>> good morning, everybody welcome to "squawk box" here on cnbc we are live from the ninth annual alpha summit in new york city i'm becky quick. joe kernen, andrew russ. >> news from the federal reserves you can see the dow futures are down by about 70 points. nasdaq off and s&p off as well in japan, the nikkei is up by about .3%. the hang seng down just over 1%. in europe, active trading taking place now, you'll see green

arrows across the board. nothing by more than a percentage point the dax is up just over a 10th a percentage point not surprising anyone with any expectations more rate cuts could come if the economy slows. 10-year yielding 2.237%. >> i saw there were three dissents they failed to point out one of them wanted to go 50 the future federal reserve, in raining. >> right wanted the cut by 50 basis points >> a job interview >> right

in the general news, they said, the federal reserve was doing okay it looks like a great economy but there are things to consider beyond the globe >> i thought that was his best perfo performance yet. maybe not what you were hoping for and ending up on the day, you were effective >> am i here >> over there. smile for the camera >> okay. new reports about how -- was that was that fake? >> new reports about at&t plans

for direct tv. stock moving a little bit. reporting the giant is considering options including spinoff. >> fake news >> is it fake? >> i have taken calls on this. this is fake news. i shouldn't use that term. you are right. i actually dislike using that term >> i know you -- i knew -- >> okay. read the report and tell us what is wrong can it. >> direct tv is in discussion with dish. saying direct tv had been bleeding subscribers as viewers shift. as you know, acting investor disclosed a stake in at&t and named businesses including at&t

we've got $800 billion in debt they are paying it down some people think it gave scale considering all sorts of things. at this point in the day, they are not considering. my understanding is that they are not considering. the wrong acquisition to make. they need to pay down the debt it is a bid of a complicated

story. you do have the diffident story and fly wheel issues i think what is happening, i think they've forced the issue the idea they are considering it now is premature how about that >> what is the long-term second place is if you do spin it off, what happens to it he would love that >> by the way, it is a different environment to when they said no to that. >> these are all the questions >> back in the '80s when cable

systems were being built out the write offs that you could get a client selling these were like four, five, six to one but you at least get the write off because satellite tv is probably going to put cable tv out of business in the '90s here we have so many years later and that's not happening cable with broad baband is proby more available >> comcast giving away boxes for free everybody is still looking to control the box. if it means you got to give it away, you still get to be the one controlling it >> i called it fake news it was a bad term to use it made me listen. >> i tell you what, it is

possible six months from now, it will happen. but what happens in the news business more broadly is you could be wrong today and right later. >> context is important. >> in the moment, i don't think this is correct. could it be correct in the future it could turn out to be correct. >> bow also says the faa administrator set to meet with flight engineers today for an upclose briefing on the max and the updates. dixon says he won't certify before he flies it himself >> i'm not going to sign off on

the aircraft until i would fly it myself or put my family on it >> you will fly it before you certify the plane? >> i will fly it >> he's a former fighter pilot and also worked for delta. he's certified to fly the 737 max. boeing is expected to submit a software package to approval within weeks tesla earning top marks. model 3. the first of vehicles to win that rating. a bit of a vindication for the company and for musk who was accused of making misleading safety claims. the audi'selecti rick model

received high safety rating as well because the batteries run along the bottom creating rigidity and center the weight much lower in the vehicle. it can be considered helpful in terms of physics i'm no physics >> we should appreciate the calm >> kind of like if you were going to test people if you could be a broadcaster, this would be like the 20-mile

obstacle course. when the people get here, you can't even hear yourself >> we should call this our super bowl >> could we do another one of these in january instead of davos? no i love davos >> we get to see all the people we want to see in one place at one time >> what if we did a segue. >> you want a segway >> no cars or snow and we walk a mile and a half every day. >> when we come back, we'll talk about the fed divided. what growing dissent means for future moves and more on your money. >> don't miss the sit-down

interview with mike pence coming up in the 11:00 hour >> that's today? >> let's talk about some questions we can ask >> i looked at some and i'm deliberately not using yours >> let's look at some of the biggest winners and losers microsoft is buying back some shares we'll talk about that a little later.

>> the u.s. central bank is cutting. the outlook is cloudy amid pressure coming from the president. steve joins us now with more >> i wonder if we are missing an important investment the stock market held up pretty well yesterday october probability is now at 39%. down from 52%. probably of another cut.

that same cut probability for december is down 10 percentage points within the margin of error there but slightly hawkish stocks rebounded sharply the fed doesn't think there is much more to do ahead of rate cuts but will do more if needed. >> if the economy does turn down, then a more extensive sequence of rate cuts will be extended we'll follow that path if appropriate. we'll continue to monitor these developments closely and act appropriately. >> the fed cut brought the new target down. reverse two of last year's four rate hikes 7 of 3 one official from st. louis, he

wanted to cut rates by a half a percentage point two investors, they didn't want to cut rates at all. the second time in a row they dissented. five forecast no more cuts and five appear to not want another cut yesterday. the market is either throwing out those cuts it is comfortable with a little less in the way. >> they didn't think the fed cuts would be there but three of them voted to go with the cut anyway you would have guessed five of them would of said no. >> i should have explained this. there were 17 members. not all of them had voted. >> i didn't know that. >> 10 voters, 17 forecasts >> got it. >> to say, we are not sure what

we are going to do it is okay >> get rid of the forecast >> i don't know why he didn't say that before. it is wheer when he said midcycle adjustment. why did he feel the need to say that anyway? he might have hit the right tone do you have that two-year chart up that's a pretty decent chart there. the stocks chame down and came back up. >> you don't have much more to promise, joe you are coming close >> we'll talk about it more, more from what the markets can expect, let's bring in our guest. look who we found, dorywiley

>> i assume i've used that before i don't know dory we found him >> you remembered. >> i'm a fish with no memory, i can't remember >> how are you >> great >> yesterday, i think it went pretty well. >> absolutely. how much more do they have to do it still amaze me how people are so negative about the market overall. if they had to make this announcement when s&p was trading, do you think it would be a different tone or are they

trading to the stock market at all? i do feel like should have factored in. the fed met the market more than half way here. the data has to make the case rather than it being automatic >> that is interesting if we have a bit of a selloff between now and then $2,800 to $3,000 in the s&p is where we seem to be stuck at right now. >> dory, would you say now is the time to buy banks? is this the place to go in your view, right now? >> first of all, i'm never going to get in the trap of saying we can't go much lower in rates

we see where the world is going. having said that, i do love banks here they have a huge amount of capital but that is priced in. it looks good. not as rapid as the 4% of the market and the president wants the banks are positioned well for a mild recession if it were to show up >> were you unsatisfied with anything you heard from jay powell yesterday >> no. i loved what he said he handled it very well. the market has been very debt induced. we have a real estate president that likes debt. we have production and manufacturing and things slowing down we are at low and global rates

there are a lot of structural things changing. we have to realize we may be in a slow growth for a while but we don't need to fuel it with an addition to death. we are doing what we need to do. congress needs to do what they need to do fiscally. now he's saying, look, we need to be data dependent going forward. >> j.j., can i put the inverted yield scares behind me now >> i don't think you can say it won't happen again it was like everyone wanted to say, okay, this happened in three days, we have a recession

coming in three weeks. the second part is it is amazing how quickly we see the perspective of rates change. we saw it right before the cut as all of a sudden, today, i'm reading it has people pretty divided. today, i read probably three notes that set we are definitely cutting rates again. i read three notes that said, we are done for the year. could we see the yield again for the short term >> yes, we could it comes down to tariffs we are projected to a slower earnings season. perhaps dollar strength may hit some of the multinationals >> real quick, they are doing

insurance cuts now they are really not very data dependent. that jobs number all of that stuff. >> forget about all of the external pressure. >> i think they have to -- i think that's what he said. >> he basically said that. >> okay. so dory, you know why i figure it is wily the reason i bring this up, he carried a goldfish around on his neck perfect game for a fish. >> george? >> gill. it was worth it. wasn't it worth it to have this completely useless info. >> i love the abuse.

i have a partner we sponsor. his name is nemo i kid you not. >> is he a clown >> we did find each other so that's the key thing >> that is amazing you love disney stuff, don't you? >> the first was finding nemo. >> a disney/apple merger could have happened. according to a new piece we've been talking about this speculation for some time. we are live at the alpha investor summit in new york. in the heart of midtown manhattan. we are back in a moment. ♪

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>> welcome back to "squawk box." we are live. disney's iger is coming out with a new book there has been speculation many years that disney and apple might one day merge. he says that a disney/apple

merger might have happened if jobs hadn't of died in 2001. remember disney acquired pixar putting jobs on disney's board last week, their interest video prompted iger to resign. he said, if steve were still alive, we would have discussed very seriously and how the relationship prior to the pixar deal was frayed. >> i'm trying to look back to the market cap then. apple was in several hundreds of

billions apple was $9 billion before jobs came back. >> this was later. with he just cross over, his other company. i started -- i think i'll start with something on the side, pixar. >> we really understand the jobs family wealth today. it is a function of disney, not apple. he sold so much of this stock when he first left, he was pushed out much of his wealth, they own 20 something million of disney. >> apple is worth $226 billion in 2010. >> diz was what then >> $75 >> coming up, stocks to kauch? we'll tell you about a streaming

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>> good morning. welcome back to "squawk box" delivering live from the 999 alpha summit in new york futures are down a little this morning. we are down 72 today, as you can see this morning on the dow indicated there. the s&p down and the s&p off

about five >> microsoft shares are higher this morning the company announcing plans to buy back more than $40 billion in stock the third time the board has authorized a buy back of stock they've been doing this pretty effectively. that stock is up by 1.2% and leading the way. roku shares under pressure today. that stock dropped yesterday after comcast said it would give customers a free streaming device and looking for ways to keep control of the box. roku down another 2% >> coming up, after yesterday's fed decision, where should you

be putting your money to work. joining us to tell us his top picks in the market. later, steve bannon will take trade, the latest oil attacks and china and more stay tuned aack in a moment delivering to you from alpha this morning passio out. and you should be mad your smart fridge is unnecessarily complicated. but you're not mad, because you have e*trade which isn't complicated. their tools make trading quicker and simpler. so you can take on the markets with confidence. don't get mad. get e*trade and start trading today. so, every day, we put our latest technology and unrivaled network to work.

