red arrows today, if this continues for a week or two, does that change? >> you know, a move like this today, eh, i don't think it's much it's how long does it go on for. the reason he was pressuring the fed so much is he wanted to weaken the currency so he had more ammunition against beijing, right? it gave him more strength. the other thing i would add this morning, i don't think moving bitcoin is disconnected as well. there are currency controls in

china. suppos supposedly they were paying 100 grand a year for harvard, nyu, vancouver, money gets out. >> that might have been true but, by the way, is not happening now. >> i think it's still -- >> very limited what you're seeing right now in terms of investment in the u.s. from china. investment forget about it, even just some of these issues. >> yes student numbers are down, et cetera yes. real estate is down. my point is that even though there have been years worth of capital control supposedly in place, everybody managed to evade them and get around them is it harder now i don't doubt that, but there's going to be pressure to get money out for sure >> okay. michelle caruso-cabrera, nice to see you. >> nice to see you always an honor to be on. >> we only get to see you on a terrible day. >> that's always historically the case, even when i was here full time. >> that's terrible >> right >> still early.

>> one of the things that happened over the weekend, no deal brexit. >> right >> october 31, that's another. >> deglobalization. >> oh, my gosh that's a big deal. >> yeah. >> all right >> back with us. >> see ya later. coming up, it is one of the fastest growing forms of charity, but some critics are calling it a tax dodge for the rich we'll tell you what it is and why some are so angry. as we head to break, check out gold prices. one of the beneficiaries up almost 1% at 1471 per ounce. stay tuned, you're watching "squawk box" on cnbc moving is hard.

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jeffries says alibaba will benefit in the short term from seasonal trends. u.s. china trade wars trumping that sohu getting a bigger than expected loss. revenue coming before loss pressuring results that stock down 3.5% target, take a look at this, upgraded to buy from deutsch bank it's on a profitable growth pace the stock is attracttively valued the risk reward profile for dollar tree is balanced. that stock is down 2% this morning. a busy morning with markets

getting hit in the latest trade war developments, but take a little break from that to bring you a story about how one of the fastest growing forms of charity is facing criticism as a tax break for the wealthy. now one of america's top billionaire philanthropists is adding to that criticism robert frank joins us with more on that. >> good morning, mike. they have become giant tax except warehouses of wealth. over $100 billion now held in donor advised funds. they are the fastest growing charities in the u.s they have democratized overall giving in america, but critics say billions are piling up in these funds without actually going to charity while getting tax breaks and more secrecy to wealthy donors here's how they work donor advised funds are checking accounts for charity you put money in, you get an immediate tax writeoff and you donate later the money is allowed to sit in the fund indefinitely.

now the funds are especially popular with tech type tie coops like mark zuckerberg in a recent series of tweets john arnold said donor-advised funds should pay out a required amount, 5 to 7%, just like foundations every year i think this hoarding of resources is inefficient and counter to the spirit of the rules. now the biggest donor-advised funds are run by offshoots of fidelity, vanguard, schwab fidelity has recommended 4 billion in grants this year. that's up 50% so that's great for them and the supporters now they say donor-advised funds have emerged as a stabilizing force in philanthropy. >> stabilizing in what way >> in that last year philanthropy was down whereas donor-advised funds were up.

we're offsetting a decline. >> suchmixed feelings about this because i desperately want to incentive advise fiphilanth y philanthropy. >> it has to get to philanthropy. >> eventually. no way to return it without losing the tax benefit. >> that's right. that's right theoretically, fidelity, a lot of this is going to fidelity funds. >> exactly it's growing >> more of it will be paid out later. on the other hand, they're taking a lot of illiquid assets and avoiding a capital gain. >> there is an argument to be made on the other side of this, if it's a lot of money, it's hard to spend money wisely in the course of 12 months. >> absolutely. >> if you come into money, you have to give it away to capture the benefit, should you be able to do that over two, three, four years. the question is, should they put a time limit on it >> that's the issue.

foundations are required to pay out 5% per year. >> some people think it's too little. >> a lot of people, forgive me, donor-advised funds, they create their own foundation and put the money in. >> that's right. what people are saying should happen with donor-advised funds, do the same rule for foundations, just require a certain amounts every year there are some accounts on donor-advised fund that don't pay out anything year after year. >> here to debate donor-advised funds and if they're more of a tax break than chart tir is adam brandon and seth hamlin is here, center for american progress senior fellow. good morning to both of you. adam, i will start with you. what do you think should happen here do you think this is a fraud of some sort? >> no, not at all. i think this is a great vehicle for philanthropy this is something that unites people of all ideological stripes in our country, both the right and the left this is not a republican/democrat issue. everyone is using these.

