in volatility going out after that for the next several months is very, very gradual and i believe that reflects the fact that for probably the first time in my voting lifetime and many of yours as well we will not know who won this election on election night could very well take the month and that could be challenged and of course -- >> got to jump in. my apologies, randy. thanks so much for joining us. >> you're very welcome ♪ good tuesday morning, welcome to "squawk on the street" i'm carl quintanilla with david faber and kayla tauchy, cramer has the morning off. welcome to september, historically the worst month for the s&p but 2020 has already given us plenty of surprises futures are mixed as we await pmi and smi data, oils hanging on to 43 roadmap begins with september and stocks can the manger averages add to their 7% plus gains from august?

>> then walmart's answer to amazon prime, we will give you a breakdown of what is included an what's not >> and finally, white house chief of staff mark meadows will join us live, we will talk stimulus, covid-19 and the unrest across the nation that's happening toward the top of this hour and you will not want to miss that. carl >> kayla, david, guys, everybody is taking stock of the journey we have had not just in august for stocks, but for the past five months, the dow best five-month gain since 2009, for the s&p the best five months since 1938 and as we said at the top, david, we are heading into historically the worst month not just in general, but especially during election years, september and october have averaged negative returns and we will talk to mark meadows about politics which are increasingly going to be part of the picture here >> yeah, no doubt. i think you heard it with the last guest who appeared on

"squawk box" at the very end of that show. we are entering what conceivably could be a very tumultuous period, not to mention the election night itself potentially. i will defer to kayla on a lot of this, but that could be very difficult to ascertain at some point. so that certainly is going to become more of the mix here in terms of how investors do things, but for now, carl and kale larks i mean, we're coming off this period, as you said, august up over 7% and, you know, i hear this more often than not now, which is, man, this is looking -- this puts 1999 to shame in some ways you know, i think you always want to make comparisons, some are apt and other parts of it aren't we are talking now about some of the greatest companies we have ever seen created in this country as opposed to that period where there was so much speculation in business models that had no business at all. that's not the case for apple or for amazon or for tesla even but the moves in the stocks are truly extraordinary and tesla

and apple of course after the splits yesterday, i mean, $464 billion market value for tesla and mr. musk, of course, his net worth now, what, $120 billion. it is staggering not to mention the performance of zoom in morning as well, another example of the stay home economy that is outperforming even the highest expectations in terms of earnings. >> but there are certainly, david, have's and have not's, you mentioned the high flyers in the tech industry, there are certainly many legacy names in the industrial space that have not seen those gains that you just mentioned, but the white house does view it as a tailwind the president yesterday at his briefing talked about the gains that we saw in the stock market in august as something that was good for the economy even as data from the federal reserve shows that it's really the wealthier part of this nation that has been able to benefit. the fed says that the top 1% of earners in this country hold more than 50% of stocks right now, the top 10% of earners hold

87% of stocks. so certainly all of these gains, carl, you mentioned, best gain for the s&p since 1928 according to bespoke that is certainly something to take note of, but it's also worth noting who is benefiting from this, how it really helps the underlying economy and what the underlying economy actually looks like just this morning barclays is out with a note trying to estimate the impact on gdp from parents who are working from home having to manage virtual learning they say it's something in the line of half of a percentage point for the calendar year, but then it could be as much as 2 percentage points for the third quarter, 3.5 percentage points for the fourth quarter we're trying to figure out what this brave new world we live in actually means for the underlying economy if we can't look to the stock market as a guide there, carl. >> no, absolutely not. and if jim were here he would say once again what a huge blind spot we are dealing with if all you go by is the performance of public equities. journal, david, this morning

with a piece about evictions starting to ramp up now that the moratoriums are beginning to expire and the economy continues to open. we're also struggling to your point, david, about how we value some of these names that we knew had an upward trajectory but there is no sense as to how far that actually goes zoom is a great example today. the quarter last night, the performance before the bell, goldman this morning, heather bellini going from sell on zoom, sell, to neutral saying although they've been positive on the company we are -- there's clearly no telling where the limits are on valuation and part of that may be froth, part of it may be the fact that their customer count -- they are enterprise business and consumer business is performing in ways we could not have imagined. >> yeah, and, you know, valuation you'd like it to come into the conversation to some extent, i think there are -- listen, we've talked about it a lot, but it is such an important component of the moves that we've seen, the new investors

who are joining this market and have done so over the last number of months, who are piling into some of these names and seeing great profits as a result to some extent, but valuation does have a way of coming back at some point and being meaningful it's not clear that that's the case now and, by the way, in a name like zoom where revenues were greater in the last quarter than they were for all the revenues brought in last fiscal year, where adjusted net income was more than double what it earned in all of last year, i mean, it's going in the right direction. it is -- it is not exactly disappointing in any way, but to your point, carl, the multiples in many of these names even in an apple which is the largest market cap company in the world at over $2.2 trillion has moved up dramatically. now, in an environment where rates are near zero and potentially will stay there for a long period of time where there is an inability to find a return in most or any other markets, it is perhaps not unexpected that would be the case, but you still have to at least keep it in mind.

look at the one-month, kayla, move in apple, 23% 23% off of what was already a trillion 7 or trillion 8 market cap at that point. it's stunning. >> and it's hard to see what could slow that gain, david. i mean, we've just sustained the worst headline cycle in decades for this country or for at least a decade and these stocks are on a tear there is nearly nothing that can stop them and while strategists say that we are overdue for a sort of garden variety pull back it's hard to see what is out there on the horizon that would actually cause that to happen. we are going to get a jobs number this friday, we will see whether it shows sustained growth of more than a million jobs in this country for the third month in a row and we will see what the underlying economy looks like, again. but it is hard to see if investors are willing to put their money into these companies because they can't get returns everywhere, because they are

aspirationally hoping for products that they are yet to release for targets they have yet to deliver on, then what actual data, what actual announcements could actually cause that pull back carl, it's really impossible to see. >> no, i know. i mean, look at the classic -- some of the classic tells, kayla, that we normally look at that would imply a bit of a pull back a split not happening with apple or tesla certainly an additional equity raise which of course tesla announces today up to $5 billion in new common in this 8 k. still up after a 12% gain on monday after a 74% gain in august, making it the best performing stock of the month so we have not just big players, but big players that are defying the laws of gravity in many ways, tayda kayla. >> one thing we keep hearing over and over again is the market has priced in a new stimulus package, we have yet to see that, but we have someone who is leading the negotiations

on behalf of the white house that we want to turn to right now. standing on the north lawn is the white house chief of staff mark meadows joining us now. chief, good to see. >> you great to be with you. thanks so much >> so in the last couple of days both you and the house speaker have accused each other of putting up a number that you're negotiating but not filling it in with programs when i spoke to the pelosi camp yesterday they said the way that they see this negotiation going is having the two sides agree on a price tag and then backfilling it from there. is that a workable approach to you? >> well, it's not a workable approach because that's not the way that you actually arrive at any kind of a number generally what you do is you say you have a certain amount allocated for this program, another amount for another program and as you do that you build it from the ground up. that's what we've been trying to do, base it on facts, base it on actually the costs associated with each program. i think that's been the frustration. i will say this, as we've had

discussions about democrats on capitol hill, as we've continued our discussions with republican senators, we're making real progress and i will say that as we look at the number of things that we actually agree to and the amounts of money allocated to those areas, probably the biggest stumbling block that remains is the amount of money that would go to state and local help the speaker is still at $915 billion which is just not a number that's based on reality and certainly not a number that represents the lost revenues for state and local governments. >> well, what is a number on that specific line item that you think the president would get on board with that could also secure the republican votes in the senate to pass is there a number that you're discussing behind closed doors >> well, we actually have talked about giving great flexibility for the $150 billion that was allocated in the previous

