tv Squawk on the Street CNBC December 4, 2018 9:00am-11:00am EST
i want to thank our guests this morning jim paulsen, i want to thank you very much any quick thought. >> i think it will remain volatile here. >> stagflation >> i don't want it >> tim, thank you. >> that does it for us today, right now it is time for "squawk on the street. ♪ good tuesday morning, i am carl quintanilla with jim cramer and david faber. futures is down about a hundred here we get our first yield curve in version in a decade. plus, another downgrade of apple. europe is down nearly 1% 10-yr, wtwo handles of a couple of months.
futures is down as whether the u.s./china problems will resolve of the market dispute. apple are falling in the market. >> first up, those stocks are set to open lower following monday's rally the u.s./china troop is wearing off. wilbur ross talked about a deal ahead and striking an agreement with china >> when presidents get together, you are at a very high level, very broad principles of understanding. now comes the hard part which is translating that into a definitive agreement it is similar to the u.s./mexico/canada arrangement it took something like 18 months
which was a short time as trade negotiations go. it took about 18 months to work out all the detail in the 2,500 pages. i hope that we'll pin down real way to implement the broad principles that were discussed and relayed in the press relief our government put out >> he's meeting with autoexecutives today regarding europe he says there is no truth of him leaving. >> yep, that's definitely a force. i know that when you get off the desk the companies are involved with electric vehicles. they are all talking about this is it. this is whether it is nxp semior 3-m. they're all saying listen we are
on the right side of auto. don't think we are apart of the bill we are part of the interim there is some interesting walk back yesterday where you came thinking the president was saying this is about to happen we'll get a deal behind the scenes all you heard was first it is going to start the 90-day january 1st and suddenly it is december 1st. you heard mnuchin is put out and he stands for a trade deal and lighthizer is about ideology if it is mnuchin, you got a trade deal and a lot of business to be done by caterpillar. if it is lighthizer it is about ideological confrontation. these are different views. >> i chose the byte that we heard from wilbur ross because we got a lot of communications
when he said that people listen in terms of specifically the 18 months reference to the nafta negotiations and whatever it is called, afcm >> usmca >> that was quick. people are hearing that and go 90 days, is it enough time to get anywhere you did hear him say at least make reference, of course they're not going to have it all wrapped up there is concerns about that to your point you say walking back but others in the market are less kind. they'll say there is a history here of not being honest and not about the simplest thing the lack of truth telling makes it difficult to understand what truth is >> who >> by the president. >> we are getting tweets that are not being acknowledged by the chinese much less confirm.
>> when one of their strategies, if they have not done anything ever against us. i was the major ceo yesterday, listen, we don't want to deal with china anymore so i mean they can keep on having niethese talks. we don't want to deal with them. >> there is a large contention of american business that believes nobody can afford this. you got eventually during the course of this year they're going to figure it out because the fact is if you were to go to an all out trade war, the likes of which we equationally discuss here where everything gets involved it would be bad for our economy and ours heading into 2020 which would be an election >> totally agreement >> here is what he said last night. people make mistakes it is like trying to rush out of china and rush out of other
countries. china is the biggest and most sophisticated manufacturing country in the world there is no one else other things are doing things better you can't ship all these to vietnam or to little countries he says he knows how bad it could be you can't leave them >> you can't leave them entirely >> you can't >> we are going to raise prices because we differentiate, that's not a problem. dollar general, if you want to call and see what they say we'll shift over pbh is trying to ship over listen, we have no choice. >> i think the market though investors are going to be reacting to every headline and comment whether or not they'll be based on facts or hope or whatever it may be and you got a larger contingent thinking we'll
end in a decent place and not focusing on the data >> i want to go back to your non truthful comment on trump. >> i don't know if you know like didn't he immediately say president xi, qualcomm pays $2 billion >> i didn't expect to know a reversal qualcomm moved on. why are you saying this? that indicated to me that he's really focused >> what about the autotariffs yesterday? >> is that true? >> the in fact you can't say what the president tweeted is true speaks volume, jim that says a lot. >> that's why i think it is going to be a difficult period here in terms of the importance of this or not knowing where things really stand.
i got an idea. let's make a bet if the chinese means business, we are going to hear that caterpillar got the biggest order ever >> you are going to look at the facts on the ground. >> i am so stuck with the facts here, it is scary. >> you want rhetoric the chinese steal everything 1947 he backed away and lighthizer fought it. we are going to swim the yanks and the people like to fish in the ocean. how about my master degree that i tried to get at city that's something >> your point is -- >> they buy enough of lng apparently as mnuchin said today and they can sort of wipe their hands. >> buy nxp
there is none. why don't these people make phone calls? we are sold out. >> they got the long-term contract >> it is an idle buy >> the energy is an idle buy it is going from america to other places it is sold out cheniere energy does not have any push >> the market is going to be opening lower because lighthizer is in charge as we found out relatively early yesterday people are just concerned overall that this is not and
comments like wilbur ross to talk about of aggressive timeline >> it is very hard, how about december 1 verses january 1. three months start on december 1 so it is march 1st >> the one thing that did happen, you can't take it away 10 did not go to 25. dollar general came onto "mad money" going to 25, why is that important? you see the full rate bans, by the way, you know what the ceo said >> you got him on last night >> he said tell david that the uv protection -- he actually mentions you, he says the uv protection is not as good. would you please tell david, your colleague that every bit of the uv out of china is as good as ray ban
>> because they stole our uv intellectual property. >> the $179 glasses that people confused me. how could you do that? >> i am going to go up to china town and grab me something >> there is a $35 coach bag. >> incredible. >> why is tapestry is such a sale >> oh, the new coach >> oh, david, you are on the case gary filbun listens to me point now, they know they stolen the uv i am going to bring you five pairs tomorrow and some readers, too. >> i don't need those yet. >> got. >> speaking of things that are assembled in china another downgrade for apple. we'll fill you in this time. and also ahead the banks, the
fed, exclusive interview with tim sloane and brian moynihan. we'll talk about this yield curve in version and what it says about futures economic growth futures are down, we'll be back in a minute. i still can't believe how incredible the screen is on the new iphone xs. and our unlimited plan really takes things to the next level with your choice of the best in tv, movies, or music. it's the perfect holiday upgrade. i know what i'm asking santa for this year. you still write letters to santa? no. please. i send him emails. can i get his email address? oh... i don't feel comfortable sharing it. get the iphone 10 s and our unlimited plan with your choice of the best in tv, movies, or music. more for your thing. that's our thing.