if you look going back to hear fidelity mentioned, they did a study saying across the industry 20% more on average is being distributed. so you mentioned how most foundations are required to give 5% well, the proof is in the pudding. these donor advise funds are kicking out close to 20% more on average. so obviously it's working. >> what happens if i told you that there were going to be limits put in terms of how much could be deductible in a given year in a meaningful way that's the other piece of this on a huge windfall year, one of the big issues, especially when it's a founder-led company because that money never gets back into the system, that you have some kind of upper limit on what that number is? >> i think the goal is to get as much money into philanthropy as possible i work for an organization that survives solely on donations when i see more money going in to support charities from

hospitals to my economic group, hey, that's a good thing when you start putting restrictions on what happens, i think it's going to have a negative effect on overall fi philanthro philanthropy. >> seth, where do you land >> the ultimate goal is to get the money to working charities in the end we shouldn't lose sight of that. these investment funds can sit indefinitely there is no rule for when they have to pay out. in fact, 1/4 -- davs, most are operating well a quarter of dafs don't pay out anything the money can sit in dafs indefinitely there's another issue with the timing the donor gets the tax deduction up front the money might go to charity much, much later the other thing is the valuation. because you can give money -- put money -- or, excuse me, put property into a daf that you can

find an appraiser for and take the full deduction, then the daf has to sell that property and may incur a lot of fees or discounts in selling the property so the money actually going into the daf or going to the ultimate charities might be much less than the donor is getting a deduction for. >> adam, i guess one of the issues here is the possibility of a conflict. fidelity wants the assets to grow and not go out the door, right? they're paid a percentage of the assets under management and also putting this money into their mutual funds isn't that an anti-thesis to the fact that you're getting a tax deduction forgiving to society rather than having it sit in a fidelity account isn't there a conflict there >> most have a sunset and have provisions for how much they're supposed to give i think all fidelity accounts do sunset even though, yes, it is growing in an account, it is meeting its ultimate goal which is getting this money out into the chart annual sector.

i think that is the ultimate goal you're trying to give to. people give to them for a variety of reasons they want to give to these funds they want to make sure that it's given to causes long after they're gone knowing that the circumstances change and just because a charity is great today doesn't mean it's going to be great tomorrow have donor-advised funds has you give more effectively after you're gone. this isn't for everyone but a great tool for people of all ideologies to support the charities they want. >> seth, let me ask you a separate question. we've had a great debate about philanthropy and the warren buffets or bill gates of the world who effectively have had this conversation because of the money they've been able to make, the great fortunes and the idea that they are as charitable and philanthropic as they are. so i have huge admiration for them in this respect, but technically a lot of that money doesn't ever get taxed, doesn't

ever really get into the system and whether you think any of that should be rethought >> the tax treatment -- well, yeah, absolutely we need to change our tax system to -- so that, you know, essentially like someone like a warren buffet has huge appreciation of assets and never pays taxes on it and might never in his entire lifetime because if you simply hold assets and then pass them on to heirs, there's no capital gains tax at all i think we need to do something to tax -- >> the complicated part is that the good news is that you have people with big hearts who are trying to give away -- >> yeah. >> -- money and are in many cases doing it well. i think, by the way, of ken langone who's done remarkable things with nyu, helping all med students being able to effectively go there for free. there are remarkable things happening. i can play the role of joe

kernen here. the government's going to misspend the money anyway so why don't we want to encourage philanthropy. >> i think we do, but i think the tax deductions should be commensurate with the timing and the amount of the money and the timing of the money actually going to charity dafs are throwing that out of whack. as adam mentioned, dafs can be used as legacies you can give money to a daf and you can sort of think of it as your children and grandchildren can control the giving, which is fine, but then why give a tax break up front if it's not going until generations later. >> adam and seth, thank you. >> thank you great segment. all right. coming up this morning's top story. that is global markets under pressure amid u.s./china trade texch tensions is wall street retaliating

we'll have the market implications next. futures setting up for a pretty steep loss pushing 1.5% on the s&p 500. the dow set to open at 325 right now. the nasdaq is looking to be off 133 points that is the steepest decline of the three. look at european stocks down as well. all across the board the ftse 100 down 2% pretty weak in general there and oil also having a tough morning on this general risk off trade. down more than 1%. i, brent, natural gas down 3%. stay tuned you're watching "squawk box" on cnbc this was me six years ago...

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a possible new front in the u.s./china trade war china allowing its currency to drop to the lowest level in a decade the fallout ahead. markets responding treasury yields tumbling we'll show you the biggest movers. a new line of attack against big tech are facebook and the rest of the faangs too fwobig too compete? the final hour of "squawk box" right now. live from the most powerful city in the world, 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 we have a very big monday morning for you. i'm andrew ross sorkin along with melissa lee and joe and becky are off today. right now the big news is the trade tensions and take a look at what's happening with stocks as the yuan is now devalued to its lowest level in over a decade an indication perhaps that china's not prepared to negotiate with us on trade so quickly anymore. dow looks like it would open off about 340 points off s&p 500 looks to open down about 40 points right now. the nasdaq looking to open down about 143 points let's also show you treasury yields right now may be the good news again if you want to get a mortgage but not in this

environment. the ten year is at 1.772 30 year, fixed one 2.03. this morning's news about the weakening chinese yuan, investors were getting nervous about the chinese trade war. kayla tausche joins us now with the latest good morning, kayla. >> reporter: good morning, mike. relations have been intensifying, not de-escalating. in the days after president trump threatened more tariffs on the remaining chinese imports after talks in shanghai did not make progress. china's central bank as you have been talking about all morning letting the yuan fall below the key 7 point threshold and the president has wanted a weaker, not a stronger dollar. also, state-owned entities in china are reportedly being told not to buy farm products from the u.s. that's the opposite of what president trump has been pushing for. those reports are untrue president trump tweeting over the weekend that it's china's

