♪ >> live from new york where business never sleeps, this is "squawk box. >> good morning, welcome to "squawk box" here on cnbc we are live i'm becky quick here u.s. equity futures are currently a little lower nasdaq down by 26. this comes after a mixed day yesterday. we did see some strong movement in the mornings. green ar owes to the upside. you saw the s&p was down by just under a point and nasdaq down around 15 points a lot of people watching trade talks and what has been happening in the treasury market we'll check on that.

take a look at what happened overnight in asia. the nikkei up about a third a percentage point hang seng was flat, shanghai composite down red arrows across the board. ftse flat at this point. cac in france down by .4 of a percent. the 10-year right now looks like it is yielding 1.63% those continue to wick up ground 30-year 2.1% >> the count down is on. apple holding a launch event expected to launch three new iphones. fee occurs may include upgraded processors and new camera functionality. we could see a new apple watch

an apple watch was not worn bio d odell beckham he's in trouble for wearing a hard object. people still wear watches for different reasons. >> jewelry >> anyway. including streaming and service. i don't know what odell was using it for maybe he said, it is time i start playing better >> apple products working into team it wouldn't be a matter of

cheating necessarily >> unless you clocksomebody in the head with it >> what was the score? >> these are the new browns, right. we'lltalk more about potential and pricing. all about apple. an apple day don't they have a month of days per year >> may be. maybe three weeks. >> doesn't take much for us to focus on apple >> good reason not to mention it is right at the center of what is happening with china trade talks boeing too >> do you know much about apple?

>> can you help me i'm at 86% how much it charges up i was at 89 for a long time. >> you need a new phone. >> do i need a new phone or battery. >> they have that battery replacement program now. >> i look at it twice and i'm at like 40% >> you need a new phone. i do too. >> who should i talk to? >> i think the people here but i think i'm going to buy my own device and bring it in softbank working saying the conversation happening now is whether softbank will vest more. now skbekted to be between $15

and $20 billion. leslie will join us a little later with more on the story >> in other ipo news, saudi aramco saying the ipo will be very soon. it would then be ready to list outside the kingdom deciding where that listing would take place. >> it is a kingdom not sure it is a share holder. >> the kingdom remaining the share holder >> coming up, new inflation data in china we'll take you live to beijing to look at the impact. u.s. equity numbers are off.

nasdaq indicated down about 23 and down 5.5 a look at the biggest pre-market losers and winners in the dow which does not include at&t, in case you are wandering ♪

♪

. >> welcome back. some interesting data out of china. what happened? >> thank you so much beijing got two bits of bad news on prices today. china has a pork problem so pork is seen as a basic staple here. also viewed as a potential social stability here. looking at any major swings in pork prices. came in 47% higher beijing announced new measures to fight african swine fever which has ravaged the pork

population and releasing emergency pork from reserves one of the state papers had a headline that appeared to be convincing the chinese that they don't need to eat their beloved meat saying your wallet and body will thank you the worst news for policymakers is on the producer side. the ppi has fallen manufacturers are struggling most believe even with the surge in prices. most expect the government may have to stimulate the economy further and that may include a possible rate cut later this year >> thank you see if that's going to be

enough thank you. let's get a check on the markets now. joining us now, our guests good morning to you both let me start with you in terms of the overall market set up the last several days has become clear, the market seemed to have overshot stocks went down 6%. you had defensives winning a lot of those stocks losing ground is this a snap back-type move or more to the rally? >> i think more of a rally what we saw was extreme

pessimism. when you look at short interest in terms of a shortage flow. this happened at the same time traditional market indicators were improving you also had high yield investment breaking out. make it round numbers. through 2950 puts a target around s&p short term. that break out is firmly in place. if you can hold that gap around 2960 >> so 3100 is where we were hitting back in july looking at how we might get there. if it continues that the big

growth stocks aren't really leading the way, is there enough that will get us there >> yesterday was the start of a rotation you saw offenses versus more cyclical areas it is not the end of the world for technology if people came in very pessimistic on equities, they are bullish on bonds also it was positive when i last check. the market breath indicators could continue to improve. that's what we are focused on. we'll see more broadening out at that level >> so paul, listening to all of the things about these shifts. the market is reevaluating

yields should be higher, there for stocks should be higher. that's a good thing. if people were trapped in trades and had to exit, how do you see it >> sentiment towards he can quities -- equities the highest number we saw since early 2009 we are at record low and people are expecting further declines the surprise index was just leaving one of the broadest streaks. you are seeing expectations reset. you are seeing sentiment extremely off on the side of bonds. it reduces negative headline

risk and can take some of the luster off the bonds and move people into equities and increase the flows there >> from the technical perspective and all of this talk is there a chance for melt up or is that crazy talk at this point? >> are we there yet? >> it seems like we have a similar set up to 2018, 2012 where you rallied sharply. there is a chance that could happen we had a melt up in late 2016 after the election i don't know what the catalyst is this time around. you've seen significantly higher highs like in 2012, 2013 or late 2016 to 2017 i would say the set up is there.

we saw it in 2016. no one ever knows the catalyst for a melt up before hand. you never know this is going to happen when we are seeing these tight ranges and one of the narrowist ranges on record, you see that resolve going higher >> it turns into a bullish observation. we saw three big legs higher and now in the later stage of the period. >> when we come back, new data on small business confidence later, everything you need to know ahead of apple's big product launch tick around.

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the index dropping, wiping out the gains we saw err lier this summer this is april we saw things ramp up take a look at this chart. a look at how optimism has been tracking down about five points from a year ago recession talk is taking a toll on the outlook the biggest drops were in expected better business conditions and sales expectations gains were in earnings trends. skilled labor also a new issue the single most important problem followed by a tie in taxes and government red tape regulations.

continuing to attract talent or to train less qualified employees they are looking to hire back to you. >> i've told you in the past to make the most of every day today is 91019 pallindrome. tomorrow is 9/11 all the way to 919, every one of those days it is a palindrome >> i wasn't realizing. an entire week plus. are you excited? >> not many things get you excited. >> you've got to use february as 02 for next year

021120, that doesn't work. >> it is going to be a while if you don't do that. >> not just a week it is all next week too. >> we also decided jason should be on every day. >> when we come back this morning, today's biggest movers including an automaker credit down grade and a new player in the crowded breakfast market and wework's latest investor wants to step on the brakes on the latest ipo and a look at yesterday's winners and losers yesterday's winners and losers ♪

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>> welcome back. you are watching "squawk box" live from the nasdaq market site in time square >> dow futures down about 38 points we've been watching what is happening with the nasdaq down about 20 points right now and s&p down by almost five. marke markets barely budged on either side nasdaq brown by about 15 stocks to watch this morning ford shares are falling after moody's cuts the rating to junk. ford says its underlying

business is strong and shares are down about 3%. >> wendy's will vest about $20 million ahead of the breakfast launch and hire 20,000 employees. they slashed the forecast for 2019 earnings growth to a decline of 3.5 to 6.5% wendy's currently offers breakfast in about 300 of the 600 u.s. restaurants plans include the baconator and the frosticino i have a request on the dairy

content of those frosty's. >> i don't think much. >> what if it is not dairy what is it >> i don't know. mysteries of the universe. you new legal action over e-cigarettes the fda issuing a warning to juul over the company's claims that its products are safe alternatives to cigarettes juul says it is reviewing the letter and will fully cooperate. new york governor cuomo steps up the request to ban flavored sales and the use of thickening

agents and the use of vitamin e or a thickening agent said to be the cause of the lung disease in young people >> altria owns a 35% stake of juul that stock down about 25 cents this morning >> coming up, the latest on the wework ipo the largest investor asking it to shelf its plans that's coming up next on cnbc.

>> welcome back. u.s. equity futures improved a little down about 30 points on the dow.

29.5 four straight up days. nasdaq indicated about 19 and s&p down four and change >> apple expected to unveil new products joining us now to talk about what investors should expect is daniel flax, senior research analyst. great to have you here thank you for joining us >> great to be here. thank you, becky how big a deal is this as the company is changing, does if still have the same level of input. >> the iphone in terms of the product and the customer base is critical for the iphone business, what is important is that the install

base continues to grow the smartphone market has been soft, i think what is important and what enables the company to integrate they do it in a fun, easy and secure way that delights their customers >> these phones are not seen as game changers. new phone, a little longer on the water resistant, what does it mean for people looking forward to 5g launch next year >> the additional camera will be important. you'll have faster speeds, improvements to face i.d., which is important >> it can open, even if it is

sitting on the table >> correct >> i think the new camera is really cool. that is something that would make me potentially get into it. >> that is key if you think about what is happening in terms of cameras and the 3 d sensing capabilities you have augmented reality, none of us are teens here but in terms of how teens communication, a lot is with various images imposed on themselves we think about the work place, the ability to super impose. if you are repairing an engine, and you can 3 d images and super impose an image. or if you are shopping and you

can super impose items into your room integrating the camera is making the phone more important to you. >> how much of this do we already know, is there anything they can say today that would be a game changer >> unlikely anything traumatic they are working on a bunch of things that may not see the light of day today to your point, the 5g device that could come to light next year, it is important that 5g devices are being built. the impact from 5g is more significant than just devices. this is about the internet affecting all sorts of devices but ultimately for apple, the key for this cycle and 5g and

beyond, about keeping the customers happy. that will enable them to buy new prices, and consume more services >> just looking at the chart this is about the fourth trip stock has made you see that right there is there anything that holds it back around these levels or as valuation gets full or are investors just waiting for the next. >> i think it come $down to innovation and whether people will get more of a glimpse a much bigger part of the story that isn't getting as much attention are the wearables. we will see a new watch. and air pods

people are able to get utility the ecg app on the watch that is happening to save lives. there is a lot that they can do in health care i think there are other areas like monitoring sleep. we'll see a glimps into what is coming that gets people excited they have to create value. that ultimately will translate to share holder value. >> what about the trade war to china, is that factored into everything happening right now >> it is a risk. we have the risk from the revenue impact there is the risk from the supply chain impact when i think

about the investment case, if the company can deliver innovative products and services, they can look through some of the sorter term head winds. but for creating share holder value, it will come down to the products, innovation and the ability to execute around that >> thank you >> thank you >> your guy, he always watches us >> he does wendy's is the closest to a milk shake. now i have a new question. don't we need beyond milk. >> we have beyond milk