c.a.r.e.s. act in addition to another $150 billion that would go there, which would overall give $300 billion in terms of flexibility and additional funds to state and local, which should represent the actual loss that we see if you take the gdp reduction that we've experienced over the last quarter and based on projections now, that should indicate about a $275 billion loss in revenues, that's what we're trying to address, and i'm willing to look at the facts secretary mnuchin has been very clear that he's willing to look at the facts and right now it doesn't need to be a bailout as much as it is just an additional help to provide some stability to those local governments that have lost revenue during this unprecedented time that being said, you know, we're making real progress with some of the democrats on capitol hill

they've had some very thoughtful recommendations that we've actually been able to have real discussions behind closed doors and i think as leader mcconnell and senator barrasso have mentioned, the senate republicans will be returning, they've been working around the clock each and every day we have a call to talk about where we can find consensus there. i expect them to pass a bill or at least put forth a bill in hopes of getting to that 60-vote threshold sometime next week >> so we're expecting something to come out next week when the senate returns from its work period do you think that that proposal that will see the light of day will approach the $500 billion skinny proposal we have heard about or will it be closer to the speaker's $2 trillion benchmark for you? >> well, i don't see a $2.2 trillion benchmark actually happening mainly because it's not based on facts and it's not based on the reality it's real easy to put a number

out there and say that this is reasonable it's much more difficult to actually look at it and support it with actual numbers and so that's where the senate proposal is looking at a more targeted bill as they look at maybe a $500 billion bill, but if we can add from that and use that as a foundation or at least pass that, knowing that we will largely agree on that targeted proposal coming from senate republicans, let's go ahead and get what we agreed to off the table, passed, signed into law and continue to negotiate on those things that perhaps might separate the two parties >> mark, leader mcconnell has talked about some of his caucus worried about the deficit, which makes sense, but kudlow talked to "politico" and suggested that the economy could eek it out without further aid saying there has to be a limit. i wonder on kudlow's comment how much of that is informing your

negotiations >> i think the vast majority of our negotiations as secretary mnuchin and i have actually looked at trying to address the needs, we focus real succinctly on those small businesses, what can we do to help the small businesses continue to operate there's been some discussions as it relates to airlines and what happens there. more broadly than that what do we need to do for enhanced unemployment, what do we need to do for k through 12 and school supplements there and then those direct stimulus checks that we actually put out last time there is a broad agreement on a lot of that and as we look at this the leader mcconnell started out with a $1 trillion goal of putting forth this, we're actually north of that by $300 billion right now, but we

are nowhere close to $2.2 trillion and it's primarily because the numbers don't support that so i'm hopeful that we will get everybody back in town and that senate republicans will lead the way to breaking this log jam >> mr. meadows, what do you say to those who point to the progress that was made in such a rapid amount of time in april, for example, late march and april when we got the first stimulus bill, relief bill, and now. and say, do you know what, the difference is you. your presence here and i will quote from one of your former colleagues, a democrat jerry connelly, closing deals is not mark meadows' strong suit, his whole track record is blow it up what do you say to that? >> well, jerry and i actually have worked together on a number of things on postal, i'm one of the few people that actually put forth a bipartisan bill. what they seem to forget is that i was actually part of the last

negotiations on the c.a.r.e.s. 3, secretary mnuchin and i actually worked very late into the middle of the night, i know my particular aspect of that negotiation was working on the testing funding and hospital relief package those two things we were able to get across the finish line listen, anything we set our minds to if we base it on facts we can get it done i can tell you that most of my life i only got paid if i brought two sides together and, you know, when you look at it in that particular venue, it works really well. listen, there's going to be a whole lot of finger pointing right now, i'm not trying to point my finger at anybody else other than say give me the facts, we will get there secretary mnuchin and i are willing to meet around the clock. we continue to make overtures to both democrats and republicans and we will get there in the end. >> mark, you mentioned last week that the president could

potentially take executive action to prevent airlines from furloughing and laying off workers. where does that effort stand >> yeah, we are looking very closely at a number of executive actions. i think i was responding to a question that was specifically about some of our airlines and whether we can actually do that to help the airlines or not. still remains an open question, but the president has been very clear, in fact, i met with him on this very subject yesterday very late. he wants to do whatever he can do to get things done. he's tasked secretary mnuchin and i could get as creative as we can within the confines of the law to put forth as much money to make sure that we keep this economy going so, you know, we went back to the drawing board last night, again this morning, working on that i will say that when these talks broke down there was one individual that actually worked and got something done and

that's the president of the united states and whether it was with enhanced unemployment or any of the other issues that we looked at, it was through executive orders that this president said when congress is not going to act, i'm going to that still remains on the table and we are looking for a number of options there >> mark, i want to make sure we talk about vaccines before we let you go, i know you've been sitting in on some of the meetings with operation warped speed and running point for the white house there. there had been some talk about the astrazeneca vaccine, the trial going on in the uk and now the phase three trial that's under way as of last night's announcement here in the u.s last week on cnbc jared kushner said there would be 100 million doses of a vaccine available here in the u.s. before the end of the year. could you elaborate on that? is that the astrazeneca vaccine and what is the white house looking for to potentially fast track something? >> it's not just that particular vaccine. we are looking at actually

operation warped speed is taking an unprecedented action to make sure that vaccine is delivered to hundreds of millions of people before the end of the year and so what we're doing is actually spending money to produce vaccines, millions -- hundreds of millions of doses of vaccine while they're going through the clinical trials. so as we get any positive news, whether it's astrazeneca or any of the others that are out there, you know, there's multiple candidates that are going through phase three clinical trials right now, we're actually producing that, which means that we will actually have millions of -- hundreds of millions of vials of perhaps a vaccine that does not work that gets shelved, but that's why we have to have this as an all hands on deck kind of approach and the reason why jared kushner was so right in that description is because we're doing that on multiple efforts to make sure that we're not waiting for the approval of a clinical three trial to start the manufacturing. we're actually starting the

manufacturing in parallel to make sure we can deliver it as quick as we can to the american people it's unprecedented in terms of what we're seeing, but these are unprecedented times. >> okay. to put a quick fine point on this. >> sure. >> mr. meadows, do you expect this vaccine to come out before the election or a decision to be made before the election >> yeah, i can tell you that we're trying to do it, it has nothing to do with november 3rd as much as it has to do with september 30th, october 30th, november 30th. you know, we're trying to make sure that what we do is get a vaccine to the american people as quickly as possible and whether it comes out before the election or before the end of the year, it will -- it will come out in record time and it's all about trying to help the american people as quickly as we can. this president has been very clear. get a vaccine, get therapeutics, get it to the american people so we can get back to normal. >> we appreciate your time,

mark, this morning i know you are headed to kenosha with the president momentarily so thank you for making the time to speak with us this morning. >> thank you it's great to be with you. >> like weiss. chief of staff, mark meadows carl >> kayla, when we come back we will get more on those vaccine candidates as we now have three that are in final phase three trials plenty of news on big cap techs as we see facebook, apple, facebook and amazon in the news. nasdaq futures are higher. then walmart a tndheir new answer to amazon prime when we come back. ere. i wish my trading platform worked like that. well have you tried thinkorswim? this is totally customizable, so you focus only on what you want. okay, it's got screeners and watchlists. and you can even see how your predictions might affect the value of the stocks you're interested in. now this is what i'm talking about. yeah, it'll free up more time for your... uh, true crime shows? british baking competitions. hm. didn't peg you for a crumpet guy. focus on what matters to you with thinkorswim.

