tv Squawk Box CNBC October 31, 2019 6:00am-9:00am EDT
it is thursday, october 31, 2019 "squawk box" begins right now. >> good morning, everybody we are live from the nasdaq marketsite in times square i'm becky quick. check out the futures this morning. they are moving sharply lower. that report says officials are concerned about president trump's impulsive nature and the risk he may back out even of a limited deal dow is down about 90 points after it was up. so a swing of about 100 points
>> i harken back to rick scott when he came in and says nothing. they are not going to do anything but it also -- is it a coincidence that the s&p is at a new high and again, sometimes i think over here we have some house money. the markets are fine they've hit new highs. let's put the pressure back on did we exert any pressure? >> chile canceled the apec deal where it was supposed to be signed >> in no such jaw bone, they do. this election coming here. the chinese know that. i don't know whether they'd be better served with someone else or that the impulsive nature is something they want to deal with they have a point.
he does put us in this position. suddenly, we are confronting china. i think there is a majority of americans that want to do this now. >> there is a majority of politicians. >> the genie is not going back into the tooth paste tube. >> are they capable? >> are they capable of doing anything big ever. do you do it now or wait >> i don't think they'll ever do it with the ip that's what put them where they are. that's what moved them to the top of the global economy. >> they may come along on ip theft. now that they have their own companies, they may be in slightly different position but will also admit they've been stealing it for years. that's a heavy lift for them >> we said sharper
so plus 25 >> you tell me this house money idea you have can be used now? >> i think when the president gets back to where he can say we are in an all-time high -- >> i think he'll tune it gown a little bit he has the election coming up. he may feel like he has house money, my guess is that he won't be quite a stride ant as he has in the past. >> how we looking today? feeling good >> feeling great >> i had some people expressing sympathy to both of you. >> people can see there is a new set. it looks like it is ready to liftoff like a space ship. it is cool >> it is i got something from customer service. they received a letter from a
viewer, he was sending me a referee hat. >> it has flame flthrowers attached it can bore into the ground and all electric but it runs with a battery. >> we like it. >> that can spontaneously come bust >> let's talk about the markets. joining us is steve. so much to talk about. my plan was to start off with the fed until we heard this new news about the chinese questioning whether there is going to be any deal that will be signed. any impact from that >> becky, i'm with you here in terms of where this is heading on the china deal. if we get a dip here, if
anything we have to raise it we have 3,500 for next year. if there is a dip over there, we are going to buy it. there is no talk over the discussion coming out of china both sides need a deal and can't agree to a bigger deal in china, they would be considered humiliating trump would have to go after both sides the market needs a truce that's what it is getting. we are on track for that that is good enough along with all the other positives. this time last year, they were promising us three more hikes. the earnings season was turning out to be pretty good. services side is doing fine.
we put out a piece yesterday what if we are early cycle we are not late cycle here >> you slipped this in but if you have a $3,500 price target for next year, that means you are expecting gains of nearly 15%. that's a big deal the first half of the year, we see earnings roughly flat remember, the expectation of the discount rate on the maerkt, look at what is going on in the
treasury market. it hasn't been thought that it would drop off the cliff the earnings session you can see is not going to be happening in early cycle, it is very, very frustrating for the bears. the market is reevaluating higher because the worst case scenario has ended that could take us up another 15%. >> what did you hear from the fed? that they cut once they were very much in line with our way of thinking and the manufacturing side of the economy must be soft we think we are in a soft patch here close to ending
we think one more cut is probably what we need. if you list ton that press conference, saying there is virtually no chance of a hike. if he's wrong about the economy bottoming, he's going to cut i thought it was very, very market supportive. there is an old adage, don't fight the fed. it seems every time, people want to fight it anyway that's the message coming out of all the central banks. that is pushing into financial assets pushing valuations higher. >> that is a bold call if the fed does not cut rates one more time in december, do you care >> i don't care if like the
trade deal blue up and we were wrong about the economy. particularly service was weakened i would want the fed to cut again and i think they would i think they kind of share our view they are coming out of a soft patch in the next quarter or two. >> thank you we'll see you soon. >> also new this morning the intention to merge the automakers involving a 50/50 stock swap the chief executive will become the ceo with an initial five-year term if it clears all the hurdles, it will become the fourth largest automaker in terms of sales this is the second attempt by
fiat to form a merger of this one looks like it is getting the support of the french government despite reaction from renault that action was pursued earlier this year big action in that space better than a no deal. it doesn't necessarily help in the same way that the renault deal would have done in terms of getting into china this may be a multistep process. >> meaning they fold somebody else in? >> i wonder, you do this, spend a year or two. it would have gotten a lot of these things done a lot quicker.