>> for lactose intel rens. the more fake it is, the better for the planet in terms of cow farts. >> not in terms of how much water is needed to grow almond trees. >> but in the world we live in now, the less natural it is, the better we should boycott wendys for how much dairy they use. >> i'm not going to do that. >> i'm trying to figure out how i can signal the most virtue it is a cashon crisis now. >> when we come back, a show

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>> wework's biggest investor wants to call off the ipo. more on this story if you were getting 47 and now you are getting 20, i would say wait a while >> i would say cut your losses softbank is urging wework's parent company to abandon the

deal softbank is concerned about the valuation wework could get in the market wework is having trouble finding investor demand. that big mark down could spell big trouble at softbank's attempt. wework does not appear to be giving up easy a separate source said it is still all systems a go in other words, wework is still moving forward with the plan wework needs the cash, the company is burning through more than $150 million a month. an ipo could bring billions to the table and wework could cement a credit ability from the

deal one solution softbank could come in with more cap fool the question is whether they want to double down here >> it soupnds like probably not. they are pushing them to find money elsewhere. >> right they've already put in about $9 billion if you round up a bit. that would be doubling down. that is a lot of money to put into one company >> the fact that lowering the valuation makes them to take the on-paper loss. >> right now, they are invested at this blended evaluation we've seen this in the valley all the time and it is part of the reason we are seeing it

these days you do see them come in round after round. >> we should point out when these initial investors are getting in, it is not apples to apples tie of thing. a lot of these have warrthese evaluations that are what they never said they were going to be. >> you mention, they have all of these various stipulations to them often times, you see liquidation preferences. if you put money in, you get a greater proportion

it almost doesn't matter for a company if they have those preferences so long as they do -- >> it is a marketing number?son senior associate dean of management studies at the yale school of management just at face value, i think you're applauding wework's efforts here this is a very positive thing going on why are you laughing is this -- is -- you're giving kudos that they're keeping shareholder value as low as they possibly can by cutting the ipo price. kudos. >> you're not -- you're almost as good as adam newman. >> newman. >> we were changing the subject but you're not as good. >> newman. >> at newman yes, i know. the same month that "mad magazine" alfred e. newman went out of business. >> you mentioned that. >> what happened here?

this is brutal >> no, i'm not going to take that segue, joe. what's really amazing is, yes, now that you mentioned it. i hadn't planned to mention this it's the honesty in the company. honesty, yes, they dropped the weworks in the name because we doesn't work they're admitting it they've gone for the we name they are maybe going to become a we company clearly you take a look at this model and you wonder what's wrong here on a governance level? what's wrong here on a financial level? what's wrong here on a strategic level? what's wrong with the character of the ceo you can open any one of those boxes. on the financial model, $47 billion valuation. where does that number come from they've got $12 billion of cash invested in them how do they pump that up to 47 billion?

how convenient they have commitments. only 3.4 billion. it's a big gap 120,000. permitted last week. pretty promising inside dealing leasing back to the company. buying the name we as the trademarking

as our own mon know tore ryization. and lots of things here. and serve core this base in australia. and have i bludgeoned you on this i can understand it in 1998. everything that's going to fly in the current environment

where was the fluff? uber, didn't come from that. that ipo >> why they thought they'd get away from it we took a look at institutions you know those muppets that we like to put on the show from time to time they're the critics. they start out cheerk somethiin something, and then they're booing now we're seeing the feeding frenzy trashing the company. where were they before there were journalists andrew ross sorkin was asking questions. that's terrific. you wonder, there's a sucker born every day or every minute as p.t. barnum said. who were the suckers here? the same people who fell for charismatic ceos like evers, bernie madoff. the people who fall for those scams are basically all of us. i know some very sophisticated

people who followed soft bank into this deal and are sorry they did their investments aren't huge. we learned something i would have been happy to teach them something for a lot less than this. you're asking the question that the beatles ask is i should have known better, 1964 flip side to "hard day's night. i should have known better than a deal like this. >> no, i had help. they used to do it that way. to play it on my turntable, you had to put the thing in the -- remember that, you had to -- >> the needle in the -- >> no, there was a thing on a 45. >> a disk that went inside. >> a disk in the center. >> because it was 33. >> different size opening. >> mine just had a switch. >> joe, we shouldn't admit it. didn't you have one of the ones you had to crank up with the big horn gramophone. >> back in your childhood again. what's going to happen, do you think? this doesn't seem -- i mean, i would come back in a year, wouldn't you even if i were newman, i think

i'd shelf this no >> i think the cbre, cushman wakefield would take this. this is a huge embarrassment on soft bank on top of uber i don't know how suppressing the ip ipo will erase the headlines about how much of a disaster this was if not a scam it's built on the form of a ponzi scheme that's going nowhere good it's built on bigger and bigger growth making it up in the volume doesn't seem like a promising investment some of these investors who put a lot of money into this were real estate people, people who know this business somehow suspended. you know, there's a guy named john bennett in the 1980s out of philadelphia who was a hukster he was supposedly a philanthropist if you give me x, i'll give you

2 x back to the charities. the people he drew in were john whitehead, john templeton. university of pennsylvania harvard medical school all kinds of people who should have known better that the thing was a complete scam. he drove that up only to half a billion in that case it was a non-profit. sophisticated people make dumb mistakes all the time. it's the old if you're so smart -- if you are so rich, why aren't you smart >> right right. both good questions, jeff. thank you. >> thank you >> yeah. i don't want to ask those of myself, actually coming up, stockfutures off th lows of the morning. we're going to talk strategy next later the chief legal officer of microsoft brad smith joins us to talk about the antitrust crackdown on big tech and a lot more stay with us at synchrony, we're changing what's possible. for instance, 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?

will wall street's recent rally lose sting we'll break down what factors could move stocks. >> elliott management's activist game why they're working to shake up at&t's board we'll speak to analysts about the future. >> a news making interview with microsoft's brad smith he joins us to talk about tech regulation, antitryst i shaust s facing tech and u.s./china

relations. ♪ live from the beating heart of business, new york. this is "squawk box. good morning, everybody. welcome back to "squawk box" here on cnbc i'm becky quick along with joe kernen and mike santoli. u.s. equities this hour, things are a little bit weaker this morning. dow futures down by 43 points. the nasdaq is down by 25 s&p down by 6. this comes after a long string of up days i think until yesterday the s&p and dow were up for six out of the last seven sessions. dow was up by 38 points. s&p closed down but less than half a point >> s&p's up 5 or 6% from the august lows even though we're not yet back to a high. >> but we're only 1.5% off of the highs. >> yes yesterday even though flat, a lot going on bank stocks up more than 3%.

software down two. see if that continues. here is what is making headlines at this hour apple is set to unveil the latest iphone models its product event will take place at apple events in california it will begin at 1 p.m. eastern time small business optimism has fallen to a five-month low the monthly index from the national federation of independent business was down 1.6% to 103.1. it was led to a drop in businesses who expect the economy to improve in the months ahead. restaurant chain wendy's is bringing back breakfast. it will spend $20 million to expand hours and hire 20,000 new employees. wendy's already sells breakfast items at about 300 restaurants this effort will involve all of more than the 5800 domestic locations. >> talk about what we were talking about off air. >> i recall analysts talking about wendy's going big into breakfast. one of the impediments was mcdonald's tends to have the

best real estate in markets. when wendy's locations disproportionately required a left turn to the morning rush hour so that's a real draw back if you're trying to sell quick breakfast. >> right nobody makes a u-turn to go back -- >> you have to wait and the whole bit. i don't know if that's changed or if that was a legitimate criticism at the time. fast food breakfast has been a big thing for a long time. wendy is making this big push. >> stock is down 70%. >> people are not happy about the revised down guidance and the expense. let's get a check on a few market hot spots dom chu joins us with those. >> i didn't turn around a u-turn at all to get any breakfast. just saying. there are some u-turns happening in the market. they have gotten some attention because they could foretell a little bit of slowing momentum as we've broken out to newer out of range highs take a look at some of the spots we're looking at first of all, mike santoli

mentioned software that is one of the hot spots that we are mentioning because they have been an outperformer, very heavily so over the course of the past year and right now in the last maybe couple of months you can see here the ishares expanded tech software taking igb up 20% on a year to date basis it's over here i want to show you on a one-month basis what it looks like at that point you are seeing a little bit more of that performance move, that gap widen between the s&p 500 and the overall software index so as that software sector showing signs of weakness. is that foretelling something bad ahead. also the ipo market. the renaissance ipo etf is one that tracks recent ipos and puts them in a basket you can see over the course of the last year to date basis heavily outperforming the s&p 500. if you narrow down into the course of the last month or so or take a look at this etf, that gap has widened out. it's taken a leg lower it's widened out that gap with

