good tuesday morning welcome to "squawk on the street." i'm carl with jim at the new york stock exchange. david is in los angeles for the global conference why meantime we are looking to add to four straight wins for the nasdaq futures with solid irnings and guidance from j&j. netflix tonight. bitcoin near 63k we begin with retail traders versus the short sellers a report playing down the meme madness narrative. we'll break it down with gary

gensler live this hour. >> we are back life at the milliken conference. i'll be chaired by guests and find out why cathie wood thinks gamification is exciting for investors. first approved u.s. etf for bitcoin set to start trading this morning they're looking at the cost outlook and the guide hold at p&g. >> it's very clear that they're telling you right now we are going to be spending far more money than we like they can't make it go better beauty 2% organic sales. grooming 4%. health care at 7% but i get that from j&j that's lower. gross margin for the quarter

decreased versus a year ago. driven by commodity cost unfavorable mibs product impactness higher transportation. carl, they did not triumph the way pepsico did. this very good company was -- they weren't bushwhacked by it but the street felt they would have had more buying power and avoid the issues j&j doesn't -- they have the regular stuff that you -- neutrogena and should be up more has phenomenal growth in pharma and pharma is what people want people could have raised -- raised did buyback it's a -- i think that you can get this thing 982 that they might do that's very inexpensive stock versus what i'm used to with

j&j. i like that one. i love pharma. people don't talk about what they got going if you have prostate cancer you get j&j's drug, used to go to florida and nuclear radiation and seeds. they do first line in different cancers. it is an undervalued stock. >> not buying this morning's narrative that low tax bill means low quality? >> i get that growth i didn't see it at p&g i saw similar growth in pepsi and did -- stock did quite well. >> it is a question whether or not not cutting guidance is a victory. here's what the guys were told this morning. >> significant commodity and transportation costs with that strong top line and with our continued cost savings program to deliver earnings per share

equal to last year down 1% 5 billion of cash returned to shareholders in a difficult and volatile operating environment the results for the quarter, the strength and the breadth, give us the confidence to confirm guidance >> this is interesting because you got dover under the same pressures why they raised margins year on year the idea of profitability is better. >> look. my charitable trust, we have a giant position in walmart. they are doing quite well and people are far excited about other things like albertson's until today and costco with very good numbers why target downgraded from conviction buy this is a strong call.

david? proctor and gamble did not raise. we know that this quarter is the beat and raise quarter if you don't raise we just decide we don't want you >> okay. i'll accept that i guess so you're saying how long is that going to be a case? backing up for a minute, jim, 300-basis point reduction as urn right to note at the top is extraordinary and reflects the pressures that we talk about whether it's rising commodity costs or supply chain and the costs from a result of that. but if you can't -- you're not beating and raising. but you're sticking with what you've got, i don't know i could argue that's positive given this environment and then i have a question. do we get a sense as to when this is going to start to abate?

>> i think that we look at the earnings estimates of packaging companies next year. they're all down these estimates are not made up. if you get the kinds of declines that we are hearing in packaging, plastics, i don't know how much higher diesel can go, i think you will see earnings, margin expansion next year no one cares right now about next year why they look at this year and making a judgment we don't want proctor we want pepsico. >> right. >> you may think that you should hold proctor i'm of the opinion if you trade around proctor you don't understand proctor it's a juggernaut and will solve what they're faced with. didn't this quarter so people say give me something else. >> i guess we're going to do this every day take a report card and argue

whether or not corporates are managing input costs effectively. >> exactly even apple there are notes saying that apple is able to manage the supply chain david, did you ever even care about apple supply chain whoever is in charge is suddenly king >> i don't remember really worrying too much about it they are moving away as we know from the intel chips to their own and would think that's helpful. i have to admit that's not something i thought about but i don't remember thinking that mump about supply chain a couple years ago and took for granted until we learned about it in a way we wish we didn't given the problems that we are suddenly aware of back to walmart for a second. >> sure! >> i do listen to you. >> thank you. >> i do listen. >> looking at the phone. a picture of the dog hurts my feelings.

go ahead. >> i don't have any pictures of my dog i feel like you have not been particularly positive on walmart and concerned about some things. >> i am. you know why >> not that you haven't owned. right. i know you have as we look at it being added to the conviction buy list but i hear your enthusiasm this morning and i feel like the recent commentary is focused on challenges for the company as opposed to positives. >> i think that what's happened, this is not the way to get an upgrade. but it is because everything else moved other than watt mart and walmart is cheaper i hope to see walmart plus which whenever you say plus you have a disney plus, paramount plus, plus, plus, plus -- it is minus. minus is not plus. there's something you just learned from me. >> instead of max/min?

>> yes right! they don't talk about plus increasing market share in grocery. it is one of the most boring conviction buys but looking at everything else it's the only one that's not moved only one tractor supply is having a huge year versus them you know what i mean >> i do. i know what you mean you look for the ones that haven't moved and research side why not? why not be more convicted if you're goldman sachs >> that's not a bad thing. you know >> one thing they say is higher profitability allows them to invest in what supply chain. >> supply chain. if we were a supply chain annual it ist, chinese understands who's in charge of supply chain analysis at cnbc >> david i think. >> david >> i'm going to go down to the

port i will go down to the port and get in a -- one of loading -- i will go to china how about that experience the whole thing live. i'll streak it on peacock. >> makes sense. >> yeah. >> peacock plus? >> how about espn plus what is espn plus giving you put you in on the field trying to stop henry? >> honestly, i saw them play in that thing what's it called playing on the beach had that on espn spikeball. they had spikeball >> okay, all right. >> that's what you get you get a very high level of spyball play on espn plus. >> are you the only guy wearing a jacket out there is anybody wearing like -- you know, sleeveless >> no. people are still wearing ties a little bit but not happy about it. >> he is our supply chain czar

an encan do whatever he wants. >> i'm an aficionado i'll be the guy to see. >> s.e.c. chair with us on the big gamestop report and talk about the new bitcoin etf futures and more look at the futures on equities. looking for a fifth day of gains as the s&p and nasdaq within a percentage point of an all-time dot ay. n'gowa jerry is here! j! mate, how are ya!? it's so good to see you.