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. >> welcome back to "squawk box" this morning u.s. equity futures and markets still digesting some of that news steve leisman says he thinks if a slow comes it will be because of the numbers the fed is still watching nasdaq is off by 27. the 10-year yield off a little bit. 10-year at 1.791 >> after ned's fed decision, the question is where do you try to put some of your money to work here now to help us help you answer that question managing director, i know you

have some interesting ideas. you've been on a handful of times. i wonder if any ideas in the past have changed from what the fed did yesterday. >> everyone is a fed watcher i don't think it is of much value. as it was said, the markets aren't here to, they are here to serve you. everyone is saying, what is the future bringing. the data has not fallen apparar d domestically >> that may be true -- you've liked the banks. bank of america, in particular for a long time. >> yes >> that is had eavily dependent

what the fed does. >> the economy is the most important component to the banks. it is interesting people worry about the economy. the economy isn't falling apart. where people should be worried is the stock market. people go back to '08 and '09. we have other periods of the bare market that grows that is the real thing here. the idea the economy and stock market are tight market step that was led by the capitol market and fed market.

greenspan cut rates because wall street wanted it, not the economy needed it. >> cole, the flip side of that, when the market takes a meaningful dive, you could make the argument and maybe i'm overstating the case that the stock market this time around has a better chance of taking the real economy down than the real economy does of taking the market down. >> use microsoft that component is a big component of the dow and the stock market creating a lot of success, you are right. use what happened last week as an example one of the largest change overs we have seen global bond yields rising in a

two-day run. i say that because, we are in hotel california, guys you can check out any time you'd like but you can never leave >> also the roach motel. >> but like henley says, last thing i remember, i was running for the door i had to find the passage back to the place i was before. the place i was before is chief stock is meaningful. the idea that all businesses are going to win is wrong. corporate america is levered and that's the problem. >> if you keep going with the lyrics, we'll have to pay royalty. i want to make sure viewers get some ideas this morning. i mentioned bank of america,

lennar is also on the list >> yes we are a big contributor of occidental petroleum we could have a terrible market. money could be made because no one has capital in that arena today. >> cole, it is great to talk to you. >> thank you, guys >> a great conversation. we'll sing a little bit more from that song in a little bit >> thanks forgetting it stuck in all of our heads when we come back, a big day here at the alpha summit coming up raj shah coming up next green arrows across the board.

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welcome back to "squawk box. we are live from the ninth

annual alpha summit in new york. the best vesting ideas from asset managers on wall street. joining us now is raj $ billion. raj, thanks for being here >> thank you for having me >> it's interesting, the rockefeller foundation i think is the only foundation that has an official arm that's dedicated to asset management. so it's a little interesting we were talking about it before you got here how does it work and what's the relationship with the noun addition >> we created the rockefeller foundation impact investment management platform to help investors who wanted to be serious about having social impact with their investment we see a country today, our own country where it used to be the case that 90% of american children could do better than their parents. today it's less than 50% it used to be the case if you were born in poverty in this country, you had a 50% chance of ending up in middle class 40 years ago. now it's less than 20%

so investors, business leaders, we saw the statement from the business round table have a responsibility to help change that and we meet all the time with family offices and investors who are serious about wanting to have a positive social impact and we try to help them do that by finding high-leverage smart investment opportunities that are really -- >> it's not just managing money. >> your own funds? >> no, we have an endowment. we use the endowment to promote these types of activities. but this is about helping others who are making trillions of dollars of investment decisions put some serious proportion of that towards social impact >> since you've come along with this, how have your own investing returns been and i ask that just because obviously this is part of your mission. but can you do that and still manage the assets of the foundation for the maximum potential to fund the other projects the foundation is involved in? >> yeah, our endowment is managed very successfully and very well and is now nearly $5 billion. our impact investment portfolio is really targeted at measurable

impacts to lift people up. so we've invested in a platform called six up that helps thousands of low income students in this country go to college and get financial services to do that they use unique new technology algorithms to make that bankable >> meaning what? you wouldn't be looking at how much money you have in the bank -- >> test scores, potential for performance, ability to support them while they're in school to improve performance. and we know that correlates with repayment after the fact and lowers their effective interest rate and we have invested in cross-boundary that is providing energy and electricity access to nearly 200,000 people in rural africa that don't otherwise have electricity. that is transforming their lives. and frankly, cross-boundary is able to find partners that charge a price per kilowatt hour that allows for a reasonable return for investors >> what do you consider success?

i would look at it and think you have two different things, two different goals you're trying to accomplish how do you measure it? >> investors that work with us, often there are foundations or other offices are meeting their investment returns success for us is also that we can measurably demonstrate real impact against climate or human opportunity goals. and we think that there's more and more interest in this area of investing and our big message to folks is if you're really serious about this, you have to go beyond esj analyses or negative screens if you're serious about positive impact, find a partner like the rockefeller foundation or someone else who you believe is credible and has a network around the world of entrepreneurs and businesses seeking capital, but also trying to lift up people who otherwise are vulnerable >> investors and family offices that are interested in doing this type of thing, are they mostly u.s.-based? >> oh, no. in fact -- well, certainly we see u.s.-based partners and our

current partners are mostly u.s. based such as macarthur foundation and others. we see a lot of interest out of china and asia where there are more than 800 billionaires in china. it's the fastest growing philanthropic environment in the world. and their version of philanthropy is really impact investment >> i don't know if you saw this. a couple months ago calpers, there was a report in the "wall street journal" calpers brought a consultant in and showed them actually their investment strategy, which was an esg oriented -- they were one of the most progressive aggressive in this space that they actually had much lower returns as a function of it than they would have had they kept nicotine companies and cigarette companies and other things in that portfolio >> i think you should -- if you're going to do something good, you should -- water.org. accept the 2% or 1.5% return give water build outs.

don't expect -- maximize returns. say what you are, do what you are, do it philanthropically and -- >> we do we've invest ed in science and technology that's helped billions of people move off the brink of poverty, punger next week we'll be announcing a major partnership to -- >> 2% instead of trying to maximize -- >> that is exactly what we're suggesting >> even if you got your money back after micro loans >> what do you make of the larger trend there are pension funds across the country who are thinking of isg and things like this they look at calpers which was the leader in the space, and then i think there is a little bit of second thought -- >> i don't think there are second thoughts at this point. >> you're moran impact investing less than esg, right >> that's correct. we're more impact. i'll give you this about esg there's almost $31 trillion under the label of esg investing.

that has grown by $10 trillion in the last 2 1/2 years. so that trend is serious and is happening. only about 3 to 4 trillion of that is serious. the rest of it is not done well. like any other industry at a nascent early stage, people like calpers and others will do better it is certainly the case if you're a teacher in california, you probably don't want and need to have your capital in a nicotine business or in -- >> you might not want it in a free and fair trade coffee company that gets worse returns because it does president take advantage of comparative advantage. you feel good on the front end, get lousy returns, less for retirement >> that's pretty judgmental about free and fair trade coffee some of those do well, some don't. >> it's based on performance >> i'm making a point, if you have a low return from not being esg, the people you're trying to help in terms of pensions aren't getting the returns they deserve. feeling virtuous on the front

end isn't worth it -- >> impact investing isn't for everybody. there are billions and i think soon to be trillions of dollars of capital in the hands of people who want to have a social impact -- >> it's a philanthropic move >> i would say -- >> just give me my money back, give the micro loans to people who can't get water, don't have toilets. >> we've been doing this for a while. that's not the most scaleable way to move hundreds of people out of poverty you need both and an all hands on deck effort that's why we welcome the statement from the business round table, we welcome the trends we see in china and elsewhere. that's why we built a platform that's mobilizing hundreds of millions of dollars towards businesses -- >> raj, thank you. i really appreciate having you here >> teach people to fish than give them the fish round table did okay, maybe they'll do betterment even before that they did some good coming up, market reaction yesterday's fed announcement gray jay powell performance, we'll tell you what to expect. we'll talk about what president trump says doesn't like the guy

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>> announcer: the delivering alpha investor summit is back, and "squawk box" is live joe, becky and andrew are exploring the critical issues impacting markets with some of the brightest in business.

plus, former white house chief strategist steve bannon joins us to talk trade, iran, and the president's criticism of the fed. "squawk box" live from the delivering alpha summit begins right now. ♪ i'm back, back in the new yor mood ♪ ♪ i'm back, back in the new yor mood ♪ ♪ i'm back, back in the new yor mood ♪ ♪ >> good morning. welcome back to "squawk box" here on cnbc i'm joe kernen along with becky quick and andrew ross sorkin santoli is here and liesman. we are live from the delivering alpha summit from new york city. you feel left out if you guys weren't here, rightly so welcome. >> i get it right at the top i have patience. >> it wasn't in there. >> let's go. let's go

>> futures were down yesterday we were up, down, but not out. you can see on the implied open for the dow, s&p indicated down about 9. nasdaq indicated down about 30 andrew, it's your read >> couple big headlines at this hour to tell you about faa administrator steve dixon says he's not going to end up certifying boeing 737-max to return to service until he flies the plane himself. he made that remark in an exclusive interview with "nbc nightly news." he's set to meet today with boeing executives. separately ryan air has frozen payments to boeing and is in talks about recouping the cost of the max's delayed return. we should tell you the head of the faa is a pilot separately, facebook c.e.o. mark zuckerberg continuing a visit to washington today he met with some senators last night, will meet with policy makers today coming as facebook under scrutiny for its privacy and marketing practices. and the bank of england has now left its key interest rates unchanged in an axa announced

just moments ago and planning an interest other rate news this morning. following the rate cut by the fed yesterday, the bank of japan keeping its policy steady overnight, but signalling it may expand stimulus at its next meeting and going against the grain on the other end norway, which raised its key interest rate by a quarter point this morning, norwegian economic growth remains solid >> are we the only ones on the planet raising interest rates? >> steve, there's no way -- >> i think there are a couple others the drift is downward. >> all right new reports about at&t and its plans for direct tv moving the stock. the "wall street journal" reports the telecom giant considered several options including a spin-off of direct tv as a separate public company or combination of assets with dish, its rival. reuters says at&t and dish are not in discussions over a deal due to regulatory issues direct tv has been bleeding

subscribers as users shift to cheaper online streaming services and it expects a subscriber losses to continue in the current quarter. earlier this month, elliott management, the investor disclosed at&t, named businesses including direct tv as possible sales candidates urging at&t to end its spree of acquisitions, criticized the purchase of direct tv for 49 billion in 2015 and time warner last year. andrew -- >> i made calls on this yesterday to try to understand it my understanding, this is not truly in consideration at this moment as we said in the last hour -- >> spin-off of direct tv >> it's possible in the future they might try to spin-off direct tv. you can make the argument from a strategy, but financial perspective, the business throws off between 4 and $6 billion you have a dividend, you have debt you might want that cash at the same time you can say this is a melting ice cube it's like --