the s&p 500 and the ipo etf. to balance it out, technology has been a hot spot, of course, but transportation and small caps have also been real important and over the course of the past, say, year to date basis or so we have seen a movement for many of these kinds much sectors small caps and those transportation stocks have underperformed the overall market, however, they have outperformed over the course of the last week or so. so as we watch hot spots, small caps transportation stocks always important but then that software and ipo side of things, kind of there's that real conflict in the market and that's, joe, probably why you're seeing this kind of churn that we've seen over the course of the past couple of weeks, guys over to you. >> dom chu appreciate that. thank you. the equity market appears optimistic about trade the bond market has high hopes for a rate cut when the fed meets next week. joining us to discuss the capital markets, matt toms, chief investment officer of

fixed income at voya investment management i mean, stocks are still keying off this we get a lot of jobs numbers we get key insight into the economy. we still worry about jay powell and the next move for the fed. does that still make sense, matt >> somewhat. the focus is on the foreign central banks and the ecb. jay powell and the fed very likely to cut in september and very likely to cut again this year but look for thursday for the ecb to actually disappoint in our opinion maybe a ten basis point cut. expectations are key we are probably too far ahead of ourselves in europe. maybe some central bank disappointment this week >> as far as the yield curve goes, what do we need to where you feel comfortable that the fed is on the same page with the yield curve and with central bankers around the world how many basis points? how many rate cuts would we need

to get there. >> yeah, 30 basis points on the 2s, 10s curve would be comforting for us. that would imply that the market implies some of this rate cut to push through into economic growth inverted 2s, 10s is a concern. unfortunately the market is losing faith that aggressive rate cuts are enough expect fiscal commendation in europe to help to steepen the curve. that's the comfort zone. >> when do we start seeing the trade war actually being manifest in the numbers that we get on a weekly basis? or do we ever? >> well, you might the market's fear it dramatically the trade war in china is having an impact in sentiment a trade war with europe would be dramatic and you'd see it impact the numbers very quickly the u.s. has pulled back from that hopefully they don't go back to date we have seen it within the leisure and travel subcomponents and trade subcomponents of jobs.

we have not yet seen it in the professional services. that's the key number to watch we haven't seen it yet we don't think a recession is imminent >> okay. do you have a basal number of where you are for a recession on any given year where is it now? it's usually, what, 20%? are we at 20 right now >> it's 15 to 20 you have to believe you're somewhat elevated from there u.s. consumer looks good the fed will be accommodative. foreign concerns are unlikely to heat up we think politically to push the u.s. over the edge. so mildly elevated but not nearly as cause for concern that many would say >> all right, matt we appreciate it we will -- we'll see you again becky's running around because we have some amazing guests that we want to talk about quickly here thank you, tom keep your eye in we have 15 marines, members of the commander's media trading

company. you actually are going around and talking -- >> no, they're here for a media symposium. they're shadowing some media companies. >> you can learn nothing from us, guys >> but what i wanted to do, there are 15 of them here today. they've all been serving our country for a long time and i just wanted to thank them for that to do it properly i was going to ask them to line up. i gave them six seconds notice so i can properly get everybody thanked. colonel vincent dawson is here bradley magra, colonel michael mccarthy, colonel robert morgan, george fleming, lieutenant julian flores. lieutenant colonel patrick lindstrom. lieutenant colonel james thornburg. lieutenant colonel randall white, lieutenant colonel robert schuford john roberts first lieutenant brad lazroff. >> semper fi

santoli, we had a soft life, we just did fortunately we didn't -- there wasn't a war and we weren't called when these guys are called, they go >> by the way, each of them have gone several times >> they have been deployed when "squawk box" returns, the man who predicted warren buffet's participation in the occidental deal joins us

welcome back to "squawk box. futures now looking all morning at very slim losses. just about the flat line the s&p 500 down three points. dow projected down 11. the nasdaq slightly underperforming down 14 after a good day yesterday. new reaction over ecigarettes. the fda issuing a warning letter to vaping market leader juul after it claims the products are

a safe alternative to cigarettes juul says it's reviewing the letter and will fully cooperate. in the meantime, new york governor andrew cuomo stepping up his criticism trying to ban flavored cigarettes in his state. he's trying to ban thickening agents that are causing so many problems and that the fda believes may be the cause for all of these lung illnesses. >> investors feeling it as well. they downgraded piper jaffray. altria owns a 35% stake in juul. that stock down by over half a percent. >> coming up, activist elliott management taking a big stake in at&t and challenging the company over its strategy and its board. we'll break down what it means for the telecom giant in a

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hedge fund firm elliott management taking a stake in at&t sending a letter to its board and calling for a restructuring sending the stock higher in yesterday's trading. leslie picker joins us more on this activist play >> elliott more often than not gets its way shareholders seem to hope that's the case at at&t shares of the media conglomerate changed as they outlined recommendations to draw the stock price higher the portfolio, cost structure and capital allocation and corporate governance elliott invested $3.2 billion into the company and it could boost stock prices by 60% to over $60 by 2021 for its part at&t said in a statement that it would review

elliott's perspective noting that many of the actions outlined are ones they are already executing today. in its letter elliott stopped short of proposing specific director nominees only to say that it identified several candidates to discuss with at&t's board citing sources close to the hedge fund cnbc.com reporting that elliott thinks ceo randall stevenson's exit is on the table. he had been responsible for several ousters. guys >> leslie, thank you let's expand this conversation stick around jump in on it too. we're bringing in don bilsen earlier this year don's unconventional research helped him figure out that berkshire hathaway's inclusion was going to be part of the occidenta occidental anadarko deal don, let's start with you. you say that this was the perfect time for an activist investor to jump in?

>> absolutely. it's been a lousy stock for basically randall stephenson's entire tenure. it looks like he'll be leaving the company in the next year this is the 13th year of being a ceo. that's your life expectancy. they are going through the succession process this is the time to jump in. >> i wonder how much of this was -- at&t said themselves that many of the things that they're being pushed or asked to do by elliott, they're already in the process of doing they've already kind of taken this on and maybe it's the perfect time because the stock has started to pick up, the company is at an inflection point, it's finally able to get on the ground with time warner and bring down some of the debt. it seems like it's been on track with many of those issues. >> absolutely. that's what every activist wants is a little bit of tailwind. >> they want the work to have been done so they can jump in and claim credit. >> they want a little bit of that and not fighting headwinds. if the model is turning a little bit and you have an opportunity

to affect management and put some of your own people on the board, this is the time to do it. >> frank, you upgraded the stock earlier this year. why did you do that? what do you see happening? >> the thesis was simple the stock was beaten down. there were more things that could go right than with some of its peers. it could see some appreciation one of the things we thought was going to help is deleveraging. it's a big part of what elliott is saying is it's selling off assets they have 500 billion of assets. selling 2% of them i think they're going to continue to do that for the next several years. get some of this stuff off the books. it may not be the big ticket items that elliott is asking for, but they're definitely looking to do that as far as some of the things they want them to sell, it's not as simple as it seems. these are complex businesses and you do have a lot of benefit from having these assets across the different platforms. data generation for one is really important to generate both for content creation and then also to be able to monetize that with advertising over time.

it's just going to take some time and elliott incites the time warner acquisition they haven't had that to look at that until they got through the justice department issues earlier this year. i think you'll get to see some more details i do think you're right. elliott's jumping in with a tailwind they've taken this on. they're going to use buy backs and that will get investors. >> all of these will help shareholders >> one of the things when leslie was giving me the report she called at&t a media conglomerate that's true. we've called this a telecom company. the company has changed drastically. in terms of what you think they should be holding on to and what they should be changing, what's the right path forward do they need to be bigger as all of the other companies comcast and others have gotten bigger thinking scale is the way to win. >> i thought the time warner deal didn't make sense it's too late. i think they should let go of turner you can get a multiple for what you paid for turner or above

that, that would be a good opportunity to pay down debt with that. at its heart it's a wireless company, it is a telecom randall has come up with this concoction to turn it into something else and the stock hasn't responded and that's where we are today. >> oftentimes with these big moves, elliott is putting $3.2 billion of capitol to work in this stake they get work have investors do you have the idea that elliott has support from other investors that are already in the at&t stock >> that's the thing. it's so under owned. people don't have big media stakes in at&t it's largely owned by retirees and workers. 550,000 retirees, 250,000 workers, that's a big part of that stock very similar to procter & gamble so the votes get tough to handicap. >> i would somewhat disagree with that. a lot of investors we've talked to have been shifting into at&t.