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apple is down in the premarket. cuts the target from 205 to 200. t apple is facing the reality of market saturation. hsbc says it had a bullish view on demand. it koicould be the catalyst for long-term. the iconic hardware uni growth is broadly over for now. >> we have to recognize this is in conjunction of sears logic which made the sound out of your cell phone 82% of the revenue is the apple. so that's obviously bad. the second thing is once again that decline is the same decline we are seeing in every single
supplier every time a supplier cuts the same amount, we get someone else who panics the issue that you have to weigh is apple cheap even without growth is apple going to have an up year in 2019 well, we have a fiscal issue, we are talking about the calendar year the answer is yes. that'll be from increasing service revenue. >> it was a sixth apple supply cut guidance since they launched all these models that's a lot it got notes like this one, i won't name the firm. the cycle is becoming an unmitigated disaster >> unmitigated disaster. i hear that and i think the unmitigated disaster is telling for 12 time earnings to me the biggest worry is not even this site 5-g is the way to buy.
i think the whole concept of how badly this cycle is, is going to prove to be over done. the same cut backs are indicating you go back to the statement on the last quarter conference calls. they did not say that you would hear no supply cut back. it is going to be difficult. i just come back to the idea of if it is unmitigated disaster, what should the stock sell for i mean look -- what else is an unmitigated disaster i am going to take my life in my hands. i am going to say that it was not - the eagles did not win because of mark sanchez. i think facebook is an unmitigated disaster >> you are not alone in that >> really? >> are you serious >> i talked to a couple of my hedge funds guys, they're often wrong. >> never in doubt. they seem to believe the same. >> really? >> multiple is low and the
growth rating is with the worst of time. they're up 20% or whatever the number is. >> your view is they can make it up on asps with thousand dollars phones now with the norms? >> what you have to start thinking about is the ecosystem and what it means and what they can run through the ecosystem. what i would like to ask apple if i see them is what else can you put through with the ecosystem. that's how you will get the gap that's solved. there was a time when proctor bought gillette and i could not figure it out. then it turns out there is going to be a huge number of razors. that became incredibly popular it was not that bad this quarter. i mean if you have a number of blades provided they are not behind the iron curtain that all
the drugstores have. it is good business. >> so blazer-razor business. >> how do you do it? >> what did you say about the president? >> what term did they use? >> i don't remember the term >> it was untruth full >> i think that's a fair statement. >> i challenge people to challenge that statement >> david, i will give you a little heads up. when you think that, you say ill-advise or it raises eye brows. these are the things that you say because then when you come out when you listen to it, that's ill advised >> keep in mind. >> i appreciate the advice >> when we come back, i will explain it to you. we'll watch it >> sometimes i can't tell if we are on the air or not. >> we'll get cramer's "mad dash" in a moment and count down to the opening bell
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what was incredible is they announced one on monday and it was not that strong. last night they announced another one that gives you a run for your money they only had ten patients we are talking about people who would die if they did not take this drug. if they expand it to 30 patients and get good results, i think it will become amazing miracle drug people are not paying attention to this. amgen is not hyped this was a remarkable test that was revealed i realize that amgen is as good as anything that came out of this conference. people have to focus on the new formulation that amgen is making it is traumatic. when you add this onto their revolution migraine truck and
you put it up with rapatha, its got a huge amount of cash, too >> yes, it does. people focused it on some time and they brought it back >> i think people did not look at this. they did not read the paper. i read the paper over the eagles win with sanchez the guy knows how to fumble. he's not going to make it so what's the point >> well, that's maybe a good point. >> this is not sanchez >> this is wentz not sanchez. >> got it. >> okay, it is not mahomes >> all right i understand you are not winning the super bowl this year either, keep in mind >> david, it is early. >> it is early although we got an opening bell ayitusnus omowmitefr n st wh
just over two-minutes. the markets are closed tomorrow for the funeral of george h.w. bush this yield curve in version had everyone's attention twos and tens are still above a dozen basis points what does it say >> i come back to the fact that the world has got strange interest rates if you have any responsibilities to get away with your bonds, you have to own risk-free germany bonds, you have to own our paper. so it is distorting the curve. if the federal paper want to issue all the paper that mnuchin knows. they're not issuing the paper that the people want if you make america great bonds 30 years and the inverted yield curve would go away.
>> what's the 2-yr >> what does it mean >> it means that yjapan rates ar distorted and europe is distorted. >> directionally it is not a bullish sign by any means, right? if we were at 100 basis points two years ago. >> i think there is a forced economy here you are either going to have a boom because of consumers or we'll have a recession i think it is some where in between which is why i think jay powell says we are closer to neutral. i think we'll look back. i think jerome powell is a great man. he's a great guy the peak of the u.s. economy came between october 3rd or october 4th. >> thank you, judy woodruff. i think right now the wait to
try to really book in it is jay powell were to go on "deal or no deal." >> you did it, well-done, jim. >> we'll talk about that later there is the opening bell and the s&p at the cnbc realtime exchange at the big board today. it is brazilian mining company vale >> you guys are more experts than i am. >> i don't know about that >> it is a term of endearment. bnp paribas are doing the honor as well. >> i had gary freedman on "mad money," we went through an extraordinary gallery, the meat packing district he told me listen -- i am going
to buy a million dollars worth of stocks. he bought some at 26 and 27. i said that's going to drive the stock. i was so wrong they reported. this is not an idle. this is one of the great mer che kma chants of our time you got to go, everyone when they visit new york should try to go to the amazing rooftop restaurants. >> it is one of the most exciting places that i have been to >> i went actually >> really? >> you know how great it is. >> it is all right >> oh my god >> it is in a cool building. >> i am never shopping with you or go to restaurants with you. >> i have seen many buildings. >> there is a lot of cool place going on here. >> just to go there? you are unbelievable >> why don't you go to century 21 >> you do, don't you
>> that's where you got that tie. >> ywhy would i? >> you are frightening >> meanwhile, jim, you got some good news out of autozone as their comp stores are ahead of expectations >> they bought back a huge amount of stocks the average car, i had car auctions on last week, kar, the afternoon kar is 12 years. mine is 12 years how old is your car? >> a year. >> well, is there anything -- >> what he lacks in wardrobe, he makes up on the road >> i am sure he has a bmw or porsche. >> no, audi. >> there is a lot of signs amd should not have been down that much. there is a lot of talk with nvidia and the new self driving
cars let's say self-driving may be more important than lek atlanelc i continue to hear it much safer than humans. >> something going on at alphabet they're making major changes to healthcare and bring in this guy. he's brilliant they bring in this guy something is happening at alphabet they're tired of doing a stock that's not doing well or china reinvent itself. >> it has been a terrible stock verses the rest of fang. >> i am not sure if it is still standing because -- >> they better not do china. >> they make so many errors. they should be criticized more >> diane green had this unbelievable business that just never stops. >> if you don't monetize things, they have healthcare and they finally appointed a ceo for
healthcare >> i am going to say this. >> they got the other bets line is long. >> let's have losses it is like so much -- their cloud initiative, whatis the term that you use for apple? >> unmitigated disaster. i did not use that somebody else did. >> they are falling behind the rolling stone are touring again. >> i heard that. >> everyone is off their clouds. >> i got tickets they're coming out of sun rise senior living to do that concert. >> they are far older than you are. that's saying something. >> thanks. karen cramer, i think she saw sinatra. >> it is time to go see the stones >> i will go with you.