>> that's the problem. >> aol service, if you will. do you want to own that, keep that for cash? how do you want to play that that's a bit of what the process will be. i would say right now -- >> what would be the valuation you would get on that, who would be the bidders when you have this free cash flow -- >> and would regulators allow you to team up with dish >> they didn't last time around, but this is a pretty different environment. lots more competition than there used to be as we mentioned the fed cutting rates, but stopping short of signaling more rates to come this year. initially that sent the markets tumbling, but things stabilized after that people looking at j. powell thinking, okay, maybe now we get where he is. steve liesman is here, he has more on that front steve. >> good morning, becky he wouldn't promise future cuts. they are sure more cuts are on the way. more commentary after the decision by the fed. b. of a. says the fed is not done cutting rates this year bar clay says the bar for further insurance for interest

rate reduction sz relatively low. over at goldman they say we see 85% chance of at least one cut by year-end. finally oxford, they're on the outlier here we foresee two more 25 basis points rate cuts coming in october and december to avoid unwanted tightening of financial conditions the bond market, though, took the fed's rate cut decision as ultimately hawkish the two-year yield shot up by 10 basis points when the fed announced the quarter point cut. only seven of 17 fed officials forecast more cuts this year two dissented against the rate cut entirely they wanted to hold the line fed chairman j. powell in his press conference suggested the fed could go either way from here >> if the economy does turn down, then a more extensive sequence of rate cuts could be appropriate. we don't see that. it's whan we expect. but we would certainly follow that path if it became appropriate. in other words, as we say in our statement, we will continue to monitor these developments closely and we will act as appropriate to help ensure that

the expansion remains on track >> so i'd say the key from here is whether the fed feels it needs more insurance if that's the case, then rate cuts are pretty likely if the fed is pivoting back to data dependence, in that case economic weakness will show further cuts, strength maybe not more then. >> joining us is director and head of fixed income at strategic partners tom, let's start with you. do you think the fed is done or more to come >> i think they have one more to come i'd even go so far as to say i think there is a 50/50 chance we get another one in december as well i would definitely take exception with the argument this was a hawkish fed statement. even with the reaction in the two-year part of the curve doesn't necessarily say this was a hawkish statement or hawkish result from the fed. i think the fed delivered exactly what most folks expected the fed to deliver and that is one cut and data dependence.

>> yeah, i'd agree with that that sounds like they were walking a pretty fine line mike, you pointed out earlier that every time the fed is has done with the market expected, the market has been disappointed this time the market was kind of stable >> we got the as expected decision by the fed and the s&p was almost exactly flat on the day, which is almost ridiculous. you sometimes do the next morning like today get a little bit of a rethink and recall brags of what was said i think almost to kind of comment exactly the way steve posed it from the other angle, the stock market seemed to say, we're getting another cut unless the economy gets a good deal better in other words, we don't need incremental weakness from here but if we're not getting another cut it probably means things improve from here or we got a trade deal or something. so it's the same point made from a different angle. it's a glass half full >> do you think the market baked it in at this point? >> the action implied that the bond market didn't have a reaction that said we're certainly getting more cuts. it priced out some certainty of

additional cuts. >> if you look at the probabilities, mike is right that there was a slight decline. i mean, within margins of error -- >> for december you mean >> for october slight decline for december and slight decline going into march. the whole thing came down, 10 basis points not a huge deal in the two-year, but it's a two-year note. the idea they moved by 10 basis points does suggest to me a little bit more hawkish read and i think what mike is saying is key here. the market took it okay and the market has not taken this okay it may have been a chase -- i don't know if you noticed, powell gave some of his answers that looked like from cue cards. that's what yellen did that's what yellen did i know janet yellen was so insecure in her ability to ad-lib that she had programmed out certain questions she was sure she was going to get from reporters. she had the answers in front of her. i think powell -- >> we believe in a strong dollar from the treasury's perspective.

>> exactly things like that, i think powell was totally ready for the question on, is this a mid cycle adjustment >> right >> i don't remember if he read from that. but the thing is that he's decided he doesn't want to leave it up to a whim any more he's going to be more precise with his language. he hit the right note there that allowed the bond market to dial back just a little bit and the stock market to be cool with it. >> tom, correct me if i'm wrong. i think you wanted to see more from them. you wanted them to go all-in or am i misinterpreting what i read in the notes >> we thought the fed should have gone 50 basis points in september, but we had no expectation they would do that let me say what we interpret the bond market as saying. the bond market is telling the fed what the path should be. that is, the bond market is guiding the fed based on what the collective global investor base is saying the correct path of monetary policy should be but the fed does what it wants to do, and that's the reason why you're seeing the two-year yield rise a little bit after powell's statements and after the

meeting. the bond market is saying to the fed, this is exactly where you should go. the fed does what it wants to. >> tom, why 50, tom? why do you think the fed should have gone 50 and i assume you think it should go october what's the rationale behind it >> great question. i'm glad you asked that. one of our differentiating views is we don't believe the fed is running out of ammunition. we don't believe the fed has a limited number of cuts so they need to preserve them. rather, what we believe is those cuts become less and less effective the lower inflation goes so by the time you see wages rolling over, it's too late. the fed should have already cut by then. so we believe that to get ahead of that, to keep the -- their ammunition effectively useful, they need to make sure inflation doesn't rollover any further and they need to get ahead of any rollover in wages. we believe that the best way to do that is to more or less force steep ent the yield curve if you're only cutting at a pace as fast as the yield curve or

slower, it will generally flatten as we saw two-year yields pushing higher. the monetary velocity or credit channel impact from liquidity shrinks. and that's the problem >> okay. tom, thank you we appreciate your time. mike, it's great to see you. steve, you'll be back in a little bit >> i will. >> calling janet former fed chair yellen insecure, you don't mean she's insecure. think about when we remove one word from the statement and the world almost ends. is there any reason not to be insecure >> i don't know, right and she was. she was very -- i think she was normal -- >> that's why greenspan -- >> she was careful what she said >> and also, is it two-year note did you say it was two years >> yeah. >> i just wanted to get that clear. >> i meant to emphasize -- >> no, i got it. it's just -- i like the way you say it, the two-year is actually two-year >> an insight.

>> that's why you're here. coming up from the delivering alpha summit, former white house strategist steve bannon literally says how we deal with china is the defining issue of our time and it will be talked about 1 00 years from now. china, hong kong, freedom, everything we're talking about, he's next. later, i assume this is david -- is it like the guy you could do -- would you say villa orville a? we'll find out if i'm wrong. executive director and cio of the state of wisconsin executive board. he's right outside the u.s. for investment opportunity stay tuned you're watching "squawk box" on delivering alpha on cnbc ♪ ♪ (bang) good luck with that one. yes! that's why i wear skechers slip-ons. they're effortless. just slip them right on and off. skechers slip-ons, with air-cooled memory foam.

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strategist steve bannon is our guest. we're going to be talking about trade, china and iran, all of it right after this break and later, take two interactive chairman is out to save the galaxy the publisher of the highly anticipated border lands 3 video game will join us to talk about a new venture and the gaming industry, everything that's happening across the board "squawk box" will be right back. coach saban we have health insurance. did health insurance pay for everything? no, we still have bills. aflac gives you money directly to help with those.

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♪ ♪ welcome back to "squawk box" live at the delivering alpha conference this morning. the question on the table right now, is there a trade truce ahead? u.s. and china negotiators

meeting face to face once again. we'll get to kayla in washington >> the u.s. and china made at the last truce at the g20 in hopes of calming what's erupted since then they sent more than 30 officials to washington where sources say the two sides will discuss currency, which the treasury says china manipulates sent nil says china still ships here there are two meetings on agriculture in close focus for president trump as farm finances struggle if there is any announcement from this round it could be in that industry. china's vice ministry of agriculture is planning follow-on trip to nebraska and montana early next week to meet with u.s. farmers personally and earlier this week, nec director larry kudlow said he's optimistic, too. >> right now i think there's a certain optimism in the wind, and i'm congenital optimist.

china has removed some of its trade barriers on agriculture. we welcome that. the u.s. has postponed some of its actions as a good will response, so there's a little music in the air >> the main goal of deputies this week isn't necessarily to broker a deal. it's to set the table for the principals meeting in october and a possible meeting between the countries' two leaders after that joe? >> we're waiting it's not far off time goes very quickly, too, as we are finding out, kayla. thanks for more on all this let's welcome steve bannon, former white house chief strategist steve is known as an architect of many of president trump's america first policies you were there then. i know you still talk to the president now. >> i'm just his top student. >> he mentioned that >> i'm his best student. >> either you have insight into how he's thinking or maybe you've actually influenced some of his position.