monetary devaluation and pumping in the massive amounts of cash and saying things are going along very well with china, but in the last several days outspoken china critics have been speaking out again. secretary of state mike pompeo saying the u.s. was, quote, asleep at the switch, end quote, as china pursued maligned behavior mark esper who was with pompeo in australia said china has a disturbing pattern of aggressive conduct and vice president mike pence is set to speak on china at 11 a.m. after shelving a speech in june as relations thawed those are all known china hawks. "the wall street journal" says all of the economic advisors were opposed to the recent eggs ka lags except for peter navarro. >> i want to talk more about the big currency move this morning

the yuan's big move against the dollar breaking through 7. joining us is the founder of xante data and steve liesman is also with us this morning. >> reading about currency intervention and how do it to i here >> that's the question >> so many questions. >> steve was talking about this before it appears that the chinese government is letting this happen as opposed to pushing them in this direction and the question i guess thi morning is does it matter whether -- which they're doing >> yeah, good question i think it has an internal inconsistency. it's a big curve that moves above 7. on the other hand we say, okay, but we're not doing it deliberately, right? it's a very fine balancing act basically what i do for a living is to track these capital foes we track what the pboc did in the market overnight

i believe they actually sold some dollars to slow the move, right? so they ignited the move but at the same time trying to moderate the pace of it it's a fine balancing act. the key thing is we've broken a level we have not seen in five years. over those five years as they tried to keep the -- remember really quite stable and now they're breaking it. it's a very important psychological level. this has to be taken very seriously. >> they noted the move and came into the market to manage that move, does that indicate to you that they're not interested in a yuan that is much further weakened >> i think what they're trying to do is they're sending a signal that this negotiation is breaking down. if you impose tariffs or not, we are going to gradually move the currency if they move 2, 3% in response to the 10% on 300 billion, if we move to 25% on 300 billion, they're probably going to move the currency even more this is the signal they're sending back to the u.s. now. >> can i tell you what i was

reading about and ask you -- i don't want to get too deep in the weeds but this is a very interesting question as to whether the u.s. can physically intervene in the yuan. let me ask -- you know this. there's off shore yuan and on shore yuan and the number of assets, i don't know the total, but it's limited what's off shore, and that's the only place the u.s. can intervene the chinese government can use administrative measures to keep one from affecting the other so here's my question. if the u.s. wanted to, could it actively intervene to keep the yuan from depreciating is that possible >> so this is a debate we have been having for the last few weeks and it's a pretty complicated issue. number one, united states treasury only has $22 billion worth to intervene for in terms of cash. >> i'm sorry, i thought it was more and i thought generally the fed joins them in with it. that's usually what happens.

it's like -- it's 92 now that fund, exchange stabilization fund, and then typically the fed would join in and double it. >> so you're correct historically the fed has joined? >> okay. whether they would or not, we don't know. >> if you look at the composition reserves, they obviously need to sell dollars to buy cny and in terms of the dollars the treasury has is only 22 billion. >> got it. >> the big question really is fed independence here. >> huge. >> is the fed willing to support an operation that is this controversial that is not coordinated with any g7 or any g20 part sners. >> let me direct the camera to melissa lee's face that is shaking her head vociferously. >> why do you highlight my reactio reactions? >> because it's important. >> it seems like a failing -- it's suggesting fail for the u.s. to intervene

specifically in the off shore yuan market. when we have the euro weakening and so many other forces strengthening the dollar. >> we asked 100 professional currency investors last week how much currency intervention is needed to really move the dollar in a sustainable way. >> right. >> almost everybody said a commitment to unlimited intervention. >> right >> 22 billion is not going to cut it. >> but wait, just to be clear, you didn't answer the other question, which is the physical problem, which is that there aren't a lot of offshore yuan for -- >> right. >> now it may be that the open mouth operation, the intention, andrew, of the administration to do this would change the market on this, but the chinese have a wedge between what's off shore and what's on shore that makes it technically difficult for it to happen. >> i want to ask alan. as an investor but also as a political mind because you're very involved in politics. i think the upcoming election

has a huge role in where these negotiations go and the timing of them in terms of whether a deal can be struck before the election, whether the chinese think they have more leverage after an election, whether the democrats think they can use this against the president, whether the president thinks he can use this fight effectively for his own election how do you see it? >> i think -- i'm sitting here as a venture capitalist. i am so happy that you're in a totally different world. the companies we're involved in have so little effect of what everything you and steven have been talking about so it's wonderful to be out of it. in terms of what the -- the reason be i say that is because most of our companies are not importing things, they're domestically based currency moves, even interest rates have very little impact on the kind of companies that are in the whole high tech, ipo, venture world. listen, it's a poker game that's going on i'm looking at it as an

