2019 and squawk box begins right now. ♪ >> live from new york where business never sleeps, this is squawk box good morning, everybody. welcome to squawk box here on cnbc we are live from the nasdaq market site in times square. i'm becky quick with joe and andrew our guest host this morning, shark tank's kevin o'leary >> great to be here. >> great to see you today. let's take a look right now. you'll see the dow is indicated to open up by about 125 points s&p up by 16 points and then the nasdaq up by almost 60 this comes after a day of declines for the markets yesterday the dow lost 175

points that happened with markets closing at their session lows. weakness across the board. a lot of different sectors under pressure financials, materials and consumer staples all down by more than 1% we'll see what happens this morning. futures indicated up this morning. overnight in asia, the nikkei ended down by about a quarter of a percentage point the hang seng up by .1 and the shanghai composite was flat and in europe where there's active trading taking place there's green arrows across the board. the biggest gainer of the three major averages is the cac up 1.4% but you see gains of better than 1% for the ftse and dax as well take a look at what's happening with treasuries. right now the ten year is yielding 1.588%. so the yield picking up just a little bit the two year yielding 1.539. >> lowe's is solidly higher on

the numbers here 215 adjusted versus estimates of $2.01 on better than expected revenue. a little bit anyway. the revenue is 20.9 expected and 20.94 to 20.99 and then for adjusted earnings for the year, the forecast is 545 to 565 and the estimate is 558 so that brackets that. full year comp sales up 3% after posting, i think, 2 or 2.3 2.3 was the same store sales number in the most recent second quarter. total sa to total sales up 2% and expect that to get better all the numbers, the senior analyst that was here yesterday, don't adjust your tv sets. it's the same guy. you were talking to home depot

yesterday. a lot of similar things here the comp sales are about a percentage point below home depots, right? and actually the outlook about, i think home depot did three and was indicating four for the year this is 2.3 and indicating 3 for the year so comp store sales aren't quite as good but overall number, i thought you said yesterday home depot was taking market share. this was pretty good here. both home improvement retailers are doing pretty well, no? >> well, one thing, i'm reading this very quickly but it seems as though as i'm thinking about we always compare lowe's to home depot and vice versa, the lowe's u.s. comp 3.2, that's a tenth of a percentage point better than what home depot did. so -- >> one thing i will say is making positive comments like we heard from home depot yesterday. he said despite lumber inflation

and difficult weather we're pleased we delivered comp store sales in 15 geographic regions of the united states this is a solid economic background and continued momentum executing on the retail fundamentals. >> despite lumber prices. >> they're still seeing a strong economy and it happened in all 15 geographic regions. if you're looking for any signal as to what this means for the economy, consumer looks good and this is another home retailer doing well. >> i agree with that becky this is another positive data point for the u.s. consumer. we have all been waiting now and i talk a lot about this on the show, big turn around potential at lowe's. lowe's has lagged for years. looking at this report quickly, looking at the last couple of reports, it seems under the guidance of the new ceo, lowe's is getting it's act together and frankly, if we're right here and this continues this stock has a long ways to run >> is this a better buy than home depot because of the val valuation of the turn around

potential? >> i think so. the dream scenario there's more than $10 in earnings per share at lowe's it's very simple math. i have $135 price target but the key here with home depot and lowe's, lowe's has been under for a long time. at least 5% below those of home depot. there's a lot of slack. >> what about the geographic location of stores isn't that another hit against them they don't have the same distribution isn't that why they're under owned? i always thought executional skills were weaker but if you want full geography you have to do depot. >> that's a piece of it. it's very true that home depot has generally speaking better locations because going back to that 5% comment i made, that's maybe 2 points of that the other three is simple -- well not simple but store level execution. >> i have to own both going forward. i can't get enough exposure anymore. i have to have the executional

upside of a lowe's now institutional investors always underowned this thing. is this the turning point? >> i think so. the way i'm recommending is you own them both. home depot is a very high quality company and undervalued stock. lowe's turn around opportunity so it's two different type of investment vehicles but i don't think you'd be hurt owning both of them here. >> brian, thank you. >> thank you. >> what is the -- are you embalming people before you came in or something. >> joe, i'm always trying to bring it fashion forward when i come here, i'm always proud of that and i'm featuring a new watch. >> he wore all black for the watch. >> it's a halloween situation. >> i'm going to bring you guys forward with that, you have to start to match with what you're wearing. >> i would never wear a black shirt -- you would have to take me dragging and kicking. >> joe, i looked in the mirror this morning with this watch on and i said to myself, you look spectacular. you have to be honest with yourself. >> you say that to yourself. >> i think he did.

>> the only reason i kind of like it, no one will remember but maybe you remember paladin, he was cool. he wore all black. >> there's nothing new in fashion, you're just bringing back old ideas and making them new again. >> some people don't like when i talk about things. >> i don't mind. you can beat me up. >> i'm not beating you up. i'm giving you the attention that you crave so much. >> i don't crave it. you bring it forward i wear this because i know it's interesting. >> do you think if your name is mr. wonderful that if you wear grim reaper black from head to toe. >> the whole mr. wonderful thing is just truth in advertising, that's all. >> that's like calling a bald guy curly. it is. >> bring it on bring it on. >> we're going to come back with a nickname for him. >> i'm going to need you today because they're going to talk about -- >> seinfeld is on board with what you say on this. >> he is

if you can't look at that cynically. i think it's interesting that the bankers are saying, all right, you got us. we have been scum bags for years. >> there are forces attacking capitalism and i'm here to help you defend. >> you got us. all right. so farce we're concerned we really have taken this profit incentive and shareholder value thing to the extreme because you saw we caused the financial crisis so now, now we're trying to be good guys. >> they're one of a piece. they're not at odds. >> did you read the journal piece today? he says you do as much as you can. obviously but then you try to -- >> we're going to talk to seinfeld later but he remembers when it started the reason they went with it and the reason he came out with that was it going against corporate do gooders trying to do things that were good social responsibility but didn't help their manages and didn't manage their business well and as a result the fed did more harm. >> it implies that -- it's back

to the profits are bad, ceos are greedy and somehow it implies that if you try to enhance your own value somehow that's counter to doing good by your employees and it's not they go hand in hand when you run an effective business that keeps employees their jobs and it helps them compete globally. >> that's why i said to you that they're one of a piece i don't think you're that far away from me. >> these guys are barbarians. >> trying to solve all of the c problems on the income statement of a company is a mistake. >> the whole idea of this thing is a straw man solving a problem that's not there. >> i think it's being misinterpreted we can talk about all of it. you're misinterpreting it. in other corporate news this morning, walmart says that fires -- i want to hear your -- can you stay here for a second

i want your take on this story fires at 7 of its stores were called by tesla solar panels they're suing tesla for breach of contract, gross negligence and failure to live up to industry standards tesla and walmart has been partners on clean energy for years. more than 240 stores have had tesla solar systems installed. walmart's complaint list lists thousands of dollars in expenses with repairs and damage to merchandise. you cover walmart. >> my team does. i have covered it in the past. i know it. >> i thought it was a bold thing for them to sue tesla over this. they're not -- >> i thought it was a long time coming they had 7 fires before they bothered to sue and they want them taken off the other stores. >> they store the energy at night. >> but it also suggests there's a larger battle fight going on between these two companies in a way that i'm not sure i understood. >> there's something bigger here because this would normally not happen. >> exactly. >> i agree with you.

>> my guess would be the bigger could just be that tesla is refusing to take this stuff out. if you've had fires at 7 stores i wouldn't want it on my stores either. >> you don't have the right to return the inventory soprobabl this is the way you litigate a settleme settlement. >> but what i imagine is at tesla what you want to take the product back to fix it or return it or whatever for whatever reason they're not doing it. >> once you ship out a panel with a lithium battery you don't want to see it come home. >> i am also surprised that given who walmart is that tesla wouldn't want to make this right. >> do you think they're scared that walmart is suing them i don't think so. >> we'll see the president says we are far away from a recession but floated some ideas to stimulate the economy including tax cuts after saying that there were no tax cuts and he wants the tax cuts we'll talk about greenland too while we're at it. we'll do it all when we come back as we head to a break take a look at the biggest premarket winners and losers in the dow.

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access to the most 4k content. and your movies and shows to go. the best tv experience is the best tv value. xfinity x1. simple. easy. awesome. xfinity. the future of awesome. it's mixed messages from the white house. president trump is thinking about a payroll tax cut a day after the white house denied a report saying that it was considering that during an exchange with the press yesterday the president floated a number of ideas to try to stimulate the economy including lowering capital gains taxes by indexing gains to inflation. >> a lot of people have been talking about indexing for many years and it's something that i am certainly thinking about. i can say that a majority of the people in the white house they

like indexing. it's something that i'm thinking about. payroll taxes, i have been thinking about them for a long time whether or not we do it now or not is not being done because of recession. >> president trump also rejected the idea that the u.s. economy is close to recession and took the opportunity to bash the federal reserve. >> we're very far from a recession. if the fed would do its job we'd have a tremendous spurt of growth the fed is psychologically important. if the fed would do its job which it has done poorly over the last year and a half, you would see a burst of growth like you have never seen before. >> president trump said the fed raised rates too quickly and waited too long to pivot to cut rates. we'll be hearing from the fed

tomorrow coverage includes interviews and it's all leading up to fed chair jay powell's big speech on friday. >> let's talk about the fed's messaging, the odds of recession and the market response. chris is here, portfolio manager. also the president of pain capital management you heard what the president had to say it's not exactly a new thought what is your sense in terms of what they're going to do for the rest of the year do you think we're going to do something new in the next 24 hours? >> i don't think we need a rate cut. but the economy is rocking right now. >> it's rocking? i keep bringing the stories saying there's a recession coming. >> that's why i'm here this morning but let's just look at it we have over 2% gdp. that's been the average for the last ten years

wages are going up unemployment is low. it's as good as it gets. >> you gave me a look like i was crazy. do you think think a recession was coming >> i was just viewing cash flow for 52 domestic small caps yesterday which i get every month. there's no recession coming. >> good. i hope you're right. >> they're trying to interpret the future of a much heavier trade war. do most kic companies are on fire it's unbelievable what's happening. >> would it be a mistake to reduce rates then? >> i don't think we need a rate cut here. >> you don't >> i understand what the president is doing at the least he's keeping the fed on their back heels here because because he's changing

policy that was never the mandate of the fed. inflation and employment, that's what they should be worried about and here they're saying it's because of trade wars. >> jump in. >> do i think they should cut rates? they're going to cut rates because they're looking at a global interest rate market putting pressure on our markets here i don't think we're near a recession. i think what we're seeing is a deceleration and a lot of the small cap companies are still doing well but it's collapsing the supply chains are compressing with what's going on with huawei and others, people are redirecting where they're having to put their investment. >> how does that narrative fit with your small businesses >> the concern is there. i see no evidence of that. who cares. let's keep kweezing them out of existence. i'm okay with that. >> but if you're a component

supplier you have to readjust, right? that compression is occurring but they're beginning to talk about 2020 already because i think next year is going to be very good. you're in an election year you have a budget deal that's already in place >> do you think that we go ahead in december? do you think the president looks at that and says i'm not putting on additional tariffs and threatening my chance? >> it's probably unlikely but i want a good deal i think as you have spoken for years we need a good deal. we need protection of ip and i think the tech companies are going to benefit from that it keeps on today this is going to hurt them and i think at the end of the day, they're sitting around saying we have to workout a deal on this and maybe that deal happens before the end of the year maybe it happens before the election.