we've seen this as the stock has lifted it was clearly under valued earlier this year. i think elliott will get more attention, but what they really have to do is get some of the big mark fund level managers behind them and with the position we're not sure how much is actual stock ownership. it remains to be seen how that will play out. but i do think you've seen more of an institutional shift into the name there is still a pretty sizeable ownership from that community. >> frank, aside from deciding what assets get sold and how much of the asset base gets sold, it seems like a capital allocation question strategically, right it's allocatallocating you mentioned buy back they don't want any additional m&a. how is the company thinking about spreading capital across the things in terms of shareholder return and new investment how might that change? >> i think the shareholder returns are pretty important you made a commitment to paying down the debt. that will make a lot of the bond

holders happier to have less outstanding. once they cross that 2 1/2 times threshold which we think is fairly achievable, sometime they can start doing the buy backs. the company has bought back the stocks and shrinking the equity base part of what they're discussing. the company has raised the dividend for the entire time it's been a public company i would expect that to be the case they usually do that towards the end of the year. i don't see any reason from our model, i don't see any reason why they couldn't continue to increase the dividend. that's an important part of the story. when you look out there for investment with yield, it's very difficult to find. you can't get into treasuries. i think a stock like this, that yield investors can count on is going to continue to be a very attractive part of the story i think they're going to be shoring that up. >> the yield, 5 1/2% is a crazy yield. when you look across what's happening, some people thought it couldn't continue like that the stock price going up, the changes had a little bit the dividend went up one penny a

year do you think the dividend will increase beyond that rate? >> it's been up 2% a year give or take. that's the range you're looking at not looking for a massive increase definitely would expect the board would continue to increase it this year and going forward i don't see why they couldn't. >> frank, thank you for joining us today don, good to see you leslie, we'll see you again in a little bit. coming up, our squawk newsmaker in the morning microsoft president bill smith is here. we're going to ask him about big tech regulation, the future of the silicon valley and so much more take a look at u.s. equity futures. we're about 18 we'll be right back.

still to come on "squawk box," microsoft president brad smith joins us to discuss some of the headlines coming out of the tech industry and his new book we'll find out why privacy, cyber crime and social media could pose a threat. that is later. a big day for apple fans the company is going to reveal new products and we'll preview what's to come we'll hear from peter navarro at

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toerps general from around the country are investigating google of possible antitrust violations ylan mui is joining us. >> reporter: we knew this was going to be a massive bipartisan effort now we know just how sweeping it is 48 state attorneys general plus d.c. and puerto rico banding together for an historic antitrust investigation into google actually, the ag's said their probe is already underway. they've requested documents related to the advertising business. >> all of our -- everything we've requested so far is related to advertising if there are other facts that demonstrate that we need to go in another direction, we will talk about it and we're certainly open to doing that. >> other issues the ags brought up were privacy, search bias and whether google is buying up and locking out its competitors. even the ags who stressed that they support innovation also said that they fear google has simply gone too far.

>> but the question for us today is whether google has strayed from its founding principles to not do evil in its search and relentless drive to be the market dominant player. >> reporter: the ags were careful to say this remains a preliminary investigation. texas is leading the effort and there will be weekly status calls in how things are going and the next step but, becky, this is going to be a long game and the ags said they are committed to their own investigation regardless of what happens at the federal level back over to you. >> ylan, thank you very much. for more on the changes facing big tech. let's welcome microsoft president brad smith brad's new book is called "tools and weapons, the promise and the peril of the digital age." thank you for being here. >> thank you. >> great to see you. i want to talk, first of all, about why you wrote this book. i think of super heroes where you say with great power comes great spons sbiresponsibility is that what brought this on >> that's part of it

look at the issues you cover every day. it's increasingly tech everywhere we thought it was important to make these issues more accessible, to bring them to life so people can understand them better and to show there are some paths forward to address them because i think the world wants the tech sector and people in government to address these issues. >> do you think this is an inflection point in society? >> i think there is an inflection point i think it started last year with cambridge analytic a and we're seeing it unfold we're seeing the next year of the next decade. this will be with us for quite a while. >> what are the big issues when you look around and say, okay, these are big problems they need focus, attention and solutions? >> in some ways there's a part about trust. people want to know whether they can trust tech when it comes to the privacy of their data, the security of their data, how artificial intelligence is really going to work but there's also a lot of issues that hit people at home and they're economic issues. what is ai going to do to my

job? what is ai going to do to my community? what does it mean for my kids? what skills are they going to need to learn? what does this mean for rural communities that don't have broadband today? what does this mean for urban cities where we see tech towers being built but middle income people being displaced in terms of their housing if you actually think about the issues we debate every day, they have these technology roots and we wanted to really capture how technology is impacting all of the other things we talk about every day. >> before we solve the problems for the rest of the tech sector and all of society, why don't we start with what you're doing at microsoft. how are you thinking about some of these things in house let's take artificial intelligence what's one way to deal with the artificial intelligence and fix it at microsoft before it gets out? >> we started last year. we set forth six ethical principles that we said would guide our development in deployment of ai in issues around bias, accountability, privacy, safety and the like

we've been advocating ourselves for new laws, laws around facial recognition. we don't want to see a commercial race to the bottom. that's where you let the genie out of the bottle and we wake up five years from now and we find we're not comfortable societally with how law enforcement is using facial recognition or shopping malls. >> or governments. >> exactly. >> at large. >> governments around the world. we recognize there are days when the smartest thing that we can do for the long-term value of our company is turn down a short-term deal. and we've done that in certain cases where,for example, facia recognition would be used in ways that would either cause bias and discrimination against certain groups of people, women, people of color or governments, especially over seas where we felt that facial recognition could be deployed in ways that could unleash masur vail lance that's not a future we want to create. >> can you be more specific or is that as specific as you want to get with those?

>> we shy away from identifying specific customers unless they want to talk as well we have shared there was a police department in california and to me the interesting aspect of that episode was when we went to them and we said, we don't think it makes sense for us to provide you with facial recognition to do what you want to do, our first concern was, well, gee, they're going to go choose from a competitor instead they said, you know what, we are so glad you said o this to us we don't want to make a mistake. >> microsoft has set up ethical principles and you're in touch with customers you encounter should there be a more central and rule setting function. does somebody have to set industry standards >> ultimately, i think the answer is yes. i think there will be industry standards to address a number of these issues ultimately, this is a space where we will need new laws and i think this will be one of the

leading policy issues for the next decade. where do we want rules in place to govern how computers make decisions? it's clear that people want people to remain in charge and if we're going to empower computers, we need to know how the computers are going to make decisions. >> you know, that u.s. law enforcement agency may have turned around and said, thank you very much. we really appreciate you pointing this out. my guess is there are some over seas government that when if you turned them down may turn to somebody else, maybe it's huawei, somebody else, sure, no problem, we are willing to fill the void so you can look for someone to set industry standards but there are always going to be people in the industry, companies that play outside the rules unless you have a global set of standards that everybody actually follows and listens to the rules on, you're always going to have somebody else who is taking what you've done and maybe stepping it up or giving it to players you wouldn't like to see it given to. >> i think you've just hit the nail on the head of one of the global questions for the next

decade because even if we can succeed in the united states in developing an approach we are comfortable with, what will europe do? what will china do we want to see us take a high road in terms of creating technology that the world can trust and at the same time we don't want to be undercut by foreign competition. so there is a real global strategy that we are pursuing that the whole industry is going to need to pursue, and i think that connects with many of the other trade issues of the day. >> i mean, right i'm thinking about this with china in particular when we say the reason we're here in the trade talks with them is because they don't follow in any of the wto standards or rules that they were supposed to be abiding by how can we trust that any global entity would have not just every country but a major country like china with massive populations, second largest economy in the world, how can we trust that something's going to get done even if we have these ideals and standards?

>> i think there's a way to break it into two parts. the first is what will a country like china do in a country like china. there is facial recognition being deployed there are ways that americans would probably look at and say we're not comfortable on in terms of masur vail lance. >> ight. >> ultimately though there's 1.4 billion people that live in china. if you add up north america, if you add up western europe, japan, the other democracies of the world we have an even larger group of people. i think in some ways in the race for technology, whose going to pick the winner between american firms and chinese firms? the answer is europe the answer is japan. and i think it's in part our case to be made to them that we need to work together to preserve values that we really feel are timeless. we're all the excited about technology but we also recognize that technology actually needs to serve timeless values and not simply march on over them. >> we just heard from ylan mui

talking about the state attorneys general, 50 of them, who are going after big tech at large. i have to say, all of the times, every day we talk about this issue, we almost never bring up microsoft as part of that. that's kind of hard to imagine when microsoft used to be the evil empire that regulators were focusing on. you guys have really avoided this how? what happened? what was the transformation at microsoft? what's it like being there now watching this with other companies? >> well, we were the first graduate of the school of hard knocks when it came to technology and antitrust it's easy for people to forget today that in the late 1990s, the year 2000 the u.s. government and 20 state attorneys general were seeking to break up microsoft. we learned a lot of valuable lessons and the first thing we do every day is try to remember them you know, because one of the lessons we learned is you have to really look at your self in

the mirror you have to be able to see what other people see and not just what you liketo see in yourself you have to understand the problems that people are raising, which means you have to get out and listen to them, and then you have to be prepared to start solving problems you have to compromise in order to, you know, find a path forward. if you look at the history of antitrust and big tech, which didn't start with microsoft, it actually started with standard oil and the tech of the early 20th century, one of the real lessons is that when these things start, they last a long time the entire microsoft set of issues lasted 29 years, which was less time than it took for ibm or at&t and so, you know, i think there's a lot of common sense, frankly, in what we took away, better to figure out how to solve problems than just keep hiring more lawyers to fight them. >> bill gates himself has said

that he thinks that investigation not only from the state's attorney general but from the u.s. government, that that really caused him to take his eye off the ball in some situations because he had to take his time on so much of that and probably other management. do you think that's going to repeat itself with other companies today? how difficult is it to lead in your industry and find all the fast changes that are coming even faster today than they were back then but also be dealing with such huge questions coming not only from the u.s. government, from the states attorney generals, from the e.u., from all over the place? >> if there's one thing that's clear to all of us, it's sort of the laws of physics. time is finite every hour you spend doing one thing you can't spend that hour doing something else in those years at microsoft bill gates, steve vollmer, all of us, we had to spend a lot of hours focused on antitrust issues, depositions, settlement