president tweeted - bob lighthizer will be working closely with mnuchin and peter navarro. >> come on, peter navarro? >> march 1st, there it is. the team >> i mean this is a team of rivals this is not -- that's why comparing lincoln to trump, you are supposed to call me out on that >> i can't call you out on everything or we'll never get anywhere on the show >> did you see -- >> you do wonder about when you think of mnuchin and his approach in kudlow verses lighthizer, navarro. we talked about it so often and wilbur ross and some where as well >> how they're going to come to
a cohesive set of ideas that or set of agreements. >> in the end -- >> one of them is going to be fired. >> trump is the one that'll have to decide. >> all i can tell you that xi and trump are great friends. >> because he said so. >> right >> great friends >> kudlow did say they had amazing chemistry. that's why that qualcomm offer was made according to larry. >> what is that? au, what is salt what is oil? >> honestly, let's look at the periodic table and see what chemistry really means >> right >> now you have lost me. >> i dropped out of chemistry because i want to preserve my transcript >> that's a smart move actually. >> i wish i had not gone there >> we got randall stevenson this morning saying something at the
ups meeting conference the stock is reacting positively going onto say we are going to invest more on the third party content overtime, now we are focused on hbo we need to invest in original content in hbo there was a report by the journal this morning keeping "friends" on netflix but having the right to stream it as well which was interesting. talking about -- spending a lot of time is the ceo of at&t talking about is entertaining. >> is this amazing we talk about chemistry. is there chemistry between randall stevenson and the people who do art >> i don't know. >> reid hastings on talking about -- a good fiber guy sitting down with the arts
people >> this is that marriage that we have been talking about a couple of years for now >> you hire people who can do it >> stanke, maybe or maybe not? >> i will believe it when i see new core merge with show time. >> right >> i got it. >> did you watch "body guard"? >> i am in midst of it >> i wonder what stevenson thinks about "body guard." >> they watched all ten episodes of "homecoming." >> did you watch "narco of mexico"? >> there is a survey out today that says the brand people talk about each other the most is
netflix. >> yes >> by the way, on the same note, we should note shares of discovery, we had an information problem yesterday with internet connections so we did not get this to people discovery was down 8.5% yesterday. >> concerning about ratings and people are not watching. it is rebounding a bit yesterday. this was shared yesterday by haslo. >> what did you think of disney? we did not talk about new contract that bob iger got >> it is pretty good we are raising the curtain a little bit on the new star wars land, disney world and the slate next year we know it is going to be a force >> someone that wins seven times for seven years for the kids, it still works. >> oh, disney is awesome
>> i never took one of the cruises. >> i have done the jungle cruise >> how many times? >> 500 times >> stevenson did say with $26 billion in free cash flow leads them $14 billion in dividends and 12 to pay down the debt >> that's the key consideration of so many investment. right now you are talking about so many debt low but, of course, it is only a number and if you have enough to pay it down, you are not worried. there has been a concern about incrementally of what their thoughts are in terms of achieving that >> right >> that's what people want to hear >> i know the word narrative is thrown around too often. do you think they change narrative from direct tv >> no. why would they want to talk about direct tv. we are talking about "game of thrones. >> where is jeff
>> he's on an island some where sitting back and having a couple of coronas >> i hope it is an american island >> did he buy the virgin isla s islands? >> transport of oil was up let's get to seema mody. >> the market is giving back some of the trade related gains. what the market is watching today, the ongoing trade discussions between the united states and china and whether the two countries are on the same page the flattening yield curve is getting a lot of attention and whether it is signaling a slow domestic economy of critical jobs on friday energy market, resurgence of oil, is it sustainable as we await the potential cut from op opec energy is trading higher this morning apple's supplier
cirius logic is trimming that. in the retail space, dollar general is cutting its cost. and toll brothers, in more than four years of the late euless, t latest evidence of a slow down. d.r. horton comes in below wall street expectations. concerns of a slow down, impact of higher rates have certainly played out in the market take a look at homer etf it is about 5% this year >> seema mody. let's get to the bond pit as well what a day with bonds. rick santelli with the cme >> it was a big day. it was not a big day in the context of what we consider big
days for stocks or big days for trade possible brave throughs. we have seen a continued deterioration of interest rates, really letting large part buy the long end that's ongoing high for the year for 10s is 324. we are at 295. it has been a slow but steady drip what has everybody's attention are yield curves look at the one week of tens, the fact that we dropped to mid-90s should not be shocking to anybody look at an early september chart for 10-yr note yield is it the top? most would say no. it is certainly a top and to that end you see the 10s and the 30-yr is a much different animal of sorts it breaks out really of three and a quarter when it drops through there. it just drops through there
today unlike tens which happened a while ago. the yield curving we are splitting hairs. if you look at twos and threes and foives, they all settle at 282. if you look at the half basis point, you see that the real outlier there is the five-year note basically it is all the same of al slight negative going back to 2007 the big one that many looks at it is all roughly the same this one goes back to june of '0 7. there is so many theories. we know for sure that central bank distorted everything including interest rates does it matter it is what's going on investors' minds yesterday that made it the
big day. the first of in version, how they behave is how it alienators in the grand scheme of of things or how the feds change their minds. the dollar verses the chinese currency, you can see it continues to fall. we are at the low level of the green back since the first few days of september. carl, david, jim, back to you. >> rick, thank you when we come back, it is "deal or no deal." a sneak peek is coming up next the dow is down 145. s&p is back to 27.77 this is a tomato you can track from farm, to pot, to jar, to table. and serve with confidence that it's safe. this is a diamond you can follow from mine to finger,
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what would i do? >> i would take it >> i would go for it >> it is guaranteed. >> you know why? >> bulls make money and bears make money >> hawk gets slaughtered >> that was "deal or no deal" host, howie mandel the show is back premiers on wednesday right here on cnbc i never seen anyone gets that close to the sound board snoc t he's a delightful man. he's an uplifting man. i think the show is very exciting >> i have been a huge fan of his. i once orchestrated a campaign for someone to win oh, he got me involved there is something engaging about him that's true, honest and authentic, he's a real good guy. the show is very exciting. >> his level of preparation as n knowing the contestants' stories