>> president trump keeps saying there's short-term pain, if there's short-term pain so be it. >> we don't have short-term pain yet. >> why are we talking about a recession if we don't have short-term pain. >> i don't know why. there's no evidence of a recession. when you go and look at what's going on in core america. >> but we don't want one >> we don't want one for sure? we keep bringing it up just because people are talking about it, right? >> we keep bringing it up because we have the ten year and -- >> we had the inversion. >> we had two primetime specials. >> i know. >> but trump has not suggested it. >> also talking about a recession at this point. >> also talking about a payroll tax. >> i'm just trying to act like we are but that's what i can't

figure out. >> the retailers heard bad news for ten years and at this point they're so scared that's why they're saving and that's only to keep them in better shape. >> you would say there are some people that do want a recession. we know who there are. >> i'm sure there's people that want a recession he said it flat out. >> you probably wanted a recession for other political leaders. >> if you have weaker economic activity what do you have a year from now you are to compress now a year from now going into the election and i think it's calculated. >> all the times that you didn't believe the employment numbers were as good as they were. do you remember when you would question -- >> i was hoping for a recession? >> i don't know what you were hoping for all i'm doing is analyzing the situation. >> thank you for joining us. good to see you. when we come back facebook is

launching a new tool that let you track what companies learn about you from your browsing habits but you can't use it unless you live in ireland the details are next later, don't miss our interview with the bank of america ceo we'll be talking to him about the health of the u.s. economy and responsibility of corporations all coming up at 8:40 a.m. eastern time and we'll be right back. - in the last year, there were three victims

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activity it allows users to view the apps that share customer information with facebook and disconnect their account if they want the move is a risk for facebook which depends on that data to target ads at users. it's going to be rolled out gradually in the coming months beginning in ireland, south korea and spain. >> coming up, retail giant target set to report in the next few minutes. we will bring you the results and the reaction from wall street last quarter walmart was good. so we'll see don't miss bank of america it looks like it says miss bank of america ceo brian moynihan that interview coming up at 8:40 a.m. eastern. >> are you leaving us? >> just around the corner. >> okay. be careful here's a look at yesterday's s&p 500 winners and losers ♪

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welcome back, you're watching squawk box live from the nasdaq market site in times square >> good morning, we're waiting for target now target's quarterly report due out any minute in the meantime, u.s. equity futures are strong after yesterday's sell off 175 point sell off bouncing back 136 points or so on the dow, s&p indicated up 17 and change and nasdaq 59 or so and there is target, 182. that number would be way above. >> it is way above check it out just like it's fellow retailer that we already heard from, target beating estimates on the top and the bottom line. in fact, target earned $1.82 a share and it's 20 cents above what the street was expecting. comp store sales up by 3.4%. that's really strong too because a year ago they had pomcomps up

6.5% you're always talking about what you're up against. that's almost a 10% gain. >> further evidence that the american consumer and our economy is on fire and i will say one thing about execution of this company, i do business with them and a wide range of consumer products, if you compare the teams you meet with now versus five years ago, completely different crew, hipper, younger, digital, social media, all the things that they needed to do to solve for being old. >> they got that back. >> they're back and they have a really hip management team there. you can feel the energy when you go. >> 590 to 620 on the outlook for the year 593 is the estimate but they already beat by 20. >> i would say that's being conservative probably because they're raising guidance but only to take into account what they already beat by with this quarter. >> revenue is also above 18.4 billion versus 18.34. >> they're killing it. those are fantastic numbers.

>> but if you put this together with what we heard, walmart came out and beat expectations handily and raised guidance for the quarter. they said consumers are in great shape. the same thing from home depot and lowe's and target. that tells you that the american consumer is doing really well. it may depend -- >> tariffs are not effecting their decisions on buying. >> at least for the big guys that are able to source all over the place and be nimble and can move these are the companies that would be less hurt by the tariffs because they have more flexibility. >> i'm happy to see it i think it's terrific. >> check that ut that stock is up by 5.5% it's a gain of $4.78 the latest of the retailers knocking things out of the park. >> same store sales too. they did 3.4. >> 3.4% and that's against tough comps from a year ago when they were up 6.5% so building on it. >> home depot said that you weren't going to necessarily see the tariffs impact what they did

with pricing, et cetera, et cetera, but the consumer herself. >> home depot himself. >> lowe's herself. >> we're not even supposed to use that anymore. >> then you have to say consumer. >> but even home depot were not saying it was going to be in the results themselves and the prices it was going to be dampening consumer sentiment. >> we're not there yet. >> have you seen it yet? >> here's the secret sauce that hasn't been coming to the mix yet. you have 1.5% on the ten year so let's say you're refinancing your home, you're getting a mortgage now and pulling out equity again for under 400 basis points. >> which is amazing for home retailers. >> it hasn't started yet so when trump pushes to get rates even further down, he's basically fuelling the consumer to continue this extraordinary run. >> but do we need it or do you need to save that for later? >> i'm a fan of saving the fire power but the point is there's

really good news coming in refinancing and home equity into q 1 and 2. >> even without additional cuts. >> it helps you take tariff hit in cost which are probably going to come. we have to keep squeezing. we can't give up on the chinese. i feel that now we've got them in the corner a little bit. >> i read in the last couple of days, i read five articles that say we're losing. >> no, we're not we're not losing they are hurting over there. this huawei thing is brilliant because it's actually effecting their ability to sell product outside of the u.s. >> so you think the huawei thing is to try to put pressure on them and not a security issue. >> my attitude is you squeeze everything that you can. >> this is the one part of it that i don't understand. either it's a real security issue and you need to think of it that way or not. >> i don't think of it that way. >> i get that. but i'm saying, we had secretary pompeo on yesterday. >> what did he say yesterday

>> he believes it's an absolute national security issue. >> there was one core message he came out with which is what the policy of the administration is. it said whatever they're going to give us in access and ip, we're going to give them that's fair. that's a great negotiating tactic. >> sure. but you then can't make the argument that there's a national security issue on top of it. >> you use every leverage tool you can. >> that's a disgrace. >> why is it a disgrace? >> have to say the security issues existed before the trade war. there were security concerns about huawei brought up long before the trade war. >> but that's the point. >> that's the point, though. if you're going to hit them on the national security issue, hit them on the national security issue. if it's legit, it's legit. if it's not, it's not. make a choice. they can't be both. >> it's legit because the policy says it is end of story. >> i don't even understand what that means. >> kevin you're also saying -- i think that if we got some ip

sharing with china, we're not going to use it to try to crush them maybe we would. >> i'm making a different point. >> they may use it for really bad things don't you think we wear white hats occasionally? i know you're from canada. >> let me address the issue from my perspective i'm in the trenches with the chuy naez a chinese and i have been for seven years. these guys don't play by the rules. and you're whining, andrew >> i'm not whining i think huawei has been in disgrace when it comes to ip issue and theft. we should fix that. >> we're trying to. >> we should pursue that the question to me is a different one. we can argue about ip all day long and have that debate and fight with them, the question is the second that you decide it's a national security issue, that's a different question in which case, in which case i think actually it can't even be a -- it can't even be a chess

piece on the board. >> why not >> why not >> because we just declared this a national security issue. >> why not do that that's just more leverage. that's the whole point. >> it's a black and white view of the world again and we wouldn't be dealing with saudi arabia we'd be getting no oil from them >> you can't play with these guys the old fashioned way they don't play by the rules this is not a football game where there's a referee. you have to squeeze and squeeze and squeeze and you can't stop and that's where we're finally getting policies after 17 years. no one else has done it this way. i want to keep going. >> show me what we're getting and if we get there, i hope you're right but i think that in the short-term pain is actually real >> what pain >> look at the steelworkers. >> oh, come on. >> 200 steelworkers temporarily layed off while they're opening four new plans what's your counter factual on if we hadn't helped the steelworkers would there be any industry left 200 lay offs. >> i didn't come up with that campaign platform to save the

steelworkers. >> andrew, whose team are you on here >> i'm on team america. >> yeah and so you have to use every single tactic you've got. >> 200 temporary for six months. you should least put that in there. and opening four new plants. we have a steel industry back here hot rolled steel prices fell because of the global recession, all right? so don't just throw it out as a talking point that steel industry is decimated. >> the steel industry has not improved under president trump. >> yes it has. >> you pick one vertical sector that's having a temporary issue. >> don't give him facts. we need truth not facts. >> we need truth, not fake news. >> yeah, okay. whatever. >> i love that more than 200 ceos said this week maximizing shareholder value is no longer the main responsibility of a corporation. this is next so we have that to look forward to we'll dig into the change and what it means to the future of business next. and then later in the show, don't miss our interview with bank of america ceo brian

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prevagen. healthier brain. better life. welcome back, everybody. the nearly 200 ceos that make up the business round table are redefining corporate responsibility earlier this week they released a new statement about the purpose of a corporation stating that shareholder value is no longer the main focus of a business joining us with his insights is jeff seinfeld, he's senior associate dean of studies at yale school of management and also a cnbc contributor, you're wading into a hot topic. this may have seemed like a change that didn't make a big deal but it is certainly making people sit up and take notice. what do you think of the change? >> i think that what's happening out there and i was listening to a little bit of of your early

fight there, there's a confusion between different concepts here. there's a social responsibility and philanthropy angle which is very different from a social responsiveness and corporate awareness of how you do business every day and whether or not that's antithetical to doing good and doing well. but there's a lot of myth making out there. corporate america has been on this kick for decades. going back to the 70s, you can find a lot of great examples, the 80s, and, in fact, what the business round table did which is very important is to cannonize what has already been the prevailing practice at great companies like ibm and pepsico and disney, you look across the board. of course jp morgan and bank of america, you have others that have been on the frontiers in this area. but you get people waving

around >> but he has been a little demonized over this. the idea that he said that you focus on the shareholder first or primarily or only that's your focus, i think it means much more than that that you only pay attention to shareholders if you're really minding what's happening at the store as he suggested you would have been looking at all of these constituents to begin with. >> that's where people that distorted all of these mantras they wave around in the friedman tradition going back pretty far miss what he actually said it's like people that quote robert frost and say good fences make good neighbors or robert kipling. they don't read the rest of the text wall street journal today but i years ago have been pointing out. in fact in a book which i wrote 40 years ago is it says, what friedman actually says, it may be in the well in the long run interest of corporation to devote resources providing

amenities to the community is that the context really matters. and that companies are doing this, especially with this gen z concern about the social positioning -- >> but the journal's point is if you feed the public belief that free markets and business are wicked and immoral and that the profit incentive leads to wicked and immoral behavior then you're justifying government, elizabeth warren type constraints that, you know, you're almost conceding, okay, you're right, the profit incentive does lead to greedy corporate behavior do you think that the profit incentive runs counter to shareholder or to employee interests or to community interests? do you think it's a detriment to society that corporations try to -- >> no. >> okay well then be clear. >> absolutely not. but everybody on the show, watching the show has done pretty well if we had invested in regeneron when they came up with a solution for macular

degeneration, unlike touring technologies or valiant, some pharmaceutical companies with whatever they can get away with with 3 or 4 or 5,000% increases. >> sew with a rule that helps companies -- >> they charge. >> but what does it do, jeff the orphan drug rule allows companies to make money on where they wouldn't normally in the free market. we try to do things like that. >> they haven't raised the prices in 8 years. what they have been doing, investing 20% or more -- >> i don't know. >> the point is that -- >> they do very well ingenuity performance with pepsico -- >> let me ask you a question i'm a student in your class. i'm putting up my hand i'm putting up my hand and saying professor help me you're trying to teach me to be a great business leader in america and you're telling me i have to solve the problems for

all of these communities, which community? which community? is it the indian, the cambodian, the taiwanese? which community am i supposed to save >> i just want to say, hold on a second there's this bizarre straw man that both of you -- >> the wall street journal. >> and the wall journal created. it's the mantra is its almost impossible to say was not taken too far. look at the financial crisis as a decent example of that there's questions in this country by the way across the country there's a whole generation that doesn't even believe in capitalism and we need to save it but my point is -- >> you said that very well the myth making here is some what on the left, elizabeth warren is up obviously looking for scare crows but on the right too. they created a false dichotomy here

when milton wrote that 1970 essay it was a reaction to what he saw as too much corporate do gooders out there. it had been a way of life that strong performing companies have also contributed. >> but can we explore this >> how they perform. you take a look at the assault weapons inside dick's sporting goods. that did well for the company. take a look at cbs getting rid of cigarettes. took a $2 million hit and enormous revenue they had there. it did well. >> true or false, let me ask you a question -- >> so those things did well for the companies overall? >> yeah. it wasn't a trade off. >> and it didn't hit shareholder value, so doing the right thing enhances shareholder value by definition let's say you have too many employees and you go into a slow down, is it your responsibility to keep that company operating competitively globally so you save the company and you save the employees?