negotiations the issues of the day. you can't help but wonder what you would have done if you had that time back it's the opportunity cost of time, and i still remember when one of the members of our board of directors said that in the board room in the early 2000s. it's a comment that has always stuck with me. you've got to decide where you're going to spend your time, and when you're in the tech sector, when the world is changing, when the technology is moving so fast, spending it on antitrust issues probably is not where most ceos or senior leaders would want to allocate their attention. >> once the wheels of the federal and state governments get ramped up and start rolling like this though, is it too late is there anything any of these companies can do to stop the onslaught that was probably coming >> i think that there is a lot of inertia to these things i think your question points that out the answer i would say is, it's never too late and the real question for all of

us really is what are the tech problems that we want to see the world solve? and that's really why we wrote this book. you know, you can talk about economic power and the like, but a lot of what really i think weighson people's minds is wha it means for them personally you know, what does this mean for my data? what does this mean for my security and i think the more we can work together across the tech sector to address the root issues that weigh on people's minds the most, it's not going to end every issue for every individual company but it will create a healthier climate and i think it's a healthier climate not just for the tech sector but the u.s. economy the truth is every company is becoming a tech company in part. when we talk about ethical principles for artificial intelligence, we realize we need to create these not only for ourselves but for our customers. when you put it in that broad

perspective, then it's like it's not a day too late but we better not wait until tomorrow. >> it's hard to solve the world's problems if you go out of business so, i mean, you do need to stay profitable. i mean, it's nice to want to help everyone, but that's part of it, right let's talk about that in a minute because i know it's a really feel good -- we're going to go to break >> we're going to go to break. >> brad's going to stick around. we're going to continue. i want to talk to you about whether i was really compensated for all of my personal information. i get a lot of free stuff, but these companies have hundreds of billions of dollars in market cap because of me. not just me but, i mean, did i get my fair share of that? >> good topic. let's talk about it. >> you're not answering it >> we'll come back after the break. >> we'll continue this conversation with microsoft's brad smith he's got a lot of my money including his thoughts on the administration's handling of huawei and u.s./china relations. "squawk box" will be right back.

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welcome back microsoft president brad smith is with us his book is "tools and weapons." brad, thanks for joining us for an extended amount of time so two subjects that i wanted to get to before we get to the privacy, let's just get to what a

company's mandate really is. you're lean, hungry, you're new. you want to crush competition. that seems like what you want to do you want to be so good at what you do that you're not worried about competitors, you're worried about your customers you're worried about surviving suddenly you get to a point where you're so good at what you do that people start calling you a monopoly when you haven't really employed any monopolies sti -- monopolistic principles. should we immediately assume there's something untoward going on because it has a huge market cap or dominant position or is it exactly what you were trying to do right from the beginning >> i don't think that one should ever equate size in and of itself with a potential tlel

threat or harm if you create a technology that changes the world, you bear a responsibility that helps address the world that you've helped create. i think specifically to address your question, you want to move fast but you need some guardrails the guardrails keep you on the road knowing what you stand for, knowing what your principles are, knowing what you want to avoid. i believe in the long run that's what serves companies and the shareholders. >> i don't see what the companies that are in the cross hairs of the ags, they have nothing in common other than being really successful and so how can all of them -- how do we suspect all of them of doing things that are unethical or doing things that need guardrails >> i'm not here to advocate for antitrust action against others in the tech sector i am here to advocate for work that we all need to do to address the issues that technology is creating for the world and get at the underlying problems.

>> if consumers are not being harmed, in fact they're benefitting where everything is basically cheaper than it ever has been and it's almost free, how do we know when to worry about emerging competitors being blocked out? when it's no longer hurting the consumer or the customer, that's who you think of, suddenly you're worried about new entrants aren't getting in how do you see side that's a real issue >> i think you do what you just suggested, you ask, what's the problem here is there a problem that needs to be solved? are competitors being harmed or blocked by offering their apps on an app store, for example that's an example. >> i'd like to harm most competitors if i was starting a business wouldn't you >> well, and that's why antitrust law in the united states and around the world says you can do that when you're small but once you have a certain size, a certain position in the marketplace, you don't have that same freedom to maneuver i do think there is this broader dimension to increasingly

antitrust law today which looks beyond traditional competitive and economic harm and it does ask what is the impact of this on data? what is the impact of this on democracy? and that's where, you know, the justice department is increasingly focusing. and i'm not sure that they're out of touch with the american public when they're asking the broader questions about the implications of technology >> do you still -- you tweeted out some favorable things, you're not part of the business roundtable but you were favorable about some of the new, i don't know what they were. i guess they were guidelines it wasn't solely signaling although some of it was. >> mission statement. >> mission statement was milton friedman wrong that enhancing shareholder value kind of trickles down and takes care of a lot of different issues and you may not necessarily have to specifically say i'm going to be a good person? i mean, you stay within the law.

you satisfy customers. you expand your employee base. shareholders benefit you're doing exactly what you're supposed to do do you need to say you need to think about other things if you don't say that does shareholder value actually end up hurting someone >> well, i think the business roundtable has really defined the issue correctly for the 21st century. >> why >> because what they say is focus on customers first. >> right. >> take care of your employees be a good steward in your community. >> all that would happen. >> but i would argue that the opposite is even a better strategy take care of customers first and in the long term your shareholders are going to do very, very well. and i would almost argue if -- look at microsoft. look at what we've done over the last five or six years we've sued the united states government in two different administrations when we thought we needed to to protect

customers. >> you get bloated tech companies get bloated world enters a slowdown. you fire nobody. you don't tighten your belt. you're not profitable anymore. everybody ends up not having a job. you were thinking only about your employees and you're unable to do some of the really tough things to rationalize a business why won't that happen? >> well, i think the point you're making is any good idea taken too far ends up creating problems. >> and you think shareholder value and chasing that has been taken too far? >> no. what i'm saying is, look, of course if you say that we're going to take care of our employees but never restructure the company we're never going to let anybody go, that's not a sensible path for balance. >> someone somewhere else -- >> yeah. >> let's do the privacy thing. i'm not going to add up the market caps of all the companies that have stolen my data. >> or that you've freely given it to them. >> freely given it to them

and i'm fine don't answer this. am i a sucker. in many ways i am, but i love google -- i take everything. i don't have any -- nothing's that interesting for me, i don't think. but should i have demanded more compensation for all this information that advertisers are getting about me >> well, i think the first thing we need to do is equip people with the knowledge of about how much data there is about them, empower them so they can make more decisions i think interestingly, even ironically, the leader of emp powering people with knowledge about their data is the european union law from a year and a half ago. we're the one company that said we're going to extend the benefits and rights to all of the customers everywhere because we do think people have the right to know what data we have about them regardless of where they live. we'll i think benefit if the market goes to work, if there are more opportunities for people to use their data. >> the eu did something, like the blind kernel corn.

how does that work that's good. anyway, we're out of time. that went fast, didn't it? >> it sure did thank you. >> i'm back. >> i'm thinking i might read your zblook i hope you will. we wrote it so it would be fun to read. >> the book again is "tools and weapons, the promise and the peril of the digital age." brad smith is the president of microsoft and thank you for your time >> thank you. >> we appreciate it. when we come back, another big interview here white house trade advisor peter navarro will join us after the break. we'll be rightac bk.

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live from the most powerful city in new york this is "squawk box." good morning, welcome back to "squawk box" live from the nasdaq market side in times square i'm joe kernen along with becky quick and mike santoli andrew is off today. the futures indicated down 23 on the session. nasdaq actually showing bigger point losses than the dow. obviously a bigger percentage. those are down 26 and change s&p indicated down 5.5 treasuries, the ten year was over 1.6 earlier 1.65 1.59 on the 5 year >> if we close above 2.09 could mean the yield lift is going to continue. >> technical levels to keep an eye on as well. let's get you caught up on stories investors are going to be talking about soft bank is urging wework to

shelf its public offering. wework at this point is still proceeding with its ipo plans. she said the conversation is whether softbank wants to invest billions more so wework doesn' need to go public. the ipo's valuation is expected to be between 15 and $20 billion. that is well below the $47 billion valuation it was given after softgbajabiamila's last investment back in january.ajabt investment back in januaramila't investment back in januarila's t investment back in januarinvestt back in january. they charge a fee for faster service. and apple is set to unveil its latest iphone models and other product updates today. the highly anticipated event will take place in california at 1 p.m. eastern time.