and what they can use the money on is unbelievable >> he came back two years later. i was going to say he's a great american but he's canadian >> oh, is he >> a sweet, good man. i've got to tell you, this show is going to be compelling. >> yes. >> because he's compelling and because the people don't make the right move they want the million. >> are you allowed to open that? >> i don't know. i just did. >> this man is pure joy. >> i'm not allowed to open them? nothing in here. >> hitting on 18. >> >> these are fancy. what did you get >> nothing what else is new >> david apple at 163. your guys are right, with tremendous damage. >> goldman sachs and ge. >> let me see. i have the microscope. >> i have this app that doesn't
microscope. >> look. >> oh, my god. david, ge. no oh, no oh, no no deal! >> put it away for a few years. >> oh, my god, no deal, david. >> don't forget, premiers tomorrow night, wednesday night, right here on cnbc, 8:00 p.m. eastern time. >> it's going to be dynamite he's dynamite. >> dow is down 158 your muscles look good, but we should be seeing
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fact that all the transports are leading -- >> opec is nonexistent i care more about what we produce and the fact that there's 30 million barrels in the system in canada and the u.s. where are we going to put that >> that's with the permeon putting together pipes next year. >> no place to put the oil, there's so much. so so no, i'm not worried about that deflationary situation. >> i assume you saw judge leon yesterday. >> and the hearing he had. the judge, judge leon, you may recognize the name, of course, presided over to try to stop the at&t time warner deal and said get lost of course, now on repeal comes out and said i'm not sure i'm comfortable with this deal, despite the fact that the government already fully agreed to whatever investments were going to take place and so i
don't think you should incident great yet. i want it take a closer look very odd. >> i believe it was much ado about nothing. by the way on that deal, all is well that ends well. shakespeare. >> "mad money" tonight. >> we have marathon, frank calderoni and robert bernshteyn. people who say i'm dodging the questions are severely ill-advised which means, by the way, they're clowns. if you want to know what's underneath me, they're clowns. mr. clowns i should be a little more formal. >> "mad money" at 6:00 p.m. >> deal or no deal do you find deals at tjx >> sometimes deal. >> now we're talking. >> big banks and the fed are in
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good morning i'm carl quintanilla with david faber and mike santoli sara has the day off first in the decade has a lot of people's attention. >> and we'll stick with that first time for more than a decade does it signal recession? >> president tweeting about the trade truce with china. >> and big tobacco might be going green to make marlboro cigarettes lows today sinking as questions about whether that u.s./china trade agreement will resolve the long-term dispute.
the president takes to twitter a few moments ago, saying the trade disputes have already started. unless extended they will end 90 days from the date of our wonderful warm dinner with president xi in argentina, bob lighthizer will be working with clo closily with steve mnuchin, larry kudlow fidelity's director, charles schwab liz ann saunders. guys, good morning to you. liz ann, let's start with the curve. after a long period of not have ing to deal with it at all, what do you think it means right now? >> it's in the belly when that has happened in the past it's ultimately led to an inversion, most of the time, in
the more common measures, 10-2 or 10-3. we've been on watch as has everybody. you tend to have a bit of runway, both for the stock market and the economy at the point of inversion but i think it probably does start some countdown clocks to the extent people think of the length of runway between now and the next recession, in those terms. >> when we hear things like average lead time, 14 months, does that sound about right to you? you can look at the fact that it tends to peak out around 13 months i think trade may hold some key to the length of runway between now and the next recession, if we don't get some sort of deal within the next 90 days, i think you would probably see some expectation that the length of runway would shorten a bit. >> does a partial yield curve inversion give the fed a reason
to pause in terms of hiking rates? >> i don't think so. first of all, i look at the three month to ten-year curve. reason the market looks at twos to tens is after the financial crisis, you know, overnight rate was anchored at zero for so long that it became a meaningless number but the three-month to ten-year is still positive and still several two or three rate hikes away from inverting and i think at this point maybe two to three hikes is all we're going to get. if the ten-year stays around 3%, we'll have a flat curve but nothing worse than that. and if the fed can pull back from a flat curve instead of an inverted curve, it does increase the likelihood of a soft landing. i'm not one to quickly do the math on the curve is going to
invert and we'll have a recession so many months later they'll say 2020 is the next recession purely based on that math that if the curve inverts now, as liz ann said, you have the runway and that gets you to 2020 i think if we get a signal this time, it will still be -- it will be some time next year, and it even may be premature at that point just because the negative term premium is also affecting the shape of the curve. >> what are you going to be watching in terms of making progress or wla wl they'll be able to reach a deal >> i don't know that i have insight better than anybody else as far as what the clues will be in advance of the g20 meeting, a couple of days where president trump put something on twitter and our friend, larry kudlow came out same day and said the
opposite and then in the first case it was trump saying negotiations are occurring and then larry saying no, not really. that's the other issue, there is conflicting information that comes from even members within the administration the day-to-day volatility tied to some of these announcements and tweets will be with us for the next 90 days i don't expect the market to have a true sense of what's happening until we get closer to that deadline if you even want to call it that. >> to that point, liz ann, here is the rest of that tweet from the president. he says remember, i am a tariff man. when people or countries come in to raid the great wealth of our nation i want them to pay for the privilege of doing so. it will always be the best way to max out our economic power. we are, right now, taking in billions in tariffs. make america rich again. so he's clearly not interested in letting there be a halo out of this summit. >> well, it's also the case, of course, that it's american
companies that pay the tariffs and i'm really quite surprised at how many people i run into on figurative main street that think that it's chinese companies paying the tariffs it's american companies. down the road we may look back and say ultimately this was a successful strategy but we have to look at the impact on corporate earnings, profit margins and consumer measures of inflation, to the extent that companies decide to pass those additional costs on. >> yeah. and jurrien, also important to mention, liz ann saying it's not going anywhere it's out of consumer's pockets or the companies it's not a tax it's not being collected in anybody's coffers or anything like that. >> yeah. >> jurrien, your expectations here, do you think they'll reach a dool and does that figure at all into your view of the market next year? >> my assumption that, yeah, the market is sort of on pins and needles, thinking this is like a game of chicken.