that's why i said it is a multistep world. >> i think it was 2016 on the road i thick. i'm not sure coming up, this switer stuff is interesting. i don't like any ads on twitter. i feel violated. i'm like, who is this, i don't follow them. >> we have an ad there you hate ads but we have one >> i don't like it on twitter where it is a news feed. >> it is a necessary evil. we'll tell you about the surprise announcement and what it means for facebook and mark zuckerberg facebook shares are rising after an up beat earnings report
because with nba league pass on xfinity you can watch the out of market games you want- all season long. and with the all-new xfinity sports zone, you get everything nba all in one place- even notifications about your favorite teams. watch the dropped dimes, monster blocks, and showstopping dunks. plus get instant access to your teams with the power of your voice. that's simple, easy, awesome. say nba league pass into your voice remote to upgrade for a great low price - or go online today. >> welcome back to "squawk box." twitter announcing it will ban
political advertising. their ceo saying political speech should be earned, not bought taking effect on november 22 policy is a stark difference from the other tech companies, mostly facebook. less than two hours after twitter announced that mark zuckerberg speaking on the facebook conference call about the decision to continue running the political ads. >> i considered whether we should not carry these ads in the past we should continue to do so. >> we estimate that these ads will be less than 0.5% of our revenue next year. sos that not why we are doing this to put this in perspective, the ftc fine that said this wouldn't
be enough to change perspective is more than 10 x bigger than this we believe deeply that political speech is important. that is what is driving us >> the trump campaign responding saying twitter walked away from hundreds of millions in revenue. >> it may be worth hundreds of millions but now for twitter, it is easily $3 million it is not moving the needle for them having said that, i have to say there is an element of me that thinks -- >> ludicrous ridiculous to say you have to earn it and not advertise. you would never know any of the lesser candidates. reporting their earnings in a national election or two-year election in the earnings, it says boosted
by political spending. how are you going to organically find out about the newest candidate, andrew. >> i think the issue is. either you accept no advertising or you have to figure out a way to police. right now, it is too hot an issue about how to police, so he has chosen >> he put this out -- that you have to earn it. >> that you have to earn it, not buy it >> this doesn't prevent president trump. he's in a unique position. >> amy klobuchar doesn't have 60 million followers. we know right now, vice president biden, his fundraising is down. >> that is an issue. they use it for political ads. that's the way things work
i've heard about citizen's united and high flying ideas that's not the real world. if you've got 17 people running for president. the bottom 15 aren't going to get anywhere without advertising. >> the issue to me, i would like to take money out of politics. >> i know. iknow. >> allow you to advertise and cap the amount everybody can spend, meaning everybody could spend the same amount of money to advertise. >> what would the cap be >> should we have a law to raise a cap on this? that's a good idea >> mark zuckerberg is anxious if he were to police the advertising, he would be regulated by policymakers that would be upset about how he's approaching this
>> that's why they are upset this whole thing is a lot of political theater. they are able to do this because it is not significant portion of their advertising revenue. he intentionally did this trolling minutes before facebook announced their earnings this was entirely set up to troll. there are these battles. >> when is the election next year >> i don't know if it is trolling per se. >> totally trolling. >> i think it minimizes the differences in the valley and for facebook over this issue we saw that note from 250 people >> there are thousands of people
outside facebook >> talk to me about whether you want to ban political ads. are you thinking clock work orange getting to election day coming to your mailbox. >> barry diller made this reference that somehow none of these ads are pleased. that's not exactly right most are pleased by broadcasters, by the cable networks there have been ads president trump has tried to put on the air that have been blocked >> only on cnn >> i imagine if there was a