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on gamestop with the s.e.c. saying payment for order flow and the incentives may cause them to find ways to increase trading with digital engagement practices. gary gensler will join us on the report jim, some said was short on recommendations. >> thank god you said that that quote from page 44. i did some work. an analysis. they dodged everything we got to talk to the chairman because literally they say they found novel ways to increase -- it is novel bad? is it okay to have customer trading be using digital engagement practices celebrity animations draw a conclusion. it's not good. likely to create positive

feedback from trading lead investors to trade more than they would otherwise is this something we want? do we want more trading? in the previous paragraphs it talks about owning stock there's a moment i happen to like gary very much. it is the commission staff report there's a moment in this thing where you realize the reality and the reality is the -- underneath the memes are actual companies with employees and customers and plans to invest in the future listen, do you even understand what they're doing but they don't say that. it is like one of the gold star reports. everybody gets a gold star trade a lot. >> is there anything wrong with taking a light touch >> well, i think that -- yes because the younger people are not -- i think that if you wanted to step back from it what it says is the companies are

encouraging a level of trading that particularly with 19-year-olds that they -- they play with fire i just want even though it's good documentation of what options -- things like that, they have these kind of subtle references to we don't really want this but, you know, to each his own. i think they have to be saying people under 21 or whatever, unsophisticated, you need to do more to know the customer. look chairman gensler did a remarkablejob. fix it i read it like, eh, 1 million people and 19 and under and welcome to the clubbut there's no club and no money back. no guarantee you bring in with about 1 million of those accounts with

an average age of 19, i would liked them to say which is an age of people who may not know enough or want them to be more sophisticated. >> david i can easily imagine someone saying that the opposite would have been a move to a nanny state. >> yep and the law of unintended consequences you can talk to people more studied in these matters than i am and what the s.e.c. and congress did and led to diminishing ability for the formation of capital light touch not necessarily always a bad thing from the s.e.c. as you know the chair and we'll talk to him has a lot of appreciation and history on the matters so they are aware of the unintended consequences of too heavy a hand sometimes certainly education has to be an important part of this wait jim, i do want to give cathie

wood a chance to comment, too. she was here late yesterday on a panel and a pretty interesting panel. she defended gamification. >> i know that lot of people are concerned about the gamification that the robinhoods of the world represent. i'm not worried about that i think after the tech and the telecom bust and the meltdown the fear and risk aversion that permeated the markets took the joy from the markets and took the creativity and the imagination. now it is coming back and i think it's starting with the millennials. they are excited. >> joy, jim. creativity the imagination. come on. >> it's about trying to make money. not lose money which seems to be

lost in this it's about investing for the future it's what the capitals markets do it is not a game you know what's a game how about you figure out whether if josh allen crosses the goal line and then go ahead in fantasy and win. it is fine ifsz let down. the eagles aren't playing sanderson enough disappointing. is that investing? i guess so by her take by her take investing is basically the same as gambling and it is not. it is not the same as gambling. >> important points to address in a few moments we'll get cramer's mad dash and the opening bell where futures are solid. we're back in a moment we love our house, been here for years. yeah. but there's an animal in the attic. (loud drumming) yeah yeah yeah yeah!!!!

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time for cramer's mad dash i think you are watching cloud flare. >> a gamer name. why do you like upstart? because it goes higher why what do they do goes higher. what i like about cathie wood this is where you drafted this this is daily fantasy. dropped whoever you had. maybe somebody ent ir and pick this guy up on the wavers. they do security met balance. they are basically a streaming content company. what i worry about with

gamification is people don't know what they own if let's say you went to the horses and bet the farm on main stay two weeks ago which was a 6:1 shot it's a philly riding for the first time on turf the people know more about a horse race than cloudflare and i don't like that! >> we saw a similar move and then a double downgrade. >> too hot it seemed like it was made for the gamers probably that guy is 60 points last week. no trade that guy for someone i'm not kidding, carl. fantasy is more significant than gamification you couldn't gamble. nothing to be on it was like just wasn't a season now we have a season they move over to playing the bar stools. >> yes.

>> it is like michigan/michigan state. >> you don't think they learned a lesson >> they have learned that there's better games you know here's what they think cloudflare, i want it but i need 10 points. give me ten points and i'm buy it not the money line that's what they're doing. that's fine. if it's a giant casino may i suggest blackjack with skill >> yeah. again chair gensler will join us on the other side of this break. another look at futures here and then an opening bell in about four minutes

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as far as i'm concerned, the market one day -- and i believe one day in the long run -- i don't know how long it is. i think you have to be a fool to try to tell how long it is in this kind of a market. in the long run we are certainly going to hit the wall. people may say to me anybody can

say that but i really think there will be a crisis the way we're going, printing money, going into inflation. if you look around you, you see inflation all around you and i don't know how you deal with that in the long term. >> that was icahn yesterday as the judge in the half celebrating ten years of amazing content. what did you think especially about the open-ended time line on the thought >> i think that that's an older person's view which is fine because it's an older person who recognizes what's happening with inflation. people do not remember 1980, 1981, 1982 with cracking inflation by raising rates, raise rates going into an inflation. what i really disagreed with was he was saying that there are corporations run badly and i think that's a stretch

>> of course activists would like to think that yes? >> every playbook is used. do we have david >> i think so. >> i'm here. >> the activists are out there are not that many companies so poorly run. you want to take on macy's and have it split off their e-commerce true financial engineering. >> yeah. listen you can always find a company that could be better run and/or have a more response board of directors. there are certainly i think plenty out there and a great point of yours that corporations are better than they were. here that i have been here it is all about esg and the governance part is still very important you are seeing a great focus on

diversity, inclusion and the other important initiatives by corporate america in the last few years. >> let's get the opening bell. it is pro shares celebrating the first u.s. bitcoin linked etf. at the nasdaq. celebrating the listing via spac here we are with the etf the question is do i own bitcoin or the etf >> i think that this reminds me of owning gold putt it in a deposit here to own bitcoin? i had a struggle with jpmorgan i want to deposit with jpmorgan and you have to speak to people and always very kind about it and should be hlike paypal. it is easier to own than gold.