or do you resist -- >> nobody is telling you not to? that's the thing -- that's why that's here. >> companies that manage for the long-term that can balance the work force pretty well -- >> i have a very simple question, jeff. >> i think this is -- this must be the answer, there are three constituents in the business, the customers, the employees, the shareholders if you do the right thing for all three don't you encapsulate all the issues that you're dealing with you needed to do it 100 years ago and you need to do it too. >> you just made the point for the brt. they changed their statement to reflect that and guess what, prior to that they had a statement that said profits only not the three that you talked about. and that's what you're just talking about. >> that's what every business has done. >> the brt was founded with this backdrop of business having a terrible public image. we had a huge problem with the tennessee valley, with problems

that people were very upset. >> all of those things came back the companies went out of business because of that stuff. >> it was the business round table created the super fund to clean these places up. >> right. >> iup. >> right. >> i know that - >> how did union car bide do how did the polluters do >> it -- >> it hurts the shareholders you do the - >> even the playing field. >> it's absurd. >> these businesses wanted to do the right thing. and they fought for them. >> everything comes around you don't need to dictate morality or else, you know, you have the wrong -- everybody has got a different view on what morality is. >> it's corporate citizenship. >> one ceo's social responsibility is -- >> but it's how you measure it is a problem you have a lot of -- >> jeff, thanks for joining us and i know that style starts from the ground up. for a lot of teens, shoes matter.

the right kicks, make the outfit. kids like to make a statement, they want that wow factor. and for parents, you want to pick shoes that they're going to wear over and over again. so i put together some of my favorite kicks for the new school year. ♪ when it comes to back to school shopping, your year starts at dick's.

welcome back to "squawk box. two big retail reports coming out and two big gainers. take a look at lowe's and target right now. lowe's stock up about 9% - >> target is up 13%. >> up 13%. we had some good numbers across the board when it comes to the big consumer companies joining us right now with reaction is charlie o'shea from moody's and liz dunn, founder and ceo of pro forma good morning to both of you. last time i saw you, i think we were talking about whether walmart's numbers and some of the other numbers actually were just operational specific to them or actually a broader situation. i was coming off oi think the day before macy's had tanked i think you thought it was walmart specific but maybe there's a bigger story here. >> i think it's walmart plus some of the other big guys that have had the ability to invest and have been able to execute a strategy that makes a lot of sense. target did the same thing, listen, we'll takea short term hit. we think it will pay off in the long run it is paying off in spades

you want to look at q2 for target, q1 hit the bull's-eye and q2 split the arrow in the bull's-eye and this as good of a quarter that target could have had. >> does this go to the strength of the consumer? any sign that there's a problem here >> i mean, the consumer's in good shape i think when we look at the results that have come out so far, we have seen a little bit of weakness at the margin but i think the market is very concerned about a slowdown and so, you know - >> are you concern as about slowdown >> i'm a little concern about a slowdown, but -- >> mr. wonderful is not concerned about a slowdown. > not in the consumer, but t companies. >> dealing with trade issues that may affect them and go -- it's a full burden. >> right it's not just about the tariffs but they're bracing for a slowdown because globally there's a slowdown so the companies are cutting

back on expense and travel so the consumer is fine. the u.s. consumer is fine. >> a question about retail now it's a land mine out there for investors. you get some big blowups and then the phenomenal numbers like target right now executional skills for first time matter more than ever in this sector. >> execution skills? >> you have to look at the size. i think charlie has written some things about how the large guys are kind of consolidating share which is sucking a lot of oxygen for the smaller guys and making it difficult to compete but they have used their size - >> i don't care as an investor i want the big guys to eat the small, inefficient ones and make themselves more inefficient. that's what will happen here coach socks -- they picked the wrong stuff. why don't they get acquired by someone who knows what they're doing. that's okay, what's wrong with that >> that doesn't fit in with the

brt. >> of the big companies out there, which ones have the biggest upside which ones would you not touch by the way, we have green across the screen i don't know. >> as a credit investor or a credit analyst, ratings analyst i think the companies that are best positioned now are on that list i would add tjx from a credit perspective. i would add ross stores. i would add anybody -- any of our investment grade rated retailers has a leg up on anybody else because they have got the investment grade rating means financial flexibility and a balance sheet. to kevin's point you have to execute but you have to have the money to execute. >> would you buy the equity? >> yeah. i think for the companies on that list -- well, wait. changed the list, it had nordstrom and kohl's on there. never mind i wouldn't buy department stores but walmart, target, yeah. home depot, tjx. >> thank you, i appreciate it. we have another two big

hours of "squawk" ahead. we will get some housing data and seeing how the fed's low rates are impacting that sector. "squawk" returns in just a moment we know how your customers shop. and what they've already purchased. like this lamp. and we use those insights to show you what they might consider buying next. mid-century modern, nice. that way, you can keep sending them offers for the perfect products. and that keeps them coming back. how's that for changing what's possible?

breaking news, mortgage rates drop to multiyear loans. that's straight ahead. the american consumer -- >> i love the smell of commerce in the morning. >> retail results giving us unique insight into the strength

of the u.s. economy. plus, our news maker of the morning, bank of america ceo brian moynihan will join us live 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 to "squawk box." i'm andrew ross sorkin with becky quick and joe kernen look at the equity futures at this hour. we have some good numbers on the retail front just moments ago. we'll tell you about it in a second but the dow looks like it will open up about 130 points higher nasdaq looking to open higher, 35 points. two major retailers are seeing the stocks soar in

premarket trading following upbeat earnings reports. lowe's reported quarterly profit of $2.15 a share that beat the consensus estimate up $2.01 so a beat of 14 cents and lowe's said they see a strong economy in all 15 geographic locations across the united states. so giving a little bit of credence to the strong economy here too lowe's shares up by double digits 10% increase right now so we'll continue to watch that. a similar story from target too. the bottom line came in 20 cents better than expectations at $1.82 a share. revenue was better than expected and target raised the full year forecast that we heard from charlie o'shea you couldn't have posted a better target from target the shares up by 11%. >> look at this -- get this recession going in 18 months we better get started i know it's the last three months for target and lowe's, but we have to get going on this, don't we >> they're making comments on

what we see right now. and for the rest of the year. >> get the fed to cut rates quick. >> in both cases they're looking at strong numbers. very strong consumers so we'll see what happens >> maybe a payroll tax and a hundred basis points in qe. >> why do you need extreme measures when the economy is doing so well? >> how do you think the fed feels this morning after seeing the two earnings reports it's a very difficult squeeze they have here there's no need for a cut. >> okay. having said that, the federal reserve is going to be releasing the minute of the the most recent meetings after it -- that comes at 2:00 p.m. eastern time. you will recall the policymakers cut rates at this meeting which took place on july 30th and 31st investors are scrutinizing the minutes, and the news coming in has been very strong. >> you know, the real issue here is if you keep doing it to zero interest rates you destroy the financial sector which has been hobbled. you'll like europe

i think the fed has to think about the sector of the s&p which is getting slaughtered. >> you know, kevin, these are domestic things that aren't affecting the dollar being too strong and if certain multinationals are -- we have a bigger trade deficit with europe now than we did when trump started so not that that's the end all be all, but currency -- i think that's part of what the fed is looking at as well the dollar is too strong. >> but joe, when did we lose to do nothing strategy as an option for the fed? why does it have to be a cut or an increase, how about do nothing? wait and see what happens. >> compared to the interest rates in the rest of the world though, there's a big disparity. and the dollar will keep coming here. >> you have a president squeezing your head every day. that's got to be fun a different kind of situation for the fed. never been quite like this he's really hammering them. >> you don't like it or you do like it? >> i think it's just the personality of this administration to work this way, but the issue is for all of us we don't want the fed to give us

zero interest rates. we don't need it and it kills our financial services industries. >> do you think it was a mistake to lower this recent as well >> yeah. >> the whole thing was a mistake? >> you liked the - >> that's my point do nothing i love do nothing. do nothing is a great strategy it's an option you can raise or lower, but how about do nothing sit there and do nothing that's what i want >> i know some people who do that. >> well, we haven't done it at the fed. i have to cut and -- >> i saw matt yesterday. >> he's working hard. >> okay. >> whoa. >> oh, no wonder morgue more -- mortgage applications fell 0.9 last week and financial activity remains near a three-year high but new home applications fell amid flattening interest rates. the average 30 year did edge lower during the week by three

basis points to 3.9%. joining us now with reaction to the data, realtor.com senior economist george, and ceo of brown -- guys and gals, why wouldn't i wait until i get them to pay me like denmark would you do it now or would u you -- you hear trump talking about 100 basis points why not wait >> i think it's a good thing when buyers see that rates have come down it's another factor for them to consider and it's confidence for them. this might be a good time for me to purchase so i think it's a good thing. >> why aren't we seeing it yet there's a lag? >> i think it's taking time. remember volatility in the stock market, politically, all that stuff, instant is not good for real estate. remember, it's an emotional purchase. >> the emotion right now, people are just waiting, they're waiting because they think it's coming down even more? >> people do think that.

maybe i should hold off. wait until it hits the bottom. >> that's for a refi not buying a house. >> right people don't know when it will hit so i think buyer confidence is good, but, you know, instability makes people unsure as to when's the right time to purchase. >> so weird that we may get a really good refi opportunity with sub 4% unemployment seems to be great things for economic activity. >> you're right. but when you look at the housing market right now, really i liken it to walking into the shoe store. looking for a shoe size 8. what you find on the shelves is two pairs of 9's and 30 pairs of size 13. for a lot of buyieriers when th look at the market, the inventory is growing up a at the upper end and they're not getting inventory at the mid range. a lot of millennials, they compromised the largest share of mortgages this year. so when we look at the realtor.com inventory data,

homes under $200,000 declined 10% this last month. so for buyers, it's sort of a -- they're running into the wall of they're not finding the home they can afford. >> when did this happen? housing prices went up too much or there's no one building at the low end? >> both. when you look at the house prices they have gone up close to 50% in the last seven years >> much is the land costs. isn't that the problem we have here >> it's obviously the land is one. when you look at the land you have obviously the price you have impact fees for a lot of developers so obviously the cost of construction has gone up in addition, considering that we are undersupplied obviously prices given the demand -- existing demand are going to adjust. >> lumber prices are coming down, both home depot and lowe's mentioned that but they're coming down to really high levels. >> but the issue on the low end, $200,000 home aren't a lot of millennials saying i'm going to rent now why do i want to take on a more damage maybe that's part of the reason.