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unveiling of walmart's answer to amazon prime, it's called walmart plus membership service will cost $98 a year, only offer free shipping on orders over $35 david, fuel discounts, there will be some lines in the store where you can avoid the cash lines, you can scan and go so the match up continues to evolve, even as we got news about amazon drones yesterday. >> yeah, listen, it's interesting, i think, on the face of it certainly at this point perhaps a little paltry in terms of what you're getting there. remember with amazon which as you saw is a little bit more money you're getting all of that content in terms of video and music, which a lot of people

enjoy. i think it's fair to say a great deal but it is all reflective of walmart's continuing efforts in the digital world and we've seen it, of course, reflected in the company's numbers to some extent as well and, you know, this partnership with microsoft that they came out and actually confirmed sort of just trying to, i think, lend even more credence to what they're trying to do, that i was referring to of course for buying tiktok. you know, it's interesting, carl i don't know where it ends up for them i know that the walton family is very much focused on that dividend and making sure it's paid every quarter for them. it's certainly a changing company at this point, focused perhaps on getting its demographic age down a bit as well, maybe focusing more with the tiktok thing if it were to happen on urban areas. so it bears watching but this product, i don't know you know, it's free delivery,

which is great, but it seems to come at a fairly substantial price at this point without a lot of additional stuff. >> yeah. we didn't get to tiktok with meadows, kayla, but certainly fertile ground there as well as we look for any guidance on which direction at least the administration would prefer this thing take >> especially now that we're in the month of september, just two weeks before that september 15th deadline that the administration has set. on walmart plus, i think the fuel discount is particularly interesting. yes, it's not as much of a boone for consumers now that gas prices are as low as they are, but in addition to helping walmart compete against amazon it also helps them compete against companies like costco and sam's club that sell their gas on site and are able to offer it in such an affordable way for their paying members i also think the $35 price threshold is interesting for walmart because it helps it limit costs. you know, you are not paying for free shipping, carl, on things like a toothbrush that's $2.99,

where the cost to get that to the consumer is astronomically higher than the item that you are actually purchasing. so perhaps walmart has figured out where the fulcrum is where they can make money on a product like this. >> price discovery on streaming, price discovery on delivery are all things that the giants are working out. guys, with he will take a break here, get ready for the opening bell in a few moments. we have pmi coming out at 9:45 eastern in just about 20 minutes and at the top of the hour it's ism and construction spending. so a busy tuesday in store don't go away. traded goods.

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the split and despite the announcement this morning that they will raise up to $5 billion in new common continues to go higher as we now know musk is the third richest person in the world. tesla is the best performing stock of the month of august david, up 50% since announcing the split on august 11th and as we search for explanations here cash cashin yesterday suggested that the split itself creates complications for the shorts, essentially results in a squeeze which then some others sort of i think probably raised their

eyebrows at saying, no, that doesn't really happen. i think everybody is looking for answers as to how a split and new common could result in a stock that continues to go higher >> yeah, well, listen, we talked a lot about the robin hood traders as we call them, although many may be using e-trade or schwab and ameritrade, whoever it might be. there is a certain extent of that as well as we watch the opening bell this morning at the realtime exchange. of course, we will see how we end up for the open here, carl, but tesla, it's a rare day that it goes down and, again, it is one of the largest market cap companies now in the country what is it i mean, still behind berkshire but seems to be ahead of pretty much everything else after that. >> yeah, i think it's closer in on berkshire and i was just looking at zoom as well, guys. at $127 billion, kayla, zoom is now bigger than ibm, it's bigger than amd, it's creeping up on texan and qualcomm and if it

were in the s&p 500 it would basically be right around the top decile in terms of market cap thanks to robert hum, one of our statisticians here remarkable gains on remarkable market cap gains in the past few months, few weeks. >> remarkable gain for the bottom of the founder and ceo whose bottom line through $4 billion. the company also set to grow for the remainder of this year raising its own forecasts for revenue by more than 30% it's hard to see how a lot of these stay at home names will be able to grapple with the comps for next year which will be absolutely impossible to reach if and when the world returns to normal how in the world could zoom possibly notch a year over year gain based on just the incredible performance of this year, but that's for them to figure out and for us to commentate on. >> yeah, exactly you know, as you point out, they

came in with, what, expecting a billion in revenues, they are on track for $2 billion to our talk about valuation, it is trading now at 60 times revenues you're buying a stock at 60 years worth of its at least expected revenues for this year. keep that in mind. yes, the revenues may be growing incredibly quickly, but to kayla's point is it going to grow as quickly a year from now when hopefully we are not all zooming our way through the entire day but are back to actual in-person conversation. carl, did i want to come back to that list on net worth because it is stunning and does reflect the increase in market cap in so many of these enormous mega cap names. i mean, bezos got divorced and he is still worth $202 billion he has added $87 billion this year as you can see, as has mr. musk off a much lower base of course don't forget ma kenzy scott, mr. bezos' long time former wife,

she's worth $66 billion as you see bernard arnault and larry and sergei, warren buffett has had the only rough go of it here watching his net worth decline the numbers are staggering and of course when you're talking ballmer and gates microsoft, zuckerberg facebook, bezos in amazon, larry and sergei with alphabet all of which although not as much nor alphabet have added enormous amounts of market cap over a very short amount of time again, these numbers i don't know how it figures, kayla, into the discussion around wealth in this country and the election, but they're staggering these are all founders, pretty much across the board, people who created their companies, but the numbers are just -- we've never seen anything like them. >> no, and mckenzie scott has become the third richest woman in the world with that 25% share of her ex-husband's wealth

worth noting she has given away more than a billion dollars of it, even just in the last couple of years so she is devoting that net worth to philanthropy, she has already given away quite a bit of money, some statistics that i saw more than bezos has. so she is trying to do what she can with that money, but it is worth noting as we look at the open and look at some of these trades, you know, as we talk about these tech companies like tesla that continue to soar, you do have a lot of these legacy old line companies that continue to struggle in this economy. earlier this week you had coke announce layoffs to optimize its company for the future and then there is a report that ford, the automaker, a planning to cut 1,000 salaried jobs in north america and that announcement according to a bloomberg report could come as soon as this week and that stock is down about 1% after the open so you are seeing a lot of these big cumbersome manufacturing and

old line companies who are trying to figure out how to right size for what the world looks like for the future, even as these asset-light companies are able to really optimize their products for the economy that we are in right now and it's a struggle for a lot of those companies and you're seeing ford stock react to that news this morning. >> yeah, that's a great point, kayla. as software is not just eating the world but eating the industrial economy in terms of shareholder preference as well david, i'm curious to know what you think about some of the sell side throwing in various towels. we mentioned goldman removing their sell on zoom this morning, but also today wells removes their underweight on qualcomm, they go from 90 up to 120 based on higher peer valuation metrics. you have a slightly different story with ge and steve tuesday is a removing his price target yesterday. analysts seem to be arguing

either we are not going to try to chase the market or we're having to get religion on things that maybe we were too pessimistic on. >> you know, it's a difficult position to be in when you are an analyst you don't typically hear me feeling badly for them, but you're trying to stick to your valuation metrics, you're trying to at least sort of stay in some semblance of what makes sense and yet the stocks are running beyond you, you're forced perhaps to think about things in a different way, you don't want to look particularly stupid which is not that easy -- you know, not that hard to do when you see moves like this. and so i think it becomes difficult. you know, i really don't pay that much attention, frankly, to the ratings oftentimes or the ups and the downs or the price targets as i do for some of these analysts in terms of what they actually are saying and what their views are of the fundamentals or what perhaps in some of their work they're uncovering i think it's worth reminding people that that's what's important. we will see what kind of commentary comes out of, for example, the zoom call -- the zoom call -- well, this he did

have a conference call as well, but the zoom quarter and how it's viewed. you know, again, are you really going to want to continue to pay 60 years' worth of revenues for a company that is growing at 100% a year, but is it going to be a year from now particularly given how unique this period may be for it. speaking of unique periods, guys, did i want to hit shares of kodak, a name that i was following quite closely as you both know a few weeks back when the company stock soared, it seemed to have secured a $765 million loan from the u.s. government to help the -- with the creation of supply chains for the ingredients for drugs. and that loan very much in question why is the stock moving like this there is a 13 g filed de shaw that seems to have gotten people's attention i can't tell you why de shaw is in this name what i can tell you is the following, don't forget, de shaw