observer, not a participant. they're playing poker. one raises the prices, one lowers them. tariffs go up, tariffs go down i think trump is playing a very -- i don't want to say shrewd game. he's certainly playing this and micromanaging. >> steve liesman, let me ask you on the poker game. there's going to be a conversation this morning between the president and steven mnuchin, right, about how to deal with this then there's going to be a question mark about what jay powell actually does given that you know both of these gentlemen so very well, what are they thinking >> the history, i think, of the treasury secretary is as follows. he will object to the policy up to the point that the president makes a decision and then he will carry out the decision that the president has made so i think the time for objection on the tariffs is over and now there's a debate on currency and currency intervention i think the president's going to be pushing for that. i expect the treasury secretary

and possibly through channels the fed chairman to push back against that and i think it was melissa -- >> channels. you say channels who does he call >> i think there are ways -- the treasury secretary and the fed chairman meet on a regular basis. i think melissa made an interesting point, that the fed is going to be opposed to this when it's not in concert with other g7 nations that's an important point. as a strict political tool. >> we're saying this as if something's going to happen. it's conjecture. we obviously know what the issues are you mentioned it as a psychological level. contextualize it as economic impact, trade flows. is it a difference to be trading where we are versus just under 7? >> i think it's the signal that we've been in this relatively narrow range for five years. now we broke out of it we don't know whether they're going mow 2% in a week or 2% in

the next 20 months this is a very important psychological shift. go back to steve's point what is the next step in the sequence we know trump is tariff man. he has said it himself we don't know whether he's currency intervention man. so i think the next logical step for him is if he feels that this negotiation is breaking down, he's going to step further on the tariff tool. >> i want to interrupt and say quickly, i think the president will learn you cannot be tariff man without being currency man, right? is that what has happened over the course of the tariffs is the yuan has depreciated, prices of, for example, u.s. greens have depreciated in response or declined in response to the increase in tariffs. if you take a piece of it, you have to own the whole thing. you cannot own just the tariff part. >> i want to read to you some commentary posted by the pboc on its website. this happened in the past hour managed to get the translation of this.

this is from central bank governor as a responsible big country china will abide by the summary of the g20 and adhere to the market exchange rate system, not enghaj in competitive devaluation and not use the exchange rate for competitive purposes what's your take on that >> so i think china is trying to create friends around the world, the e.u., japan, so forth. this language is a part of that, building alliances outside the u.s. so i think the bottom line is that they have allowed this move they have a heavily managed currency so every time you have a significant move in the currencies, it's because they're allowing it to happen. whether they are spending currency reserves, actually engaging in the market, is a bit different. our models overnight actually detected that they smooth it in the other direction. this is like how they are fine tuning it and calibrating it

very precisely. >> can i add one thing to this which is important, which is central bankers around the world have a very high regard for the technical expertise inside the pboc. >> right. >> a lot of these guys are foreign trained ph.d.s other places >> the fight is on president trump is clearly awake. you want me to tell you what's going on on twitter here donald trump -- president trump talking about china. china dropped the price of their currency to an almost historic low, this is what he wrote 46 seconds ago, it's called currency manipulation. are you listening federal reserve. this is the conversation we've been having here this is a major violation which will greatly weaken china over time. >> are you listening treasury department >> powell. >> that's an important point now the president can continue to say this is the fed's decision, which it is. if you want to have an intervention that works well, you've got to drop rates, but as yen said, the treasury has a

stabilization fund it is i believe the treasury secretary's authority to act to use this with the approval of the president. >> getting --getting back to y yen's point, even if they use that fund, is there enough dollars to make a difference in the price of the dollar? >> there's $22 billion it's a minuscule amount. it's only going to work for a couple of seconds. so this is something that requires a much, much bigger commitment there's the technical difficulties there's even like issues around does the u.s. really want to buy a lot of chinese government bonds and signal that the chinese currency has become a reserve currency this is a very tricky issue. >> we're a little naive here the president has gotten himself in the middle of a knife fight i called it a poker game it's a knife fight he's gotten in deeper than he

wants. he's fighting against a formidable adversary you asked about the democrats. i think so far the intelligent democrats could sit on the sidelines and watch the knife fight going on and see where it goes before they stick their neck out. >> does president trump think he's in a knife fight when the chinese have brought guns? yen, i go to you you've been talking to traders overnight who have been actively trading over the world is the bet a stronger dollar from here? the dollar will go higher? >> who wins in a currency war? the answer is bonds, right everybody have to buy some bonds. all the currency affects will even out the bont marked watches the chinese bond market. now they're allowing their currency to move more. they might have more flexibility to move their own monetary

policy we could see a big move in the chinese bond market that will give further fuel to the bond market rally. >> yen, point of information here this is, i think -- i don't know how much people want to know about how to intervene, but let me read you a jpmorgan report here i guess this is how to intervene at home but it says the exchange stabilization fund of the treasury is $96 billion, and you're exactly correct, $22 billion in dollar cash 5rks 1 billion in sdrs, special drawing rights 13 billion in euro and yen can they sell the sdrs, too, in order to intervene >> would that make a deference >> they can potentially do some conversions via the imf where they boost it a little bit 22 billion or 70 billion -- >> astill a drop in the bucket. >> that's the issue here. >> the president's tweet is consistent with his pressure on the fed to ease more