>> asset light version of the world. >> it's less of a commitment let me see how it goes i'm going to rent see what's going on with the economy. with rates then maybe i'll buy. >> where are the rental prices right now? >> the rental market is a little bit soft right now i mean, it's a great time for people to rent >> why a lot of inventory >> specifically in manhattan there's the new rent regulations which you're probably aware of so you know there's a lot of stuff going on. >> manhattan is a different planet. >> it is totally and we love that but it's a different planet. we love manhattan, but there's oversupply in manhattan. like you were talking about undersupply, there is oversupply and the demand has not caught up to that. we have a different issue here. >> as far as the millennials are concerned, the mantra they're not going to own anything, not going to own cars, homes - >> asset light world who's going to pay for experiences? >> when they were 25 they loved living downtown in a studio and

eating out all the time. they're in their mid 30s with kids the most popular vehicle for millennials is the suv and crossovers and guess where they're buying in the suburbs why? schools. as soon as you become a parent what's the first question -- where are the good schools downtown hasn't kept up with that. >> will we get a new name? will they be millennial 2.0s >> i think they're called the unburdened group. >> they'll stay that i mean, groups can transition as they get -- as they mature. >> no, like i'm generation x i think i'm "x" forever. >> i'm a boomer. millennials forever but we may describe them differently. >> it's going to evolve. >> do you know what this means aging sucks. >> people get happier as they ame. >> i don't know about that. >> no, there's windows we won't talk about ages, but you're at an age that you should be happy right now. >> i am.

>> i'm apparently in an age that i shouldn't be happy. >> i see that. >> it shows. >> see -- >> becky is so young she should be very young. >> kevin, you're in your - >> when you're in your 20s you should be happy. >> does it mean anything to you that you know the moon landing is real? >> very sobering to realize that my knowledge spans multiple decades now. >> i wasn't here for the moon landing but i know it was real i absolutely - >> but being there -- i mean in front of the black and white tv. i mean, the world of experience that we have - >> yeah. >> but would you trade some of that for youth >> no. >> is there a fountain you can jump into? >> do you get to keep your wisdom >> and your money. i would o go back 30 years withy cash that would work for me, i have to tell you. it would be great. >> just so you know it's off topic, but people are happiest with their financial situations between 55 and 80. they're happiest with their physical appearance if you can believe this between the ages of

70 and 80. >> i believe that. >> really? >> and life overall -- they're happiest at the age of 69. the credit for this goes to the center of economic performance the gallup poll. >> i will add one element to that i listened to a speaker talk about happiness. in the end what he said was remarkable in this room. it's all about relationships when you build relationships in your life and friends and family, in the end when you take stock of all of the things you have acquired the only thing that really matters relationships. >> and staying connected i watched an uplift video this morning about a 98-year-old guy. i think he's in new jersey he's still bagging groceries twice a day because he loves it. he loves coming in and be connected with the community. >> you have to have a purpose. people need a purpose to feel -- >> we're getting really soft here on "squawk box. kumbaya. let's hold hands >> or we can go to break

coming up, a key legal proceeding today in the opioid lawsuits what's at risk for the big drug companies? we'll talk about it next here's a look at the biggest premarket winners and losers in the dow. "squawk" returns in a moment we all feel, we all love, we all cry. it's part of being human. sonoma county declared a homeless emergency in 2018. you have to know the individuals you're serving to understand their needs. working with ibm watson we can bring together data spread across dozens of departments. that gives us a fuller view of the people we serve. dear tech, dear tech, we need to look after everyone in our community. and we want to help our fellow human beings. ♪ ♪

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we talk, i mean we don't -- you know just go silent during commercial breaks. anyway, i can't let you in on this one we were talking about happiness, age. >> move on. >> how we feel. >> before you blurt it out, go. >> there could be developments though in the oklahoma opioid case involving johnson & johnson. the case is one of thousands seeking to hold the drug industry accountable for the epidemic some are saying this could lead to the biggest corporate settlements in history. >> good morning, joe we are expecting to learn today when the judge in the oklahoma trial will issue the decision expected neck week that could have a major impact not just on j&j but also other stocks of companies involved in opioid litigation just the prospect of this litigation has weighed heavily on some makers of opioid erases millions of dollars from teva and mallinckrodt in the last

year there was a potential $10 million settlement with two ohio counties but these are two cases in the thousands pending against endo and others that could start to go to trial this fall there are also multiple tracks of litigation, state attorneys general are bringing their own case separate from those brought by the cities and counties and the doj has reached some major settlements. $1.4 billion from r eckitt some analysts say a global settlement across all the parties involved could top $100 billion though one estimate of what plaintiffs are seeking as much as $480 billion. >> on the flip side of that, if j&j is successful in this situation having fought it when everybody else settled maybe that would have a lot of the stocks rising because you would assume that other companies would not settle with other suits being brought. >> that's right. people say that this decision in

oklahoma will have a huge impact on opioid stocks across the board. either way and particularly in a positive way if j&j wins we could see the stocks like teva and mallinckrodt - >> like tobacco in the late '70s. >> did you -- you because of the egregious behavior it's coming back to haunt them in terms of shareholder value. you should have thought about this. >> unfortunately there were executives who clearly didn't. >> but it's coming home to roost. >> it will come -- >> let me qualify this, by saying that opioid addiction is a horrible thing but had you invested in tobacco companies during the long litigations and class actions you would have done very, very well and basically conceptually if you're stupid enough to smoke i should profit from you

that's the way i look at it. i'm not saying at the end of the day that opioid addiction is not a horrific problem, but the point is that the fact that we're getting into this litigation has already brought down these market caps >> don't force me over to andrew's side on this. >> come on. >> i love you in so many ways. but you don't want to profit off of that, come on. >> you're telling me i'm -- my largest -- >> you don't. >> it's j&j, it's 5% weighting it's - >> you don't own it because of the opioids? >> no. i'm making a point i'm looking at history to tell me what will happen in the future of course it's a bad thing of course. but look at how much money has been made. >> the tobacco point was -- >> that and the ebola virus gets going, i have some stocks for you. >> i'm a horrible man, just horrible can't believe it. >> just when we thought it couldn't get more heated this morning, meg, good to see you.

>> talk about o'leary. >> the top stock movers and then bank of america ceo brian moynihan will join us live. >> a big interview becky's got. >> this is the perfect time to see ask him what he sees in the economy. we'll see what he's seeing from his perch right now. what it means to have the president pushing for another hundred point basis points cut from the fed stay tuned you're watching "squawk box" on cnbc time now for today's aflac trivia question. in 2001, which animated film was entered into cannes? the first animated entry since 1974 the answer when "squawk box" continues. ds get slime in the plumbing? no. that's home owner's insurance. slime in my motorcycle. no. that's motorcycle insurance. slime everywhere? ughhh nooo, there's no insurance for that. do they help when i have bills health insurance doesn't cover?

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♪ now the answer to today's aflac trivia question. in 2001, which animated film was entered into cannes, the first animated entry since 1974? the answer -- shrek. welcome back to "squawk box. it is now time for the morning's movers and we want to get to dom chu who's got those. >> so andrew, the two biggest premarket gainers that really matter right now are target and lowe's we'll start with shares of target which are up around 12% or so. a quarter million shares of premarket volume that the retailer posted a trifecta of better than expected results

profit, sales, sales growth. that's at established store locations and boosted the full year forecast and ceo brian cornell talked about things like deepening relationships between the customers and the target brand in that earnings released statement. so those shares are up 13% the other surge like we said, shares of lowe's, america's second biggest home improvement retailer is following up on yesterday's big gain in home depot. lowe's stock is up around 12% or so 75,000 shares premarket volume posting the same trifecta that target did better profits, sales and same store growth better season demand, and then growth in paints and the contractor supply business as well and we'll end on shares of nordstrom. because it's also up around 2% roughly 3,000 shares premarket the upscale retailer is going to move up in sympathy with some of the other retail industry movers this morning and it reports after the close today.

remember, guys, that stock has lost more than half of the value in the 12 months a tale of have's and have not's in the retail business. >> very clear that there's some winners and losers let's talk about the health of the consumer and the impact on the market joining us for that is the vice chairman of investments at invesco. and mike santoli, cnbc's senior markets commentator. you know, if you were to go station yourself at a mall, one of the bad ones, you'd think that the yield curve was definitely right you go to the target which is not at an anchor or one of the anchor tenants at a mall you'd think oh, my god, it's gang busters so it matters which retailer we're talking about. >> overall the reason that the u.s. economy is doing as well as it is, because employment is good income growth is good. >> consumer is strong. >> consumer is strong that's 70% of the economy if it wasn't for that part we would be in the much bigger situation than we currently are.

the part of the economy that's not working is capital investments and that's really more retrograde than anything else. >> the consumer back drop there's enough to go around for just walmart and amazon that's the way that the market is responding to lowe's and target. these are two big companies that are in kind of revitalization mode so that's what you're seeing that gap getting closed a little bit -- >> and shows that investments pay off. i mean -- >> if you had the scale investments pay off, yes. >> for target i think the same day delivery on issues, things like shipped or picking up in store, same day in house pickup for all of those things i think that accounted for about half of the growth -- almost half of the growth they saw in same store sales. >> if you're ubiquitous you can take -- you don't want to extrapolate the great numbers

and say the economy is reaccelerated. yeah, the consumer doesn't have a debt problem right now all of these things are tail winds for the group. >> i think the consumer part of it is where we are today what looks in the future depends on how we resolve the trade issue. it's still a central issue and how the administration addresses this i think it's going to be critical if they don't kind of resolve this in a reasonable fashion over the next -- let's say 12 to 14 months then we're probably doing to have a bigger problem. >> walmart was able to raise guidance even knowing that the tariffs can kick in later this year obviously the tariffs wouldn't kick in until the end of the corner, so maybe not a big deal to raise guidance. i thought that was aggressive and kind of bold to say, look, based on what we know as of today, here's where we think it's going and even with it they're flexible they can be hurt less than a lot of the smaller stocks. >> let's kind of focus on trade for a second because that's a driver of it what we're talking about here is

tariffs. tariffs means it's a fiscal consolidation, a tax on the u.s. consumer if you see the consumer growth or consumer income growth at a certain level even with that tariff you can probably project decent growth rate i think that's what they're focusing on. >> so is the message from both target and walmart that if you have scale you can push back on the manufacturing costs, saying you have to absorb some of the tariffs. we know they're going to be increasing into 20 -- i mean, next year. and because of that you have particularly in apparel, make them basically pay for half the tariff make the chinese manufacturer actually pay for a portion of the tariff by cutting down on their profits. it's a strategy. >> i think the chinese manufacturers are paying for it. if it wasn't for that, growth in china would have been meaningfully better than what it is today but the larger portion of that is really being paid by the u.s. consumer

that is okay because consumer income growth is substantial and they can afford to pay that tax. but that cannot continue for a long period of time. >> well, so far it's working these numbers are spectacular. >> these numbers are spectacular today. but the point i'm trying to make is the tariff issue has to be resolved because it is a tax on u.s. consumers >> let me ask another investment question should i start investing in the loser in the retail with the large winners consolidating them >> i don't know about consolidate them. >> coach coach. bad performance. >> yeah. >> good brand. >> yes brands perhaps because that's not -- you're not talking about thousands of stores. right? you're talking about their brands and they do have some kind of life outside of the four walls. >> i think what's stark right now, look at gap, kohl's, look at the very large ubiquitous

mall chains that trade under ten times earnings because the market had saidwe don't see a way out. >> some are 7-x. >> macy's at 5. >> you think that's a good deal? >> yeah. that's the problem. >> you know, they are cheap -- they're like banks in a lot of ways. >> worse, because -- >> because banks are making a lot of money, these guys aren't. i think buying retailers on the thesis that they'll get consolidated that's how you'll make money because they're cheap today i think it's -- it's an iffy stream. >> i'm starting to believe that executional excellence matters for walmart and target and maybe the management of a gap wasn't as good and the punishment for that is that they get taken out by better management teams that happens many many industries >> but there's the right -- you're playing defense no matter what you do. i think it's been conspicuous that private equity has mostly stayed away.