i don't know if you need an etf. >> is this a landmark moment for the asset? >> it is and a great reason to trim i've been selling ethereum and took some profit of bitcoin and bought a farm. real estate seems to be peaking. according to various reports maybe zillow i think that real estate is more timeless and valuable in inflation than these might. >> sure. a disappointment on housing starts largely due to multiple family on fire you mentioned zillow today downgraded down to neutral many unanswered questions in the near term. >> why not slow down than stop altogether raises a good point. before chairman gensler, i think if you get all of congress against you you have a ten-part

series in "the wall street journal" to shame you every day and people think you're trying to ruin society is how you get the stock going. facebook is unstoppable! mark zuckerberg might be saying bring it on! we want more hearings. we want frank. >> that's a high for the month. >> i know. is the journal out of bullets? tried to get teenagers to watch like snap? i don't know maybe that's all she's got. >> as we talk bito is open with a 41 -- yeah opening at 41 i guess. we'll track this. >> yeah. it is a great opportunity to trim this is true hype today. there's guys to mention the word sell and this is ridiculous

i think they feel like when google came public at 88 what were you kidding? sold it for double triple quadruple? you're a fool. i think they feel that way they're greedy i'm not greedy i'm not greedy i think greed is bad but you know, i also got rid of the silk suits and stopped talking about -- >> lamborghini you mentioned facebook back to 340. you got microsoft fresh all-time high today. >> that stock is a juggernaut. >> apple back to the 50 day after -- i don't know, about a moth below is faang -- how important to - >> so important. amazon i had amazon web services on i had adam on. $60 billion company. growing like mad 37%. it would be a fortune 50

company. by next year it will be a fortune 25 company it is buried within amazon and all people think of amazon is maybe -- i don't know. the movies aren't that good or election stalling. i had a conversation about alexa. very apologetic. i made a mistake very powerful. >> yeah. >> david, may we need to ask for evidence after that bipartisan letter from congress yesterday >> yeah. we may need to i know guys, forgive me, alexa, for moving on but we haven't talked at all about covid this morning. which is nice. unfortunately another anti-viral under development to treat early and moderate symptoms of covid essentially failed and it does kind of point to the fact that

the drug that's awaiting fda emergency approval not that easy to get the science right here i talk about atea partnered with roche on an anti-viral and said on the coal to 1100 milligrams a day the 1100, that may cause nausea, vomiting, people fell off at that level the fda didn't let them enroll patients here in the u.s had a similar structure to a drug discontinued due to toxicity for heart and kidney. we'll see what happens perhaps they will be able to go forward but it does point to the success that merck was able to have and while shares are up now they were treated dramatically from the first week with the

success. >> yeah. look i'm still hoping that one day regeneron will be approved for fda -- not approved for another form of immune response to get it so you don't get very sick. i don't know you're absolutely right. hard drug to make. >> yeah. meantime we are watching that variant in the uk and thankfully not spreading as quickly as delta did but an important point to david's point watching bito. first u.s. listed bitcoin etf up about 4% today bob pisani joins us with the s.e.c. chair gary gensler. good morning. >> good morning. we have a lot to talk about. gamestop report. what do they all have in common? they're all regular lated by the s.e.c. let's talk to s.e.c. chair gary

gen gensler. thank you for joining us. >> great to be with you. >> i want to talk about your gamestop report but i have to start with bitcoin we have a raft of cheering people down here from pro shares pro shares bitcoin etf futures etf is started trading a few moments ago. can you explain to our viewers why you chose to allow it, a bitcoin futures etf to begin trading and not yet approved a regular bitcoin etf? >> bob, thank you for that question just to give you a little context, i think that we in the official sector should be technology neutral and not policy neutral and what we are trying to do is ensure to the best we can within our authorities to bring projects in to the investor protection perimeter and so what you just

mentioned bitcoin futures have been overseen by the sibling agency, the commodity futures trading commission which i was once honored and proud to serve there and been four years and some of these applications came in and went effective as you said, one went effective with regard to those products over at the chicago mercantile exchange that the sibling oversees. >> the important thing is you made it clear in the past this does not have the concerns that approving a full bitcoin etf would have you don't have people breaking into exchanges or problems with fraud or manipulation. was that a factor? it seems that that was a factor in the fact to allow the bitcoin etf futures. you don't have those particular problems there. >> i won't get into one plx or

project i think what you have here is a product that's been overseen for four years. by a u.s. federal regulator. cftc and been wrapped inside of something that is within our jurs kings called the investment company act of 1940. so we have some ability to bring it inside of investor protection it is still a highly speculative asset class and listeners should understand that underneath this still has that same aspect of volatility and speculation but there is our sister agency is overseeing this for four years and then it brings it inside as i said an 80-year-old law here at the s.e.c.