like the movie "american g raffiti," two teenagers playing the game of chicken and the consequences can be enormous of course, they can. my sense is that the u.s. is playing a deliberate long-term game here and this is not going to go away any time soon this is one battle in a longer period of trade tension. so i'm not assuming that there will be a deal that will put this whole thing behind us and so, you know, when you look at the 2019 earnings estimates they're already drifting lower as they typically do and i think there is some downside risk to that. right now the street is looking at 10% growth. i think it could be more like 5 or 7%. unfortunately the pe ratio of the s&p already reflects a lot of uncertainty but i think there is some downside risk. as liz ann said, there is a price to be paid either consumers will pay more for goods because of the tariffs, if they get passed on by companies, or profit margins
are going to decline if companies cannot pass them on. either way, you know, it's not just chinese companies that are going to pay the price there will be a price to pay for everyone, and that will probably be reflected in the earnings numbers for next year. >> liz ann, when the commerce secretary, wilbur ross, comes on cnbc and says the press is blowing worries of a slowdown out ofproportion, you're thinking what? >> we saw a bit of a slowdown, 4.2 in the second half, you're about 2.5, 2.6 based on atlanta fed's gdp and closer to the 2% range. that's just consensus numbers to the sense that there's relatives between those and reality, the slowdown has happened. and we also know that the pickup in growth in the second quarter had a lot to do with front-running activity in advance of the tariffs one other point i want to make on earnings is the other factor
that's not baked in is the collapse in oil prices you've not seen yet analysts ratchet down earnings for that piece. you could see a haircut to earnings having nothing to do with tariffs and much more to do with what's happened in the energy space. >> finally, jurrien, quickly, overweight cash in treasuries. cash is a better play than stocks for the first time in a decade are you that far >> i don't think cash is a better play than stocks. if we get 7% earnings growth, markets trading at 16 multiple the fed, let's say it does two or three more hikes and slows down or pauses that's not a bad outcome. that's a high single-digit return for the stock market and if pes expand as they typically do when the market rises, you could get 10 or lows double digits
that's obviously going to be cash i think the bigger question is how do you diversify portfolio do you do it with long bonds or cash and, obviously, long bonds have been the huge winner since the financial crisis, you know, creating return of about 5% with a strongly negative correlation to equities. maybe cash starts to compete with that as we go forward that's my sense. >> jurrien, liz ann, talk to you soon thank you so much. >> thank you. >> looking at a live shot here of former president george herbert walker bush lying in state at the u.s. capitol rotunda after passing away friday at the age of 94. funeral service for the 41st president taking place tomorrow at the washington national cathedral. ahead of the service at the bush library in texas on thursday constituencies are coming to pay
their respect tas. >> former cia directors, one of the key jobs in george h.w. bush's career, pass by the casket as he lies in state at the capitol. at 11:00, his service dog, sully, who has gotten a lot of attention on social media, will go by the casket as well before being reassigned to walter reed and wounded soldiers there and we saw last night president trump and his wife, melania, the first lady, pause before the casket for a couple of minutes, saluted without speaking and left you saw former president bush, the entire bush family and current leaders of congress, a warm hug from nancy pelosi, who is about to become speaker, with george w. bush, who was the president the last time she served as speaker. so this is a come iing togetherr a lot of people who worked at high levels of american government for a long time who
have enormous respect and affection for the 41st president of the united states. >> we have financial markets closed tomorrow. postal service service will be -- i think no deliveries. arlington national cemetery will continue with funerals as they see fit. but meantime, john, the president continues to tweet about trade. here is the latest one if a fair deal is able to be made with china, one that does all the many things we know must finally be done, i will happily sign let the negotiations begin, make america great again. do you think we'll see a lot of wheels of political commerce come to a pause tomorrow or not? >> yes, mostly, but remember, the wheels of that mueller investigation are grinding forward. we expect today to get a sentencing memo for michael flynn, the president's former national security adviser, who has pled guilty to a felony, for
lying to investigators and we expect in that memo, to the extent it's made public as opposed to parts of it being redacted and held classify ied e expect to hear some reasoning behind why michael flynn did what he did and what cooperation he offered that benefited prosecutors. then at the end of the week, we expect to get memos regarding michael cohen and his cooperation and a memo about paul manafort and how his cooperation went sideways with the lies that prosecutors said he told them we're going to learn an awful lot and that might propel the president's activity on social media that seems to reflect his level of anxiety and concern about what's going on in that
investigation. >> we'll keep our eye on that, of course, and the precedings at the rotunda and at the national cathedral. john, of course, tomorrow we'll be live in washington and have special coverage of the funeral of george herbert walker bush right here on cnbc beginning at 9:00 a.m. eastern time >> when we come back this morni morning, a huge interview. you're not going to want to miss it, wilfred frost sitting down exclusively with wells fargo ceo tim sloan. trade truce between presidents trump and xi jinping. as we head to break, top performing -- actually, there they are, the top performing stocks in the s&p. waste management and alexion, autozone
at comcast, it's my job to develop, apps and tools that simplify your experience. my name is mike, i'm in product development at comcast. we're working to make things simple, easy and awesome. welcome back optimism giving way to the trade truce with president's tweet storm saying, quote, i'm a tariff man wilbur ross spoke to ""squawk box"" and added further color on the trump/xi meeting listen. >> i do believe if they live up to the indications they had with president trump, everybody will be very happy. what's unknown is how much of that was just 40,000 foot level talk between two presidents and how much of it is real at ground
level. >> an expert on these matters joins us via the cnbc phone newsline, stephen roach, current yale university senior fellow. stephen, thank you for joining us today what do you think of commerce secretary ross' comments is this 40,000 level or could we actually see a potential longer term deal be struck here >> i think he's right. i think the devil will be in the detail and by putting u.s. trade representative robert lighthizer in charge of the negotiations, i think we can look at the detail that was provided by him in this so-called section 301 report that was published last march, which goes into the allegations that are being made against china in great detail. and i've read the report very carefully and taught several classes about it in my course at yale i have to reluctantly say this
report makes a very weak case in trying to justify tariffs and the risk of a trade war. >> why >> well, it breaks it down it breaks these charges down into four pieces the case for force technology transfer through joint ventures, which there certainly is a transfer but the idea that this is forced, there's no evidence whatsoever presented on that the case for technology transfer through china's m & a going out policy, acting as a predator, gobbling up our companies, that's also unsubstantiated by data we have detailed m & a data by china over 13 years and the tech deals are a very small piece of that the third piece is the illegal support through industrial policies claiming that china alone engages in state subsidized and supported policies