we'll talk much more about what's expected from apple in a few minutes. it is crunch time for congress to vote on president trump's signature trade deal that's the new nafta or usmca. kayla tausche joins us with more on where that stands hi, kayla. >> reporter: hi. the white house is still deep in negotiations with nancy pelosi to get space on the floor for the vote a spokesperson says the substance will determine the timing meaning, the more democrats' requests make it into the deal the sooner it will be put into the vote they have four asks, making sure mexico is implementing new labor reforms, better enforcement of environmental protections that they say nafta overlooked and ensuring changes for pharma companies won't raise drug prices house aides say they're set to meet with ambassador lightheizer next week. they're waiting to see what concessions he's going to make

mexico is the only three countries to have ratified it. elections in canada have held up passage. the white house is trying to regain some momentum through a day of action today circulating talking points to surrogates and supporters in ten topic areas. in washington the white house and republicans say they have the votes. democrats say the deal isn't there yet. lightheizer has retrained from starting the countdown clock on the deal until he's sure guys, back to you. >> kayla, joining us for more on the battle of the usmca let's get to our squawknewsmaker of the morning, white house trade advisor peter navarro. it's been a while. >> good morning, joe, my friend. how are you? >> i'm good. you are quite a lightning rod for the trade policies of president trump? whenever anything really hawkish happens or whenever he sounds a tone that causes the market to go down, it's always navarro's

fault. do you ever waffle on your resolve to stay strong on this, peter? >> what i'm focused on today, joe, is being a lightning rod for usmca. and i think what's important to understand, joe, is that in terms of the volume of -- sheer volume of trade that we do with canada and mexico, it's over a trillion dollars it's actually almost twice as much as it is with china and we actually export close to 5 times more product to mexico and canada than we do to china so usmca really is the big deal. we're hoping to get this thing done within the next 30 to 60 days and today is going to be an important day talking to the people of america so that they can encourage their representatives to do the people's business when they get back to washington. >> i think that the -- we'll

sti stick with usmca for a while talking about usmca, it's gotten a little bit better in terms of the prospects for the democrats i guess maybe to support this even though it would give president trump a victory. i don't know as we get close to the election whether -- better strike while the iron is hot do you think the chances have gone up recently with some of the things the democrats have gotten with the usmca? >> joe, this is a deal that does and should transcend politics. it's a unique deal because it benefits both farmer's, ranchers and manufacturers. it doesn't pit them against each other. there's broad appetite around the country for this deal. the big thing, the big obstacle really has been the fact that congress has been in recess and it's very hard for ambassador lightheizer to get the kinds of

negotiations he needs to get this over the hump, but that's getting better the president and the afl/cio went down to mexico to get some assurances on the labor reinforce am this is a great deal for america and hopefully thedemocrats wil do the people's business on this >> well, you've been in washington for a while now i don't know why you're -- >> it's dog years. 2 1/2 years is 20. >> some of us are leaving a place like this. you left irvine to go to washington >> i miss my pacific ocean out in california there. >> can you give me an honest handicap of whether this gets done before the end of the year and you say politics should be set aside. >> true. >> that's not going to happen. >> true. >> how would you really handicap that this gets done before >> i think this has to get done before the end of the year for several reasons. >> what are the chances? >> i'm going to give it 100% here because it's so important

for this country, and i can't imagine that nancy pelosi would not put this on the floor to at least have a vote. i mean, as you know, there's some progressive politics going on here. they want to take our cars and our cheeseburgers, private health insurance, raise our taxes and give the money away to illegal immigrants for health care that's kind of like the far left, but i don't think that's who nancy pelosi is. i think she is going to do the right thing on this and get the job done and it is unique that all 50 states benefit farmers, ranchers, manufacturers are solidly behind this. again, i go back to what the concept of this is, joe. the center piece for me as the director is the domestic content rules which push out domestic content to 75% in the usmca zone

and then strong labor protections, $16 an hour standard plus environment al protections get us a fair share of that manufacturing. so the vision of usmca is to transform north america into the manufacturing hub of the world with the u.s. as the center of that universe. who cannot like that so let's get it done and i think that the next 30 days are going to be critical to that as congress gets back they only have so many days on the calendar though. it's really interesting how little they work, at least back here in swamp land >> yeah. >> so, you know, i'm going to be very optimistic about this -- >> okay. >> -- because it's so important to the country >> you've made the comment when talking about china, anything that you don't hear directly from lightheizer is fake news, but if you tell me something right now, can i -- can i assume

that it's -- to the best of your knowledge it's not fake news what you're telling me >> so the -- here's the two rules. the lightheizer rule is that all negotiations take place behind closed doors and there's no leak to the press. >> okay. >> the navarro rule, i've always wanted to have a rule named after me, is that if you don't hear it from lightheizer, kudlow, mnuchin, ross or myself, it's likely to be fake news designed to part a fool from his money. the problem, joe, as you know is it's a lot of mischief crepes into the news cycle to move the markets and just so many times as i've seen over the last year and a half it's just wrong so let's be cautious here for investors i think, look, play the long game here. see the chess board. >> okay. >> what we're trying to get to -- >> what's the chess board look like in terms of what was agreed to in april and what -- where

the chinese are right now for when -- as far as you know, for how it starts going in october have they said, okay, you're right, we did agree to that? we're willing to come back and talk about those things. or are they still way far apart and not much hope for getting close. >> you're asking me to violate the lighthizer rule? >> because the navarro rule takes precedence over the lighthizer rule, trumps the lighthizer. >> trust in trump, trust in lighthizer i think what's important here, if we're going to get to a great result, we really have to let the process take its course. they're coming here, leo ha, the top negotiator is coming to washington in october and he'll sit down with ambassador lighthizer look we know what the structural issues are it's what i've called the seven deadly sins.

it's worthwhile to go over them quickly. it's the cyber intrusions into the business networks. forced technology transfer, the intellectual property theft to the tune of several hundred billion a year the dumping into our markets the massively subsidized state-owned enterprises, the currency manipulation. the last one, the seventh one is very, very important to president trump. this is the made in china, fentanyl and other opioids that are coming into this country, going to kill over 100 americans today. they're going to kill over 1,000 a week and over 50,000 a year. just a couple weeks ago the mexican navy intercepted 23,000 kilograms of what appears to be fentanyl that was coming from shanghai on its way to toledo and beyond this is the kind of thing that's unacceptable so we know what the structural issues are, joe. we also want market access there and we'll have important, frank

discussions about that that will be behind closed doors with ambassador lighthizer who should be optimistic because i think the chinese really do want a deal they're getting hammered by the trump tariffs. they're having to cut their prices, manipulate their currency down into the toilet really and they're losing their supply chain i think, joe, that's one of the most important things about what's going on here i mean, they're losing their supply chain faster than you can say trump tariffs. >> yeah. >> i think that's good for the world economy, a more diverse supply chain is more resilient some of that is coming home and that's good for america. >> what is a more powerful force? i read the same article that maybe you're eluding to. we don't even know the extent of the damage that's being done to china's economy right now because we don't have the real numbers. so it may give the president more leverage in that regard but we were also told that china can play the long game and we

know that president xi's not up for election in november of 2020, so what is the more powerful force there that their economy is worse -- doing worse than ours or that he doesn't have to worry about political concerns like president trump has to worry >> so i'm not going there. again, the lighthizer rule the way i can best talk to folks in your audience today is to step back a little bit and look at all the things that i think are going to drive the macro economy. joe, you and i used to have talks all the time about what's going to happen in the economy here's what i see. i see that can be good the passage of the usmca i see the fed cutting rates. i see the european central bank cutting rates. i think if the germans engage in a fiscal stimulus we'd see 500 point jump on the dow in one day. that would be great for europe it would be great for u.s. exports. it would be great for the world

economy. i see china already engaged in significant additional monetary easing but i think they're going to do a second fiscal stimulus so i see a lot of things around the world that are going to stimulate the global economy, and these are the things i think investors should be looking at in the meantime, we need to be patient with the china negotiations and we need to focus like a laser beam in getting usmca passed because there's a lot of good things happening. i mean, the trump economy, let's be clear about this, let's talk about recession, it's silly, the trump economy is solid as a rock we have 157 million americans employed we've got 18 straight months of unemployment rate below 4% wages are rising historically low unemployment rates for blacks, hispanics, women, the disabled and veterans and my favorite, joe, my favorite statistic in all of this is we have over1.5 millio

prime age workers, off the couches back into the work force. this is what the dream was when i was helping president trump campaign back in 2016 to restore this country again to its greatness and he's done a great job doing that so let's be optimistic here. >> okay. we'll be optimistic. but there are people that support president trump. there's plenty on social media you can imagine. the president see shs it and some who support him say when navarro is whispering in your ear, president trump, about tariffs, you've got to realize that if it causes a slowdown it could affect your re-election chances. do you ever worry since you're a supporter that if you're too hawkish in this regard and try to accomplish too much with china, that we could slow here and it could impact the president's re-election? >> well, let's talk about my hawkishness, sir, my alleged

hawkishness. as you know, joe, i published a book in 2006 called "the coming china wars." today that reads like a normal government document. basically the way i described china ten years ago is the way i think america perceives china today. there is a broad bipartisan support on capitol hill to get tough on china and the american public if you look at the polling understands very clearly that we need to stand up to china's unfair trade i'm not understanding this hawkish point of view in terms of the fact that a lot of what i've said is now conventional wisdom in terms of the trump tariffs, i think they've been working beautifully. they're defending our steel and aluminum industries against a glut of over capacity. those industries are doing very well president trump used the trump tariffs to do something within two weeks that nobody got them to do within 20 years on the

border i think that with respect to china, let's be clear about this, joe. people need to understand this the tariffs on china are our best defense against china's economic aggression and best insurance policy this is important. the best insurance policy that china will continue to negotiate in good faith. so the trump tariffs are working beautifully so that's how we need to move forward. >> would there still be tariffs on november of 2020? >> i'm not going to speculate about that rule one, lighthizer rules, behind closed doors. >> lighthizer. >> i know you're trying to get me there my view is today is a beautiful day here in washington to get moving on the usmca. >> got it. >> a lot of great bullish news i remember sitting with you the day after the election telling -- we were going to get to 25,000 on the dow and you

chastised me because you said i was like -- i should have went to 30 but -- so let's go to 30 today, joe pass usmca, get a rate cut from the fed, get german fiscal stimulus and this is a global economy. >> and end the trade war. >> this is going to -- >> who snuck that in there was that becky. >> hey, becky. you've been so restrained. michael santoli, how are you doing, friend? >> peter navarro, thank you. we'll be -- the president's probably watching, too. >> i want to be an eagle, not a hawk, okay >> yeah. yeah >> don't we all. >> eagles. >> thank you, peter navarro. programming note, don't miss an interview with steven mnuchin, treasury secretary on "squawk box." when we come back, it is apple's big day. successors to the current iphones expected to be revealed in the next few hours. we have a preview next. later, jeffrey weigand

offers his thoughts on the vaping business as regulators aygin to take a closer look. st tuned, you are watching "squawk box" on cnbc ♪ ♪♪ ♪♪ ♪♪