largely a quantitatively driven fund this he do have other aspects, people may know them from my reporting when they've been active in a particular stock, but a lot of their strategy is based on algorithms, quantitatively driven, so sometimes names just end up being in the portfolio because they hit a certain parameter and they buy a lot of it, particularly when it's a small cap company. so they file g sometimes, it's not a passive stake, it's an active stake, it's not clear that that much should be read into it, that seems to be the only reason the stock is up 40%. yeah i can't tell you much more than that, but keep that in mind. always important, kayla, as we continue to watch the kodak story unfold >> yeah, with many twists and turns, david any view on how long the horizon, that de shaw is looking

at for that investment could be? i know that it basically just hit a bunch of quantitative parameters but now that it has and now that it is in the portfolio, do you know, is it something that they will flip, something that they'll hold for a year plus? what do you think? >> probably not. i mean, these things tend to move fairly quickly. i don't know, if, in fact, it is part of an algorithmically driven strategy there, it could be a matter of moments that they actually own it or it could be for some period of time depending on what it's hedged against or in some way what it's in synch with. so i don't know. i don't know what it showed up there, but it is a g, it's not a d, and so we will have to wait and see, if i can keep rhyming guys, i also wanted to hit tiffany, real quickly, of course, for a different reason, something i've been following closely which is namely the

continued concern about what bernard arnault who showed up on our earlier list of the richest people in the world of course may or may not three to do in terms of can you get a price cut there. i've been reporting a lot on this yesterday a service -- a pay service that follows things on the anti-trust front and orts had indicated that there was a potential delay in their filing for formal approval from the eu on an anti-trust basis i can confirm that, in fact, i think it was late last week they were in receipt of from the eu what i'm told by people familiar with the situation were requests for information that was really just about catching up on certain items or sort of cleaning things up, not thought to take particularly long to fulfill this request and i'm told, again, that while it might have the affect of delaying a filing, formal filing, by a bit, it shouldn't hold it up too much but it does play into the fears, continued fears, of investors which is why the stock a trading

12 bucks below the 135 price that it is going to be yet another reflection of bernard arnault's reluctance to try to follow through with the deal yer, it's november 24th that is the final drop dead deal date, they did extend it for closing this he won't get that far if they get eu or delay things, tiffany will sue them based on everything i hear. we are watching this closely, see if a fight comes all indications are that they will file for eu in the in near future, it might be this week, most likely not. we have all time highs on the nasdaq, all time high on apple, all time high on peloton. let's get to bob pisani this morning. hey, bob. >> hello, carl happy tuesday, every kind of a flat open although two to one declining to advancing stocks with the s&p and that shows you the power of technology stocks. if you look, again, today tech is moving, but that's because

you have apple and amazon on the upside, that helps but look at this cyclicals, industrials, banks, energy to the down side here where are the new highs? we are at historic highs intraday yesterday i see six new highs on the s&p today, there's m a, there's amazon, there's walmart, there's qualcomm every single day these four or five stocks are on there and where is the rest of them? we need more new highs here to confirm the great movement in the overall uptrend in the market not getting that zoom video you struggle to find the superlatives a few facts i put together, the ipo price in april 2019 was $46, it's $450 right now. the market cap when it went public was $10 billion it's now $130 billion the revenues when it went public was $430 million in april 2019, it's now they're talking about $2.4 billion you struggle with superlatives to try to figure it out. this is a simple way to understand what they're doing --

there's zoom today, that's not a typo up 30% and it was, what, $65 when it started in 2020, you see what it is right now how about the market how do you describe five straight up months people are at a loss for words because everyone is trying to figure out what would break the market momentum and a lot of professional traders are at a loss for words i spent a half an hour with tony dee wire yesterday, he is withdrawing his s&p 500 target he tells me there is no bless dent to how high the valuations can go with low rates and unlimited qe no precedent these are veteran market analysts kind of at a loss for words mere brian belski reinstated he had withdrawn his 2020 targets, has reinstated it, he said the market epic rally is challenging forecast models based on earnings and interest rates. oppenheimer withdrew their price target recently. these are veteran market

analysts who know their stuff who are at a loss for words on how to describe what exactly is going on this is the issue, what multiple do you put on unlimited fed support? how do you describe it that's what they're having trouble doing. in the past recessions were caused when the fed essentially withdrew accommodation what do you have now when the fed has essentially said we are not withdrawing accommodation anytime in the distant future. what is the multiple how do you assign it you are not in any historical pattern or precedent and that's essentially what analysts are i go is a, we are in uncharted territory and in the absence of that you focus on the drivers. the drivers are unlimited almost unlimited fed liquidity and the fact that the global economy slowly, very slowly, does appear to be improving. those seem to be the two things that everyone is focusing on want a little bit more on the bull/bear debate cnbc has a whole discussion on that very interesting times to be in if you are a stock market analyst.

guys, back to you. >> that's for sure, bob. thanks we're going to get pmi in a few moments, let's get to rick santelli hey, rick. >> hi, carl. listen, we will go through some of the charts and when the news hits we will break right into it look at a three day of tens, since last week we completely see we continually give up ground, whenever rates seem to firm up they don't seem to get any legs a month to date chart, we went from basically 50 to 70 basis points, not bad, breaking news, our august final read on market pmi expecting a number around 53.5, a little bit light, 53.1 53.1 now, this replaces 53.6 which was the early read and 53.1 is the best number going back to -- to january of 2019 so the beginning of last year. and later on today, very short while from now we will get the ism august read which is also going to most likely be a barn

burner other isms around the globe have been. back to the charts, the month to day chart we've gone 50 to 70 basis points on ten, dollar index and euro currency, the euro makes up a significant portion of the dollar index, month to date of the dollar not a great month, when you hook in a two month to date and hook in july that's where the deterioration started in earnest, we are under 92 in the dollar, basically 28-month lows where it's going to close today and finally let's look at an april of 2018 of the mirror image the euro versus the dollar, crossed 120 for the first time in 27 1/2 plus months carl, back to you. >> all right rick, we will see you in a few moments for ism and construction spending, that's our rick santelli watch chips today, amd, broadcast, nvidia, qualcomm are coming off their all time highs, we will break down some of those names with straes rascon after the break. stay with us acy rascon after

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chip names such as amd and nvidia leading the charge for stocks as they close out august or closed out august with more all-time highs bernstein's stacey rasgun is joining us now and has names he wants to continue that run for a while. nvidia, qualcomm, broad cam, amd i think all of them hitting all day highs yesterday. what's an analyst to do? do the fundamentals support all of that? do you have to bend yourself into a pretzel to justify some of your price targets? >> well, not exactly

so let's talk about where the sectors kind of come year to date obviously, you know, nobody had a global pandemic on their score card when things started out and when everything hit, people were sort of applying the global financial crisis as the most likely filter to look at the current at the current crieses through, that's what happened in march, everything collapsed. we've seen something interesting as it has gone along, semis by and large are proven quite resilient in the wake of the global situation we've got changes in consumer behavior, work from home that's actually been driving and supporting demand far above i think what anybody had hoped for and so now, we're looking forward, we have a few things. demand held up better than people thought we have a growth story for a number of names, particularly ones better at these trends and looking at the current situation it's validating how important technology and by proxy

semiconductors are i couldn't imagine doing this, if this happened 20 years ago, so it's giving investors a little more confidence to look through what's going on right now, especially is when they're seeking structural or secular stories you want to own for the long-term. a lot of the names you mentioned fit in into that category in this environment where investors are paying up for growth and those opportunities, these stocks are working >> so do you then, have you actually increased your estimates of long-term growth rates for some of the names and therefore are willing to accept a far higher multiple as well? >> some of them, yes for example in our coverage, we've got a number of outperforms, two of them i classify as secular, nvidia and qualcomm and nvidia numbers have just been going up by leaps and bounds data center is on a tear, even as we go into a digestion face within data center broadly, nvidia is holding up super strong and the gaming cycle

they're about to kick off looks to be a monster, so numbers are going up a ton with qualcomm it has been deft to own for half a decade because of regular customer disputes are now mostly clear now they settled the huawei issues. the 5g and apple cycle are starting to come up so again the same thing those kind of growth rates, those sort of estimate expectations have been going up leaps and bounds and the stocks are working on that. >> stacy, got to leave it short today but always appreciate even when you're tight on time or we are, you sharing some insights with you -- with us. >> i appreciate it thank you for having me. >> stacy, thank you, sure thing. when we come back, keep an eye on large names walmart is leading the s&p at the moment with a nice 3.3% game zoom leading the ndx, up 36% the dow is up 4.