it doesn't mean as i command the treasury department to do something. >> absolutely. >> we need easier policy >> that tool is lessening every day. not much more he can do. >> there's also 1r58 u, perhaps, in having a foil >> right. >> let' follow through if bonds are the place to be while the u.s. government tries to weaken the dollar, how do you buy u.s. bonds snb i think you need dollars to do it. we definitely sell stocks, that would be one way to use the existing assets. you would sell existing currency to buy dollars to buy bonds. >> you mean bonds in general do well, right? >> yeah. like you have europe is buying treasuries the u.s. is buying bonds everybody is buying bonds from each other, right? >> right >> and if everybody is doing the same amount, then all the currency impacts net to zero but you end up with a lot of bonds being bought, that's the fact.

>> but the big question is we are the reserve currency of the world. will the world allow us to weaken our currency? >> absolutely not. that's the key point. >> so everybody's going to pivot, which means it's a race to the bottom. which means you may not care now, but if there's a race to the bottom you might eventually care no >> oh, eventually, sure. we're talking about today. >> i get it. >> okay. >> all right >> the conversation is going to continue for quite some time thank you, guys, all of you. appreciate it. coming up, then and now. what happened when china played with its currency back in 2015, plus a sector pick that is vulnerable to china trade peenions but may be less dendt on that company than you think. stay tuned, you're watching "squawk box" on cnbc company th, fights cancer, repairs shattered bones, relieves depression,

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nasdaq looking to open 152 points right now >> we've been talking about 2014 all day long you might remember china playing with the currency then dom chu talks to us about what happened to stocks. >> it likens to what happened in 2015 in some ways but not in all of them. there are some subtle differences between what happened then versus now let's take you back in that time machine, guys, to what happened then in 2015 we saw three successive devaluations of the u.s. currency -- or rather the chinese kurns be si versus the u.s. dollar. it happened between august 11th and 13th three times. it did catch the markets by surprise over the medium term china's currency had been appreciating steadily versus the u.s. dollar. one of the reasons it was important was because what was happening there was a slowing down of the chinese economy. the chinese economy is slowing down now the chinese government then was arguably very concerned about what could happen if there was a

hard economic landing so the easing of policy with the yuan and devaluation was meant to maybe engineer maybe a softer landing for the economy. also, there was a lot more chinese stock market volatility to the down side back then we are seeing it now but the market volatility playing into the narrative back in 2015 as you talk about that look at the markets then, we're going to narrow down that window. not real time charts what happened in 2015. the chinese yuan, you can see there in orange. the move here. now it did react a little bit in the negative to the markets then it wasn't about a week or two later when the markets turned to the down side. s&p 500 down by 11, 12% during the peak to drop i would point out if you take a look at the s&p 500 and other markets in the 2015 time frame, this is one look at the s&p etf versus the etf that tracks the chinese market as you can see, the market

volatility in china, the orange line happened significantly to the down side. the u.s. market played catchup there once the devaluation happened the wild card gang that we are not talking about here, there are a lot more factors going on in 2015 including some uncertainty about what fed interest rate policy was going to be like, whether or not the heightened cycle would take a certain trajectory yes, the chinese devaluation in 2015 seems like it is today. is it deliberate versus letting the fundamentals take over all of them variables. >> we do know of course the fed did hike interest rates in december of 2015 i don't think we're getting a hike in a couple of months here. thank you. >> you've got it. >> joining us to talk about these markets, christopher roan. chris, last week was a little bit of a pull back in the s&p 500. off of a record high going to deepen it a little bit this morning how are you viewing this move? >> we're off 4% from the highs

this is a modest pull back so far up 17 year to date i think we're halfway there. 27.90, that's down 6 or 7% from the highs. what i want to watch for i want to watch for the tactical indicators spikes in put calls. we're not quite there yet on that stuff we have about six, eight weeks of seasonality that's here as we look into the future i think we have to hang in here for a few months i think this is corrective i don't think this is a change in trend. >> 6 or 7% is roughly what we got in may, is that correct? you had to get up to a new high, pull back. is there anything to say about the fact that the s&p if it opened here is going to be below last september's high? it seems to sort of track this breakout to a new high a little bit. >> i think we've spent 18 months making almost no priceprogress and then over the last six weeks we decisively broke out. i think the odds of another 20%

december of '18 or another 8 or 10% may of 2019 is pretty low. we already had that. one of the big differences is we look to 2019 participation started to broaden out here take semis they've been playing for 18 months they're acting pretty well in this environment i think the leading market groups that i would look to for signal are saying this is corrective, not a big change. >> we see bond yields getting compressed even further. i mean, it seems as if bonds were over bought and over loved even before we got this move well below 2% in the ten year. where does it seem like it's going? >> two things stand out. where we look forex sess in the market, it is not in the cyclical groups, it's in the low vol defensive oriented sectors flows into staples, utilities have been where the excesses are this year. what's interesting, the last leg lowering of bond yields from 2 to 175, banks haven't really followed them lower. utilities have not made new relative price highs versus the