responsible policing party you would have that but we don't >> here is your answer, broadcasters are bound by law. he wants them to be bound and somebody else to set the rules not him. >> do you want ads regulated for the truth? >> i don't -- i'm with barry i'm a big boy. i'll figure out whether it is true or not. a lot of things i like to believe anyway even if they are not true >> that's the problem, joe >> there are there are alternate facts. and you go outside on the tweet, look at the pew poles. >> i thought you said peep
holes. is that why you are late, every morning? >> how many people can identify mike pence they don't even know who he is >> i know, the deplorible people who voted for trump. >> and 50% of the world thinks big foot exists. >> you think big foot exists but global warming does. and for dorsey it is worth this much for him and this much for zuckerberg >> i think it is a lot more to zuckerberg in a different way. >> i will add there is more
trying to come up with the regulation >> one more quick observation. facebook, core facebook is actually, joe -- should be called conservative facebook if you look at the top ten things shared on facebook and it is bright bart and ben shipiro it is a very different group >> a lot more. get ready for tomorrow's job's report linked in jobs report. we'll be back with more. orlando isn't just the theme park capital of the world,
it also has the highest growth in manufacturing jobs in the us. it's a competition for the talent. employees need more than just a paycheck. you definitely want to take advantage of all the benefits you can get. 2/3 of employees said that the workplace is an important source for personal savings and protection solutions. the workplace should be a source of financial security. keeping your people happy is what keeps your people. that's financial wellness. put your employees on a path to financial wellness with prudential.
by the way, she's the it wasnext mozart.g day. as usual we were behind schedule. but sophie's enthusiasm cannot be dampened. not even by a run-away donut. we powered through it in our toyota prius. because a star's got to shine, no matter what. it's unbelievable what you can do in the prius. toyota let's go places.
>> welcome back to "squawk box." linkedin is out with its jobs report and big report coming out for the holiday season that is transportation dan roth is here, editor and chief at linkedin. transportation, sir. is that surprising surprising to me >> yes we saw transportation as being a industry probably not changing or in trouble. you hear all about this self-driving car, self-driving trucks you have to think that transportation must be going through numbers shrinking. that's not what we are seeing. >> who are these people?
>> you look at the top people being hired now is software engineers. companies becoming tech companies. hiring sales people, software engineers. you you are seeing as they are growing, the percent of the work force on the ground logistics is shrinking. people doing the background stuff, searching the weather and detailing deliveries is growing. another thing we looked at, is all of this growth happening in big cities with the rise of the talent hub this transportation is the rise of the rest. places hiring are chicago, dallas, houston. these aren't cities you've never
heard of before. these are massive cities with great economies. these are where the transportation jobs are. >> georgia is on that list too because of ups >> ups is hiring 50,000 people on friday. brown friday to do seasonal jobs trying to hire 100,000 people in general for seasonal jobs over the next couple of months. big hiring seasonal jobs sometimes turn into full time jobs. >> should there be insider wages? >> not yet we know what has seecmed to hav happened is these companies have worked in the high-cost changes. >> we think of these as seasonal jobs how often do seasonal jobs turn into full time jobs?
>> i don't know how often. they highlight the fact that their ceo and cfo both came from part-time jobs the idea that you get your feet wet and see if you like us >> 1.5 million packages delivered on the island of manhattan ever day just to residences >> horrific to congestion. >> people are turning warehouses into streets >> to get out of here, you have to go by ups center, during the holidays, it is impossible to get off of this street >> the amazon effect, the idea we expect to get packages to our door right away. of course, i put an order, within an hour, i expect to see it showing up. these guys are making it happen.