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there was a time not too long ago where an amazon target of 3,500 let's say got laughed at, but we actually got there this morning, stock settling back just a touch from an early all-time high, above 3,500, currently 3,488. quk t see iback in a moment. don't go away. we made usaa insurance for veterans like liz and mike. an army family who is always at the ready.

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bond investors not exactly optimistic about the comeback of new york city post covid robert flank explains. >> good morning, dave. the risks of investing in new york city debt have more than doubled during the pandemic, that's the message anyway from the muni bond market last week, new york city sold over $1 billion in long-term bonds and the rate was 1.45% that's low, but the number that's important in the muni bond market is the so-called spread, that is the difference between the yield and the rate for aaa bonds or the benchmark before covid, new york city spread was 20 to 30 basis points but the spread on last week's offering was 72 basis points, so more than double and the muni bond world, that is a large and very sudden move howard cure of evercore wealth management says it reflects concerns over new york city's credit rating and potential problems now the fed is helping to keep

these rates low for now, but new york city has $38 billion in outstanding debt obligations and it is now seeking approval from the state for $5 billion more to avoid layoffs of over 20,000 workers. analysts say the city has to pay even more for those bonds or could to attract buyers, which of course could raise its borrowing costs, forcing it to cut capital spending and services even more, which could reduce the tax base and add to that potential downward spiral new york's bonds are now trading to levels similar to philadelphia, though not as bad as chicago, so at least we've got that going for us. guys, back to you. >> all right, robert, the story we got to watch closely. robert frank talking about the spread in new york city muni bonds. good tuesday morning welcome to "squawk on the street." i'm carl quintanilla with david faber and kayla tausche coming to you from various locations as we monitor the pace of all-time

highs, on the nasdaq at the open and high-profile names like amazon and peloton pmi came in not too bad a few moments ago at 53.1, and we're about to get our first look at ism manufacturing, and get a sense of how the industrial economy continues to repair. let's get to rick santelli >> yes, well, carl, i always keep my fingers crossed when you come to me early holy cow the numbers are out on time ism manufacturing august manufacturing read 56.0, definitely much better than the 54.8, and 456.0 is the best rea going back to november of 2018, very, very big number. if we look at the new orders component it moved from 61.5 to 67.6, prices paid from 53.2 up to 59.5 and listen, we need to monitor prices paid, exactly how

disinflation, inflation, higher price, lower price and supply/demand shocks are going to resound nobody really has a good idea. the ism employment component, because employment obviously is the issue, and we're going to be getting some employment data, 46.4, that moved up only a bit from 44.3, and obviously it's under 50 still in contraction mode. july read on construction spending we're expecting up 1%, a disappointment here, only up 0.1 of 1% and we did get a positive revision, but it was subtle last month moved from minus 0.7 to minus 0.5 carl and kayla, back to you. >> thank you, rick i'll take it from there. speaking of all of this data, steve liesman has some new dita ahead of the friday jobs report and how those extra unemployment benefits have factored in. steve, what have you found >> yes, kayla, we got our first indication of that i'll get to that in a second

some of the other data we're looking at the first is this kronos time punches. they cover the time management and work shifts for some 3.2 million employees. they make their data available, and it's done a nice job of telling us what's going to happen in the jobs report. unfortunately, this number is up just 0.3%, about, i don't know, a half of what it was or less than half of what it was in the prior month. that's the monthly change in time punches going over chase credit card spending, what kayla was alluding to right there, chase gives us their data on credit cards. they've segregated this into high unemployment states or those with the highest claims to see if they'd be affected by the runoff in the federal unemployment insurance, down 7.7% year on year, compares to better numbers for the lower unemployment states. jeffries does an economic index, 63.2, an all-time high like a lot of the high-frequency

data the growth rate edged off annettea markowski tells me "given the falloff in fiscal support payments, i was expecting an outright contraction in consume he activity" but goes on to say "even though the momentum isn't strong,' quite impressive it's held up. look at the data from kronos a good job of showing the decline over there in april, and the bounce-back for two months in a row, may and june now it's pointing in line with 1.25 million expected for the jobs report with the 0.3% gain if the axis are lined up correctly there. if you take out the k through 12 return to work folks, that number would be actually lower down to 0.1% so some downside risk. finally let's look at the high unemployment versus low unemployment rate state spending you can see the divergence, the claims dropped off, more of the

federal payments dropped off, both are still negative, one coming back faster than the other. kayla, that's really the story, a tale of two economies that you can split in multiple different ways, those industries affected by corona, you have good numbers on manufacturing coming back, but you have states that have higher unemployment and lower unemployment and they're coming back at different paces here kayla? >> that's what they're calling the k-shaped recovery, steve we'll take any data we can get to try to figure out -- >> not for kayla >> -- friday -- ha, ha, we appreciate it, thank you, steve. it is a good place to start with our first market panel this hour for that, we bring in credit suisse's jonathan golub and ed yardeni. pmi rose slightly. ism is the best read since november 2018, even though the employment picture shows contraction there, what do you make of it, jonathan >> i think this is a little bit of a shoulder shrug.

we know that sequentially the economic data will get better, this month is better than it was a month or two or three ago, but it doesn't really give us a read the way the ism is calculated on the overall health of the economy, compared to what a fully operating economy would be our expectation is that for the next month or two, we'll continue to see progress, but then as the comps get a little more difficult that it's going to soften up a little bit into the fall >> you talk about sort of the marginal improvement of some of this data on a month by month basis. do you think the market is pricing in this recovery, taking one to two years to be a full rebound or do you think it's still expecting this sharp v that we've been hearing from washington is in the wings >> no, there's not going to be a sharp fee. the sharp fee off the bottom, when you have an economy that you close down you shut the lights on it, and then you open it up, and all of a sudden, yes, you get a big bounce but if you look at the bond market, if you look where

the ten-year bond yield is right now, it is saying we are going to have a slower, long-term economic environment for a very long time, and mind you, when we went into this crisis in february, we had a ten-year bond yield under 2% so it wasn't like the underlying expectation was we're going to have a gangbusters economy and i think the confusion is that when the stock market is going up, people keep saying that the market is at this indication of this fantastic economy we're getting. it's really an indication that a smaller group of companies are doing incredibly well, and that the discount rate for stocks, the interest rates are actually boosting up the value of equities it's not that the economy is going to continue to be like this >> to jonathan's point on that, at what point, if ever, do stocks reflect macro weakness in the parts of the economy that

equities tell you nothing about? >> well, look, i think we are seeing a restructuring of our economy in response to the pandemic clearly people who can work from home are working from home, and many of them may continue to do so we're seeing deurbanization as people move to the suburbs we got a housing boom which has been a very big, positive force for the economy, and with mortgage rates at record lows, that's been able to continue even though home prices are going up so i think that parts of the economy that are actually doing well and actually maybe have gotten a benefit from the pandemic, and i'm talking about the internet stocks, the cloud stocks, the housing stocks, all those areas have really been the leaders of this bull market, and so that's perfectly consistent with what we're seeing in the economy. >> um-hum. on inflation, the lumber, for

example, gets thrown out a lot as a canary but is it simply reflective of as you said mobility moving to suburbs, not indicative of some larger presence of creeping inflation, the kind that the fed hopes to build? >> yes, well you know, the inflation numbers have a whole bunch of components to them. one of the biggest one is actually rent. we do know that rent inflation is likely to go down quite sharply here as a matter of fact, i'm not sure that we're even measuring it correctly because there's a lot of people who simply haven't been able to make their rent payments so i think for the short term here, there's some pretty powerful forces keeping a lid on inflation, and lumber is not directly in the cpi, maybe it's in the ppi, but the best cure for high commodity prices is high commodity prices. i suspect high lumber prices are going to lead to an increase of supply