okay, you at least have an idea of what he's thinking on certain things and you have your own ideas. >> i know what his default is. what you're hearing out of beijing is wishful thinking. i think what they're trying to do to a large extent is trying to game the system they're talking about a two-step deal if you look down below it they're talking about, you know, maybe we break off part, 80% of the stuff was covered in lighthizer's deal. we shove everything else off to something else >> security stuff? >> yeah, yeah. this is, this is -- this is -- they're trying to box in donald trump. and i think trump has been the force of stability here. he's been on point in this thing. he said, look, the lighthizer deal was 18 months of negotiation. it dealt with the major restructuring of the chinese economy, integrate it into the world ee conminute it has those semen verticals they have to address the tariffs are part of that but remember, this is an economic war that beijing has run against the west for 20 years. donald trump stood up to this and i think if you really listen to president trump and you listen to lighthizer, they're

talking about really -- we're staying on track on the major deal we're not going to be gamed by some two-step process in ccp -- >> in terms of timing, i know the president trump thinks he has the leverage and he may actually -- from a rational perspective, but you can make the argument the chinese are willing to take the pain >> look, the chinese -- i think president xi said to a counsel inside of beijing, hey, we can eat grass for three years if we have to. we're tough, we did the long march. the reality is, and this is the major shift in the overton window that president trump has had, we're not the declining power. he was elected president of the united states because the elites in this country had treated the trap, the henry kissinger, graham alison that were the declining power, we're the rising power we have all the cards. remember, in this economic war the trade is one part of it. we have a currency part, a technology part, we have a capital markets part you're going to have the head of

the sec on today, and i hope that you start to really ask jay clayton from sullivan and cromwell some tough questions on sarbanes-oxley and other regulations that are on american companies, emergent growth companies but not on chinese companies. this war, economic war has many aspects to it. trump has been, i think, the rock of gibraltar on this. he's been so stable saying, hey, here's what we want. remember, there is a big reformist element inside of china that work with lighthizer and peter navarro for 18 months. they understand they have to restructure this economy in a major way. >> we had the former prime minister of australia on with us earlier this week. and he said the hard liners are circling right now in china. he thinks they may be in the u.s., too, but especially in china. there are these two camps between what you mentioned, those who are willing to go ahead and make a compromise and the hard liners. he said if we don't figure something out probably by the end of the year, it's going to be a long time, long time

coming after the beginning of the year, both sides have things they have to start worrying about in the immediate future >> i a grie. this is why when they looked at the deal in may, a number of the hawks led by wan xi shan, this is a surrender to the west this is between transparency, accountability and enforceability, which is the tripod this is based on, we can't sign this. i think this is a long-term process. we're going to be in this, this kind of armistice, this economic war i think for a long time. here's the thing not only has trump changed the dialogue i think he's opened up to the world that the united states, the american capital markets, american companies, the american market is where you want to be this is a safe haven >> play the national anthem in protests in hong kong. >> listen -- >> that wasn't happening when the deal broke down in april >> if people -- if people think the millennials are just no accounts, look what's happening in hong kong

these are young kids on the street fighting a totalitarian regime for capitalism, right and if you see how they're taking -- they're being gassed, they're being tear gassed, having rubber bullets shot at them they actually testified on capitol hill this week the mainstream media is focused on cory lewandowski and the circus of this impeachment process. but at the same time you had joshua wong and others, these young kids from hong kong on capitol hill talking about it. beijing does not want to address -- i think hong kong is the key that picks the lock. so far president trump i think has been appropriate he's risen above that, so they can't blame him on being the black hand of the cia on the back of it and seeing this is an uprising for the hong kong people for the rule of law. but if you want to see -- look, the great story in the first half of the 20th century is going to be the freedom of the chinese people the chinese people are the most hard working in the world. only they can bring their freedom. we have a totalitarian regime about to celebrate their 70th anniversary. that's not an anniversary the united states should be celebrating. that regime killed more people

in history >> you understand the president pushing off tariff hikes to the 150th so as to offer some good will in the negotiation so it's not on the anniversary >> becky, he has gone out of his way to be accommodating and trying to do something -- look, he's trying to do something that actually works for the chinese that deal of lighthizer's and peter navarro's was systematically thought of to integrate them into the world economy and to free the chinese people who have been slaves of the manufacturing process. i think it's foresight and trump has been the rock. i think all this happy talk is going to be a two-step deal, they're going to buy a few more soybeans trump has been adamant that, hey, there is a deal on the table. we want to go back and start looking at that deal one thing i think china is going to do, the shanghai communique one of the tricks i think they're going to pull is to try to get some deal that's so general, go back to the original deal put in language so general it could be interpreted by both sides. i don't think trump -- i don't think trump takes the bait on that either. remember the ccp, they are

experts in bar bearian management, right? they know how to incentivize tributary countries. >> hold on i'm sorry, i have to get -- is warren the prospective nominee at this point or is it still biden? >> i don't agree with matt drudge yet if you look at -- matt has a tremendous sense of news but if you look at her speech down here at washington square park which is quite dramatic, it's really trump light. now we're seeing -- if that's the case, you're going to have populist nationalism versus populist socialism her speak is really trump light. taking peter schweitzer, my government accountability i talk about trading, i think she's clearly defined where the energy is i think biden because of china, and i think this is why trump has shifted this discussion and china is going to be the framing device for the 2020 election the geopolitical concerns of the nation >> that was my question, though. do you believe that the trump base looks at china the way you

look at china, which is to say if you're a farmer, soybean farmer or anybody else in the middle of the country, i think there's a lot of people -- i imagine, maybe i'm wrong i think you're probably going to disagree with this assessment. i would imagine that they can think about it theoretically, but beyond that they're looking at their own, their own wallet and saying, i don't know >> i think it's the exact opposite i think when he saw america in decline, this is how we pierce the blue wall. if you go to pennsylvania and michigan and wisconsin, you don't have to come to new york i have to actually walk people through why, you know, schwartz man now has religion cnbc. he says oh, yeah, they've had 20 years they've been doing this, right? wall street is starting to get religion like trump on the campaign, if you go up there people know the factories and the jobs all went to china and the fentanyl and opioids came in, da spaespair of not having . pennsylvania, ohio, and iowa, this is why donald trump is president. immigration was an issue

if we would go to the upper midwest, it wasn't where we build the wall, where are the jobs bring the jobs back. this is about shifting the supply chain back to the united states it's why usmca -- nobody is talking about it that's the first -- remember what trump has done just this weekend, he's got the mexican/canada deal which makes it a geo strategic manufacturing base, north america with mexico. you've got the india deal he's talking about, and japan the pieces on the chess board are coming together and this is the industrial democracies now working together -- >> he's doing what the critics have been saying all along he should have done, even the ones who agree he should be tough on china, get the rest of the globe together to be on your side. >> this is why they say get the allies together. look at trump on iran. i think where he's going on iran is a full economic boycott, economic -- beyond economic sanctions. i think you're going to start to

h hermitically seal off iran it's going to be a quarantine. everybody wants to be john wayne. president trump is strong enough he doesn't have to be john wayne. he looks at this as a businessman of he knows the sanctions are the firststep. he can go further. you can start to hermetically seal off iran. i think it's going to be part of the chinese discussion china has a $400 billion deal with them on oil between 10 and $50 billion credit line. this is you will going to be put on the table as he starts to ratchet up the -- >> this is going to go down as the most nasty and vitriolic in history. when you say win, the margin of victory in some of the swing states in 2016 was fairly narrow, was it not >> we drew an inside straight. 79,000 votes in five counties. >> how is the hand being dealt right now in the swing states look for the president >> it's going to be a grind. president trump has to get these swing states

arizona is in play north carolina is in play. this is going to be a grind. he's got the entire mainstream media apparatus. when i said vitriolic, the civil war in 1860, look at the kavanaugh thing. op-ed in the times may not have been edited properly we're going to impeach him a supreme court justice. look at president trump. look at the corey lewandowski fiasco the other day you have joshua wang and these people from hong kong testifying mainstream doesn't want to cover it because it's all about the impeachment hearings this thing is going to get so nasty a lot of people are going to say this is too much. president trump is a closer. that's why we won in '16 he closed. hillary clinton didn't we won, very thin margin -- >> it's not in the bag >> it's definitely not in the bag. this is going to be a very tough -- president trump knows that that's why he's very focused in his efforts. he understand -- look, you can have a reagan-type victory if things go your way, but i think

it's sticking to what the program is, sticking to his policies that's why china is going to frame this you can see biden's weakness look at elizabeth warren one of the reasons i think kamala harris has dropped she's been all over the map on china elizabeth warren gives you -- she came out with the white paper. she is now trying to become -- she's trying to get to the right of trump like marco rubio and others on china. it means bringing back manufacturing jobs to the upper midwest. >> love her or hate her policy, she's genuine and sincere in her belief kamala harris, i was never sure whether she was really that sure i think it might be formidable >> people are making the decision in an era where you have the mu las, the situation in the persian gulf. just as tough situation in the china sea, you have china now working with pakistan, working with iran, working with turkey, working with russia. you see the eurasian land mass

do you want donald trump who is stable and ranch et cetera it up or elizabeth warren? american people will make the decision >> thank you for on set this time >> thanks for having me, guys. thanks >> see you. >> still to come from the alpha delivering conference, the investment officer for conference investment. joining us for a big announcement, and later sec clayton opens up with the delivering investor summit the crowds are gathering the excitement is building we're going to bring you to that interview live stay tuned to cnbc all day for exclusive coverage of the delivering alpha investor conference, including joe's interview with vice-president mike pence that's in the 11:00 a.m. hour today. "squawk box" will come back after a quick break. hmm. exactly.

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still to come from the delivering alpha investor summit in new york today, we're going to be talking pensions the markets and why you may want to look outside the united states for some investing ideas. we'll be joined by david villa the cio of the wisconsin investment board and then take two interactive

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welcome back to "squawk box" this morning we are live at the ninth annual delivering alpha investor summit in new york at the pair hotel. we have politics and economics and investing ideas from some of the smart est asset managers in the country. doing that right now joining us on set is david villa, director and cio of the state of wisconsin board. on the alpha advisory board, we're thrilled to have you on the set with us. >> thank you very much, happy to be here. >> here's my question. given where interest rates are and what j. powell is doing, slow growth everywhere else in the world, if you're a pension fund in america today, what is the rate of return that you think is fair and reasonable to expect and to promise pensioners >> about 6%. >> 6%. and do you think that's the fair number over the next decade, is

that today is that over a decade, two decades? what is that number for most people right now >> five to seven years >> five to seven years >> might be 7% over 30 years >> that's actually interesting that's higher than i would have expected given how low interest rates are. how do you do that where do you go to find returns like that when we're talking about the fed continuing to lower interest rates >> yeah, you need a big dose of private equity, private real estate, private debt, a lot of alpha, a lot of excess return. otherwise you're going to be 5 >> so in terms of how you have reallocated the fund, you talk about private equity and other alternative assets, what does it look like if we were to do a chart of your fund right now in terms of where the money is being directed >> it's about 55% equities and 45% fixed income >> within the equity component, i'm assuming there is a private equity component of that or no

>> yes >> okay. and what chunk, what chunk would you have in private quity, wha chunk in early stage venture, late stage -- give us a little bit of a break down. >> sure. >> there's a lot of our viewers who are even thinking about their own portfolio. and to the extent you've had some success, i think of trying to model that. >> well, for private equity, if you consider the hurdle or the benchmark to be public equity, you need to earn more than public equity. and if you don't pick the top quartile fund, you're going to earn less than public equity so it's not worth the squeeze if you can't pick the very best managers, and that's very hard to do. and so the very best managers are rare and they're expensive so we're only able to put about 6% of the fund into private equity because of the supply of good managers.