>> the stocks are cheap enough. >> maybe we'll get there because that's what this is starting to look like. have and have not's. >> you can say that about a large portion of the his market. there are valuations that are very, very cheap i would go back to banks banks are equally cheap if not better value because of their profitability and at least their profitability growth - >> that's where money goes to die. they have been perpetually cheap -- >> i thought that was autos. >> now it's banks. >> banks are terrible places. >> this is an interesting point because you talk about autos you talk about banks small retailers. all these areas that used to be, hey, the domestic economy is doing great. the fed is cutting rates the consumer is fine you would normally have those trades work. but because of secular issues in a lot of the industries, there's -- they're on the outs >> retailing has always been about execution and strategy companies that do well on that front will probably survive out

of this chaos. and probably do well people who can't execute well and their strategy is flawed i think it's a small world for them. >> you're dressed for the undertaken take all of the companies in and then embalm them. >> there's constant change in the market. >> i can't believe you said, wait a minute, are you saying that management as execution matters at companies you know that. did that just occur to you >> retail like this -- >> did you see what happened with mcdonald's when this guy came in after a couple of years? >> the sector used to be like a sea. when you had great numbers out of one, everything would rise. not now. >> it's huge. >> you want to -- go buy far fetch. it's been killed we'll talk about it coming up. boeing is looking for some new workers. tell you why look at the uieqty futures in the u.s. they're up stay tuned you're watching "squawk box" on

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delivering them and boeing has to hire additional workers boeing stock right now $331.01 still to come on "squawk box," president trump blasting fed chairman jay powell. what top economists make of that criticism. plus, does the u.s. economy need more when it comes to tax cuts we'll debate that. bank of america's ceo brian moynihan will join us. we'll talk about what he sees in the economy. but first tech under fire as regulators start to investigate the industry l lko vc investor geoff lewis. stay tuned you're watching "squawk box" right here on cnbc

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and unrivaled network to work. the united states postal service makes more e-commerce deliveries to homes than anyone else in the country. welcome back to "squawk box. at least a dozen states attorney generals are moving forward with the antitrust probe of big tech. here's what top justice department anti-regulator delrahim told cnbc yesterday. >> i think it's safe to say we're all in the same place, having had conversations with the states attorney generals at the federal level and the state ags, you know, they're at different stages of the investigation. >> joining us right now is tech

investor geoff lewis, founder and managing partner of ped rock partner and a lyft shareholder how does this change the game? it was one thing to they the doj was doing this or the ftc was doing this it's another one when the states get involved. >> absolutely. i definitely think it's quite striking how bipartisan it is at this point in time and the involvement of the states is certainly an escalation. you know, i don't think it's -- i don't think it's all things equal for all tech companies i think, you know, of the faang, google is probably by far the most vulnerable here i would be very, very scared - >> exposed to facebook >> there's a bizarre dynamic at google because of how monopolistic the business is, the employees don't have much to

work on, so they're quite democrat. >> you think it's political thing? >> i think they're uniquely well, the employees have a lot of time on their hands to get politically active and i think that puts them really in the line of fire. >> but the thing i don't understand about that comment which -- i appreciate the comment, but it would be one thing if we were talking about the trump administration deciding okay we want to crack down on google because we don't like their politics. i get that but if the idea is that the doj is going to do this in concert with a dozen, two dozen states where it's politically different on all ends, i'm not sure the politics of where google stands actually matters >> i think that's -- i think the politics is one thing. the reason that the employees have time to get so politically engaged because there's not too much work to do there because the business is a great monopoly when you search for hotels on google you get the google travel products when you search for restaurants it's showing you the google

reviews maps, google maps. it's a very monopolistic market. >> remember when the microsoft attempts, and at the end of the day the market took care of it you know, any time you say that a technology is dominant and it's got -- you know, overbearing market power there's some guy in the basement inventing the next big thing i always assumed that that would clean this up. google is not any different than two decades ago. what's the problem >> i think it's very different i think the search monopoly is very, very hard to -- very hard to break google has done a phenomenal job of preventing any mediation of the market they're trying to do it now with the self-driving efforts, with the ai efforts all of these new - >> they were guys in the basement once too. there's another one coming up somewhere. >> but it's much harder today.

>> that's always the argument. let the market be the market you don't need the government determining it. >> i have been in a lot of basements and i haven't seen many building the next google. >> everyone says that. >> why have you been in a lot of basements? >> finding the next best thing. >> lyft, you're an investor in lyft do you stay an invester in lyft? >> i'm very bullish. >> relative basis to the - >> i'm most bullish on lyft. i mean, the focus that that they have had on capturing the share in the u.s. market lowering market costs while growing share it's been -- thus far i think they have executed very well since the ipo. i'm long term bullish. >> the four people who bought the stock on the ipo. >> wait a second, you didn't answer andrew's question directly do you stay in the shares when

the lockup expires >> i plan on holding to the shares that's my personal theory. >> is that because you see the light at the end of the tunnel that a lot of investors don't see? >> i think it's a much harder light to see for uber because they're doing so many different things, competing with so many companies on the delivery side i think with lyft it's lowering market costs and i think we're through the price wars that have really prevented the company from being profitable in the u.s. and the focus -- and the focus of the business i think there's a good, long term story. >> the other other ipo in this fall if you believe the papers, wework what do you think? >> are you in wework >> i have no exposure to wework. >> but you read the s-1? >> i scanned it. i scanned it you know, there are two cuts i think the superficial cut it

seems deeply off you know, you have -- the huge founder is secondary, all the founder loans. all the founder family members working at the company and then the substantive cut that's a large market of people who want to turn real estate into the variable versus a fixed cost just like companies who wantedservers to be variable costs versus fixed costs and quite honestly, while they're losing a lot of money today, in theory the real estate market is really big there are some who want flexible office space i can see a good long term story there. i'm not sure about the current value. >> which cut do you take >> i tend to focus more on the substantive stuff. >> three classical shares i put it in the garbage when i got to that section. >> i think it matters a lot less than you think it's a great business. i think fundamentally you need to determine whether you think the fundamental business model

is truly disruptive and can capture a large swath of the real estate market i think it has a chance of doing that not necessarily at this valuation. >> by the way, that sound bite that we played from delrahim was an interview that brian sullivan did yesterday. so kudos to brian for that too. coming up, president trump blasting -- president trump blasting the fed chairman, again. is it warranted? we'll debate the topic and then in the next hour, don't miss our news maker of the morning. bank of america's ceo brian moynihan possible every single day. with technology that helps you offer shoppers a better experience. take your company's app. we can add in all sorts of capabilities, which help your customers manage rewards, offers, and payments on the fly. and now, applying for credit can happen in a flash.

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xfinity x1. simple. easy. awesome. xfinity. the future of awesome. i'd like to see a cut in the fed rate because that should have happened a long time ago. i think they're being very tardy and not having done it they raised too quickly. and, you know, i have been quite vocal on that. they also did quantitative tightening which was ridiculous and despite that, if you look i guess you could call it normalized but if you look, our economy is doing fantastically and if you take a look at the previous administration, they weren't paying interest. they had no interest rates they had loosening not tightening and frankly, it's a big difference and our economy is incredible. our jobs -- you look at the jobs market but you have to be proactive and so we really need a fed cut

rate. >> president trump taking another opportunity to blast the fed and chairman powell for not moving fast enough to lower interest rates this comes as fed officials get ready to gather at the annual jackson hole economic symposium. joining us is nelly lange, brookings hutching center on fiscal and monetary policy member vince reinhart who's with mellon the chief economist there. and cnbc's very own rick santelli all right, folks, let's figure this out we're looking at a great economy or not, especially when you hear strong numbers from target and lowe's and walmart, vince, what kind of economy do we have >> we have one that is slowing somewhat but still has a lot of momentum resource use is pretty taut and we're seeing upward pressure on costs. the bottom line is we couldn't keep growing at 3% like last

year or else we'd put too many pressures on resources we are slowing to something more sustainable. we are doing better than most of our trading partners >> rick, do you think we're slowing to the point that we need another hundred basis point cut race from the -- rate from the fed? >> oh, no. people in the administration that are badgering the fed a bit, and i do my own fair share of badgering but not on this topic. consider the german yield curve it's not inverted. they have a minus 67, ten. see life is great. if you don't have to have that inverted curve argument that we're going into recession they have interest rates low they're probably going lower they'd like to pie everything in sight like the bank of japan, do we want to switch economies with europe i think this notion of continuing this feedback loop of being afraid of interest rates dropping as many investors are i

referenced the stock market behavior over the last several plus weeks and of course what's going on with the central banks that are racing to lower rates to keep that spiral going. i don't see any good coming of it i think that we need to prioritize, we being the central bakes and particularly the fed if raising prices is worth sabotaging the economy and joining the flush of negative interest rates that doesn't seem very logical to me. >> nelly, what do you think? >> so i don't think the fed needs to cut rates to the extent that some of the politicians are expressing the economy is strong. there are some head winds. the economy has been -- it's been fantastic, the amount of labor that has been on the fringes coming in to the market. and starting to be productive. parts of society it's the monetary policy could cut the rates but it doesn't solve the underlying issues that are currently facing the

economy. so not 100 basis points but it wouldn't surprise me if the fed were to cut in a gradual amount over the next few meetings >> hey, vince, let's talk more broadly, not just what the fed could or should do but also do you need something like a payroll tax cut at a moment like this >> i think the president should turn around and look at the budget deficit as well that $1 trillion deficit for the next couple of years at some point, it would be probably more productive to organize our fiscal finances rather than just try to figure out how -- how you can spend or cut taxes within the limits of executive action it's not doing to happen obviously in a run-up to the election but at some point we're going to have to think hard about our fiscal finances. >> think hard, and what do you think it would mean if we were piling everything right now?

vince, i'd like to start with you, but ask everyone this if we do a payroll tax cut, potentially to a tax cut for capital gains so it's indexed to inflation, if you do things like that, if you look for big cuts from the federal reserve, what does that mean is that -- does that hurt us down the road if there's really a downturn an we have nothing left to fight it with? >> so it's two parts number one is it hurts us down the road because we'll accumulated more debt and a willy-nilly fashion that didn't think about the longer term financing of the u.s also it does erode the federal reserve position in the sense that rates are lower and they have less room to go down. but monetary policy does have tools. they can -- they keep cutting even if they have to go into negative territory even if they have to expand their balance sheet. i don't think we're there. we're not close to there we are the best performing economy across the advanced

economies. it's uncomfortable to be so. because it tends to outappreciate our exchange rate but we're better off being the best performer among the group. >> rick, what do you think >> well, first of all, i don't think that the any needs more stimulus in the form of tax incentives i think those should be rationed just like rate cuts. for one we need them and the economy needs a bit of a boost, not for political cycles, to kind of rind together with market inputs by agencies and governments and of course the president's programs but i do disagree with vincent on that negative rate. it's like -- you ever have a barstool or a chair where it's wobbly and you trim a couple of legs and it's still wobbly and you trim more. pretty soon the seat is on the floor. that's the problem, we're using the eight quarter points that we have left in the 2 to 2.25

range. it sounds so innocent. you get sucked into it pretty soon the belly of the plane is getting closed to that zero bounds, whether it's zero to 25 like it was for many years. i still contend that the economy may need a boost, but lowering interest rates or not reducing the balance sheet to me is not the cure -- it's not the medicine that's going to cure what ails the economy. >> like side burns, rick oh, no, i went - >> exactly. >> next thing you're up like this you know >> yeah. instead of lamb chops you have no hair at all i'm with you, joe. >> like o'leary -- no, he's got some -- all right. >> hey, leave mr. wonderful alone. he understands the free markets. >> i asked him - >> i'm going to grow my hair back. >> i asked him if he'd trade trudeau for trump in a new york minute he said. >> he's called the kind of glide path of what's going on with the trudeau administration many years ago.