>> john, how do you see the inner play between what we're seeing in the inflation discussion and what's happening in the stock market? they seem to become sort of intertwined at least in recent weeks. >> well, you know, i think that there's some underlying issues with the inflation data. in the near term if you wanted a whole bunch of items, i went to buy an ipad and they were out of them at the store because demand was so high because people are staying at home, but that is a near-term issue, because of the disruption we're in, and i think ed was hitting upon this, that is this an underlying trend we're going to have inflation, which typically happens when you have very low unemployment, and factories don't have the ability to meet their demand, and the like, or is this the inflation that results from a shock to the system even if we look at housing right

now, and ed raises a good point, do we expect that this deurbanization process that's talking about is a permanent trend or is this something that people are doing as they want to get away from cities until this process is over, and my -- i think the overreacting to some near-term pick up in inflation which is legitimately showing up in the numbers but i don't think it's an indication that we have a long-term inflation trend. i think that we have the opposite, and i just want to also comment on something that ed was saying in terms of the change in the economy. the positive changes in the overall economy are showing up in the s&p 500 so yes, there are people who are spending their money on, you know, an online video subscription or things of this nature they're not very big in terms of their importance for the economy, but they're huge in

terms of their exposure to the s&p 500 and one of the reasons why the s&p 500 is doing so much better than the economy itself >> but so much of our focus, ed, is going on these top five tech names that are carrying the market i mean, they have really taken about 58% of the gains this year, versus 1% for the rest of the s&p. there have been some parallels drawn between the way stocks are valued now and the way they were valued during the dot-com bubble given how different the economy is now, do you think that's a fool's exercise? >> well, i am concerned when i see stocks going straight up i mean, what do we know now we didn't know a week or two ago because the stocks keep going higher and higher. i think once we do see that there's a vaccine available, that there's treatments and cures available, i think some of the laggards will catch up like in the financial area, for

example. so i don't worry too much about the leadership being in these magnificent five, six, seven eight stocks that have captured more than a quarter of the market cap of the s&p 500. these are real growth stocks they are big companies that have this extraordinary ability to grow their earnings, even though they're so big, and i think that continues, and they're in the sweet spot of the beneficiaries of the pandemic, a lot of people working from home, a lot of people getting their education from home, and a lot of people getting their entertainment from home rishz the internet and requires the cloud, requires servers and semiconductors that produce all of that, and this in many ways is a trend that's going on but accelerated by the pandemic >> and who knew you could even anchor television shows from home we're learning a lot this year jonathan and ed, thanks to both of you for your insights this

morning. meantime, look at shares of zoom, speaking of all of that, up big after a big quarter, revenue nearly quadrupling this stock was $230 three weeks ago on august 12th, currently $469 we'll talk about that in more depth after a short break. give you my world ♪

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forecast, sending shares higher, up currently 43% this morning. rbc's alex zukin joins us to talk more about the results. alex, good morning alex, can you hear me? >> good morning, thank you for having me. >> great you know, it's a remarkable quarter and the street's responding, those who had sells are finally taking them off. it's your view, i think that street's really coming to terms with as you put it the full power of the operating model >> yes, i think that was -- first, i also think this is a company that effectively helped save the economy at this point, right? our kids are going to school on zoom we're really doing a lot, running a lot of our normal lives on zoom. i think the power of the operating model is that they've got incredible leverage. you've seen kind of a 5x increase year over year in free cash flow margins so that's something i don't think was well understood and appreciated kind

of coming into this quarter, that's definitely getting more appreciation now >> so then how do we measure valuation at this point? >> it's a great question i think investors generally have been, that they're good at, you know, figuring out scale they're not great at figuring out speed, and i think the speed with which this company was able to achieve scale is something that we've never seen before so we've used historically a revenue multiple as a poster child of kind of high growth, but even for us, the revenue multiple, you can see where our price target is coming in to today, it starts to get a little bit tenuous, but i think when you start looking at the kind of free cash flow margins this company can generate, 50% free cash flow margin this is quarter, if you think about those margins on very large top line figures, longer term, you start to get free cash flow valuations that are not that

difficult to justify >> alex, i'm looking at a company that's trading at 65 times its revenues, and i get it it's had incredible success. it came to this year expecting $1 billion in revenues looking like it will be double that but i still wonder about next year when we conceivably get back to a normal life and not using the service quite as much explain the free cash flow conversion idea to me and how that makes it cheaper. >> yes, so what i would say is, look, in terms of just staying on revenue for a second, we have an upside model that gets you over $5 billion in revenue by calendar year 2022 and we think even in a situation where the pandemic eases, a lot of the decisions that companies have made to go to a more remote oriented and really location agnostic model for working from home, that's going to be sticky,

and so more and more employees, more and more business interactions are going to have to be able to be, you know, shifted to a remote construct and zoom is a beneficiary of that they don't get charged when you use the service. you get charged as a per receipt business when you're able to use the service. in terms of the margins, if you think about free cash flow margins and the power of these cash flows to accrue and compound over time, at a $5 billion plus revenue company in two years, with a 40% free cash flow margin, that's a pretty powerful construct we don't see typically but we see that you're looking at more of a potentially 50, 60 times free cash flow multiple on those numbers in the out years which isn't, again, if we look at comps, names like viva and the like, they're in similar ranges >> alex, part of what's so

incredible about the zoom story is yes, there have been all of these societal changes this year but this is a product that is not without very stiff competition, and you have to imagine that engineers at cisco, webex, at microsoft teams, at skype, and a whole number of products are working around the clock to try to improve their products to compete with zoom, and i'm wondering, as people start figuring out exactly what they need to work long-term from home or remotely to have multiple children doing their schooling remotely, i mean, is there a risk that one of these large horsemen in the tech industry could build a product that is better than what zoom currently offers >> i think that the competition in the segment is poised to continue to be point of contention, but let answer n's e zoom came onto the market with the same competitors and a

fraction of its scale and size and came onto the field with a better product, that their product can work at incredible scale, at very low latency and that's a testament to eric and the power of the engineering team that he used to build webex towards its founding i definitely see the competition continuing to increase, as the amount of people using screens much more so than they ever thought they would in the past, but at the end of the day, i see the power of the zoom platform to increase in its breadth as well as continue to innovate around security, around functionality, and how they expand into either monetizing more of a consumer segment than they do today, or expand into more remote collaboration offerings, communication with zoom phone, there are a lot of opportunities for them to continue to increase their wallet share and they have an

incredible base of customers to do it on as they demonstrated with the new customer growth and i think another surprising metric at least to us was only 12% of the global 2000 pay zoom more than $100,000 a year today, which we found pretty staggering, given the ubiquity of the offering. >> yes, companies are leaning on it pretty hard and so are schools and so are house holds it's going to be interesting to see if pricing does change down the road alex, remarkable story on a remarkable morning thanks very much good to see you. alex zukin of rbc. >> yes and carl, my phone i'm getting texts from all these people who sold their zoom too soon, not to mention the likes of qualcomm. qualcomm ventures one of the early investors there in zoom technologies i think they may have sold their shares at 34 initially and then 69 a lot of people ruing ever selling shares of zoom meantime, wal marptmart announct

answer to amazon prime called walmart plus reh melissa repko has more how it compares, what it has, doesn't have perhaps that amazon does tell us your thoughts. >> yes, hi today walmart officially announced its subscription service, much anticipated, and the service will cost $98 a year, or a monthly option $12.95 a month, but it looks very different than amazon prime and amazon prime of course is the comparison i spoke to the chief customer officer and she said we're not launching this to compete with anything, but at the end of the day, customers and analysts and investors will be looking to compare the two side by side, and walmart looks very different. it's offering three key perks, one is free delivery of grocery and other items to the house, fuel discounts at its gas stations and also the use of an