for private debt we have about 1.5% of the fund in private debt >> what do you say to the sort of warren buffetts of the world who say actually that active investing is sort of a fool's errand for most people >> well, i think it has been for several years, but today i think it's more like the opportunity of a lifetime. so i would, i would say fine >> why is that you think the averages have kind of peaked at this point? and the only way to really ride things higher is going to be individually choosing things or because you think at this point it's just time for some of the active investors to kind of have their day >> i think there's probably two things one is the market has had very low breadth. so only a few names are driving the market a lot of -- there's a lot of potential relative value in the market, and there's been a lot of capital that's moved out of

active management into passive management so that forces active managers to sell what they like and indexes to buy what the active managers don't like. >> that's interesting. we just said yesterday that for the first time ever, passive funds have outpaced actively managed ones in terms of how much money is funded into it >> we moved about $6 billion into active management this year and we're very happy with the outcome. >> what kind of negotiation are you having right now only fees because that's always a big issue right here at this very conference given there are so many asset managers trying to collect fees frankly >> yeah. well, we would rather not pay fees >> as i would imagine. alma but i think if you're looking for skill and you're trying to get that excess return, as long as we keep about 60% of the juice, we're happy. >> 60% of the juice? >> yeah, 60% of the value added that's created, because they're using our capital so they're

kind of renting our capital to generate their fees or their return especially when it's performance fees or carry. >> okay, david, it's great to see you. we appreciate you being here >> thank you >> helping make this all happen. we appreciate it >> bye-bye >> take two interactive zelnick joins us along with a special guest for a big announcement that interview is right after the break. check out the futures at this hour still negative, not quite as much as we were earlier, bndou4u abt ps the dow workflows in the cloud. this changes everything. you're right sir... everything. no not everything, i mean you're still blatantly sucking up to me gary. brilliantly observed, sir. always three steps ahead. six steps ahead. sixteen. so many steps. you done? a million steps ahead. servicenow. works for you.

♪ ♪ welcome back, everybody. covenant house, new york, a shelter for homeless youth is building a new residential facility as part of the space campaign our next guest jeff zelnick and board member at covenant house we are also joined by sister nancy downing, the executive director of covenant house new york, and welcome to both of you. >> thank you >> thanks for being here let's talk about the gift very quickly. where did it 1:00 a.m. from, what where did it come from, what's the point? >> i've been fortunate to be on the board of covenant house for a long time. i started in covenant house

board of california. this is a charity that reaches over 70,000 homeless youth a year in the united states across many sites it's a wonderful step forward in our history to build a new headquarters and a new shelter facility here in new york. >> sister nancy, we all think about covenant house new york where you come out of the lincoln tunnel, you can see the well known building, the logo on it what does this mean? what will you be able to do as a result >> we're so excited to be able to give this gift to our young people that come to us every night. we have 250 young people that stayed at covenant house last night. we're so excited to be able to give them a place that's warm and welcoming, that recognizes their worth and value because they're told so many times that they are not worth it. so we want this to be a space for them that says, we love you, you're worth it, a place of healing and a place of opportunity for growth for them. >> when did covenant house start? >> in 1972 >> 1972. you think new york at that time, what was happening on the streets? what do you see in terms of the problems that are there now?

has it gotten better, has it gotten worse, are there different things you're trying to address today >> unfortunately while we don't see it as much on the streets in times square, we do have as many young people coming to us today as we did back then. it's an unfortunate situation. we're hoping to change this. we hope the new building will take notice of the people that are homeless on our streets every night and help us get them off the street into a place of growth and opportunity for them. >> what do you need aside from money, aside from funds, what else would help you? >> volunteers to help us with the young people, to help them get into places of employment, get them into places for education because education means better employment for them and so, you know, always welcoming people to come to volunteer, to help us with our young people obviously the support for our new building, get the word out about young people that are homeless to make sure that people know this is a crisis in our city, and crisis in our country. >> let's talk about your company and what's happening with border

lands 3. release of the new game that's gotten great reviews some analysts think the price hasn't been priced into the stock, returns what does it cnn >> a score on 83, ps 4, people love it. we're very encouraged by the early signs. of course, it's early still, but we're very, very encouraged. it's a great game, lot of fun. we have the amb 2k in the market as well. this is a wonderful time as we head into the holiday season we're super excited. >> we talk all the time about the strength of the consumer what's the strength of the consumer look like from where you're sitting >> our consumers are incredibly avid they love our competitors properties, too. not just ours. look, interactive entertainment is the fastest growing sector in the entertainment business the winds are at our back. we still have to execute if you don't put out a hit, it's not going to do well but if you put out what people want, the market is phenomenally strong >> the entire industry has kind of been shifting in terms of how people buy their games, going

direct over the internet, having multi-player games and different things that are there. do you think we've reached the turn in the evolution? >> i think it's just the beginning. if you look at the household day devote today media, it's a long day you all know five hours devoted to linear programming. an hour and a half for interactive entertainment. >> in terms of pricing >> there are developing models that seem to be emerging including all the additional purchases that happen "end game," trying to get the game to people first, sometimes selling it, or giving it away for free how do you see this playing itself out >> such a great question i think, i think it plays out in that if you're going to sell the property up front, it has to be a phenomenal quality, which is our goal >> right >> you can also offer free to play programming that also has to be great, but it's different kind of game. so if you're playing a mobile game on the subway, you'll play for 7 or 9 minutes, but you may do that seven or nine times a

day. if you're playing border lands you may sit down and play three or four hours a night. you may do that in addition to watching television or in stead of watching television to charge an entry price you have to offer something phenomenal >> do you see a day where the big streamers will have this in-hometown relationship, the netflix and hulus, apple obviously came out with its own new gaming platform. really jump into the space and start buying up gaming companies? >> i think the answer is yes, and yes to the first part, and maybe or i can't say to the second yes, they will absolutely jump into being distribution partners as apple already is. >> right >> whether that means it makes sense to own the content producers producers, it's hard to say. they don't necessarily go well together many people try to put distribution and content together many people disaggregate it. the strategy -- >> you don't think of the games as content in the same way a

film or tv series is content because there is a lot of overlap. obviously there have been a lot of films generated as a result of the ip in the games >> i do see it exactly the same way. but i would observe of the netflix despite their market cap have yet to buy a film studio. they've started their own original production. amazon makes video games but hasn't bought a video game company. >> there are only so many minutes in the day, so many hours in the day you talk about how you have a huge share of that right now who is your biggest competitor because there are so many different screens and so many different distributors that are now reaching for that. >> we compete with everything and with nothing in entertainment. if there's a lot that people want to consume, they'll consume it all within the context of the consumers open to buy. if there is nothing great out there, they won't show up at all. so we can compete with the big movie or another game or reading a book, or any other leisure activity it's fair to say computer games

are -- >> do you have any frenemiesor enemies? >> i don't have any enemies at all. it's a very collegial business the other heads of the other interactive entertainment companies -- by the way, the other entertainment companies, i've been around for a while i try to be friends with everyone if i have an enemy, i don't know about it >> just in terms of what happens next with e-sports, i guess this is part of a continuing evolution. how important is it to your bottom line? >> not important to anyone's bottom line because they own league of legends. that's the vast majority of the business for the rest of us who are participating, we have the mba 2k league. it's a developmentproject. >> what about five years from now? >> we think it will be a big contributor. we told investors don't underwrite yet it's early >> thank you for coming in sister nancy, good luck. covenant house new york, many things i'm sure we're going to be hearing >> thank you for having us

>> coming up, senator chris van holland joins us to discuss his bill to prevent unfair corporate inside advantage when it comes to stock sale. and then sec chair jay clayton sits down with andrew to kick things off here to delivering alpha investorum smit as "squawk box" returns after a quick break. [leaf blower]

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>> announcer: right now on "squawk box," we're live from the ninth annual delivering alpha investor summit. this hour, a preview of what's ahead from the event all of wall street will be watching. we'll hear from light street capitals glenn cager on the hottest ipos of the year and what he sees next in the tech sector plus, a special sit-down with sec chairman jay clayton it's all ahead on the final hour of "squawk box," and it starts right now. ♪ ♪ >> good morning and welcome back to "squawk box" here on cnbc we are live from the, as you can tell maybe, i certainly can,

from the delivering alpha investor summit in new york city presented by cnbc, and institutional investors. it's a really nice spread over there. i don't think these people are leaving any time soon. you're enjoying. >> i have my croissant right here carbs in the morning >> joe kernen, andrew ross sorkin with the carbs. >> the pierre. >> becky quick, andrew ross sorkin, we're all here 47 points of pressure on the implied open for the dow this morning. 15 on the nasdaq just over 5 on the s&p, over 500. treasury yields this morning after yesterday's action at 1.765 on the ten year. >> let's talk about some of the stories investors are going to be talking about today the faa administrator says that he will not clear boeing 737-max to service until he permly flso

flies the plane. steve dixon made that comment in an exclusive interview in "nbc nightly news." dixon is set to meet with them to test the flight simulator he was a former fighter pilot and pilot at delta air, so he would be qualified to do just that and meept, separately ryan air has frozen payments to bogey and is in talks about recouping the cost of the max's delayed return facebook c.e.o. mark zuckerberg is set to return to capitol hill today for the first time since he testified after the cambridge analytica scandal. a facebook spokesperson says zuckerberg is in washington to meet with lawmakers and to talk about future internet regulation the series of meetings comes as facebook continues to face scrutiny for its privacy and its marketing practices. and we are just about -- just hearing about a public appearance by amazon c.e.o. jeff bezos that's going to be later this morning the amazon c.e.o. is going to be speaking at the national press club in washington to make what's called a major

announcement on sustainability >> the federal reserve did what many expected it to do yesterday, cut interest rates for the second time since july as has now become common, the president quickly criticized the feds steve liesman joins us now more with how the fed is responding can you hear me? >> i can hear you. >> i don't know if i'll be able to hear you. some cases that might be good for me >> we're far apart here. >> a lot in the background >> we have this wonderful ear piece, joe >> we don't have feedback. we don't have any of the -- >> i have it because i'm nice to the guys on the floor. >> i have them i don't have anyone else on the set, or you. >> look, just 25 minutes after the fed's decision to cut interest rates, president trump tweeted out his displeasure saying, and i quote here, jay powell and the federal reserve failed again no guts, no sense, no vision a terrible communicator he said

of his self-appointed fed chairman the press conference began five minutes later. they had a chance to ask fed chairman powell how he responds to the president's criticism >> i don't i'm not going to change my practice here today of not responding to comments or addressing comments made by elected officials. i will just say that i continue to believe that the independence of the federal reserve from direct political control has served the public well over time, and i assure you that my colleagues and i will continue to conduct monetary policy without regard to political considerations >> all that may be true and likely is. the problem is by cutting rates the fed is moving rates in the direction the president wants. though judged of course by the president's continued criticism, not nearly as fast or as quickly as president trump would like. so powell has two dilemmas here. first, not to be seen as doing the president's bidding to preserve the fed's independence. second -- that's especially if

the president is right and the fed should be cutting faster the effect could be slower rate cuts than the fed would otherwise be doing second, powell has to decide how much to preemptively cut for the trade war. it could boost the tariffs even further. fewer cuts could mean the fed is not addressing growing economic problems so almost certainly true the fed is trying to set policy independent of the president also true, the president is figuratively at least in the room and the effect of that, well, it's as uncertain, i'd say, as the economic outlook as we said yesterday from our poll, 52% of our respond ints say no effect from the president. 36% say looser monetary policy than it otherwise would be because of the president's criticism. >> that's interesting. there is certainly the entire feedback loop. once the president says it and the pressure comes from all sorts of other -- >> if you wonder why i'm talking so fast, it makes me -- all the noise here --