china does do this we know that but it's hardly unique it's a practice well done by japan, germany and even the united states and, finally, cyber hacking, the fourth piece, the charges are very serious but the ones documented in lighthizer's report all predate the september 2015 summit on cyber that had an accord signed by presidents obama and xi very little evidence has been provided since then. it's a weak case there's a lot of detail there. and i agree with wilbur ross that we'll have to look carefully at that detail. >> i don't know. you know, i speak to a number of ceos, including one yesterday that says yes, technology transfer is a very real thing, theft as people who truly do business in china are concerned about. they have a very specific take on all of this, too. it sounds like, based on what you're saying and the fact that you believe this is a weak argument that tariffs may be
here to stay. >> i just think that if we're going to go down this road that, you know, it has to be fact and evidence based assessment of the risks. morgan, you said with all due respect. i speak of this ceo or that ceo. we can't go down this road of leveling charges base d on hearsay or inuendo there was nothing that was forced in the way that we partnered with our colleagues to build this investment bank for every piece of inuendo, we need to be much more fact based which is always a problem, i think, with the trump administration. >> so then with the dow down about 200 points right now, definitely some of the shine
coming off ofthese initial headlines from the g20 over the weekend, are investors right to be concerned and skeptical about where this goes from here? >> look, we saw a sigh of relief rally yesterday because the worst case scenario did not come to pass in the aftermath of this dinner saturday night in buenos aires. once the bounce has concluded, we had lots of confusion, no detail the clock didn't start until january 1. now we go back and say the clock did start on december 1. we have no specific list of the massive purchases that china allegedly has promise d to make.
we had some broad understanding in energy and agricultural products but no specific list and again the details of the charges that are made by the chief negotiator, robert lighthizer, trade representative, are on very, very shaky ground. it's a long report 182 pages long it's 100,000 footnotes you would think there's enough in there to chew on to push these negotiations ahead with great clarity. but if you read all the footnotes, and i can assure you, i've done that if you read all the 182 pages, and i assure you, i've done that, you end up with more questions than answers in trying to assess the voracity of these charges. >> stephen roach, thank you for your thoughts on this today. >> thank you. as we go to break, check on oil prices this morning, up 52 cents or so, extending their
gains ahead of suspected output cuts this week in opec led lower by caterpillar a rare and exclusive interview with the ceo of wells fargo. don't want to miss that. don't go away. what if numbers tell only half the story? at t. rowe price, hundreds of our experts go beyond the numbers to examine investment opportunities firsthand. like a biotech firm that engineers a patient's own cells to fight cancer. this is strategic investing. because your investments deserve the full story. t. rowe price. invest with confidence.
etf spotlight. mike santoli here. a look at etfs. >> another way to look at this flattening yield curve we talk about it in terms of gaps of yields, which is what it is but it also represents rallies in some maturityies thre different slices of etfs, long-term bonds over a one-month period, 20 years and beyond, that's the most duration 4% in the last year or so. the very short term, from like
one month out to three years basically steady those prices are always pretty steady in the middle there is the ishares, iei it's the rally in five-year notes that are driving this story. they're down so much in the last, let's say, less than a month from 303 to 281, way more than other maturities are down basically there's been a positioning shock in there, a lot of people short the middle of the curve but also if the message, if there is a message, is that we can see the end of the fed's tightening campaign coming into view, that five-year area is where you're probably going to have perceived value. yeah, we'll do a hike or two in december and maybe one or two more you can fit in but that five-year seems like, okay, now
we're probably -- who knows maybe we go down from there before we hit a recession. that, to me, is the dynamic driving this flattening. >> good explanation. >> two to fives first inverted in december '05, way before the previous recession. >> mike santoli, thank you up next, banks, the economy and the fed. we'll hear exclusively from wells fargo ceo tim sln neoaxt the dow is down 180 points stay with us california phones offers free specialized phones... like cordless phones.
and accessoriesphones for your mobile phone. like this device to increase volume on your cell phone. - ( phone ringing ) - get details on this state program visit right now or call during business hours. good morning, everyone i'm sue herera nato's chief welcoming secretary of state mike pompeo to nato headquarters in brussels he will attend a meeting nato foreign ministers, expected to focus on the crimea crisis and other global security
issues. students in marseilles clashing with police outside their school amid widespread discontent over the cost of living prime minister announcing the suspension of fuel hikes and taxes for six months. police chased a man and woman throughout the city and opened fire on them. the male victim is in critical condition. the female victim is in stable condition. meyer won the national championship after his seven-year tenure. he suffers from debilitating headaches caused by a cyst in his brain and will retire. carl, i will send it back downtown to you. >> thank you very much we take you to the rotunda at the u.s. capitol
former secretary of state colin powell paying his respects to former president bush along with harry reid and, it looks like, make general mccaffery as well a series of special groups that will be led through the rotunda. we've seen former cia directors. later on this morning, we'll get special agents in charge of the presidents secret service detail, personal aides, even some graduates of the bush school at texas a & m as those constituencies come through. we'll bring them to you. of course, the service tomorrow at the national cathedral where the president will be eulogize ed by president george w. bush, john meacham, biographier and journalist. >> did i read alan simpson >> former senator alan simpson, that's right. >> always a straight talk er, we
know that. i'm sure has some interesting anecdotes to share during their times together mr. simpson, long-serving senator during the bush presidenc presidency. >> as we look at those pictures, welcome back to squawk on the street i'm carl quintanilla with david faber and morgan brennan getting bearish action today, dow down 184 pressure on transports and industrials. the banks are down about 2%. one of those days here, david, where it's only health care and utilities that are in the green. >> and it's usually the banks in particular, given again that inverted yield curve we've been talking about for some time, getting hit. that kind of brings us to our next subject which, of course, is banks and wilfred frost is sitting down exclusively with the ceo of wells fargo, tim sloan. take it away. >> indeed, i am, david
thank you very much. tim sloan is with me thank you for being with us. >> good to see you. >> taken a bearish tone in the last three to six months when you talk to your customers and look at all the data you get from them does that match up with that bearish tone >> it doesnot. i talk to our customers it's across the board, corporate, middle market, small business. commercial real estate they will say their biggest challenge is hiring enough people to continue to grow the business in fact, we came out with our wells fargo/gallup small business index today and the results for small businesses were off the charts, highest ever biggest concern, hiring people. >> which is a good concern to have. >> absolutely. >> i guess markets today are slipping because of fears that the trump/xi trade truce is superficial but temporary.