>> move on to the gamestop report usual thorough report from your staff. i think this will be the historical record of what happened but about the recommendations you have been talking for many moftings of payment for order flow and the guam if i case and the effect on the u.s. trading system and no discussion of how this might have impacted the trading for gamestop i'm wondering if there's a connection was payment for order flow and g gamification an impact the report doesn't say. >> i think that the events of january revealed a number of things and as the staff suggested for additional consideration these two topics plus two others, that we look out for the investing public when brokerage apps, when robo advisers are using new data

analytics and marketing to us using behavioral prompts to possibly get us to trade in a way that benefits them, benefits the application and the program in conflict potentially with what benefits us the investing public also, embedded in some of those issues are the structure of the stock market itself. it is so much of the market now is evidenced in the report in january and the months about half of the market is not going to transparent sort of market that fully lit market that you earlier showed but it is going to dark pools and wholesalers so those issues the staff suggested up we'll take a closer look in terms of what policies can help the public. >> chairman gensler, great to have you on the show again i know that your position on trying to invest well, i read a

great book you wrote about no free lunch and then i read this report and i absolutely understand it's thorough got great stuff. talking about how options didn't really affect things and what did impact and on the last notes number two, there's this sentence payment for order flow and the incentives may cause broker deals to find novel ways to increase customer trading including through digital engagement practices it felt like a lammenation you talked about companies underneath the memes are actual employees, customers, plans to invest and then and i wanted you to be able to say maybe this is unfortunate because i know that people want -- they want to open -- have as much engineering but this is not chairman gensler. chairman gensler is against any idea that we should be doing these digital engagement to hurt

investors. >> so -- let me sort of address that i think that we found through our economy on platform after platform, whether it's in streaming apps, retail apps, various social media that we're in a transform ty time the 2020s is rapidly changing andon top of the invention of the internet we have artificial intelligence that markets to each of us differently you might type something in a text and then all of a sudden find you're being advertised something you typed to a personal friend in the text. so those features are all around what we raise the question is, is in finance what does that mean for finance these digital engagement practices, the underlying separating you from me and from

all of us and then if the application is marketing for their revenues and payment for order flow had a conflict that the brokerage application is increasing their revenues if we trade more so are they using these behavioral prompts to get us to trade more or to move to different products options trading or trading on margin with more risk in them? where do we the s.e.c. help the investing public out to help them do well when there's these conflicts inside the -- kind of inside the box. >> right but i guess what i struggle with is you got this great moment 1 million accounts with the average age of 19. if they focus on trying to put together a fantasy team. i think they're spending more

time on fantasy. how to be able to make it -- what's the line? what's the over? they spend more time on the fantasy lineup than trading! they trade line banshees don't we want them to spend as much time on investing as fantasy lineup >> i think investing tends to have higher returns thain day trading or hourly trading and sometimes -- not always -- but sometimes the applications encourage individuals to have high trading volumes or trade on margin or options with higher risk and so, that's where there's a worthwhile public debate and i thank the staff of the sec to serve um this report as you said now it is the job of the commission to sort through

what we do with these additional considerations. >> the staff determined that a short selling squeeze was a factor and wasn't the primary reason for the big selloff, price run-up in gamestop it was positive sentiment that sustained the price appreciation positive sentiment not the short squeeze. i wonder despite that you have been talking about potential changes in short selling rules do we need to make any changes and need more disclosure at short selling? >> i think the markets could benefit from greater transparency on short selling and stop low when you borrow a stock to sell it short congress, u.s. congress actually about 11 years ago passed two provisions that mandated direct

to the s.e.c. to do greater transparency in short selling and this related activity stock loan so i have asked staff for recommendations on this. to promote -- meaning that on a regular basis the market would benefit from seeing the volumes and activity in the lending market, meaning lending securities, and also, this short selling activity. >> just to follow up on payment for order flow, most viewers of the trading activity in the last 30, 40 years agree that the american investor has never gotten a better deal even trading costs are lower execution quality has improved dramatically in the last 30 years and debate about it, exactly how much, but the average investor seemed to get a good deal. do you feel you're going to be

able to demonstrate a real harm from payment for order flow? could you tell us what comes next here? you have the commission with the staff and the excellent report on the facts but not a lot of direction about where it should go will the commission meet and make recommendations or rule changes? what's the path forward after this commission staff report >> let me say this you're right that our markets have gotten more -- to -- have moved to zero commission and doesn't mean it's free there's still payment underneath the applications it also doesn't mean that it's always best execution. we have had cases where we have announced in the last 18 months with conflict with the broker and the payment for order flow on the other and if you place a

retail market order as shown in this report the vast majority of those don't go to the trance parent but the dark market these pools that are not competing. so i have asked staff, can we achieve the simple concept that the order competes with other orders and buyers if you sell compete to get and pay you hopefully the best execution for that price, order by order by order w order. that's an important concept of competition to help the investors, the companies that are raising money in our markets. >> mr. chairman, again, i want to praise the staff because those who read this will know it's not a vast conspiracy against them which was really the topic that i know a lot of us felt we were really razed by

all in on a citadel conspiracy i think that's busted. on page 12 something disturbed me you talk about the marketplace may have superior information about underlying assets. that i think is illegal. did some have superior information and should be in fron >> well, i think you chose the words carefully maybe there. but when order flow, when trading is being purchased to one whole saler or another, then they have information the rest of the market may not have, at least for a short period of time and even mill seconds matter in these markets. you're absolutely right that, i think, from a policy perspective, want to look at that and how we instill greater competition, in essence, for

data as well as order flow >> chair genzler, you know, we have john a long-ranging interview. i wanted to come back to spacs, if i may for a moment. it does appear that that market has been making its voice heard when it comes to spacs we're seeing sponsors changing their compensation arrangement so, is the market doing its job and they don't have to take regulation in terms of spac? >> i think there is a need here for greater transparency, greater disclosure these are innovations that have happened in our market

but they're costly and may have inherent conflicts, taking generally about 20% of the offering if you raise a billion dollars, that's $200 million. to basically raise money in a blank check type of shell company. and then you have two years to go out and try to buy something. and there's this conflict that if you don't buy something, sponsor doesn't get that 20% i know i've said this a lot about staff working on recommendations. we need work on the economic analysis, which is so critical to good decision making. five commissioners

and so the process does take a number of months and sometimes the public says where's that document or where's that rule proposal i would envision staff would put something up to our five-member commission and we'll put it out to public comment with regard to spacs with regard to a number of the other topics we've talked about as well. >> a follow-up to my question. second part you didn't quite answer what's next here what happens after the report? does the commission meet your five commissioners discuss what you want to do? are you going to make a proposed rule changes i guess i'm looking for a roadmap for what you're trying to accomplish here >> so, the five of us generally meet bilaterally and then sometimes we meet as a group and as a group, when we do that,

often that leads to what's called a public meeting and the cameras are on and the like. in terms of what's next is staff recommendations on the plumbing. so there seems to be broad support to shorten the cycle we're assessing the comments on digital engagement i've asked staff to consider whether there's recommendations on those potential conflicts and better protecting the public and the third area highlighted was market structure the entire equity market structure. we haven't updated it in 16 years, since 2005. and i think technology's changed so dramatically, that it's worth while taking another look.