s&p. the equity response or leadership response seems to be different than what people would expect if you look at flows into the tlt as well, which is the long bond etf, they're starting to get pretty aggressive here where are the excesses where are they in flow might be in bond but not stocks. >> does that imply when we see the pull back, that we'll see the excesses corrected or are we in a state where we're going to see the excesses exaggerated premarket we're seeing 2 plus percent declines seeing them in all of the risk on areas and not necessarily in staples and utilities. >> yeah. i think the trouble here for a lot of investors, in an environment where there's some stress, you're not being rewarded for necessarily owning defensive equity groups. you're not being rewarded in terms of relative performance in earning staples or reits

when we look at what comes out of this on the other side, i would be in favor of a pro cyclical sector orientation. in the last couple of months it's accelerated the liquidity is pretty decent i'd be looking at groups like semis, home builder, industrial stocks to come out the other side. >> maybe some domestic strength being implied by the market x. >> thank you. >> we have a lot more coming up on "squawk box" this morning we have alan patrickhoff and is facebook so big that it's stifling innovation in thetech sector the question we're going to ask and some regulators say it is. stay tuned, you're watching "squawk box" right here on cnbc.

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good morning welcome to "squawk box" right here on cnbc we're live from the nasdaq market site in times square. joe and becky are off today. our guest host for this hour is alan patrickhoff take a look at the futures right now. we have big news taking place right now. the yuan falling to its lowest level in the past, what are we saying, past decade now?

is that where we're at here? >> yes. >> the trade war appears to be on, if not even more so. the president tweeting out this morning that china's engaged in currency manipulation calling on the fed for help the dow jones looks like it would open off 364 points. s&p 500 off 34 points. nasdaq off 158 points. got a couple other stories that investors are going to be talking about. i don't know if they're talking about anything other than this here's a couple of them. tyson foods, a rare winner they reported quarterly profit $1.47. 5 cents above estimates. that came despite weaker results in the pork operation and mixed for poultry. apple has announced -- >> ibm. >> what did i say? >> apple. >> oh, my gosh ibm announcing a new blockchain aimed at improving supply chain management it's been cumbersome with much

of it done manually. ibm's partners in this new network is anheuser-busch, cisco. and the institute for supply management will have the nonmanufacturing index coming at 10 a.m. eastern time it's a measure of the u.s. services economy and expected to improve slightly from june levels i don't know how i would have mixed those. >> apple on your mind. >> very different. >> apple on your mind. we are following a developing story out of hong kong as protesters continue to flood the streets as part of a general strike nbc's matt bradley joins us with more hi, matt >> reporter: hi. you know, this has been a massive body blow to this city hundreds of flights delayed and canceled at hong kong international airport. one of the busiest airports in the world. that's not the only system of transportation blocked i'm in causeway bay.

this road is completely wiped out with no traffic. the protesters have completely blocked it all of these major department stores to my left and my right, they're all shuttered because the store owners are afraid of violence you know, they've managed to do exactly what they intended to do, which was widespread disruption and they also managed to get a response finally out of the head of hong kong, the leadership came out several ministers and finally made a statement after not having said anything for weeks. they basically said that this could have a devastating effect on one of the biggest financial cities in the world. phillip chan, he's the chief financial officer here in hong kong he said retail sales have dropped by nearly 7% in the month of june and he -- the hang seng all throughout the day and in the last nine days has dipped by nearly 3 percentage points. that's the biggest dip since 1997 when brittain handed over hong kong to the chinese

as you can see, this has not just had a devastating effect politically but markets are reeling as well. >> matt bradley in hong kong for us. response and reaction is coming in after a weekend be of gun violence in america. cloudflare said it would stop doing business with 8chan after the sus spented gunman shooting in el paso appeared to use the site before he went on his shooting spree this morning 8chan is calling for the site to be shut down brennan no longer runs the site. joining us to talk about this and more is joanne lipman. author of the book "that's what she said." and cnbc's julia boorstin in los angeles. i'll start off with you. 8chan has been linked to the shootings in new zealand, in california cloudflare is going to go public they took the stance to get out in front of the issue. are you expecting more companies to do the same >> well, i think there's going

to be this growing conversation, melissa, about what do you do about this kind of content on the internet that incites violence the ceo of cloudflare posted a rather long blog post explaining why they were no longer going to be supporting 8chan which pulled it down from the internet. this ceo cloudflare noted they did the same thing with another offensive website, the daily stormer when they saw the daily stormer was posting equally offensive content. the problem is the daily stormer found another home companies will continue to support this kind of violent content or content that incites violence the question is what kind of regulation needs to come in. we've seen australia and other countries really try to take action around this, but here in the u.s. there still isn't regulation about providing the technology to support this kind

of content. >> does this, joanne, give the u.s. regulators the will to actually try and enforce anything cloudflare ceo said 8chan didn't do anything wrong but we don't want to do business with them. >> also, by the way, the founder of 8chan said it should be shut down because it's lawless. the larger issue is we are in an epidemic of hate speech and violence in the u.s. hate speech is not illegal. the problem is the platforms, twitter, facebook, youtube have absolutely no idea how to deal with this. so they've been doing it in sort of a scatter shot manner other countries have been much more aggressive than united states cnbc actually reported just a few days ago about germany some people are switching their location services to germany because germany has much stronger laws against hate