is that a big fear that trade tone could worsen again? >> it could be but when we look at the impact of tariffs related to china on our customers, it's not significant. nafta would have had a bigger impact, if we hadn't reached some sort of agreement and europe has a bigger impact on the u.s. than china does it certainly impacts those multinational companies that have more of a presence in china. >> many people fear we're late cycle. the guys were just talking about the inverted three to five-year part of the yield curve. you said earlier in your presentation that even a zero percent gdp or 1.5% pickup in unemployment wouldn't lead to credit risks spiking for you what about interest rates? what level would make you fear that those would spike >> 100 or 200 basis points higher it's not a question of the level
but a question of the pace if that occurred over one to two to three-year period and was accompanied by economic growth, i don't think it would have a big impact if for whatever reason -- we can think of a lot of them -- rates would go up 100 basis points, that might have a bigger impact. >> jim cramer mentioned you're often positive on the economy. you really are -- no reason to be concerned from what you see in the u.s. economy? >> let me answer that in the following way. that is, is with a history major in college and i believe in history and i believe in cycles. we've been in a long economic recovery it's been a little bit more muted than prior economic recoveries that may mean it's going to last a bit longer but i think we need to be very wary of the fact that at some point we're going to have a cycle what we see today in the economy, what we're seeing from our customers is generally a positive and so we're not overly concerned. wilfred, we have thousands of
people that work atwells fargo every day they worry about a recession happening tomorrow and that's how we have to worry about running a business. >> i want to touch on long-term growth it's been flat this year, up 2 to 3%. why is there that lag and will it catch up? >> there's always a story. in fact, what you see in our loan growth, we have residential mortgages that we acquire from wachovia ten years ago, home equity portfolio that's running down because there are legacy loans that we wouldn't be originating today. we decided about two years ago to be a little more conservative in the auto business and we let our originations decline a little bit we've made enough changes and are more comfortable with that business so you're starting to see loan growth in the auto business we see credit card growth. we see growth otherwise in residential mortgage our cni book is growing nicely on the wholesale side the other
area that's been slower is on commercial real estate we're being cautious today. >> i want to talk about the fed asset cap. originally the tone that came from the bank is that you wanted it or hoped for it to be lifted by this fall which hasn't happened what's the hope now as to when that limit to your growth might be removed from the fed? >> we were hoping it would be lifted by the end of this year and what we're -- our view today is that we're operating under the asset cap and our expectations are some time in the first half of next year but wilfred, it's on us to make sure that we're making the improvements that we talked about with the fed in operational and compliance risk, to be able to demonstrate that they should be comfortable to lift the asset cap we've got plans in place we're executing on those plans we've got a terrific leadership team on the risk side. so i'm optimistic that we'll continue to make progress. but we need to demonstrate that we're deserving of the asset cap
being lifted. >> would that be things you would be doing differently if it was lifted the loan growth is a bit low and you're buying back stock would the loan balance be different if you're able to grow >> not really. when we first addressed the asset cap, what we did was we reduced the number of nonoperational deposits or deposits from financial institutions around the world. they tended to be lower value in terms of returns and the like. that gave us more than enough capacity to be able to operate under the asset cap. so it's not affecting our ability to serve our customers today or grow that customer base. >> wanted to touch on the sales practice scandal and what's happened since number of times on earnings calls, television interviews, you sort of suggested that you thought the worst was behind you. yet the chief administration officer, chief auditor were placed on leave because of
issues when will you be able to say once and for all that the cleanup is done? >> i don't think we ever want to say and declare victory on anything part of the experience that i've had at being in this role is that you need to continue to raise the bar in terms of expectations on all your products, all your services, all your operations, day in, day out. i will tell you that in terms of our review, which when i stepped in this role in the fourth quarter of 2016, i said look, we're going to look everywhere within the company, every drawer we're going to look at processes, people, policies, everything we're well through that process. and we've been very disclosive it creates a little instability but i think it's the right thing to do. >> as part of that process, you looked into not just the consumer bank where the original problems were, but across all of your business. >> every one of our businesses,
absolutely. >> and, indeed, have disclosed some problems, foreclosure of homes this spring, for example do you think if other big banks did a similarly immersive review of their business lines they would find similar issues? is there an unfair focus on wells fargo? >> no. look, i don't want to -- my responsibility is to be ceo of wells fargo. i think that major banks in this country are very well run. i think as an industry, we've made a lot of progress in terms of addressing regulatory issues, post-crisis, in terms of improving products, service and the like i'll let you ask that question to our competitors. >> okay. well, i will do that. >> okay. >> but do you feel like whether it's regulators or the media that you're being unfairly singled out? let me take it a step further. the fact that this fed punishment was placed on you, an unprecedented punishment on the last day of janet yellin's time
in office, what do you make of the timing >> do we wish we were operating under an asset cap absolutely not is it our responsibility to demonstrate that we're going to make the changes to not only meet but exceed regulatory expectations to have the asset cap lifted it's on us we'll take care of that. >> what do you think of the impack of the midterms there was a lot of hope and bank stocks responded accordingly of the deregulatory environment when president trump came into office and, indeed, there was some deregulation. do you think the benefits of that are over now that the house of representatives have switched to the democrats >> i think what's going on right now in each of our regulators, there's a review of some of the changes being made, new regulations, policies, procedures postfinancial crisis and whether or not those are working as planned and one example could be the