>> makes me nervous. makes me yell. steve, thank you let's turn to markets on the day after the fed decision joining us to talk stocks, ipo and tech investing is glenn cager, founder and c.e.o. at light street capital glenn, let's start from the perspective of how much money is sloshing around because of the fed's policies more easy monetary policy means more money is going to be there. what does that mean for the ipo market and for the private markets where you play >> sure. well, i think we're at kind of a turning point for the ipo markets. over the last several years there's been so much capital, both from private players and public players going into these late-stage financings. by the time these companies want to go public, they don't really need any more capital. they've stayed private three or four more years longer than typical. there is a real movement going on in silicon valley, a ground swell of investors that are

saying, we don't need to take further dilution in i palomino ipo. the top companies are going to get together and say we don't do ip os, any more. >> that seems like b.s. in terms of what's happening. a lot of these companies that come public not because they want to, but they have to. >> have to >> yeah. >> we'll see the ones that don't need to go public and that don't need the capital are, you know, fully capable -- >> that's the fundamental question a direct listing only makes sense insofar as you don't need the capital. at least in the absolute immediate term what you do have is people coming online doing direct listing and three to six months later trying to raise money in the public market. >> we've seen companies like spotify, companies like slack -- slack was, you know, break even on -- almost break even in the recent quarter and business going very well,

they don't need outside capital. they don't need further dilution >> you have had holdings in uber, lyft, pinterest and slack. >> pinterest doesn't need capital either >> what do you think of private valuations versus public valuations transparency in the market has demonstrated to the degree you think the public market is a better, better way to value things, that there is actually something wrong in the private markets. and i think this is especially important because actually now there are public investors, meaning blackstone, black rock, t. row price, public investors in the private vehicles. >> sure. more supply of capital drives up prices so we've seen valuations get done in private companies that we hadn't seen before, you know, five or ten years ago. so i think there is an adjustment i think what's happening really is that the ipos are happening in the private market. that's where ipos are actually

happening. there are just a select group of investors that are doing them and then the public ipo is a separate event you know, i think the public markets -- public market investors are good arbiters of value. that has ho told up over time. that comes down in the fundamentals of the company. that's what markets -- open outcry markets as public market investors do let the markets do their function >> does it feel to you that there's any sort of a tipping point or any sort of turn in terms of how willing the retail markets are to take some of these new deals? you've seen some recent listings that haven't done well you've also seen wework look like it may not ever come to market we'll see. >> yeah. >> but does that feel like a turning point to you >> i think those are two pretty separate things. we've also had a general stock market where there's been some

questions about whether -- what's happening with this value growth rotation, and that's obviously not good for high-growth companies which typically is what we cecum out of silicon valley, venture-backed companies wework, look, there's a company that i think -- there's been plenty said about some of the behavior, some of the policies and frankly the business model there, i don't think we consider wework to be technology. >> right >> they were cobbled together, some software technology to put a technology veneer on the business but there's nothing there that really gives you the pooling efficiency that technology companies and that real sharing economy companies like uber and lyft -- >> it still requires capital expenditures, not like other tech companies >> it's not just capital expenditures when you and i take a lyft or uber, that's a property or an asset that's been used ten, 20 times a day by different users

when you rent a cubicle at wework or three or four cubicles for your start up, no one else is using those square feet all day. so there's really no pooling efficiencies there >> do you have concerns about uber and lyft given some of the regulatory advances we've seen, not only in california, but here in new york city, other places where -- it may make it tougher for there to be -- for those companies to turn a profit any time soon. >> they've got to live by the rules that our legislators bring to the table, and there will be new ones and we'll see how that works out. i think with ab 5 -- >> in can have >> the new legislation in california, if that transition occurs for some percentage of drivers, it gives both youther and lyft the opportunity to both require their drivers to do things they weren't able to require, meaning work certain hours, work certain locations, and also restrict them from working for the competition to reduce churn of drivers which is a major cost to both of those

companies. i think there's two sides to some of the opportunity to have a certain percentage of your employees or certain percentage of your drivers to be employees. so we'll see how that works out. i think the cora tracktiveneatts of both those companies, sure there's a few competitors in cities it is a two-business market in the united states. we've seen pricing go up dramatically lyft, which only does business in ridesharing, they don't have a food delivery business and they don't operate outside the u.s. and canada. they, i think you're going to see their fundamentals do really well very quickly. and so we've got a big position in lyft. >> i want to thank you for your time today it's good to see you glenn cager. >> coming up, face to face u.s./china trade talks pick up again today after a two-month hiatus

after a break we'll ask maryland senator chris van hollen for his view on what congress really wants to see from these negotiations and then later a special interview with sec chairman jay clayton as we kickoff the ninth annual delivering alpha investor summit stay tuned you're watching "squawk box"n bc o wful. why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum- just to help you improve your skills. boom! mad skills. education to take your trading to the next level. only with td ameritrade.

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welcome back to "squawk box," everyone the futures this morning a little lower after we heard from the fed yesterday, they cut rates. it didn't necessarily say they would be cutting rates again any time soon. jay powell said if the economy weakens they would step in to do what was necessary does sound like they're more data dependent in the u.s. economy than they have been to this point dow is down 20 points. nasdaq down by 11. market taking all of it in stride >> u.s. and china meanwhile set to go back to the negotiating table today on trade joining us now for the view from the senate, maryland senator chris van hollen senator, we'll get to the bill that you recently wrote in just a minute let's just start with this, though it's hard to figure out where the different sides of the aisle

could kind of hazy on trade. we have senator schumer, you know, telling the president to stay tough we've got others that don't like the tariffs or the trade war with china at all. do you think something good could come out of this in the end? was it the right thing to do >> well, look, i hope these talks in washington go well, but our trade policy has been total chaos under this administration. there are definitely some legitimate issues. for example, china has been stealing our technology. they've been essentially strong arming u.s. companies to turn over sensitive technology so what we should be doing is working with our allies, our european allies especially, in a coordinated way. i support the effort to put huawei on the control list in fact, later today, senator cotton and i are going to have a bipartisan amendment instructing

the conferrees, people part of the national defense authorization bill, to make sure that we don't take them off without some kind of congressional review on the other hand, i would say that the tariff war is hurting american consumers, american farmers and american businesses, and that is the wrong way to focus. we should be focused on these national security technology issues >> we've worked with the allies for years. i don't know how long -- i don't know when you would date the deleterious effects of dealing with china with some of their tactics. some people, it goes back 25, 30 years, since the w.t.o so we haven't seen a lot of progress, and everybody talks about dealing with our allies. let me just ask, if the method works and the tariffs that were put on eventually end up with an greechlt where intellectual property is not stolen, where some of these goals are ee fe ed

would you ever concede it was the right thing to do? if it works out, would you finally say something good about trump? >> look, if china accepted all the conditions the united states has demanded, and especially with respect to ending the theft of our technology, setting a whole different set of rules for a foreign corporations compared to the chinese enterprises, which you know many of them are government-owned enterprises, that would require china to have a major shake up in their approach on lots of these issues yes, and as i just told you, i agree with what this administration has done with respect to huawei. i thought that was the right move in fact, what i worry about is that they will trade off national security issues for

concessions on trade that is a very dangerous game to play, very dangerous >> right although in the real world, we know how some of this stuff works. my only point was the default position for everyone on your side or people that oppose what trump is doing, we need to work with our allies. all of them -- we've done nothing in 25 years, and the dee palo alto position to just knee jerk and come out with with need to work with our allies, no one believes that's a viable -- nothing happened it didn't work finally something is being done. >> actually, that's not the case we worked with a lot of our allies in the east asia area tried to form trade agreements what's that? >> but we haven't gotten it -- it's been a long time coming >> so do you really think it's a good strategy -- but this administration did the opposite. you think it's a good idea to put tariffs on canada and claim that's a national security -- >> we're not talking about canada >> no, we are.

we're talking about -- we are talking about our allies i know, about you we'but we're working with our allies and putting tariffs on canada and the europeans doesn't make for a good -- >> fair point. maybe not. we weren't talking about china and those others we were talking about whether it's a good idea to try to hold china accountable for a lot of egregious trade -- >> of course it is of course it is. we're not an island. so the best way to hold china accountable is to have a much bigger block, united states and the e.u. in putting pressure on china. instead we're fighting with the e.u. and china >> the e.u. has got some issues. they haven't always treated us as fairly. what about the a.k. trading gap bill you introduced? seems like there is a lot going on in the world. this probably makes sense, but what put it on your radar screen and what's it in response to a lot of c.e.o.s have been taking advantage of the ability

to sell before bad news or something? >> well, it's been pretty well documented that some c.e.o.s, some executives are taking advantage of insider trading jay clayton, who you're going to have on later, said that doing this is sort of basic corporate hygiene. under, under our rules right now, if a company has a material change that can effect the stock price, they file an 8-k. but there is a four-day period that lapses between the time the company makes an official determination that they're going to file an 8-k and disclosure of the a-k. we're saying when you have that kind of inside information, you should not be trading on it. this is really a no-brainer. i think it does have bipartisan support. and i'm hoping we will move forward on it. i'll tell you another thing that seems to be common sense, and this relates to china. you know, chinese companies on american exchanges are the only

companies in the world who don't have to comply with our accounting procedures. we've talked about that before so there are some things that we need to do to sort of clean up and tighten these rules to make sure we're fair to american investors, retail investors. >> we had that discussion earlier, senator >> right >> in fact, jay clayton is here. we may get some color on that, on the chinese companies not being subjected to the same requirements so appreciate your time. >> good to be here >> i'm still getting used to -- you used to be a scrapper in the house. i get used to that, now makeybe need to be -- we have to treat these senators -- >> i'm happy to -- >> it's like the house of lords instead of house of common isn't it sort of similar, i think? >> it's good to be with you. there's the house and the senate >> it's good to be with you. and good to leave you. >> leave me a loilone, let me g.