speech and naziism i do think it's going to lead to yet another conversation about do we need more legislation? do we need to take another look at section 230 of the communications decency act that's the section that allows the internet providers to have immunity, basically to be considered telephone wires. >> alan, where do you stand on these companies? >> i think an element that we haven't really seen is the corporate leaders really speaking out on this this is always a political issue. it's always talked about in terms of what congress is going to do. i think we need a hell of a lot more activity on the part of leading company leaders to come out and massively ay, we've go to do something about this every time there's an episode like we just had this weekend, people for a day or two talk about it, congress argues about it and nothinghappens. i mean, we have got to do something about it we can't just do it -- >> i don't disagree with you

the flip side is they're all couched in a corner scared out of their minds that their customers are going to abandon them or the political class which i'm not sure is going to represent the public in this instance is going to come at them even worse. i'm thinking of delta, so many other times where it's ultimately in some strange way backfired. >> in this particular case, you have to do what's right. it's insane to have what's going on we all should be ashamed on it we should be marching in the streets on gun violence instead of watching hong kong speak about detention and exporting people. >> when you talk to ceos of portfolio companies or big traded companies you've invested in and turn them into that, they tell you what? >> as i'm saying before, they're more focused on what's happening today, what the shipments are, wa their readership is, what the traffic is

they don't think in terms of broad issues this is an issue that every one of us has got to be really responsible and act and speak out on. >> i have to say the tech platform leadership has been absent on this i mean, i think they are so concerned about being seen as the press and being responsible for the content that airs on their sites that they just -- they want to, you know, keep a hands-off attitude i've seen this in my experience as chief content officer at ginnett, we ran into eschenfelder use like this and had to deal with facebook and others where we saw abusive content. it was very, very frustrating experience. >> do you think that the leadership of a facebook though or twitter or somebody else can say, well, they didn't post this manifesto on our platform because we probably wouldn't have let it through. it was on 8chan. they keephaving to hide behind we have proto kolgs, policies, remedies

not that they've proved good enough but they have been able to -- >> that's the conversation but at the core of it is what we're allowing people to own and our gun control issues if you solve those, i'm not saying it's going to solve the whole thing, but that's the core of the problem is we have too many people with too many guns who are allowed to run loose. >> sure. it's not about where you post 20 minutes before doing it. >> julia, can facebook say, hey, you know what, we wouldn't have allowed this so our controls and the money we've spent on people policing content before it gets posted, it's working >> reporter: well, melissa, we just have to remember that it was a couple of months ago that there was a shooting in new zealand that was live streamed on facebook. facebook has taken actions of trying to minimize the chances of that happening but it's very hard to promise that that kind of thing is never going to happen again there is a lot of conversation about whether facebook should take more drastic actions. both twitter, 4chan and 8chan.

these websites, these platforms are homes for community and groups sometimes those groups are, you know, talking about really violent extremist things how extreme should these platforms be in terms 6 policing that it seems like there's always room to go further they've been cautious. they don't want to be seen as media companies, they want to be seen as open platforms they will be more extreme in their moves to shut this down. >> it's harder and harder to argue that they are not media platforms. >> oh, i don't disagree. they are so scared of the politicians in washington who are going to go after them that's part of the could he number drun here >> i'm sorry to harp on it, but i think at the core of it is we have guns on the street. people have them and shouldn't have them and if we -- we're never going to be able to solve that if we dramatically minimized it, these issues people will speak out and say things on the first amendment.

they won't be able to take the same actions. >> we're going to leave it there. joanne, thank you for joining us julia, good to see you. coming up, the facebook bubble could the social media company's market dominance prove to be its achilles heel? we'll talk about that thwi our guest alan patricof when "squawk box" comes right back. that's what happens in golf nothiand in life.ily. i'm very fortunate i can lean on people, and that for me is what teamwork is all about. you can't do everything yourself. you need someone to guide you and help you make those tough decisions,

that's morgan stanley. they're industry leaders, but the most important thing is they want to do it the right way. i'm really excited to be part of the morgan stanley team. i'm justin rose. we are morgan stanley. dear tech, let's talk. we have a pretty good relationship. you've done a lot of good for the world. but i feel like you have the potential to do so much more. can we build ai without bias? how do we bake security into everything we do?

we need tech that helps people understand each other. that understands my business. we've got some work to do. and we need your help. we need your support. let's expect more from technology. let's put smart to work. ♪ ♪ welcome back to "squawk box. futures under significant pressure as they have been all night. see the dow set to open down

more than 375 points s&p 500 off about a percent and a half at the opening. the nasdaq futures off 168. >> looks like the lows of the premarket. >> yes. >> pretty much >> 40 minutes away from the opening. as scrutiny mounts and for a br entire landscape involving big tech. >> this is a new argument at antitrust. and it is the idea that big platforms suck up all the resources for themselves, and dry up all the investment around them the worry is that this dynamic discourages innovation, competitors get bought out just as they get off the ground, and new players may not even try to enter the market now the ftc is reportedly meeting with companies that facebook acquired as part of its investigation and facebook has pushed hard against this concept, even commissioning a study that showed investment in tech clearly outpacing other sectors. but critics are skeptical of those results.