app which allows people to skip the line and check out themselves through a smartphone app, called scan and go. >> they also held out the prospect, melissa, of more to come do we have any sense as to what else they might do of course this is taken in large e context of walmart making significant inroads digitally just in general as it tries to compete more effectively with amazon >> that's right. e-commerce sales nearly doubled in the second quarter, and walmart's really seeing benefits from the pandemic as everyone turned to it, a lot of customers including new and former customers turned for a wide variety of things like grocery and walmart is looking to hang on to those customers and build during the pandemic and their chief customer officer mentioned they may be adding more but this is a starting point for them, but two core elements of this are leaning into that pandemic trend. one is people want groceries

delivered to the home and if they're a member of walmart plus, they don't have to pay a fee for that they can get as many as they want as long as they meet a $35 threshold. the other piece is a scan and go, people looking for contactless ways to pay and that access to the apple is limited to walmart plus. sam's club customers may be familiar with that, because they already have access to the same thing at the warehouse club. >> melissa, thank you. it's interesting to watch. shares of walmart reacting quite positively and look out, if it starts to get anywhere near a mull tipple that other digitally focused companies do melissa repko from cnbc.com. kayla? >> thank you all right, david, let's turn to our etf spotlight we're looking today at the iyt, it is barely higher than its pre-pandemic levels. some names that are captured in that group, the airlines, recouping some earlier losses from today's session

united announcing yesterday afternoon it will be eliminating ticket change fees and delta and american are following suit, just a few hours later analysts say most competitors will be forced to follow the move amid the slump in travel demand and of course that is going to eliminate a significant line of revenue for an already struggling industry. we will see how that fares we're going to take a quick commercial break now on "squawk on the street. stay with us we'll be right back.

welcome back i'm sue herera here is your cnbc news update at this hour. flash flooding in north carolina washing out roads and sweeping up cars in fast-moving water the four people that are in this vehicle were rescued but two children are still missing after their mother was rescued from another stranded car facebook founder mark zuckerberg and his wife priscilla chan are donating $300 million to help ensure election officials have the resources they need coming up this november indian prime minister modi paying respect to the former president who died monday at the age of 84. mukahiji tested positive for covid-19 after undergoing brain surgery as a result of a fall. here in detroit, the city's

memorial day for coronavirus victims wrapping up with fireworks honoring workers on the front lines in the fight against the pandemic a beautiful sight. that is the news update this hour "squawk" will be back in about two minutes' time. when the world gets complicated, a lot goes through your mind. how long will this last? am i prepared for this? are we prepared for this? with fidelity wealth management, your dedicated adviser can give you straightforward advice and tailored recommendations, with access to tax-smart investment strategies designed to help you keep more of what you've earned so you'll know you're doing what you can for your family and your future. that's the clarity you get with fidelity wealth management.

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stocks looking for what would be the sixth straight month of gains imagine that, that's about an hour of course into the first trading day of september our next guest says the disconnect that we're seeing between markets and the economy, well, it may make some sense i want to bring in bridgewater's co-cio, greg jensen, the largest hedge fund in the world and the man who makes some of th decisions in terms of investing there. greg, nice to have you with us this morning thank you for joining us >> great, well thanks for having me >> we're going to show a chart

that i want everybody to see, it's your work in terms of past economic crises and the response, for example in terms of let's call it printing money, and how quick things have been, and you make note of the speed of the cycle you note in some of your writings that it's been disorienting and you also talk about the divergence of the markets from the real economy, something we've talked a great deal about here but i want to get your thoughts, greg, on the recovery markets you say and the liquidity sloshing around everywhere will help pull the economy up once the virus recedes but the hole in the economy will require capital that will pull the markets down. how do we end up here? >> if you take what's happened since covid enthe economic shutdowns and the policy response, what really in our view occurred took a paradigm shift we expected to happen over the next decade and jammed it into this couple month period. we fully shifted to monetary

policy three, which is a reflationary choice by governments to take essentially fed policy, central bank policy, merge it with fiscal policy and deliver money directly into the economy in downturns that's a big step and it's a big bridge to cross, and now that we've done that, and basically adopted the policy of getting real yields as negative as possible by reflating assets and the longer term desire to reflate in the real economy, that you're now seeing the struggle of what does that mean for asset pricing? if real yields are negative 1%, what should the price of a stock be how do you preserve real wealth in this world? that's what we see as the dynamics going on, and us at bridgewater, our job is to be like mechanics of the market to try to understand how the machine works and really we've had this shift that makes the economies operating more like it did in the 3'30s through the lat

'40s than the era most of us are used to. understanding the mechanics of the mondayer it and fiscal policy linked and attempt to achieve a government goal beyond the normal cycle in the economy and that's really what's going on so when we look at the world, we're looking at it through that lens and following those mechanics. >> so you say again, and this goes to what you're talking about here, the biggest cause/effect drivers are degree of speed, the policy response and its effectiveness. so what where does that lead you in terms of bridgewater and how you're allocating assets, and to what assets given this period and the correlation that you're citing to the '30s and '40s, what will do well and what won't? >> yes, if you think about the big things going on, right, you have the policy things you just mentioned and you have the conflict, that's growing, conflict domestically and conflict globally, and that's a normal part of having such massive divergences. so you have the economy on

average and the stock market on average that's doing one thing and then you have these huge divergences across the world which are increasing tensions, and so in that way the economy is acting like the 1930 az and building and going to create ripless. to manage money can the governments be effective in reflation? our study of reflations in history, they can be effective that doesn't mean that stocks and the economy will necessarily do well until real terms, that it coulden an inflationary sort of stagflationary reflation but one area of the policy also likely lead to reflation of some type, where we think the most important thing investors can do is create a balance to the types of environments that are probable going forward based on current conditions for us, that's not necessarily just equity, so creating the balance with assets that will do well if the reflationary policies prove to be stagflation. for us, that's gold, inflation

and bonds, other assets along those lines that could create some protection, and it's most important we hit this incredible investor pivot point on nominal bonds because nominal bonds play basically no use in a portfolio now. they don't provide any return. they provide negative real returns and they don't provide risk reduction in the way that they did before. so one of the things you're seeing in markets and one of the things we think you should see and in the beginning of is this massive shift of investors out of nominal bonds into everything else, and the mistake, the thing we worry about is everybody shifting that into equities and taking more and more equity risk into a dangerous world with high valuations, and not shifting enough into what will do well if equities do poorly it won't be nominal bonds. we think it will be the assets that benefit from the new monetary and fiscal policy, largely gold, inflation bonds like that and seeing that shift occur, you'll see more of it, there is about $25 trillion of

assets stranded in assets that can't perform their role in a portfolio. shifting those $25 trillion into other assets is what we think is kind of the big driver of markets going forward. >> all right, but let's talk a bit about what may be and some would say is a speculative bubble in equities or the beginnings of one. i'm looking at my screen this morning, greg, apple is up another 2%, facebook is up another 2% amazon is up 1.2% none of this new any news in particular to those stocks these enormous companies continue to get huge inflows that something you continue to see or a concerning sign to you, given their multiples keep going far higher >> there are concerns in pockets of speculative activity, which is normal when there's usually bubbles grow from fundamental drivers that are driving assets, which is actually right now it's this move in real interest rates negative, that now finding the

right pricing for equities, what's an appropriate pe for any kind of growth, now that the discount rate is essentially negative, what is the earnings 20, 30 years from now worth. we've seen the present value effect of the low real interest rate drive up equities and that's appropriate given the choices people have in terms of investing. what it leads to is this world where going forward the real return on equities is now arbitrage to a large degree to the real return on bonds which is quite low and quite dangerous in the long-term but the price effect, given where the real interest rate is makes a lot of sense in terms of where equities have gone -- >> let's look we lost, kayla, as you saw, we lost greg. let's give it one second and see if we can get him back because it's an interesting discussion we're having there, obviously and co-cio been at bridgewater since i believe it was 1996 so does have some interesting

perspective. any chance of getting him back, guys, or is he -- he's gone. all right, we're going to take a quick break. kayla was going to have a question for mr. jensen as well. we'll see if we can get him back "squawk on the street" will be right back