we've done things congress has mandated that we need to commissioners will weigh in and then if we think so, we'll put it out to public comment my hope is that we put it out and have a lively public debate and see what's best for the markets. >> in order for brokers to trade options -- sir, robinhood has millions of customers. there's no way they're doing that >> this is one of the challenges to get greater access, our user interface is one our mobile phones have made it very efficient but then the question that you've just raised is also appropriate. is somebody on the other side

doing the due diligence about that customer opening a higher risk account, an options trading account or marge pan trading account. and i think the staff appropriately flagged this issue. >> mr. chairman, i want to thank you for coming on and giving us your thoughts. we very much appreciate the work of your staff inlaying out your fookts facts. we look forwoulard to having yon again soon >> thank you >> jim, how about tonight? >> if you can't go to draftkings -- but they're spending more time learning on robinhood and not doing the right thing, verses draftkings where they're doing it right and

i think it's an outrage. 50% of the people trading options, they don't know what they're doing, they don't. the commissioner's excellent and fantastic. bob, we can't just say no options. i mean there are vehicles. you can lead a horse to water, man. >> mistake a market for being a gene ygs going long options is a great business as long as the market is going up. and the minute it turns, a lot of people are going to get religious. >> we are back above 4500 for the first time since midseptember

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hello! hey, rob, there he is. workday. the finance, hr and planning system for a changing world. good tuesday morning welcome to another hour of "squawk on the street. and live from day two of the milk and institute global conference in los angeles. back above 4500 as we're wading into q3 earnings proctor >> and speaking of that, we're

30 minutes into the trading session. we're going to start with kansas city southern. volumes dropped 3% and spending previous guidance due to a lack of visibility. than thanks to auto plants shutdown in mexico, skrks su, which, as of last month is merging with canadian specific, sliding down about half a percent right now the property casualty insurer reporting a drop in q3 profit. but still beating estimates from the portfolio that had a jump in catastrophe losses and facebook choosing the crypto currency exchange to partner on a digital wallet and bitcoin hovering above the all-time high it hit in april as the etf begins trading this morning.

coinbase up 1% >> that bitcoin etf, one of many things covered last hour what a conversation. and about the future of what investing should be. >> it's very interesting because he really drummed up this report as some kind of summary of what would be happening he told congress he'd have it -- in fact he told them in the summer it was delayed and secondly, it would go into issues like gameification of gaming the sec staff summarized the facts. people will go back years later and say what happened with gamestop well, they outlined blow by blow what happened over a one-month period, not only in the stock, but futures, as well as any

other derivative associated with it people are going to consult it as a historical document genzler has been talking up payment for order flow like it's a harm and gameification about harm there's nothing in the report about that what we struggled with is can you show us a connection between the trading in gamestop and payment for order flow as part of the harm or not harm and he struggled with that. i think he's concerned about some aspect of market structure and would like to make reforms and has been vaguely talk about these issues he's going to have a hard time it's almost like a separate legitical issue. it doesn't have an awful lot to do with the gamestop saga right now. >> based on commentary and

interviews today, he has a busy roster in front of him if the sec thinks he's looking at it. you press said him about what the next steps are sounds like a long and arduous process. >> remember, under clayton they -- for example, for payment for order flow, it's on the exchanges. they get paid to put orders or take orders on the exchanges if you eliminate that, that's a major source of revenue for thex changes. it's not just bitcoin, gamestop, you could eliminate the whole model under which things operate. that's a major problem there are some things that make sense. for example, my mother asked when she saw this. robert, is that right you can short a stock 122%

my mother understood that is weird. there should be more disclosure and maybe limitations. genzler said that seems reasonable other issues out there, looking at gami,fication you can make people more aware about what they can and can't do about balloons popping the next step is the commissioners have to meet and agree on what they hear about. they had a comment period on gamification it's an administrative procedure. they have to follow procedure to enact a new rule this is a many months' ros es. at least we can understand a

little bit and a lot of people were incredulous about it. people were enthusiastic >> interesting comment about being technology neutral take a listen to what genzler told bob >> i think that we in the official sector, should be technology neutral but not fallacy neutral. what we're trying to do is insure to the best we can, in our authorities to bring projects into the investor protection perimeter >> here's the problem he's got here bitcoin futures etfs solves a problem for him. he wants to be a champion of financial innovation

it does not involve a russian person in taiwan you don't have problems with fraud manipulation but he wants to keep going ahead with financial innovation. the problem is, and we didn't get a chance to talk about this much, he has no control over the regulatory structure and until he does, i dont think he's going to touch a bitcoin etf. we need national legislation encompassing who controls what because genzler does not know. he doesn't know if he controls the exchanges. he's made a power grab with coinbase, saying the ability to lend out, that's a security. so, they're making a power grab by claiming certain things are security but they need national legislation.