>> straight to zero is where he's going straight to zero. >> folks, thanks for joining us and good to see you. >> okay. we have a lot more coming up in the last hour of the show includes becky's big interview with brian moynihan. coming up, does the u.s. need more tax cuts we'll hear from president trump and then debate the topics straight ahead don't miss it tomorrow, the coverage of the jackson hole fed symposium. live interviews including th we have the philly fed president, we have james bullard. don't miss it. "squawk" returns in a minute

markets back in the green, futures pointing towards a big gain at the open with bond yields showing some stability. the stimulus shuffle. >> whether or not we do it now or not is -- it's not being done because of recession. >> president trump says maybe to a payroll tax cut. a day after the white house said no way and the "squawk" news maker bank of america ceo brian moynihan join us this hour to talk about recession fears and the true role of the corporation. the final hour of "squawk box" begins right now ♪

>> live from the most powerful city in the world, new york, this is "squawk box. >> good morning. welcome back to "squawk box" here on cnbc live from the nasdaq market site in times square i'm joe kerning with andrew ross sorkin and becky quick is here, but when are you leaving >> in seconds. >> she's leaving in seconds. >> from now. >> about to head out so she can bring us a big live interview -- you're going to do it live. >> live. do it live. >> later this hour not -- >> just down the street. >> going to chase you down like they did to me the other day >> that's what they're threatening. >> that's who she'll talk to, bank of america's brian moynihan are you going to ask if they're making money with the yield curve? >> they're making plenty of money. they're doing all right. >> the only two doing all right.

>> you is leaving. >> i'm leaving, good-bye. >> good bye. >> our guest host today, "shark tank's" kevin o'leary. the futures are not giving back everything that the dow gave back yesterday, but most of it we seal what happens between now and 4:00 p.m the nasdaq is up, about 53 i don't know of anything today that explains it except maybe this that the ten year is not the -- the yield is not falling that actually causes people to buy stocks which is -- you know, go figure treasury yields 158. the 30 year is surging above 2% for 30 years 2.06 but they look like they're in the stratosphere compared to europe andrew we have a number of big stories that investors will be talking about this morning let's tell you about a couple of them shares of target are soaring this morning they posted a quarterly profit

above street estimates target raising the full year earnings outlook and you're watching that stock up now about 15%. lowe's also jumping this morning. take a look at that stock price. that stock up now, up close to 12%. home retailer beat investments on the top and the bottom line and we'll be talk about more each of the retailers in just a couple of minutes. and alibaba -- this is interesting because it has geopolitical interests delaying the hong kong initial public offering, according to the reuters report this is coming amid the growing political unrest in hong kong. i don't want to say capital flight out of the country, but at least not -- you know, ipos like this. i think this could be -- >> alibaba wishes there was a trade platform when i fight the fight that's

the platform they come back to america on alibaba. i can't get them to take down knockoffs, amazon will if it's ip american trade ip they'll take down a knockoff, and not alibaba. yet, i own alibaba stock. >> have you called they're saying they're trying to keep the knockoffs of the site. >> that is such -- >> not true? if you could - >> i can't even say what i want to say. >> i think you can. >> it's completely -- it's complete - >> you can say crap. >> you can say or shih tzu. >> if you ever want to come over, against the corporatist, becky is gone. this is rare for us. let's embrace it. >> i don't have to send you to my capitalist boot camp. you're already kind of there. >> i can't believe you go further than i do.

>> yeah. but you know i'm really -- >> you said once the tobacco litigation started you really made a lot of money. that is just a sick -- >> i did, joe. i'm not apologizing for it what is this apologizing for making money what is this ceo saying i'm sorry i'm making money what happened? we don't need apologies. i invest, you go make money, i take the money and save whales with it. i don't want ceos apologizing. i want to stop apologizing stop apologizing for making money. go out and make me money, i'm an investment. >> president trump said -- >> what about morality >> i love morality. >> thinking about a payroll tax. that's something that the white house had denied was under consideration. eamon javers is joining us now with more. it's so bizarre, because it's like there is no chance of a recession, but if there was one we might consider this. >> we might consider this but

we're not considering it because there's not going to be a recession. >> i understand the logic. because presidents -- i mean, it could be self-fulfilling especially this president who wants to do well and runs on jobs and the economy. >> right. >> i don't think you admit to the possibility even but then if you're talking about a payroll cut, you think about that i understand. >> this has been particularly head snapping this week. because we had the wall street post report on monday that said the administration was discussing the payroll tax cut and then a statement from the white house official saying no, that's not under consideration at this time and it turns out that at this time was doing all the heavy lifting in the statement because the president said yesterday not only is he considering a payroll tax cut but also considering indexing capital gains to inflation. here's the president yesterday confirming the story that they all but denied earlier in the week take a listen. >> a lot of people have been talking about indexing for many

years. and it's something that i am certainly thinking about i can say that a majority of the people in the white house at the level that does this kind of a thing, they like indexing so it is something i'm thinking about. payroll taxes, i have been thinking about payroll taxes for a long time. whether or not we do it now or not is -- it's not being done because of recession. >> so the president there saying he likes the idea of payroll tax. if he does it it is not being done because of recession. he's not necessarily saying he's doing it now, but sort of kicking the idea around and t t that -- you know, all but confirms everything that "the washington post" reported earlier in the week. meanwhile, on the indexing idea. this is in the interesting -- this is an interesting wrinkle because the payroll tax cut has to go through congress and the president said yesterday he believes he can do indexing without getting it through congress, just do it unilaterally by executive action that's being evangelized by

grover norquist. he told me yesterday on the phone that he's met with just about everybody in the white house with the exception of the president. pushing this argument that the treasury department can simply change the definition of the word cost in the regulations and if it does that and changes it to cost plus inflation, you have automatically indexed -- automatically indexed capital gains to inflation and therefore that would take effect just about immediately. that's a controversial interpretation there are a lot of people in town who disagree with that and say it's against the rules can't be done, et cetera but the white house seemed to be embracing this idea, at least the president did yesterday he could do it with a swipe of a pen. >> eamon, we'll continue this tax conversation, but there was a major busted deal you might describe it as greenland i thought this was floating this idea. >> i don't understand why. >> i don't think -- because he said it wasn't serious but it apparently was.

>> i think it's great idea. >> all the natural resources. >> keep in mind the rare earth in greenland. >> we should buy it. >> do you want - >> kevin, do you want to buy it or incorporate it into the united states and make it into a state? >> no. think about it -- there's 58,000 people living there and the danes have to pay the welfare on it. >> half a billion dollars a year. >> it's well worth it. >> strategically - >> here's how you can do it, make it a part of maine. >> i had a chance to work there in the late '80s and -- >> greenland >> yeah. >> it's been done before. >> a beautiful place. >> there's very few -- there's very few beach front property left in the world. >> the longest runway on earth is in greenland. a great strategic -- >> why do you think it's silly >> i didn't think -- i mean -- >> why though? >> first of all, the president said he wasn't -- you know

it was on the back burner. the -- >> who thought it was real i thought it was an onion headline i did. >> the other thing - >> canada, i mean, canada is right there. >> it should go to canada. >> it's separated, but canada can't afford it right now. maybe it could be sub debt on it and maybe get a piece of it. you know i don't think it's crazy though. >> a lot of natural resources, military significance. >> we're back together. >> we should have done this on the real estate segment earlier in the 7:00. but we have a lot to talk about taxes. >> $200,000 houses >> the tax discussion. for a look at -- thank you, eamon. i want to welcome in the kato institute ryan borne and kyle parmaloe this idea of an executive order and we'll start with kyle. is that real, do you think it can happen

there's some debate about this because my understanding is that under the bush administration there was some letter that was written that actually suggested to the treasury this was not possible. >> yeah, that was what i was going to bring up. if you did it. now, i know norquist is going around town saying that this is possible and that the president can just redefine cost to account for inflation, but, you know, the treasury has looked at this back in the early 90s and they concluded it wasn't legal for them to do this. that it may be something that congress does. >> ryan, what do you say >> well, i'm not an expert on the legalities of this but what i would say is grover always fulfills milton friedman's claim that we should cut taxes for any reason whenever it's possible. and clearly, there's a possibility of doing this, then it's a tax cut, you know, that could be done relatively quickly. you know, could improve the allocation of assets within the economy. whether it has a longer term big

growth boost in terms of its effects i'm not so clear but it's something they're looking at. >> what do you make of the argument that this is effectively a tax cut for the rich >> and how does that play in the election >> well, of course in -- if you look at the people who own most assets, most people who own assets are rich. to that extent in the short term effect but look, all tax policy we should be looking to make the economy as efficient as possible deliver as much sustainable long term sustainable economic growth that's what the last tax cut was about. your opponents are going to say that tax cuts are tax cuts for the rich because most rich people may more in taxes >> kyle, how would you track it? >> so i guess -- i just want to actually respond to ryan quickly about that or just add to that to get some numbers here but it's about 78% of all capital gains are earned by those with million dollars or more in income so this would absolutely be a tax cut for high income individuals primarily. and i am somewhat skeptical that

indexing would provide any real big boost to the u.s. economy in the long term so i think you're just looking at, you know, what a lot of people would call wind fall for the top. >> kyle, go back to the issue if you can help us though understand how it would be tracked? how it would actually be effectuated. it would require a lot of tracking a lot of paperwork. >> yes so that's a really good question we do not know how the administration is going to handle this. so it would require people to know what their basis is for assets going back in time. so if the -- if the administration wants to cut taxes on assets you currently hold, that's going to be very complicate you have to figure out what t the -- what your acquisition price was for some of these things and then a separate question is is you're going to index capital gains are you also going to index other capital assets in the economy such as debt that's a significant asset that inflation hits pretty hard as

well and i haven't seen the administration say anything about that so once you start thinking about this, this gets very complicated, very quickly. >> ryan what do you think the chances are that we see something on the payroll side of all this >> well -- >> like the protestations of the administration at the moment >> well, clearly the administration is worried about the threat of a recession. certainly when you look at the indicators, and we have the inversion of the yield curve last week, but politically a recession would be very, very damaging for the president i think behind the scenes they're talking about all of these things but usually payroll tax cut is something from a macroeconomic perspective. we only approach it as a last resort helicopter money to consumers. when the fed's still got interest rates at 2.25% at the moment, when we know that a lot of the problems in the economy are on the business side, lack of business investment, manufacturing output

contracting, i'm not sure that this is really the best tax cut. i think it's incredibly premature given the -- you know, only certain indicators are turning in a recession pointing direction at the moment. >> all right >> no, i was going - >> you know what my attitude is? it's always a good time for a tax cut on any tax cut and here's why i think, andrew, you'd agree with this. do you think -- just take a dollar, any dollar. >> any dollar. >> where's it better deployed? if you leave it in the hands of a company that creates jobs or give it to the entrepreneur that's going to develop a new company and create new jobs or should you give it to the government where they waste at least a third of it? this is -- >> no. >> this is my premise. >> i agree withthat. but we're talking about a payroll tax holiday here that's about trying to manage the business cycle and if it's funded through borrowing at some statement that has to be repaid. or we'll have to raise taxes to cover the extra interest on that

so we should think about the longer term and what's best for the economic growth in the longer term. >> ryan, kyle, thank you for the conversation. >> i have a great idea for a kumbaya moment one of the viewers suggested this i'm getting behind the brt idea with this and i want jamie to get behind this. >> which part? >> the ceos also in doing this agree to cut their salaries in half to pay for some of the social stuff and to pay for raises and to do all of the responsibility so if they'll agree to do that i will be on this 100% let's see how many of them agree to the 50% pay cut starting with -- you know? okay >> i'm not encouraging that necessarily. >> no, but - >> you are >> i'll be behind it as long as they agree to do it. if they agree to that, let's do it coming up -- see how quick that happens coming up a look at this morning's retail results and we'll ask the former walmart ceos for his take.