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josh lipton has more. >> this is apple's big event the company is tight-lipped. analysts think you're going to see three new iphone models. among the upgrades, faster processor, improved camera system, maybe stronger waterproofing and shah ter resistance big question for investors, what's going to be the price how much is tim cook going to charge you for these new models. some analysts think he's going to keep the prices constant, no big change from the current lineup in addition to iphones, there will be a focus on wearables we expect new watches. washls have been a bright spot for this company even as iphone franchises come under pressure they think apple has sold 80 million watches to date, 50 millionaire pods you can buy washls and services and it's approaching the fortune 50 company it's been six months since they unveiled new services.

investors would like new details about apple tv plus, the new streaming service. what is the price of that service? reports indicate apple was considering ten bucks a month. we want price, we want availability as well as apple arcade the new game service as well what's the price and availability for that? perhaps we'll find out later today. back to you. >> josh, you say perhaps we'll find out more about perhaps the video service. do you have any sense about whether in fact those details are going to be coming today or are we speculating on that >> i mean, listen, it's something traders, investors, we saw interest in that >> price, availability, the content is must-see tv when you talk to some analysts they think apple has certain advantages they'll talk about specifically company's install base so the total number of active apple devices in people's hands. that's 1.4 billion and counting.

it's possible apple leverages that and hooks people in in the same way they do apple music which has 60 million fans and counting, guys. >> good point. good analogy it's interesting how apple music at the beginning didn't seem like people were excited about it very big business. joining us now for a deeper look into today's apple event and the tech sector, steve milenovich steve, good morning. >> great thanks for having me. >> you heard the setup there in terms of apple let's start with that in terms of how you're thinking about, you know, this particular product generation what it means, if much of anything, for the upgrade cycle for iphone and how it fits into how investors should be viewing apple. >> today i've become technology strategist my colleague is now the lead but -- >> on apple. >> on apple. i'll back him up look, our view is that this is kind of an incremental announcement, at least on the iphone side. we'll have three new models on the triple lens camera

pretty flat iphone usage i'm glad to hear people talking about washls that's been overlooked now with the iphone pretty flat, it's a couple of points of revenue growth you combine that with services and you could get low single digit growth to move forward. >> to put a fine point on that, you think it's been overlooked because people haven't paid enough attention or because we always had bigger drivers than this has washls become a bigger piece of it or is it because everything else -- or because iphones have become a big part >> the iphone was down 50% of revenue. clearly the iphone has been a big story. so that's been one reason people have overlooked wearables a bit. i think they under estimate what apple can do here, the other types of things they can potentially put on the body. clearly smart glasses would be the next best thing. augmented reality is something tim cook has talked about.

one of the things we talk about as tech strategists, it's going to be ai, ambient computing, it's all on you, around you in stores, in the home, hopefully in a fairly customer friendly way. that's where apple is so good at creating the positive customer experience wearables is a big part of the future. >> broadly on tech right now, you know, we were talking before about how a lot of the most popular kind of big software names, cloud names really pull back sharply you've had this rotation going on in the market they've been leading semis did well yesterday how are you thinking about tech in general right now as an opportunity? >> so tech in general, we're thinking kind of a market waiting. we like tech longer term you've got the pmis under 50 the ism new orders just broke 50 when that happens you see tech pes ontract, earnings come in. we look at analyst estimates for next year, particularly in semis. we think they're a little bit on the optimistic side. we think there might be a limited near up side

we are over weight services, internet, you mentioned software we're market weight there. the big change has been software has faded, had been by far the best performing sector you have tough comps semiconductors have taken off. we've got high inventory levels there. we've been discounting it. semis and hardware under weight. >> internet, facebook and alphabet, big part of that, i assume so how do the investigations fit into that and just as a, you know, general sentiment headwind or is there general business risk here? >> i think it's probably a little more sentiment. we are moderately positive on fang it's going to limit the up side to some degree the next five won't be as good as the last five these companies that are successful in tech have good 10 to 20 years.

they have time to make some hay. i don't see the next major disruptive technology get them reg gu lagts in the case of microsoft is going to get them they missed the coming technology disruptions and that's going to be years away. from that perspective i think it limits the up side they won't be able to do as much mna. i think regulation could be years away. >> even if management is distract distracted, they're not likely to be distracted by the next new thing. >> i don't think so. who's the leader in ai it's microsoft, facebook, so forth, obviously google. maybe there's something coming one of the things we're looking at is the internet was supposedly going to make the little guy powerful, decentralize -- we've had these platforms, almost the opposite i do think you could see maybe some more decentralization, peer to peer. that's where blockchain could make a bit of a difference that could be a big threat. >> down the road

steve, good to see you. >> thank you. when we come back, america prepares to mark 18 years since the 9/11 terror attacks. we have a special interview with howard lutnick and the chairman of bgc partners. and getting her car towed. all i had to take care of was making sure that my daughter was ok. if i met another veteran, and they were with another insurance company, i would tell them, you need to join usaa because they have better rates, and better service. we're the gomez family... we're the rivera family... we're the kirby family, and we are usaa members for life. get your auto insurance quote today.

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welcome back to "squawk box" on cnbc live from the nasdaq market site. we're right in times square. we're taking an in depth look at the ecigarette industry today. the popularity of next gen smoking devices has soared, but manufacturers are now facing mounting challenges. wall street is taking notice aditi roy joins us now good morning >> reporter: good morning to you, joe with all the heightened regulatory scrutiny around ecigarettes, piper jaffray downgraded them. they're less confident juul will

be approved by the fda juul is spending more than $100 million to prepare the application to keep selling its products in the u.s. to win approval the company has three big strategic goals. one, it's to fight teen vaping it's a big priority for the fda and lawmakers. another is to battle counterf t counterfeits not sanctioned by the company. to do that it has lawsuits and will work with federal agencies and work in 37 federal raids and 25 state level ones. finally, it's hedging its portfolio. there's so much noise domestically on the regulatory front that it's focusing on international expansion. since last year juul has launched in 18 different companies. there are a billion smokers worldwide. keep in mind, 970 million of them live outside the u.s. still the opportunity in the u.s. is notable since last year. ecigarette sales have gone up more than 90% from $2.3 billion to about 4.5 billion while

traditional cigarette sales have declined 3%. that's according to nielsen. back to you guys. >> aditi, obviously a huge part of the focus has been how teenagers have picked up with some of these vaping incidents we've spoken with the former commissioner scott gottleib about this and how he at the fda was going after trying to curb teen use of this and to go after companies who he thought were reaching out specifically towards those team groups. how much of that kind of resonates back in what you're hearing on this? >> reporter: it's huge obviously they're being very aggressive, the company juul about the company 21 initiatives. it seems like it's hard to tell whether that's going to really convince the fda to approve their products for instance, in "the new york times" there's an op ed by michael bloomberg and the campaign for tobacco free kids they're launching a $160 million fund to help about more than 20

cities nationwide pass bans on flavored ecigarettes san francisco's already banned ecigarettes. michigan banned flavored ecigarettes. that push is extremely strong. in that piper note they said, again, they're not sure whether it's going to pass fda approval. the teen vaping stuff weighs heavily on lawmakers and regulators. >> we've been talking about how new york governor andrew cuomo is banning flavored ecigarettes and watching in the stock market at least how this is having an impact on companies like altria which owns 1/3 of juul what do you think happens next in terms of how these companies try to get ahead of the regulatory headwinds that are really following and facing them >> reporter: well, we know that juul has poured a lot of money into lobbying, for instance, and has increased the lobbying spend. they're hiring notable people from politics. i know in san francisco there's

a push -- they're pushing an initiative in november that will be on the ballot to overturn that ban so they're also marshaling all of their political influence to fight that. >> i'm watching the papers every day for the next incident. we talked we had dr. gottleib -- >> yesterday once again. >> it's not, you know, the classic use of these things, i guess, it's when you use it with cbd or oil. >> it's the unregulated ones that are using this. >> modified. >> oils are used as the -- is it the solvent to kind of get through instead of water which is what most of these are and that's been the huge thing. >> as a regulator, how do you -- you know, you don't want people getting introduced to nicotine because of these or cigarette addiction. how do you regulate that >> i don't know that you do. joining us on the squawk news line is the man who blew the whistle on big tobacco years

ago. jeffrey wigand he's the founder of smoke free kids he says this is a gateway situation to have the ecigs and that leads teens and children to work their way to cigarettes thank you for joining us today. >> good morning and thank you also >> just for people who aren't familiar with you, i want to remind them that you were somebody who once worked for a tobacco company doing research in a research and development company but you were the whistle-blower who said tobacco companies had for years been spiking some of these cigarettes causing and creating higher addiction levels you were the one who blew the whistle on this and helped bring the lawsuits that came against the industry and eventually brought about big change what do you see happening in ecigs right now? >> ecigarettes in particular for juul, who commands more than 70% of the market share on what we call