>> this is such a key point because it speaks to what having a futures etf enables in terms of the regulatory oversight and control. is the best prod ktd for consumers? not necessarily. so, we're going to have to see how this evolves especially you look at some of inother commodity futures -- and the risk and volatility with that process >> the bitcoin community supports the etf community supports it. but owning pure bitcoin, i don't think it's going to happen unless genzler gets clear instructions on what to control and arguably, he's probably right about that >> thank you meantime, we're going to switch to j and, j results

thanks to higher sales in consumer health but missing on the top line the company raising full year guidance here to help us break down the quarter. i know you just hopped off the earnings call. >> i would agree with you. i think the big take is no surprises really during the quarter. yes, the results were mixed relative to consensus. they missed -- they beat on etfs but missed on sales. these pockets of weakness were largely anticipated, given some of the things we've seen throughout the quarter they're spending on r & d. spent 20% and that's off a

strong year of r & d spend pharma med devices in the first quarter of 2022. and thinking ahead, i think we're looking for approve and advancements of their first in class, best in class drugs no backwards step on the mega vice recovery. therision of the new ceo and cso. they talk about a smooth transition they anticipate and to continue to move forward in r & d. >> that being said vaccines been such a key focus for the american investors and the public at large. you have the green light with boosters and saying mix and match is possible too. >> i don't anticipate boosters to be a big boost for j & j. for me, i think vaccine sales

are somewhat over emphasized and covers up the strong fundamentals there but they do anticipate shipping all they manufactured in the fourth quarter >> how does this set us up for the rest of earnings season where other companies you cover that are tied to covid, whether treatments or vaccines are concern snd. >> i think one of the things that underscores is we're still in a recovery period for covid and one of the things the company mentioned in the call that's been in the headline sthz shortage of staff. those seem to be short term in nature but when we think about 2022 for our companies, that could be a tail wind they thought would be done in 2021 >> quickly, you have a bye rating on j & j?

>> yes >> thank you as we head to a quick break, here's our roadmap for the next hour >> and apple announcing the new air pods, mac book pros and more what does it mean for the stock? >> and after the break, our milking coverage continues and the executive chairman of guggenheim we have a big hour ahead of "squawk on the street. - [narrator] at southern new hampshire university,

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welcome back we're live from the milk institute conference nice to have you here. i want to start on a subject i talked about some time ago and i noticed financing for a fairly large private equity deal, stamps.com deal. what is happening with firms like your own replacing banks as a main financeer for private equity deals is this here to stay >> i'll take issue with the word replace. i'll contextualize it historically and then the market today. if you look historically at the rise of private credit, it's been the outcome of consolidation within the banks they're lots and lots of banks that used to serve ths private

equity and s and, e community. now they're so large, their primary focus is on small business consumer and the distribution of securities so, that has created momentum for private credit at the same time the high leverage and loan markets have moved to scale and liquidity if you look at the high yield market 15 years ago, that's 37% of it had issue size below 300 million. today 2% le leverage loan market -- there's been a huge move to scale in the lick would markets and created an area in the end it's not really a replacement so much as the whole market is scaling back >> why is it an attractive asset

class for you? >> one of the large consumers of the loans is the private equity community. the high yield market used to be 35% sponsor back today it's 10 to 13% so, as the private equity firms are getting more comfortable borrowing because of the value we delivered it's created the opportunity for us to do more and more we get access to high-quality companies, higher institutional quality management and a high asset backing >> and the deals have more equity in them too let's talk more about the larger business itself. you've had great success as have any of the larger platforms. you're almost at the same pace as last year some people would say that's a

sign of being at the top >> i'm not one of them >> why >> it's a function of the structure of the public markets and the structure of the private marketets. u.s. economy is probably 33,000 private companies with revenue between 33 million and a billion. that's because resources is greater than it's ever been. companies are staying private longer they're borrowing in the markets. etc., etc. so, as they stay in the markets and the solutions increase, investors have the opportunity to allocate into the markets similar to high leverage finance. so, as they go to indexation and consolidate, you're seeing the private equity markets grow. >> i see it in terms of the

hedge funds that have made meaningful businesses. in fact, a lot of has been made about the private equity some of the valuations are fairly starring. >> you have to think of it in interest rates and discount rates. so, every quarter we look at our private equity-year-old. and if you look at where private equity values are trading today, they're at a pretty consistent spread as these markets are maturing they're starting to trade more in concert as they evolve. when dwrou apply the discount rate, you can get your head around it. >> and if the fed does start to tighten in a meaningful way?

>> we're tightening because the economy is growing most of our assets are floating short duration butted you chag the discount rate and the valuations will obviously follow >> what do you think of a threat to your business >> there's not a lot of fundamental risk one of the reason they're flocking to alternatives is the duration and the fangt fact we don't need to put it in the ground we put it in the ground when appropriate and we take it out of the ground when it's appropriate. don't feel rushed to be in or out. so, we're feeling really good about the company.

>> we've been growing pretty handily and acquisitions over 30 >> are we in an environment where the big will continue to get bigger >> if you look at the growth trends the larger, called the top five ten platforms are out performing the alt industry by multiple of two. the largeerse we get, the more we can invest in people, origination resources, all the things that drive out performance. >> any thought to going private yourself >> yeah, we're constantly looking. >> you haven't found your target yet, correct >> we are looking.

>> so is everybody else, michael. over 400 spacs are looking. >> so, what we've told the market to expect from us is to find an operating business with a real operating history, cash flow that we can make better in the public markets i think we're fishing in a different pond due to our size and orientation. >> you think you can beat the clock? >> we think so >> and first time since -- >> 2019. this will be a wonderful couple of days. we've all survived >> are we post covid >> i feel like i am. >> people back in the office >> we do we fully started on monday people have been coming back

pretty regularly and we're at 85% capacity and now we're at 100. i think people seem really happy to be back no, not five day as week not quite yet. >> we're going to have more exclusive interviews, by the way, and gugen hiemp

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michael myers has haunted this town for forty years. if you track michael's victims, it's a straight line home. he's coming for me. we're coming for him. welcome back to "squack on the street." stocks are mostly higher this morning, though consumer staples are among the relative laggards. down more than 1% over the past four weeks one of the worse performers in that period. names like clorox, and proctor and gamble also coming under pressure this morning. for that, i'll have to toss to do carl for the details. >> indeed. shares under pressure after

beating estimates and saw higher costs across the bord. the company did raise its forecast for freight and commodity costs for the year here's vice chair john muller's take >> i'd say there's still a ways to go for the market forces to work and equalize the supply and demand situation and different parts of the world. so, we're not through it in the quarter we just completed, despite earnings about equal, we had $6 million after tax related to the supply chain dynamics >> and that means higher prices on more goods made by proctor and gamble for consumers shares under pressure. apple, meantime, out with a slew of product announcements yesterday. we're going to break all those down as well