and bank of america ceo brian moynihan will join us in a moment stay tuned you're watching "squawk box" on cnbc i've even built my own historic trading model. and you're still not sure if you want to make the trade? exactly. sounds like a case of analysis paralysis. is there a cure? td ameritrade's trade desk. they can help gut check your strategies and answer all your toughest questions. sounds perfect. see, your stress level was here and i got you down to here, i've done my job. call for a strategy gut check with td ameritrade. ♪

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box. another big morning for retailers reporting quarterly results. courtney regan is here. >> i don't want to talk -- >> all right. >> so some strong retail results this morning target put up a strong second quarter and they beat expectations on all met ricks. target raised the full year forecast range by 15 cents it is taking into account both the first half of the year's results and the volatility is a reality going forward at least what we know about the tariff picture right now. the comparable sales increased 2.4% with traffic growth the same day fulfillment services, drive up and picked, that accounted for nearly 1.5 percentage points of comp sales growth or 40% of the comp sales growth digital sales is up 44%. now lowe's also beating on

all major metrics on stronger revenues total comparable sales up 2.3% though the u.s. comparable sales grew 3.2%. which actually is 0.1% above home depot's u.s. comparable sales that doesn't always happen when lowe's beats home depot in the metric then they said all 15 regions of the u.s. had comparable sales and home depot actually cut the sales forecast yesterday and lowe's ceo marvin ellison said that the lumber deflation and difficult weather were issues in the quarter but he calls out strength in paint and the pro shopper which happened two of the stronger parts of home depot's results yesterday shares of lowe's are up about 12% premarket. target up about 15%. how about that for some retail strength >> i know. with the back drop of the inverted yield curve. >> interesting, huh? >> it's confounding. >> you have to do some homework

pause they're not all going to be up 15% results. >> i know. but you have to have a good digital strategy and can't be at one of the rundown malls >> tricky, isn't it? that's how a lot of them were built. >> although me and kevin -- we may -- kevin and i may go for a walk for one we put the sneakers on and walk the mall. >> 30% of capacity in the malls, what do you turn them into you have to turn them into something. but i want to say on target i don't remember a 15% move being made - >> i know. >> in my investment lifetime this is an extraordinary -- to the market capitalization. all to the credit of management who executed perfectly incredible >> we talk about stores and we're overstored in the united states and target said we're not going through the store closure program. actually, we are going all in and we're going to build more of them smaller formats and serve different parts of the country

we haven't hit yet some were doubtful and look at this pretty interesting. let's find out the latest retail results are matching up with the strength of the consumer joining is bill simon, former ceo of walmart u.s i mean, i guess first thing we say, bill, you certainly left that company in great shape. kudos. that's a good way to intro you, isn't it >> yeah. that's awesome thank you. i appreciate it. >> can you in a nutshell somehow describe the dichotomy that we're seeing between the winners and the losers, walmart being a winner. >> it's a math equation. you have walmart showing really good growth and amazon showing good top line growth throw in target, by the way, brian cornell is doing a phenomenal job right there right now. at costco, it has been growing those retailers -- those group of retailers that are growing, home depot and lowe's, they're among the top ten retailers. just take the top four, for example, that's probably 25 to 30% of retail that are growing

above the retail average they're sucking up a lot of oxygen and making it difficult for others so it's not really so much as a question of have's and have not's. the have's are the big ones and they're making it difficult on the smaller ones particularly with the model that they're operating under now. walmart and amazon going toe to toe on shipping and price. and if you look at both of those retailers they drew the top line but they're shrinking the income operating line they're investing a lot of money to grow the top line if you don't have scale like target and costco and some of the big guys it's really, really difficult to compete with that and then throw in what you were talking about, difficulties in the mall real estate environment. i think that's why you're seeing this bifurcation of results. >> is there a fix? if they put you on the board or called you in, what suggestions would you have for the companies

that are now occupying the loser list >> there are growth areas in retail that still exist. you mentioned one of them just a little bit earlier, small formats. walmart sort of walked away from that deciding to focus on the digital. there are dollar stores like aldi's doing a good job right now. you talked about target still building stores but building smaller formats. i think there's growth there you can find it if you look for it it's just a little bit more difficult than it might have been before because of the battle that's going on online. >> the xrt which is the index that they use to get exposure to retail has been a bone yard for the last two years what happens to the have not's that you referenced. should i be loading up on the losers with the assumption they'll be acquired at small premiums what happens to them, do they go to zero? >> i don't think they go to zero i think there's some value

there, because they're brands and they're ongoing concerns i think some of them will make the transition and do it well. and some of them probably won't. you have to be able to sort through that and when you look at an index like that, they buy stock. you know, they buy 10 or 20 or 30 or 100 stocks and they weight them all in different proportions when the reality is walmart is $385 billion and macy's is $25 billion in the u.s. and so you know, they're not equal. they might be equal when you buy them because they cost you the same dollar. they're not equal in growth and i think you have to sort through that, find the ones that have a strategy for growth. and you can invest there the other ones -- being stuck in the middle without something to be famous for none of that works. i would like for - >> while i have you, i haven't had a guy in retail say i don't think -- a guy or a gal or anyone that represents retail say, yeah, china, we need to do this the tariffs are the right thing.

will you say that and are you -- where is the affect of the tariffs on target or on walmart or really across the entire industry seeing anything yet? >> i think the tariff discussion from a retail perspective has been overblown clearly, there are some products and some companies with high exposure to china that are going to suffer from it. but you wouldn't see target and walmart raising their guidance if they were worried about tariffs in the second half of the year i don't think the tariff impact is going to occur for retailers on the size and scale that many thought. you know, companies have had over a year now to figure out how to mitigate, move supply chains and supply lines. i think it could have a long and permanent effect on china because once those supply chains move, it's a generation before they come back so i think american retailers and consumers will figure out how to navigate around whatever tariffs get implemented. i think i's china that's going

to suffer. >> bill simon, thank you great to have you on today thanks. >> you bet coming up when we return a wide ranging interview with the head of bank of america. we'll hear from chairman and ceo brian moynihan on the recent volatility in interest rates and renewed arguments over whether shareholder value trumps every other goal stay tuned you're watching cnbc ♪ keeping the night interesting, is all about setting the right tone. ♪ lower carbs. lower calories. higher expectations. ♪ the light beer you've been waiting for has arrived. corona premier.

coming up are investors so

scared of recession that maybe we're going to be self-fulfilling, pushing themselves into one? we'll get inside the current mindset. don't miss our big interview, part of the big two hours, part of the big two hours that andrew told you about, bank of america ceo brian moynihan you're watching "squawk box" on cnbc [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. get e*trade and start trading today.

welcome back to "squawk box" on cnbc live from the nasdaq market site in times square. this month's market volatility has led to some growing anxiety, but market optimism has been below average for most of this year here to discuss is the vice president of the association and editor of the aii -- aaii journal. that's not what i would have thought, charles although a lot of people have said that this rally has been one of the most sort of unloved and a lot of skeptics have abounded through the entire move is that confirmed by what you're telling us here? >> yes, it's what we have seen most of this year. even last year we saw optimism being below average on many weeks. i think a lot of people look at

the headlines, worried about particularly the trade war that's on the front of a lot of investors' minds and that the economy is not as strong as the numbers suggest. overall there's at love angst about whether the market can continue to trade at current multiples versus having a big pull back. i think last year's volatility, even some the volatility we have seen this year staying at the forefront of many individual investors' mind. >> i wonder what it is it's so many changes, obviously. it's the length of the expansion, the length of the bull market. i guess it's valuations, it's the the idea that the business cycle is going to do down but let me ask you if there's any truth to this. president trump even though he has a good economy solidly doesn't get the approval ratings that you would think someone might get with this economy. there are -- there's a solid i would say 45, 50% of people that

will never really be comfortable with president trump's tweets or him being president. can they say i'm bullish on the economy and bullish on the market and have that view point or that -- sort of that visceral feeling about trump and it sort of justifies -- it's almost like selling out if they say, well, i think the market is going higher with this guy. they can't do it they can't physically -- you know, or mentally, get on board with this because of the guy who might be -- might take some credit for it. >> it's interesting you've said that, because i have had the association for ten years and i have seen far more mentions of president trump in a weekly survey than i ever had of president obama. even when we asked questions that are not at all related to the administration, his name comes up and we do see a divide, in the political polls that some people really support him, but others say that the economy is really good but i'm worried about the administration i'm worried about the administration's policies.

so that political divide is definitely showing up in the survey particularly in members' comments i think that's just more representative of what we're seeing at the prodder scale across politics and obviously president trump is not afraid to get in front of the camera, not afraid to use his tweets and certainly not afraid to be outspoken. >> that's pretty crazy the whole notion because, you know, going back as far as you can, jesse liver more or whatever, but you have to have a lot of things to worry about and wants to keep as many people out as it can. so for some reason when it's going higher that's a perfect way to do it every time trump tweets that can help the market maintain a certain degree of healthy skepticism which is a crazy, unintended consequence, i think. >> yeah. you know, the headline really drives a lot of sentiments people see the headlines swinging both ways of

volatility the effects of the trade wars, inverted yield curve and that affects what people think over the short term but we try to coach our members to think long term and remember they're not like professional managers when they have to worry about what the performances are over a three year period. they are investing for the rest of their life and it's a different time frame and we we try to get them to think about what you need to last throughout retirement, not what you need to earn this quarter or next year. >> charles, do you think that the worry or angst or anxiety would go up if bernie sanders looked like he was going to be the next president or someone from the far left? we have had -- you know, stan druckenmiller said that the market would go down 40% if the bernie sanders is elected president. then i think you'd see some real anxiety, no? >> i don't know. i think it depends on who the candidate is when you looked at when president trump was elected that night, a lot of people expected that market to drop and then we had huge rally starting the next

day. >> right. >> so i think it's also a point to realize, any candidate of either party that has radical policies they have to get through congress and look at president obama with health care he barely got the affordable care act through and he had to twist a lot of arms in his own party. i think the policies and proposals that might be more radical will have a harder time getting through congress even if one party controls all three parts of government. >> all right, charles, thank you. from the land of chicago, you know what you're talking about thank you. we have a huge interview coming up right after the break with a big "squawk" news maker becky is getting ready to sit down with bank of america ceo brian moynihan what is on deck? >> you know, so many fears about a recession out there. so many concerns about what's happening. we'll be sitting down with a man who his finger on the pulse of the american consumer and business brian moynihan, bank of america, they have a relationship with