economist ian hathaway did a detailed analysis that shows a sharp dropoff in financing take the market for internet software, google is the big dog. first financings have fallen below those for comparable sectors and for vc deals more broadly. washington appears sympathetic to this idea, the house judiciary committee recently sent letters to google, facebook, amazon and apple with very pointed questions about how they do business one of the them asked, does facebook dedicate any resources to identifying promising tech startups or innovative nonfacebook platforms and apps it is very clear where this question is heading. and the letter only lets facebook give one of two answers, yes or no back over to you >> okay. we want to -- thank you -- we want to continue to talk about big tech with our guest host alan patrickoff. your sense on all of this? is there a monopoly out there?

>> i'm totally supportive of this investigation i think they're going to find that they have been monopolistic in terms of acquiring companies. >> i want you to go back to this idea of being monopolistic explain this to me at the time, for example, facebook bought instagram, for a billion dollars, some people thought it was crazy truly cray-cray crazy town, people thought they were overpaying and by the way, of course, it has now turned into a success. you have to have a crystal ball to make that. >> say the same thing for whatsapp i don't think they started out to become monopolistic we're not going back to the robert baron days where the railroads bought companies to own bit of the network so you have to pay higher prices. the same -- the oil business wanted to grab every oil well. i think these are companies that have grown organically, but have

gotten so big now that they have frightened off other people and the result, in a case of, for example, amazon, resulted in lower prices, which is totally anachronistic to the concept of monopoly but i think we have to face the reality that, for example, i know for our firm and i know for many other firms, no one wants to touch new media companies, no one wants to touch companies who are dependent upon advertising because these other banks have sucked up the market. >> is your answer to break the companies up or is your answer to not let them make future acquisitions is your answer to monitor them what are you trying to do here >> i don't have the answer, but i think to a certain extent they have to be regulated more than they have been and it may be in the end -- the problem is they collect data from all the other companies that they acquire, and when -- with that data, they probably know they, whoever they are, that we're sitting here right now, i don't know if they know what we're talking about,

but they know what we are, where we're going, where we eat, what our medical problems are, and i think it is dangerous long-term for having a limited number of companies have this amount of data and be able to capitalize upon it in terms of selling advertising primarily and it is very tough to compete if you're a smaller company. >> longer conversation, we have to continue it in just a little bit. i know we want to go talk to jim cramer this morning. >> let's check in with jim, down at the new york stock exchange jim, on a day like today, this coming off one of the worst weeks for the s&p and the nasdaq, where at premarket session lows on the futures, what do you do >> i think you look at stocks that are down 10% from the highs, try to assess the exposure to china. if they have no exposure, it is interesting. those are a discount being pulled down by the entire s&p. i'm not sanguine because i worry that hong kong explodes. and that would be the next --

that would be the next big thing that i'm concerned about but, look, there are discounts happening. and i think people have to be cognizant that not everything should be thrown out here. >> discounts, you might take a look at apple down 2.5% premarket and think that's a discount or a facebook down 2% what do you think are discounts aside from 10% off the highs a lot of stocks aren't 10% from highs, the ones that people might be interested in buying. >> there is a -- i have a long list of which the ones that are down 10% from the highs now are related to china or fossil fuel. and i really want to steer clear of china facebook is such a big part of the s&p. you got to let it come down. i'm not sanguine but i'm also not running from the market i think there is real value being created and i know that sounds kind of soporiphic. we get down to some level in the s&p, some people start coming in i thought the market would be down it is not. it is not because there are

people who are coming in buying right here but i don't want to buy anything that is related to china at this point. i think there is still more to stall. >> so in terms of the ones that don't have much china exposure, like what, can you give us a couple of names on the list? >> you look at -- we had an upgrade of target today and the target upgrade is directly related to the fact there is very little tariff exposure and target is doing many things that are good, but because retail is so dangerous here, they're saying buy that. rh, gary friedman came out last week and said it is 1% of the delta is 1% on china i look for these things. this is the -- they're all being thrown away. some of them are more exposure than others and you have to be more discerning. except the fact you're down on the first buy. if this -- if the negativity continues. >> all right, jim, we'll see you in a few minutes good to see you, thank you don't miss "mad money" tonight, jim is speaking with the chairman aria phand the ceo of

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final check on markets this morning. we're in a red, half an hour before the market opens, as we watch the continued trade

tensions and now questions about currency manipulation, that's what president trump is calling it on tritter this morning as the yuan gets devalued dow looks like it opens up 362 points now the s&p 500 and nasdaq off as well thank you, we'll see you tomorrow "squawk on the street" begins right now. good morning, welcome to "squawk on the street. i'm david faber with jim cramer. we're live from the new york stock exchange carl quintanilla has the day off. let's give you a look at futures. we begin trading for the week half hour from now as you can see, of course, we're set up for what is going to be a sharply lower open on all of the major averages and, of course, as you might expect, that's where we start in our road map this morning. escalating trade tensions are weighing on