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welcome back to "squawk on the street." we're rejoined by greg jensen. i wanted to ask you how you were sizing up the policy response. we heard last hour from the white house chief of staff we're likely to see a roughly $500 billion building block from republicans that will take several weeks in all likelihood to reach a deal negotiated with democrats for this next stimulus package. what is the damage that is done to the economy in the intervening weeks, until we get that next stimulus package and how much do you think is really needed >> it's a great question if you look at we do calculations on the impact fiscal policieies have across t country. u.s. policy has driven the gdp level up 7% relative to where it would have been on a level basis so a huge impact and the fade,

the fiscal cliff we face here is large, that you'll see a big draw-down if they don't extend the fiscal benefits that are necessary. so that's a big deal, and 500 would create a very significant cliff, so to us, our kind of estimate of what would continue to sustain the economy in the way that it's been going is somewhere in the 1.3 to 1.7 kind of range and depends what it's used for policy that gets direct spend in the economy is much more effective per dollar than the dollar that's preventing more bad things from happening. so there's a mix in this package, the money from states is going to prevent negatives. the stimulus checks will be direct positives it's monitoring those things and that's a good example of the challenge of trading markets and understanding economies today because we've gone from the last 40 years of let's say a more capitalist system where the monetary policy is driving the

cycles, and private sector entities are reacting to them. now the biggest driver in the economy are these fiscal choices and so many different choices are being made across countries on how to do monetary and fiscal policy and that's having a huge impact on the differentials so it's going to be a big deal. in the short term maybe they come up short. in the longer term we think the basic issue is you're headed in this direction where they've learned the lesson they're going to spend and print money until they can't that's the path they're on they might come up short in this policy but longer term they'll keep spending until they hit the wall the wall is marked by inflation and currency until you see problematic inflation which is significantly higher than the fed inflation target we'll see this play out.

the seesaw of politics and largely you get spending and printing until you hit that secular turning point where that becomes too inflationary >> what do you say to those who argue in the short term the need for further aid is not that dire because incomes are expanding because the saving rate's up, bank deposits have gone parabolic. there is the sense the economy could find a way absent any further aid. >> i think mechanically too much is being drawn of where the economy is in those things relative to how it got there if you take away the reason it got there, the supports to income you'll start to see downturn at the worst possible time in terms of the overall pressures. a, the fact, there's some winners in the economy and the average looks okay but there are huge losers versus those winners

and a big societal challenge and secondly that the reason that we're okay, and you can see this in the differences if you look at countries that haven't done the fiscal stimulus like the u.s. has, a much different outcomes and the reason we're okay is because you had the supports, you withdraw the supports, it's a massive tightening to the economy and unsustainable one. one way or the other, whether maybe we fall into a trap over the next month or two out of politics but over time that need for major round of support is going to come and ongoing the way the government stimulates the economy, just as many thought in 2009-2010 that quantitative easing would go away after the crisis passed it's the new lever and you're looking at the new lever for policy makers to get what they want and they're going to continue to pull this lever every time they need to, until economic conditions make that possible >> i want to end on that then. the wall that you describe and you describe it in anti-septic

terms, inflation will go up. you're talking about a financial crisis when do you see that potentially coming, greg, when do we hit the wall and do we know when we've hit it they need to deal with the imbalances in the economy and that it's a necessary step, but where we hit the wall, how far we can go with essentially the policy of replacing income with printed money is a huge economy. i think the two things we're watching carefully is what's happening with the currency, what's happening with the inflation rate i'm worried because of how the policy action and hyperspeed that it may come faster thanner this we're prepared and i agree the next big inflection point in markets will be when it is determined that policymakers can't necessarily get what they want i think if you see and you're starting to see elements of this but if you see inflation go

above 3% or you see significant dollar weakness, you're going to see the u.s. hitting the wall. you could look to other countries who don't and have the reserve status the u.s. has, and other things to allow for that policy and see other countries hit that wall potentially earlier and provide signals along those lines so we look at the uk, it's in more danger than the u.s. of hitting that wall, as an example and across the world it's completely different, but basically we think that's going to happen. it could happen in the next six to 18 months, i think it could that's probably the earliest it could and it will be a major disruptive force when policy makers can no longer get what they want. >> greg, we have to leave it there. it's an interesting discussion one we them to continue with you in the future thank you, greg jensen from bridgewater. >> thank you as we head to break here on "squawk on the street," we're keeping an eye on other cloud stocks that are soaring in

sympathy with zoom today zscaler, crowdstrike and coupa software hitting fresh all-time highs too see as is codosi upcun a whopping 18% that company reports earnings thursday thursday we'lthat makes things worse.at h but you're not mad, because you have e*trade, who's tech makes life .sier by automatically adding technical patterns on charts and helping you understand what they mean. don't get mad. get e*trade's simplified technical analysis.

welcome back to "squawk on the street." did is a mixed picture from this perspective as you see behind me you have tech and consumer discretionary among the groups going to the upside today. as we look at some of the individual movers we see a mix of out performers.

you have best buy, pbh corp. we'll end on shares of chipotle trading at an all-time high up 70% in the last six months "squawk on the street" will be back right after this.

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loomed large as you know l.l. bean has seen a boost in sales from consumers that want more outdoor wear. steve, thank you, good of you to give us the time today >> thank you, good morning >> we have been talking about restaurants having outdoor dining and to the degree to which they can continue to do that really turns the discussion into the kinds of sales you might see this fall. >> absolutely we have been marching along through the american psyche. we were right in line with that. outdoor furniture. the summer has been phenomenal with people taking on more

outdoortivi activities. now we're set up for flannel, fleece, outerwear, boots, and a strong fall. have you gone in -- are you going into the fall season or back to school or holiday with a different inventory strategy than in the years past >> yeah, in march and april we were focused on liquidity and making sure that our balance sheet is strong. we cut our inventory we have been trying to get back into inventory we are learning what people are buying through the spring and summer and bringing those inventories back we feel like we're in a position position and we come into the fall and holiday season. last year was a strong fall/winter. i think it will be an issue for

retailers how they manage inventory going into the fall. >> how are you managing your employee base at the moment? have you been able to restore the hours for employees that had to take cuts earlier in the pan determine snick. >> we have we started, we went to a forced four-day workweek. 80% pay across the board that was a way to minimize costs. we went back to a full workweek in the beginning of august results were strong. at our low point we furloughed about 2600 employees about 60% are back on the payroll. they have always been employees and it has been in line with retail sales coming back our employees have been

phenomenal through the pandemic. and our number one focus has been keeping them safe, and their health and wellness a focus. >> i know you're talking about the fact that you're positioned to benefit from new items to indoor cats like myself doing new outdoortivities, but what do you think is the risk that people just hunker down, hibernate, and stay in doors if it is still going on throughout early winter and into early next year >> we have seen a total reconnection to nature, outdoors, and being outside. people hungered down and they started to venn venture outside. we have seen so many new ventures i think people recognize that there are incredible restorative

benefits to being outside. i think that is sticking we just had a fee discovery program, we 7,000 participants we projected 4,000 and we went up to 7,000 of peopling doing new things, newtivities in the indoors. we have seen a pop in sales on snow shoes, sleds, and some outdoor hard goods for the outdoor season i think people are connected in ways like they have never been, and i think it is a fantastic respite. tieing into your lead story around zoom. i think getting outside after you have been on zoom calls for eight to ten hours a day is not going to go away >> that's true, hard to imagine that i