>> thank you, senator. >> when we come back, sec chair clayton live here at alpha later this morning, make sure you don't miss joe's interview with vice-president mike pence that is coming up on "squawk alley" in the :00 11hour stay tuned "squawk box" will be right back. behind, we all get left behind. this is a problem that affects each and every one of us. together with ibm, we created a whole new kind of school called p-tech. within six years, students can graduate with a high school diploma, a college degree, and a pathway to a competitive job. you know what's going up today? my poster. today, there are more than a hundred thousand p-tech students around the world. it's a game changer. by the way, she's the it wasnext mozart.g day. p-tech students around the world. as usual we were behind schedule. but sophie's enthusiasm cannot be dampened. not even by a run-away donut.

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♪ ♪ people are making their way and getting ready for jay clayton right here at delivering alpha. we're looking at stocks to watch this morning it was a mixed quarter for darden restaurants, the parent of olive garden and other restaurant chains. it posted better than expected earnings revenue and comparable store sales fell a little bit short. that stock looks like it's down 2.5% microsoft raising its quarterly dividend by 5 cents to 51 cents

a share. an increase of 11% that means the company now has a dividend yield of 1.5% microsoft also announced a stock buy back program of as much as $40 billion, and that stock, a dow component is up by 1.25% >> dow component >> dow component that's not a new one >> coming up, breaking economic data on the latest reads on jobless claims and a key manufacturing measure, all just moments away checking the clock the numbers and market reaction when "squawk box" comes right back i mean, if you haven't thought about switching to geico,

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welcome back to "squawk box. rick santelli here live on the cme floor. breaking news. our second quarter current account balance, which we know is a deficit, expected to be about 127 billion and change a little bit higher, 128.2 billion. and the rearview mirror, though, we do get a revision that puts a little more red ink into the equation from 130.4 to now 136.2. rather sizeable. now, in our september read on philadelphia fed index, of course this is always a trader favorite expecting 10.5 to 11, better than expected. comes out at 12, and 12, last

month it was 16.8. so we've had a lot of nice numbers here as a matter of fact, there's only been one negative number going back a long time, and that was in february when it was 4.9. he had to go all the way back to 2016, mid 2016 to find a negative number. why do i bring that in this is holding him really well. for those who love their thursday numbers, initial jobless claims, we are expecting a number around 20 -- 212 is what most were looking for 20, less than expected 208,000. that makes it officially up 2000 last week's 204 ends up as a revised 206. that is a pretty darn good number it's always impressive on these weekly claims. and finally if you look at continuing claims, always one week in the rearview mirror. 1.661 million, and that's a bit less than our last look at 1.671/2. becky, pretty decent data.

current account balance, of course, probably affected by a variety of issues with regard to trade. interest rates, you know, they're about the same place they were yesterday, right around the announcement, maybe a little bit higher. current flattening seems to be something we're paying attention to back to you. >> it looks like the futures picked up a little bit, getting closer to the flat line. rick, thank you very much. we also have breaking news from the fed. steve liesman is here and has been analyzing >> hopefully rick can stick around and give us commentary on it stick around, rick the fed has done its third repo operation -- >> everything timed but going back again >> injected liquidity into the system that's a great point i want to get to that. let me give you the results here again, more submitted, 84 billion submitted. the fed accepting 75, which is the size of the operation. >> so over subscribed. >> over subscribed once again. stock at 1.8%. what's the mid point here of our new range?

it's closer to the bottom of the fed's new rate the stop, the lowest rate the fed would have set a weighted average, rick, of 1.84 i'm taking the top superficially taking a look at this right now. and i'm seeing that there is still more demand out there for the fed's liquidity than they're supplying, though the rate seems to be pretty well controlled that said, i think, rick, the fed has the ability to control the rate that they're filling these bids at. what do you make of this as to how much, i don't know, stoppage we have in the plumbing right now? >> you know, i think jim bianco said it best a lot of people have been weighing in on this. we basically shrunk the amount of funds available in this regard and a lot of that has to do with just the way things have changed. whether it's dodd-frank, a lot of issues -- >> right >> a very easy example look at how many primary dealers we have today versus 10 or 15 years ago. the fact that many entities

don't make markets and certain securities, i think all these little details and the funds available, excess funds, everything has shrunk a bit. i think that these issues will continue to crop up in a world where part of the business is shrunk, but indeed, if you look at the end users, people that have positions, traders, institutions, in many ways they're more tightly packed and leveraged in their position. so i think these anomalies, although they aren't something we should get super nervous about, i think they're going to happen a little bit more frequently and i think jay powell and company understand that. >> so that's one of the things that's out there, rick, the idea whether or not the fed needs a standing repo facility to provide this liquidity on a regular basis. the other issues, i don't know if you heard jay powell's answer to my question yesterday when i asked him did we shrink the size of the balance sheet too much, reduce excess reserves and he said it may be time to

resume natural growth of the balance sheet. and i saw, rick, yesterday when he said that, you had a brief decline in yields after it kind of stabilized. >> it's important for people who aren't listening to that the fed is getting easier by cutting rates, but it can also get easier by expanding the balance sheet, too >> the balance sheet -- >> it was a great question, steve. >> thank you, rick >> it doesn't make any sense it was a wonderful question. everybody is all pulling their hair out about the inverted yield curve. >> couldn't you just stop there? i know, i know, go ahead >> the notion of his answer, quantitative easing is backwards. okay they want a steeper curve. we saw today in europe a variety of economies, even in japan, wither they are really starting to sweat how much their banks have suffered due to negative yields and weird yield curves. >> yes >> much of that is because of quantitative easing. >> hold on we're talking about something a little bit different here and i want to explain to becky who i

think is onto what we're talking about. before qe, the balance sheet rose kind of naturally along with the size of the economy when the fed stopped doing qe, it held a balance sheet flat, and then it began reducing what powell is saying now is let's get back to olden times when we used to decrease the size of the balance sheet. >> how big is the balance sheet? >> 3.7, 3.8. >> still a multiple of what it was -- >> i thought it was 800 billion before i'm sorry. >> rick is absolutely right because of the new dodd-frank rules. banks have to have reserves -- >> you can't pretend we're back in normal times. we didn't find a way to fix this or deal with the balance sheet >> something else i've been following very closely, peter boockvar is on this. the japanese are on this question is it time to think about orienting monetary policy to create steepness in the yield curve to make and keep your banks healthy?

that is not something the fed really targets, really likes to make policy on, but rick is right. there is an emerging school of thought right now that says, you know what -- and by the way, some people have been on this for quite a while, and i think the idea here is you create a steeper yield curve. you create healthier banks go ahead, rick you pick up on that. >> no, no. i'm one of those people you're referencing. to me, the notion of having a prescription financial drug that cures what ails the globe, but if that cure means that ten, 15, 20 years down the road when people look to retire, when they look to their pensions, when they go to their banks and try to have various financial transactions, these crazy yield curves, negative rates are going to create big potholes down the road and we're starting to really see how scary that can be i tell you, the problem with these negative rates is they may have me tatasmetasticized

i don't know how they're going to extricate themselves from this mousetrap it seems like once the door close es, there's no way out >> rick, thank you very much steve, thank you >> coming up we're going to get a preview of what's on tap here today at delivering alpha, and a big interview with sec chairman jay clayton is just ahead. steve's in andrew's seat andrew is fine he's just on stage stay tuned you're watching "squawk box" on cnbc this is the family who wanted to connect...

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metastat box" the futures this morning have been improving through the course of the morning. right now you're going to see actually the nasdaq turn positive it's up by 2 1/2 points. the dow and the s&p futures both flat lining. been a little weaker this morning, down 40e points or so for the dow. we've been building from zero all morning. here we are. >> we have a big day coming up on delivering alpha. apparently there is going to be an ipo leslie picker joins us >> that is not why i'm here, joe. i know >> you're here to talk about delivering alpha >> we can talk about ipos if you want >> no, that's okay we're delivering a public offering of great -- >> content throughout the day, exactly. >> delivering alpha. >> no one ever said the ipo had to be a stock that's trading >> someone said pence might be here >> that's what i heard that's what the rumor says, and starting in a couple minutes

actually >> v-potus, exactly. it will be a jampacked day, though, high profile important conversations with investors, politicians, economists, first up sec chairman jay clayton will join the stage with andrew they'll be partly cloudying private versus public. maybe ipos, joe. public debt. the conversation will expand yountville the u.s. to investors like j.p. morgan's mary erdos. after that there is a whole panel focused on tech investing, another with activism with nelson peltz rounding out this morning a stock picker's panel with leon cooper man and joe's much anticipated fire side chat with v-potus mike pence other notable speakers apollo co-founder josh harris. guys, cnbc will be bringing live updates on these news makers and

more throughout the day. >> what questions are you hoping to kind of get answered out of this today >> i think there are a lot of questions about yesterday's meeting with regard to the fed, you know, what do people expect in terms of monetary policy moving forward will we see more interest rate cuts or is it kind of going to take a pause i think these investors today will be primed to answer those questions. >> leslie, thank you very much leslie picker. folks, it is time. delivering alpha is kicking off right here in new york city. first up is our very own andrew ross sorkin in a sit-down interview with sec chairman jay clayton. they will be taking stage ina moment talking about regulation, big tech and everything in between. we will bring you that live in stk ou 3send icarnd about investment decisions? rigorous fundamental research. with portfolio managers focused on the long term. who look beyond the spreadsheets to understand companies, from breakroom to boardroom. who know the only way to get a 360 view

is to go around the world to get it. can i rely on deep research to help make quality investment decisions? with capital group, i can. talk to your advisor or consultant for investment risks and information. welcome back to "squawk box," everybody. we are looking at the delivering alpha conference we are live in new york city at the pierre, and we're just getting ready to see the stage being taken by tyler mathisen. he's introducing everyone, including our first interview, which is andrew sitting down with sec chairman jay clayton. again, this is an all-day conference this is the ninth annual delivering alpha conference with cnbc and institutional investor. big lineup of guests we're going to be hearing from throughout the day. i'm sitting down with steve schwarz man of blackstone to have the lunch conversation.