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i'm back and here is your cnbc news update at this hour. in new york city hall a statue of thomas jefr sns will be removed because of his ownership of slaves. they're voting to move the statue by the end of the year. it's had a prominent place in the city counsel chamber since 1958 and washington fired the head football coach after he refused to get vaccinated for covid-19 he's the first major college coach to lose his job over vaccination status he sought a religious exemption but was denied north korea has launched one missile over the sea of japan.

the missile test comes hours after the united states reaffirmed an offer to resume talks on north carolina's nuclear weapons program. and in spain's canaryi island, still spewing lauvlau and toxic smoke a month after the eruption so far more than 1800 buildings have been destroyed. back to you. apple shares are up following yesterday's unleashed event, announcing their latest products like air pods, colorful home pod minis and a lot more. joining me is senior analyst i'm thinking about the airpods and the mac business seems like what they want to talk about the most is their willingness to delve further into chips

>> i think this event once again solidifies them in the semiconductor business what you're seeing out of them is this path of trying to make the hardware and software very specifically all apple and that gives them a fur formance advantage. gives them control which they spoke about a lot and this is the way in which, ultimately, the company will lower dependentancy and able to improve gross margin structure . so, it cannot be understated it's a massive thing for amand they're obviously delivering fantastically in that department >> i remember when you went to neutral, maybe last summer or the summer before. does this dynamic make you get more constructive? >> so, when we went to the neutral that was last summer,

this is a stock that's really not go ting to out perform, giv what we knew and we think that's what's playing out apple significantly lacked the s&p and we think this is a trend put in place because of the expectation of how good the 5g cycle was going to be. i think that'sing to get discounted there are worries in terms of deceleration potential there's a whole host of worries we can go through but some of those are starting to get discounted in the stock. >> and i want to dig into the macbooks themselves. to put a bow on this, how negative is this for intel >> we don't really cover intel i don't.

i would say this has been a kwegs fquest a long time. they acquired a ton of companies to increase their assets they acquire from intel they're marching to a completely separate beat in terms of semiconductor development because they see it's significantly lower than things they can do themselves they're now looking at a product that is four, five, six years out and thinking how to best integrate and provide the performance only they can do, whereas suppliers may not be able to keep up with insoivation. >> so, let's talk about the macbook.

we've seen signs it's slowing down now that apple has new updated laptops, does it face ta the same slowdown or does this buffer it? >> that's a great question we just saw third quarter data come out and the markets decelerating significantly. the chrome book market down double digits. from a overall market standpoint and into 2022, revenue's going to be down 5 or 6% this is a real deceleration going on now, there is some of that for apple as well. and so, we're cautious at the same time we think the new innovation with the chips

they introduced yesterday, that does help them offset some of the head winds related to the covid related impact for slowdown they're really taking share in the notebooks and this will help them cat ls all the lead in the category if you want the ag regt trends, we think apple might do flattish revenues in mac and that's better than overall market as we look at that holiday, there's concern that demand doesn't come from heaven if you don't get it for the holiday, then maybe you'll get

it when it's available does that mean seizeinality is out of whak the next four quarters >> it has been off for a long time now because of covid. but when you look at last year, the delayed launch of the iphone and that benefitted the march quarter. number of units that got shipped and the stimulus in december we think this year it's sort of interesting. we're actually go took see relatively strong september. i think it gets more challenging. partly because of supply what we look at on stores, online, reterrells what you see is a mixed bag.

i think the sell out data is reasonably in line i would say given last year's tough comp, it's going to be hard for apple to have flattish iphone revenues in the december quarter and in the march quarter it's extremely hard comparisons. you have a couple of challenging quarters and then you hit a mobilized pals by the time you get to the uniquarter. >> jf thanks good to see you. >> right energy stocks in the green again. we're going it check in on those moves later this hour.

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welcome back to "squack on the street." we're live from the milken institute global conference. good to see you. >> nice to see you >> you know, a great amount of talk at the conference about esg, sustainability. comes up all the time. many of the ceos and other participants talking about it in unest. what has it meant in terms of capital formation and flows a opportunity, i guess >> it's a big subject, thanks. and i'm doing a panel on esg in a little bit because i decided to take over the esg effort about three years ago. >> why did you do that >> i was seeing there's a lot of

technologies, capital that was demanding esg but very few businesses or technologies that were at the stage of development to attract a lot of capital. so, there's been a lot of things in the works, in the labs that we're seeing we're coming to what we thought was take off velocity for the markets we put together all our groups, power energy and auto. we're now seeing it happen in front of our eyes. >> give us an example. >> there's a tremendous wave of new investment coming behind new tech fallings. we've seen a number like $10 trillion over the next decade. >> trillion dollars a year potentially? >> trillion dollars a year of capital deployment around launching the new technologies that are esg and that's the e

side, not the "s" side and wre're seeing it in front of our eyes >> i think of the spac world but projections you could argue. come on? how are you going to get there i would assume a lot of failures >> you're not innovating hard enough the.com boom you look at all the companies and markets got excited. when the auto was invented, there were something like 35 or 40 auto companies that went public you get excess optimism about how many different companies are going to be successful a few companies like amazon, google and facebook and what happal has done turned out to be sustainable. we're going to see winners and

losers i am highly confident there's going to be a tremendous amount of investment around new technology >> in terms of trying to understand who has a business model that's sustainable, how are you going about dedoing that and is there one area you think has more promise than another? >> i think there's a few areas we're very focussed on global thermostat, climate engineering, occidental petroleum to roll out a tremendous amount of carbon engineering in the permian-basin. working with partners like exxon to work out their technology >> is this thing for real? the technology is there right now? >> the technology is proven. it's been in the lab for a long time the key now is the engineering