one out of every two households in america he'll tell us what he's seeing and whether we really need some of the extreme measures that are being talked about t erything from the payroll tax cuto the fed cutting 100 basis points that's all coming up when we return here on "squawk box." staying the course is the conventional wisdom, but what if there's a better course? this is solve it from jpmorgan asset management

i'm here at the nasdaq market site with phil cam parelly, from jpmorgan asset management. so you see two big red flags in the classic 60-40 balanced fund. what worries you >> well, both the 06 and the 40. you had about an 8% return on the 60/40. great return over the next decade we forecast that that 60/40 is going to deliver closer to 5% they're important levers and investors should be open to taking it. >> what levers >> first and foremost, be tactical be flexible. not with your risk profile but with your asset allocation in order to get the high conviction views, the impact that they deserve in the portfolio. >> okay. >> second lever, prudent use of levers if the index is only giving you "x," spend a little more get more leverage in order to get more return. thirdly, private markets we think they're a tremendous

amount of opportunities in both private equity and private credit that if the investor has the right time horizon can be a great buffer >> great insights, thank you for more insights from jpmorgan asset management, search jpmorgan solve it online good morning, everybody. welcome back to "squawk box. i'm here at bank of america's headquarters in new york city with brian moynihan who's the chairman and ceo of the company. there have been so many calls --

or so many thoughts that a recession may be on the horizon we thought this would be the perfect time to sit down with you and talk to someone who sees things from a realtime basis what do you see from your perch? >> even though it's august, it's busy back there. so we apologize if there's noise. here, this means a recession is coming, but if you actually think about it, there could be two reasons the yield curve is moving around. you're seeing that debate take hold the debate over the flight to equality 80, 90% of all the yield in the world is available in the united states so the money comes flying here because you're going to give your money to someone, $1,000 and they give you back less than ten years or you give it back more that than ten years and that's why there's a debate about it but it will come down to what's going on in the economy. we have lot of different ways to

think about it we predict 3% gdp this year. maybe 1.9 and they have moved that up and down and it's settled at that point. if you look at the broader economics, the consensus blue chip not one person with a negative number for 19 or 20 so they're saying it's growing but what's going to make that happen is the underlying u.s. consumer and the underlying consumer is doing well making more money, they're employed and more importantly they're spending more money. in our customer base through this time, you mean, august 15th, year to date, you have seen the amount spent by american consumers at bank of america $2 trillion. it's up 5.9% from last year through the same period of time. so in 17-18 up 8.5% and 18 and 19 you're up 8.9% so that's more than a billion dollars spending by our consumer and that will

keep the u.s. economy in good shape. >> you talked about the punditry, there was a bank of america economists last week who raised her own odds for a recession. she raised it up to 33%. based not on a change in the model but kind of a subjective call, she is hearing what she's feeling. do you think the odds went up last week? >> i don't think the odds went up last week i think the odds of a recession debate have always been -- they tend to be around 20%. if you actually look at the most recent survey, there are people who have this year predicted still in the 10% level which is two-quarters that have to be negative and we -- and we have two quarters left to go. but what they put the overlay on frankly is what everybody is thinking about if you think of the business economy in the world and in the u.s. there's a lot of good news that not good news is largely around trade, european slowdown. what will happen with brexit

china's slowdown there are issues that need to be resolved out there are affecting the business enthusiasm. so you're seeing capital spending come down i think that's the overlay that they put on, was really around this question. if trade doesn't get resolved. now the reality is in the few months that the trade issue since may or so when it really picked up, we're getting used to it most of the people believe that the china situation which is very difficult is going to take a lot longer than people think to resolve fully may not get worse, may get better there may be debates about what's going on and you hear it every day. but the reality is it will take a long time and the keys are to get the federal budget situation fixed which is for 2 1/2 years we have to get the usmca passed i believe that settles the biggest deal and we have to figure out brexit and if china can sort of restart their economy which they're working on but it's difficult when they have the pressure of the trade. >> if you're seeing such strength in the economy and particularly in the u.s.

consumer, what do you think when you hear president trump saying things like oh we're considering a payroll tax cut. we want the fed to cut 100 basis points i mean, i look at that and i think those are extreme measures, things i would have expected in 2008 and 2009. are they warranted today >> i think if you think about whether it's -- what jay powell has talked about and the -- and the fed minutes see what they say today and what the president is trying to do and what the world needs us to do it's one synchronous thought. the consumer economy is as big as china's economy and so just think about the u.s. spends on health care the entire size of the indian economy the one thing that the world can't afford is for the u.s. not to continue the growth cycle we are in the longest growth cycle in the world and people say it can't keep going on forever and that's probably

true how do we make it more accommodative, how do we create extra stimulus that's the debate going on even though people -- the punditry can keep separating the positions it's to drive the economy forward. what we see from the u.s. consumer, unemployment, housing, they've been solid we don't see -- you have measures that need to be taken but there's a diligence around this because it's a big economy it would be a wrong time for the u.s. to have a problem. >> you would be okay with those types of measures that we talked about, if the fed cut 100 basis points that's good news or a payroll tax cut which would add to the deficit maybe $150 billion to the deficit over $1 trillion. >> i think the fed is going to be driven by the data. we'll see what is said through jackson hole eight years ago bernanke said -- the markets were sent in a bit of an interesting time in august

of september '11. >> which is why so many people at their desks today. >> right i think the question is how do you -- how do you keep the conditions favorable, because rates are low. and whether the extreme level that you're talking about or not is needed or not that's going to be a subject of i think literally the data at a given time right now the wages are growing. right now inflation is near 2% and right now you're seeing that, you know, unemployment levels are very low and new claims are very low. you have the question that the data has deteriorated. you hear people talk about this. that's on the table so what you call those extreme measures or not. i would say everybody will do what is needed i don't think the current data shows that something is needed but it may over time. >> okay. that's what i wanted to get to i want to walk away, because it's a very sound answer what you just said but i don't want to walk away and parse it and parse the wrong thing. you're not necessarily in favor of these measures right now, but

you could see a time in the future where it may make sense >> right now you don't see it and that's why you haven't seen the extreme measures take hold but the goal is to try to preserve the length of the comps announce earnings over the last week or so that continues to show it is a broad based, different types of enterprises, same stores growth of 3%, it is being spent in different areas, i think that's critically important. the other thing that is beneficial to consumers year over year, gas prices are down 6%, 7%, which has an impact of almost a quarter percent in money respent in our customer base alone you think of 5.9, if gas prices were unstable, it would be higher i think right now the data shows that the consumer is solid and as long as that is true, the u.s. economy ought to be okay. that doesn't mean the large companies that deal on the global framework are concerned of what the resolution will be

of these series of issues, and hasn't been a lot of good news for them in the midsize and smaller companies, our small business loans are record highs and growing at 8% a year they tend to be more driven by the u.s. economy. >> the markets have been volatile we pointed that out a couple of times. you were in washington, last week, i believe, when the dow was down by 800 points, there with jamie dimon and michael corbat from citigroup. the reports say that you got on a conference call with the president. what was he concerned about and what did you say to him? >> why the report -- it is not my job to talk about the conversation, but we were there for a different purpose. just trying to help all banks to figure out how to make the rules more for this case bsa, mlk, kyc and asked to get on conference

call and we did. i'll let your report speak for itself, all about what is going on did we see something that would indicate it is not what we think we see, the u.s. economy is okay it is solid, growing to 2.3% is our prediction for the year. it has slowed down from 2.9 to 2.3 this year. it has not slowed down to the place it hasn't been for a whole decade. >> am i correct in extrapolating from that that if you're asked about the market volatility, was it an overreaction when you saw the dow down 800 points? >> we get paid we're long-term managers here. i don't -- if i worry about that our stock did on a given day and wouldn't pay attention to it across the year, months, days, weeks and years, that would be a bad thing. the market bounces around every day. that's what makes a market, somebody sold, somebody bought, we're buying $7.25 billion in stock every quarter. >> i can talk to you about the business round table the business group, 200 ceos came out and most of them signed

a new directive this week, you included, that says the focus is no longer on the shareholder that includes the employee, includes the communities in which you operate. didn't seem like it was that controversial, but there is a lot of controversy that has come out of that. people saying, wait a second they're greedy, just focusing on the shareholder before, this is a huge change on the other side of things. you're backing away from milton friedman saying you got to keep your eye on business why did you do this? why did you sign it? >> let's talk about why i signed it and what i do each ceo could have a little different view the overall view was we have a common view, which is what that statement says this is not something new and different. if you look at my share this year, it is about how we have to mind the genius, great business writer jim collins talks about can you deliver on the genius? can we both deliver strong returns for shareholders and help society make progress on

its goals. whatever the goals are, we as a bank have had this as part of our life since we started. we started financial services institutions banks started as creatures of a community they serve. if we don't have a strong economy, we won't be successful. our goal is to help drive that. we believe in the genius we have to produce strong returns. we have to do strong returns and produce the goals in society. and the reason why it is -- all the charity in the world is not enough to come close to making the progress we have to make on the sustainable development goals or on environmental component or any other component. $800 billion a year in charity in the world, we need 5, $6 trillion a year. wonderful people doing wonderful things, empty them all tomorrow and still won't do it. it takes private sector to drive the change when you hear people talk about capitalism works, absolutely

works. that's why we're all capitali capitalists. we know we have to deliver for the shareholders and society we do that by -- we're two-thirds of expenses are people our human capital, which the word people use to describe it, our policy, our leave policies for family, whether it is our $17 an hour, $20 minimum starting wage, whether it is our 401(k) match that has gone on for years, our healthcare which -- covers all our employees and 600,000 people, great program. and for people at the lower part of the pay scale, family coverage that is second to none. retaining, skilling people, we're hiring 10,000 people from low and moderate income neighborhoods. these are are all things we do as a company, just around

people, why do we have to have the best people? that's what our company is a lot of smart talented people and a bunch of computers they use to serve those customers and then we draw the business. it is not hard to square this, frankly. people made too much out of it, it is a big switch the issue is the old statement was thrown up against the business community saying this is all you're interested in. it wasn't true >> just an expansion. >> it is more of an alignment big companies both drive return for our shareholders and help deliver on society's needs that's what we have to do. because the governments can help, but can't do it on their own. >> thank you for your time today. appreciate it, it is good it see you. >> brian moynihan. back to you in the studio. >> thank you, becky. send our best to brian. when we come back, tomorrow on "squawk box," fed coverage from jackson hole, we'll hear from the most important economic policymakers in the world. you don't want to miss any of it stay tuned k x"etnsig aerhtft

this

president trump just tweeting, doing great with china and other trade deals. the only problem we have is jay powell and the fed he's like a golfer who can't putt and has no touch. big u.s. growth, if he does the right thing. big cut, but don't count on him. so far he's called it wrong, only let us down, we are competing with many countries

that have far lower interest rate and should be lower than them yesterday, highest dollar in u.s. history, no inflation, wake up, federal reserve. such growth potential, almost like never before. we'll end on that. two seconds. two seconds for a -- >> you hired him you hired him. >> i can't putt either join us tomorrow "squawk on the street" is next ♪ it's been one week since you looked at me ♪ good wednesday morning welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. it has been a week since that big sell-off futures getting a bounce on the stellar results from lowe's and target as the market reat react the president. watch germany and unprecedented 30 year au