he's out with a new book, but we'll talk to him about not only lessons he's learned in pursuit of excellence over the years also what he sees happening with some of the news of the day, including what the fed did yesterday and what he anticipates might be coming from that steve, as you know, as someone who has been very closely aligned with both the white house and the chinese officials, the very top chinese officials, so we'll get his thoughts on what's been happening with trade talks between china and the united states as well. you can see right now dow futures are flat we've been building back all morning long nasdaq is actually in positive territory at this point, but we've been building back, down about 40 or 50 points earlier this morning as we continue to see what happened with the federal reserve from yesterday the decision by jay powell to cut rates by a quarter point you did see some dissension on the board the first time three people who did not go the same way, thinking about 25% andrew ross sorkin sitting down, first interview of the morning at delivering alpha with

jay clayton of the sec let's listen in. >> about the public markets and what i think is the debate right now about the private markets and how over the last decade there seems to be a sense that investors have made out a lot better in the private markets rather than the public markets and this was the year of the ipo, some of the most prominent names. whether they be uber or lyft or slack, wework has not gone public yet, in the press virtually daily. i may try to talk to you about that i imagine you will resist. but -- >> resistance is futile, right >> but i want to talk to you, though, about this idea. and what do you think of this idea that as an investor -- and there are so many asset managers in this room today thinking about how much money am i allocating towards private markets, how much money am i allocating towards public markets, this idea there is more of an opportunity today, not in what classically was considere the stock market, but elsewhere.

>> right i have to do this. thank you for having me. my words are my own, not of the commission now that we dispense with that, i'll give you my views >> a lawyer is always a lawyer >> look, our private markets perform a different function today than they did ten, 15 years ago. they perform a function that was largely performed by our public markets. great deal of growth capital to take companies from small size, medium size to a very large capitalization, all within our private markets. that is new. i think last year, depending on what metric you use, more capital, and certainly more growth capital, was raised in our private markets than our public markets probably means if it's growth capital, better opportunities or at least different opportunities, or opportunities that people want to seek we're delivering alpha, you want to find alpha. private markets are a good place to look. >> oftentimes riskier as well.

>> no doubt, no doubt riskier. i'm glad we're having this debate because as i said to you before, i've never seen a company go from a private company to a public company without coming out a better company in terms of understanding its business and the rigor the public market process puts on them we have to recognize that a lot of growth is happening in our private markets. >> okay, but that gets to the fundamental question if you think companies do better coming through the process of becoming public, what does that say about the transparency or perhaps lack of transparency in the private markets, and at a time, i'd add, that you have black rock, t. row price, and actually public investors oftentimes now in vehicles that live in this private market space? >> well, you can't take -- you can't take a monolithic view of the private market space there are lots of people operating in the private markets

who are very good at understanding how companies perform and delivering performance. are the rules not as rigorous as the public markets of course, not but, you know, we know lots of people who have operated in the private markets for decades and have delivered outside -- out sized returns by doing so and put management teams and whatnot through the same kind of rigor they have in the public markets. >> what do you think of the valuations that have taken place in the private markets relative to the public markets -- and i know you're going to, as i said, resist when it comes to speaking about specific companies, but i'm just going to -- let me mention something about wework as an example and you can maybe speak to it in a broader context, which is wework in its s1 revealed all sorts of things that raised all sorts of questions about the company. dick costello, the former c.e.o. of twitter, said the s1 is so

egregious, when you have regulators and folks across the country looking at silicon valley and wondering if there is an appropriate level of self-awareness the reason i mention that is here's a company that in the private markets was worth $47 w billion. by the way, they're worth public investors to some degree in this at potentially some of those types of valuations and then as the process you might argue maybe it's working as they've gone public. clearly an evaluation has been cut in half if not more. >> so let's go back. you know i will not comment on a specific company let's go back to the debate. price discovery is different from price discovery in our private markets. one of the things our public markets provide is notdaily liquidity, but microsecond liquidity. in private markets, its liquidity is a negotiation and so the price discovery

mechanism is completely different. it doesn't surprise me you would have different valuations over time in public and private pockets for the same type of company. >> you've talked and hinted about wanting the sec to come up with steps to effectively make it easier for public investors to be in the public markets. what would that look like? and what kind of transparency would be required? >> let's talk about this this is an issue if the growth opportunities have shifted not all the way but to some substantial extent into our private markets and ordinary investors don't having a says to them >> right >> that's fought good. you know, the question is, what do we do about it? one of the things i like in our public markets is main street investors, they invest right alongside the institutions with the same deal. virtually the same drag. they're all in it together can we replicate that in our private markets? now, it's very difficult to do that on an individual basis.

it's hard to give individuals direct access to our private markets. so one of the questions is, can we have some kind of fund structure where we ensure that ordinary investors are getting the same deal as the institutional investor it's a wonderful thing about our public markets ordinary people are right alongside the very sophisticated institutions >> then the flipside as we mentioned earlier, oftentimes these private market investments are considerably riskier so when you talk about mom and pop out there. whether you want them in these riskier investments, i should tell you, by the way, at least from a goldman sax report. goldman sachs says less than a quarter of the companies that have gone public report positive net income that's the lowest level since the tech level so what do you make of that? >> well, i, look, it's hard to draw conclusions from single stats, but i will say that i am concerned that our public

markets are being used more for liquidity than for growth. >> and, therefore, you need to do what? >> well, we're having this debate right. so if they're being used more for liquidity than growth capital and we want to make investing widely distributed >> right. >> we have to look at how we can having a says. then and let's get back to where i started. >> right. >> which is why are people waiting so long to access capital from our public markets? why are they waiting so long is it because they're waiting or are we doing something are we too short-term oriented are we too -- is there too much cost associated be going public? what is happening that people are waiting so long? >> isn't it -- isn't it that for reasons and maybe they're rational or maybe they're inexplicable private market investors seem to have a much

longer leash for the types of investments they are making. they may be more willing to give over 20-to-1 voting rights to their founders and things that historically in the public markets we would have thought as bad governance issues. a lot of these things are around governance, for some reason in the private markets, investors seem to be just fine, in the public markets, it's a different point of view. >> look. i think we really have to you know be careful not to take a look at one private sector in the tech segment and apply that across all of the private markets. i think if you look away, ki tell you that the people investing in the private markets away from the tech segment, they're pretty rigorous on their management teams the kind of rigor that they apply to significant private

market companies is in many ways the private rigor the public market plays on management teams. >> you spoke that so many private companies use the public market for liquidity the less polite way is they are letting the public sort of hold the bag after the growth opportunity really existed what do you make of the sort of trend towards direct listings versus the classics or more traditional ipo process right now? >> look. let me tell you about our job. let's take a step back our job, somebody asked me, what's your job? but it's fair. a direct listing is providing the same kind of fair information, fair access to the market as your more traditional underwritten ipo, who are we to judge whether one is better than the other as long as investors have fair access to information. >> let me ask you a question about that one of the sort of

never ending endless questions we always ask about ipos is, if the stock goes up by 10 or 20% by day one or by the way if it goes up 50% on day one, who won? was that a good thing? was that a bad thing what is the proper pricing really look like there are some venture capitalists that say we love the listing. it means the company will ostensibly collect more money. in the ipo process, certain investors may be more vangd than others both to fet access and the idea that there is at least an opportunity on the pricing to move things around, let's say. >> look. let's put it this way. you are an owner of a company that's private and looking to access the public markets. if you have different choices in how you are going to do that, i think that's good. are you going to have a larger deal, a smaller deal are you going to do a direct listing? how are you going to do it those are all variables that go

into what you are talking about. an ipo where 10% of the company is floated versus an ipo where 30% is floated, those are different transactions i >> i want to pivot for a moment how you are thinking about the economy and it's relationship to the stockmarket. are you someone who lived through the financial crisis or a lawyer in the midst of all of it and i remember having a bit of a heart palpitation on monday of just this week when we saw this issue with the short-term repo at the banks and the new york feds stepping in and i'm sort of curious when you saw that, if you had anything e any of the same heart palpitations i did and how you are sort of looking at things right now. >> so, look, i think we both know liquidity is the life blood of markets any time you see something that says, oh, liquidity wasn't expected you have to ask yourself why and think about why the feds stepped in there we have it

you know, look, i hate to say this because i'm you know i guess i get paid to worry. but i'm always looking for things that may be out of whack. i'm always looking to see if somebody has mispriced something. when i say somebody, there is a significant mispricing in the marketplace. we can go back to the 2007 time. mortgage risk was mispriced. substantially% priced on a wide basis and that was a problem i wake up every morning and think is there anything significantly mispriced? >> sow look at negative interest rates around the world what does that say to you? >> well, that says to me, that's new. and you know it is rare there are new things in our market economy. it's a new one it's a significant one it's widespread. now, my job is market function and market fairness. i'm not a central banker so i will be careful to not step into the central bank claim and i look at it and say what does this mean for coming back to my

job. what does this mean for how the mark functions there are a lot of functions in the marketplace let's put it this way they never modelled before negative interest rate >> i always think the way you think about your job, if more of the american public starts, were to start investing or directly in the stockmarket, is that considered a success for you is that a good thing is that a bad thing? do you think about that? do you say to yourself we're in this economic cycle and i don't know what inning we're in. do we want more of the public to be in the stockmarket now or you are just -- >> no, look, maybe i am stepping outside my lane. financial literacy understanding our markets, understanding investing, it's an important part of functioning in our society. okay we're responsible to funding our own retirement we're living longer e. and when i go around the country, the

thing i hear all the time is, i wish i knew more earlier i wish i started earlier and, you know, i am a big proponent of financial literacy and getting your debt under control. get your debt under control before we go to the market but we need a large section of our you know of our society that understands we live in a credit-based economy you need to take care of your financial house. and if you don't have the basic tools -- [ inaudible >> talking about society what do you make about the business roundtable did just several weeks ago in announcing that profit is now just one of several component parts of the quote mission statement of the largest corporations in america and i ask this in part because i think you probably have long thought about the idea of a