capital planning process there's been a lot of discussion at the fed as to whether or not they would want to make some changes. i think that's all good. i don't think it makes any sense for the pendulum to swing all the way back to where we were in 2006 or '07. we never want to go back there and we think -- i think a number of regulatory changes that have occurred in the oversight has been good for the industry we have more liquidity in capital now than we ever have. we're in such great shape to be able to withstand, if you go back to the earlier question, any sort of economic downturn. >> i want to ask how your regular updates with warren buffett are going. recently he initiated a big new position in one of your competitors in jp morgan i think in dollar terms now bank of america is big ger than wells fargo. are those updates with him still amicable, still going well >> sure. we have very good dialogue there's so much to learn from
warren buffett and so i really enjoy our discussions. one of the reasons why his ownership of wells fargo from a dollar terms is declining a bit is because we're buying back so much of our stock because we've increased our -- >> you like the idea of a buy back >> we didn't talk about the mix. he allows and wants us to run the business the way we see fit. that's my job. he always wants more return, as any of our shareholders do but we have got to make sure that he appreciates that we're continuing to buy back our stock at a pretty rapid pace in addition to raising the dividend because he wants to stay under that 10% cap. >> tim always a pleasure to speak to you thank you for joining us today tim sloan, ceo of wells fargo. back to you. >> wilf, we'll see you again keep it here this morning on cnbc we'll take you back to the goldman sachs financial conference in the next hour, and
stocks broadly lower this morning, dragged lower by the financials and industrials as well some names contributing to the declines in the industrial sector you've got united rentals, u.p.s. and fedex all at or near what some traders call the bear market, down 20% or more off their recent highs caterpillar trading lower yesterday on the back of those easing tensions with china oppenheimer analyst saying that they're exposed to the
china/u.s. trade dispute, down 3.5% today that's certainly a chart to watch. >> dom chu, thank you very much. jon fortt is in san francisco today with a look at what's coming up on "squawk alley. good morning, jon. >> the continuing evolution of the cloud, maybe some m & a and consolidation coming up on "squawk alley. (baby crying) ♪
welcome back german automakers are meeting at the white house. elon mu ee has more. >> they are meeting with the trump administration, including wilbur ross. the goal for the administration is convince executives to expand the manufacturing capacity in the u.s., especially for electric vehicles. the goal of the german execs is avoid new auto tariffs we have seen daimler's outgoing ceo arrive at the white house, outside the old executive office building we caught up with him as he arrived. >> we don't know, we're
optimistic >> positive way forward. what would be considered a positive way forward >> that's what we try to understand inside. >> we are expecting bmw's ceo to arrive the administration will be meeting with executives individually we're expecting a long day ahead. back to you. >> secretary ross on air earlier today talked about moving, trying to attract production specifically of evs. can you characterize that as a pivot by the administration or not? >> reporter: i think the goal is to expand manufacturing generally. secretary ross said earlier he felt a lot of german automakers in particular had already sort of tapped out their manufacturing capacity in the u.s. for traditional vehicles.
so ev is one way they could expand they're looking to capture market share from other countries, volkswagon looking at building a new ev facility in germany and china as well. they want to make sure that that new manufacturing capacity is being built here in the u.s. as they try to reduce the trade deficit between the two countries. >> ylan, what about the tariffs that exist currently, 10% duty on american cars trying to go to europe i imagine that's on the table here too, right? >> reporter: the administration say it is about fair and reciprocal trade if there are tariffs on u.s. cars in other countries, we should be doing the same i think it is important to point out, however, that the u.s. promised there would not be new auto tariffs while the u.s. and eu are negotiating a new trade
deal we will see if the u.s. upholds that pledge, if they feel the eu is negotiating in good faith i'm sure the german automakers will argue any new tariffs should be on hold and should never go into effect >> thank you worth noting, volkswagon and daimler shares are lower 2% as we await more headlines and details on the meeting thank you. let's get to rick santelli and the santelli exchange. hey, rick. >> good morning. thank you. like to welcome peter bookfar. thanks for joining me. >> thanks for having me. >> the big topic, mini inversion, a traffic jam of 2s, 3s, and 5s at the same yield long end, 10 years down 30 basis points, most of any maturity on the curve. what do you see in the mini
inversion and how should investors trade on it? >> 80% of the rate hike cycle has put the economy into recession. just as the fed picked up the pace from one per year to three per year, we started to see the inversion. it paid to flatten the curve in rate cycles. we are a credit dependent economy. if cost of capital goes up, it slows growth why are we seeing a dramatic narrowing in the last couple of days i'm not sure, particularly after the so-called meeting between trump and xi i think the bond market is sniffing out continuation of slow down and growth we're already seeing and possibly moderation or topping out inflation trends, particularly
with drop in oil and core cpe last week that showed kcoming of the edge. >> putting growth aside a second, definitely there's divergence going on. the question to me is not whether the u.s. goes into recession soon but how wide the spread can get and keep the economy looking good you did say something i find fascinating, that the inflationary cycle may have peaked i heard many guests talk about that the last six weeks. and something nobody talks about, before we had any talk break through on tariffs, everybody tried to get around them, it was disinflationary now that a potential deal is in the offing, they say it is disinflationary. what are your thoughts >> with inflation two things worried me about the up side to inflation is rise in services
and energy, driven by rents, and on the good side, transportation costs have gone up tremendous amount seems that transportation costs are leveling out and moderating, and persistent 3.5 to 4% rental increase we are seeing seems to be plateauing. >> let's put a cap on this i think this is important. logistics and markets are sometimes the trump card to logic. there has been a notion between issuance and deficits and debt that rates would close 2018 higher they haven't i think much of what we are seeing on the curve may be driven by logistics and trade reversals. >> i think the factors you mention are an influence you end the year, say the year ends today ten year yield is up 55 basis points year to date, in light of global growth slowdown, moderation inflation, yield
curve inversion, we are still in a dramatic move to the up side that's reflecting secular issues with treasury, that is excess of demand, lack of foreign buying, cost of hedging out is getting expensive, and nongrowth, noninflationary factors. >> excellent peter, always fascinating talking to you carl, back to you. >> rick, thank you very much good morning, it is 8:00 a.m. at sales force headquarters in san francisco, 11:00 a.m. on wall street. "squawk alley" is live ♪
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