10% is in transportation >> i'll say it is not in transportation, it is real estate all this unused space will be used for last mile delivery. >> you want it on the edges and the curbs. >> but the point is at some point, they are not going to allow the fed ex-truck take over the entire side walk and start using as a logistics distribution >> i imagine long term, even in big cities >> that's why drones are coming. >> so you think these landlords are going to strip down their spaces to turn them into warehouses to store for the last mile. >> i'm saying you look at all the retail being unused.
there are huge spaces. i think that's where it goes >> other cities have instituted things you can only deliver packages at night and then tricyles >> japan and paris do that they can only deliver after 11:00 p.m. >> and coming up, reports of facebook and apple right now, a look at yesterday's s&p 500 winners and losers
through the at&t network, edge-to-edge intelligence gives you the power to see every corner of your growing business. from managing inventory... to detecting and preventing threats... to scaling up your production. giving you a nice big edge over your competition. that's the power of edge-to-edge intelligence.
u.s./china trade war and futures turn lower in the last hour following a report that chinese officials had been casting doubt over the possibility of actually reaching a long-term deal even before a short-term deal is really complete. as we had pointed out, coming off all-time highs in the s&p 500. so any effects in the trade war in the equity average is not really apparent at this point. >> some news just out on marathon petrol y marathon petroleum planning to spin off its speedway chain. management had been urging them to split into three separate companies. we are looking at that stock
now. that hasn't moved just yet elliott management, the same activists involved in at&t time warner we'll keep our eyes on this one as well. >> stock closed at 66.19 actually moved to 67.07. we'll see how it shakes out as they get time to digest this it says they are continuing to evaluate they'll look into that down the road as well facebook shares are up today the company reporting solid third quarter results. profit up and revenue up nearly 30%. ad sales jumped by 28% that was above analyst estimates. facebook ended with 2.45 billion monthly active users
that stock is up 4.5%. the whole idea of banning political ads, that creates some noise but a strong quarter for facebook >> apple shares higher third quarter earnings above expectations the company gave an out beat out jook for holidays. iphone sales fourth quarter did fall the iphone 11 has been the best selling model since its launch in september i think we underestimate the wearables. we had a piece on it yesterday with the air pods. >> people are paying $150. >> $250 for the new ones to go from zero to everyone having one that adds up
it is not an iphone. but wearables and services is pointed out in the report. only 60% of what the company sells is other stuff starting to add up like $19 billion >> they can't cost much to make. >> i actually think they do because the electronics are so tiny we'll dig into that one. when we come back, twitter ceo announcing twitter will no longer accept political advertising and later, the latest on the vaping fall out. we are expecting earnings from altria and you may learn more about the company's investment in juul. stay tuned ♪
welcome back twitter out with a surprise announcement saying it will ban political advertising. the series of tweets, jack dorsey saying political message reach should be earned, not bought joining us now to talk about misinformation our guest, great to have you >> thank you for having me >> let's talk about this political advertising piece. $3 million for twitter is nothing. in the larger scheme of things, how does this change the story zo you think this pushes facebook >> when you look around the internet, misinformation is running rampent. it is in fake news and social media and political advertising with fake ads in search.
>> that's what you do? >> that's right. we are in search you have self-proclaimed experts. >> as a result of that, the question is, do you police it or block it entirely. what's the ans >> i think twitter has taken a stand. you've got to get to a source and to verification. we believe, yes, the ultimate source about a brand or person is the person itself >> if you are mcdonalds and you go to alexa now and say you want a burger how much will that cost you've sorted that data. >> exactly yes. >> that information is coming directly from mcdonalds. >> so helpfully when mcdonalds puts that data out there, they tell you the correct data.
the problem is when politicians start lying about their policies or other people's policies are >> what if mcdonalds says we are the best >> that's a subjective question. there are two kinds of questions in search. subject and objective. >> if i'm a politician and ask me if i support the impeachment of donald trump, you can point to one vote and say yes and point to another and say no. >> being able to pin down a politician is tough. >> i have a complicated one for you. if mcdonalds put on its website that burger king had salmonila
just made it up. what happens how does that work >> the ultimate authority on the company is the company itself for objective facts. things like how many calories are in a big mack. we introduced our new product that let's companies answer questions in a google-like experience >> but what happens if the answers are inaccurate >> right now, search engines have all sorts of stuff from so-called experts putting information out there that is unverified the whole key is verification. do you think you'll get
regulated? >> we are not big enough to get regulated. it is my job to get there. >> you want to get big enough to get regulated? >> that's the idea a company called campbells a basic kind of thing. you couldn't before type something like broccoli cheese soup and get results now you search, you get a google-like answer this is the future of search >> if twitter and let's say facebook were to announce they are no longer accepting facebook advertising. if you are a politician and you have to earn your keep, how would you do it through sco. that's what will ultimately have
to happen. the internet has changed a lot you used to go to a brand website and click on 10 links to come back to a page. when you run a search on google, you don't get 10 blue links, you get a wealth of results. we want to help companies answer to them with one voice >> final question. there is this big tech backlash. if you were called to say is gooulg being fair with you is facebook being fair with you? you would say. >> they are totally being fair with us because we have put out 2.4 million verifiable facts >> we believe there is a real need for independent player in the market to push verified
facts to businesses everywhere >> see the shoes this guy if you had seen the suit i saw him wearing two days ago >> you asked and i answered. on our site. he has sparkly shoes on. >> it is halloween too >> you've got to dress up. >> we haven't even mentioned it. happy halloween. happy birthday penelope. >> what are you going as >> you just go in one building >> we go to multiple buildings >> where i live, it might take 10 minutes to walk through houses >> man of the people >> you got to get buzzed in too.