so, when you move from breakthrough technology to engineering, you know you're in a good place because engineering is using things that have been done before to get them to scale. and there's a tremendous effort to buy assets. it used to be the government was the one that priced to the economy or environment so, take air pollution, the government would set up a set of rules and industry would follow. now they're demanding corporations lead the way and they're embracing that companies like microsoft and a bunch of others are willing to buy the credits from the technologies they see are going to work because they know that will create investment of things that bring down to scale when solar and wind started, it

was the government that time around bought credit and everybody said you can't do that they're the most important part of power now >> and now you said government is lagging . it's unclear if we'll get the infrastructure bill, let alone deliver capital to help get off the ground can you do it without the government >> not without the government but the government's not in the lead that's my point. corporations are in the lead and corporations will want recognition for what they're doing and tohave that, they need a set of standards. that's something the government can still do is say something is what it says but i believe we're entering an era of what i call profit with a purpose. i think consumers and investors

are looking to corporations to do things that do well my opinion is things are coming together ie, you can do the right things with nooi new technologies and you can actually do them cheaper and more profitably. >> so, when i sit here with a guy like allen schwartz, it's surprising to hear you become such an evangelist for this? >> profit with purpose is for guggenheim too we're doing something because we really believe in it but at the same time if you're going to see trillions of dollars of capitol deployed, that's a tremendous opportunity for an investment bank to be an intermediary in those flows. that's what we do. >> and another thing you used to

do i wonder to quickly pivot to that side, regulation, the fdc, doj. are we going to see any sizeable move >> i say when we started guggenheim, we participated in a lot of large deals that was the end of what i call dumb device era. an era where you have consolidation around businesses that have been triggered by dumb devices and the ininternet the iphone didn't come along until 2007 and it changed the way bds is done in the end of an era is consolidation of the giants. beginning is now it's much less about consolidation and more

about creating new capabilities to be able to do business in a new way. and that's a very different environment. so, yes, we're active but it's smaller deals on average but a lot more activity, which is really good. of transactions and at the same time, it triggers the capital markets so when we started, we had a strong mna business. the capital markets were a little slow. you know, this year we're having record underwriting businesses, too. so it's a great environment. i always tell your guys don't confuse a bull market with brains but as long as we're doing well, you wouldn't not want to do well in the bull market, right? but i think the market environment is much different from the environment back there. it's a lot more activity and in a lot of different ways. so you got to be out there and be flexible. >> all right we'll leave it there

alan, good to see you and i appreciate you taking time thank you. >> nice to see you. >> karl, over to you. >> david, thank you very much. don't forget netflix is set to report after the bell what to expect coming up next hour on "techcheck." we're still hovering right around 4,500 best level in s&p in a little over a month we're back in a moment ♪ municipal bonds don't usually get the media coverage the stock market does. in fact, most people don't find them all that exciting. but, if you're looking for the potential for consistent income that's federally tax-free,

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visit xarelto.com or call 1-888-xarelto ♪ welcome back to "squawk on the street" we're look agent the energy select spdr fund up about half a percent right now up almost 30% in just two months as rising demand coupled with supply constraints pushing oil prices higher. a core holding of the etf reporting results that matched profit expectations but missed on revenue, just a day after shares closed at 2.5 year high they're up more than 40% since late august. ceo jeff miller saying demand is only headed higher with a, quote, multiyear up cycle unfolding. more "squawk on the street" tethis ♪ ♪

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- [narrator] introducing the grubhub guarantee: our promise to deliver the food you love on time, and give you the lowest price, or you'll get $5 off your next order. corporate tax revenue is at all time highs thanks in large part to record profits robert frank has the details for us hi, robert >> hey, morgan

corporate tax revenue hitting a new record in the latest fiscal year that's according to the congressional budget office. corporate income tax receipts topping $370 billion in the 2021 fiscal year, that ended september 30th that was up 75% over last year and up 61% over 2019 it was also higher than the period before the trump tax cuts which, of course, brought that corporate rate from 35 to 21%. so we have lower rates and hire revenue. and now the reason for this record revenue is record corporate profits. many say the numbers may be a one-off since the surge in profits followed the shutdowns from the pandemic. now, if you look at revenue from the wealthy, that was also approaching records, income tax revenue up 28%, expected to top $2 trillion. tax experts say much of that was from capital gains with the wealthy cashing in on their gains from rising stocks and other assets if you look at total federal taxes paid in the latest fiscal year, they reached and all-time

high in nominal terms of more than $4 trillion it was the highest share of gdp paid in taxes in almost 20 years. morgan >> this research is just fascinating, robert. of course the timing of it cannot be overstated either given the fact that we do see these fiscal bills being batted around in congress right now what does this do if, i guess if anything, but what does this do to the debate back and forth about higher corporate tax rates, higher rates on the rich? >> there's no question, morgan, it's going to be in the mix for those on the left who say they don't pay their fair share they're going to keep arguing that and those on the right will hold this up saying what's fair share when we have record income tax collections from the wealthy and from companies so no question this will add to that debate. >> yeah. absolutely robert, thank you for bringing us the latest on this. we'll get a quick check on the markets right now with the major averages all trading higher. the s&p is up about .6%, 4511 is

the level there. the dow sup 147 points right now. we're being powered by earnings. speaking of earnings, united airlines and netflix after the bell, so we'll keep an eye on that "techcheck" starts now ♪ ♪ ♪ good tuesday morning welcome to "techcheck. i'm carl quintanilla with jon fortt and diedra bosa. today apple is getting chippy. ramps up pressure on competitors. what it means for the rest of the pc ecosystem bitcoin future's etf debuts. what is the future >> this is not a game. a new report outlines how payment for order flow entices brokers to promote risky retail