ends that turn up nicotine delivery systems, however, juul is marketing a product that is totally unregulated or in better terms, it's an unlawful product. and that's been so stated by the court now as well as the fda so they have some issues associated with the continued marketing of their product as well as njoy and the rest of the vaping folks. >> as a researcher, when you look into what's happening, why do you think this is so destructive and addictive? what do you think is actually happening? >> first of all, with juul, you have a high dose of nicotine up to 15 milligrams, a little pot which is equal to two cigarette packs. >> in one pod? >> in one little pod, okay >> so you're talking about heavy

dosing that you think is at addictive levels >> yes and so -- and they've added mango to it and peppermint and a whole bunch of other flavors susceptible for youth, children. the penetration is themiddle school an high school kids if you look at the statistics roughly about 60%. that means that children in the school of vaping now and will ultimately change to a cigarette. it's interesting to note that altria or phillip morris has taken a minority stake in juul. >> which means what? >> now the ore -- all -- all the -- all the vaping devices and -- will deliver nicotine

not as much as juul and they all add some flavors to it what's unique about what's going on now and the five deaths -- i mean, when we had light cigarettes, it took 15 years before we had the first death associated with smoking light cigarettes we have five deaths already in less than five years that's significant how is that happening? first and foremost, the users are experimenting with adding thc or other drugs into the vaping system. most notably has been defined -- has not been verified is the vitamin e acetate, coconut oil

and these -- they volatize and allow the active carrying of the chemical in the vaping phase what's happening is it's fat that's going into the lungs that's coating the lungs and incapacitates the lungs. these kids that are coming into the emergency rooms are suffocating because what they've done is they've been smoking the product, mostly cannabis, thc, that's been using an oil as an excipient so it is called lipoid pneumonia, fat pneumonia and a lot of them are going on external breathing systems because their lungs have flat out failed them. there's no way to redissolve the

fat that has now adhered on the surface of the lungs >> jeffrey, i want to thank you for your time today. we do appreciate your calling in again, jeffrey wigand. >> you're welcome. >> coming up, cantore fitzgerald chairman joins us, howard lutnick. that special interview is next when "squawk box" returns. stay with us it was sophie's big day.

by the way, she's the next mozart. as usual we were behind schedule. but sophie's enthusiasm cannot be dampened. not even by a run-away donut. we powered through it in our toyota prius. because a star's got to shine, no matter what. it's unbelievable what you can do in the prius. toyota let's go places.

tomorrow marks 18 years since the 9/11 terror attacks. our next guest is known for rebuilding his firm, cantore fitzgerald, after that terrible day. cantore lost 2/3 of its new york employees on that day, including the ceo's brother. let's welcome howard lutnick cantor fitzgerald's ceo.

we want to get your take on the markets. we want to talk about the remembrance of the day it's a tough part of the year for you. when does it start, about september 1st? >> correct right as the summer ends i sort of start getting a little edgier you know, it was an event that couldn't possibly happen someone can get sick someone can die in a car accident but it's not possible that everybody you work with -- i mean, imagine the set's gone, everybody you work with is gone, everybody behind all the cameras, everybody who you love. people don't realize how much you love the people you work with, but you actually love them and what happens when they get taken from you is you cry. there's just no other way to say it, you just cry. >> 18 years feels like what, a year and a half, two years >> it depends. sometimes it feels like forever ago because my life is completely different and when you get to like now it feels sort of right upon us. you know, so we try to turn that day into something beautiful

all of our -- tomorrow we have a charity day so all of our employees, we ask them -- >> sips 2002, right? >> yeah. we've raised over $150 million we hope to raise about $12 million tomorrow so the idea is all the clients h business as possible i invite fun celebrities to make it a cool day so that imagine someone works all day and go home sort of tired and i don't want them to say their family -- look, i worked all day and it went to a charity thing. they show a picture of eli and peyton manning and they say, wow, dad, you have a cool job. president clinton is coming, tony blair, cindy crawford, very popular on the set sean penn, lots of great celebrities, they make it found for our guys and women. and they just make it an upbeat day. we try to raise as much money as we can, do it in a fun way >> what charity is the money targeted for this time around? >> so we thipick 150 different

charities. each celebrity picks a charity and we support their charity the relief fund keeps about $5 million and does one big thing so you remember earlier this year we went to puerto rico. and we went down and gave away the $5 million to 5,000 families down in puerto rico. giving each a thousand dollars so, you know, we're ready for next one i hope there is not a next one i hope it lasts a little longer, but we're ready for the next big thing and that's what we do, we give 150 different charities and it is really an uplifting day for very difficult day but it is the right way to spend september 11th for us. >> business on that day is -- does it go up for you? >> huge. huge our clients are incredible they come in, you know, prince harry picks up the phone and starts talking so you say, all right, i'll buy 500 million of x, y, z one year we had prince harry on one phone and prince william on one phone and did a $2 billion

foreign exchange trade because the guys were just so excited to do stuff and they know that commission goes to -- we're giving it all away to charity. it is pretty fun people tell you what they want to do. if i remember back when we first reopened after september 11th, we had clients and we said, all right, we'll do one trade per client we a we're not sure the pipes work one of the great compliant clied we'll give you all our trades for the day. our board voted, you should do them all, we're sending a runner with the tickets, do the best you can. that's why the company survived. the company survived because our clients stood by us when we were broken and helped us rebuild. and it was really incredible so i have great people who give of themselves and great clients and that's why we're able to rebuild the company. we added a couple of thousand employees then almost 14,000 worldwide now. we have come back a long, long way. >> good. i hope everyone is watching now.

they are and now they now, how do you not know what tomorrow is anyway while we have you here, a minute and a half left or so, has business reflected the overhang of a possible recession in your view or does that -- not something you're seeing? >> when we talked last time i was on, it was on the late cycle recession, you know, it is coming, it is coming we were on -- we were together, now it isaugust, september, still coming, still coming i think we have a weaker economy for sure are we in a recession base yet no i think we still got at least a year to go and maybe longer i would guess toward the end of 2020 it is looking weaker. i think we muddle through low growth, 2% growth. that was good during obama trump goes out and says 4, 4, 4, you feel like -- we're still hanging in there. >> you -- on record, saying

china could lose a percent of gdp every six months from the trade war. it is hurting china. but i just asked navarro, if they play the long game and don't have elections, even if their economy is worse than ours, does that still give them more staying power or who has -- >> they surely have more -- >> who has the leverage in your view. >> what trump has done is he's forced people to reconsider the supply chain they were overinvested in china and maybe i better move some and just that thought of, hey, might be i'm too one sided, i have to move some, will harm the gdp in the long run. as you said, they don't have elections, we have elections, we can change sides anytime we want every four years, so they clearly have the advantage in the long run because they can stay the course in a way we cannot but overall, i think this trade war is more harmful to them than it is to us and therefore he's likely to get a deal done, i

just don't know when my guess is he would like to run for re-election on fighting with china. my guess he would say, do you want me to be fighting with them, or do you want my opponent that's a position i think he like likes. my guess is they don't make it to china until after the election. >> thank you for coming on it is not sweet, it is bitter. maybe bittersweet with what you're doing tomorrow. good luck tomorrow. >> thank you for your support. i appreciate it. thanks very much >> down to the new york stock exchange jim cramer is here jim, we have been talking about so many things today it is apple's big day with the reveal and we have talked this morning with guests about how much the wearables business could be. that's something you focused on for a long time too. what are you look for today, what do you think about where the stock stands what do you got? >> if you talk service, if you talk wearables, and it will not give you the numbers of wearables, they'll give you a percentage then i think you got a story to

tell you got to see maybe they run through some of the great trailers they have for apple tv. in the end, i think the analysts are anxious to say apple once again has had a big run, shift elsewhere. the market doesn't look that great today. i don't think -- i think it will be a bit of a nonevent unless they say, look, the service revenue has really come on and the credit card, they have got to talk credit card, so far both goldman and apple have been very quiet on credit card, would be terrific to hear about adoption you know you turn your phone on, if you have the credit card, it pops up instantly and those of us who have used the card like to see, wow, look at that, i got money back i like the features. >> jim, thank you. it is great to see you by the way, make sure that you don't miss a big interview here on "squawk box" tomorrow morning. we'll be speaking with treasury secretary steven mnuchin at 8:00 a.m. eastern time. "squawk box" will be right back.

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final check on the markets not a whole lot of action premarket. down 40 points august was more volatile than september, so far. we'll see. >> a lot more volatile yesterday below the surface, momentum got pounded, a lot of people talking about that. >> by a lot of people, we mean mike. >> me, people watching, the tick by tick, absolutely. >> i think before we know what happens today, we need to wait until 4:00

>> good idea >> watch every second between now and then. >> don't miss any of that. maybe just for bathroom breaks that's up to you >> anyway, make sure you join us tomorrow you're back. santoli? >> i will. >> we'll all be here for now, "squawk on the street" is next. ♪ ♪ i feel like busting loose >> good tuesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. four days up for the dow busy day as we await apple's iphone event this afternoon. bunch of downgrades with names like wells fargo and wendy's on the list europe is mixed. oil six week high. road map begins with apple's moment of truth. set to unveil its latest iphone lineup today, but for a company increasingly focused on services, will it move the needle for