and then if someone releases the hounds >> coming up, happy birthday she has powers >> she has powers. >> people born on halloween are more in tune with the other world, i think so. >> he's used to the other world than with me >> happy birthday, penelope. >> well look at apple numbers. that's what happens in golf nothiand in life.ily. mash is apple going to continue its run? we're going to check you can't dg yourself. you need someone to guide you and help you make those tough decisions, that's morgan stanley. they're industry leaders, but the most important thing is they want to do it the right way. i'm really excited to be part of the morgan stanley team.
i'm justin rose. we are morgan stanley. a new kind of credit card. created by apple, not a bank. with a better way to track where you spend. a new level of privacy and security. daily cash you get back every day. and no fees. not even hidden ones. oh, and if you happen to be somewhere that doesn't accept apple pay yet, there's this. nice.
joining us for more reaction after the earnings, wamsy mohan at bank of america merrill lynch. he raised the price on the target the stock has been on a roll the question is how much more is left in the tank with what you saw yesterday, with that earnings report, does that make you certain or at least highly confident that there's higher prices for the stock ahead? >> yeah, thank you, joe. good morning so what we learned from earnings yesterday really was that you saw three major things one, that revenue can grow without iphone revenue really growing. i think that's quite material for the stock. second, services is showing the reacceleration this reacceleration should continue strongly into 2020. and third, the install base is really growing very strongly the cfo noted the top 20 countries where the iphone sells, in each of those 20 markets they hit a new install base record and that's key to
underlying pinning of services you're getting paid to wait for all the new products expected to launch in 2020 while there is very strong capital return >> so it justifies where prices are now, that report, and in the future guidance actually justifies higher prices? >> absolutely. >> for the stock >> yes >> pretty amazing. a trillion and a half is on the horizon some day >> when i talk to a lot of the buy siders, apple is rerating in a similar way to the microsoft rerating that we saw from years ago, right so there was a point in time when earnings were really not growing at microsoft, the multiple kept expanding over time it compounded people two or three years. the risk growth managers see today is they very under weight the stock while this rerating is going on so we think there is immense amount of capital that can be deployed to apple. >> air pod is not di minimis what they're going to sell on those things it starts adding up. >> it does
>> to billions >> variables have become a real category when we first saw the first apple watch, it was something that people were not too excited about. you just didn't have great battery life that's become a real product now. at $200 price point, it's going to be a huge seller for christmas. when you look at the air pods, there's continuous innovation. they have patents on things like making sure it fits right in your year, and it's seamless >> yeah, good idea finally the 54% in growth in wearables, how much of that was air pods? >> they don't break it out, joe. it's hard to discern what the underlying moving pieces are but when you think about the volume of some of these products, right, they're approaching in the tens of millions now >> what is an the margin >> so, it's a good question. i think like it depends on what they're doing around with pricing. so for the watch, for instance, at 300 versus 200, there is a significant deterrent to the margin structure but fortunately what they also have going on is that the iphone
has got super a high margins with commodity pricing coming in they're taking some of that margin and redeploying it in other areas which has more price elasticity to demand it's a great strategy where you can go down on prices in areas that can drive significant growth whereas you're keeping the margin structure and high and the iphone is very stable. >> is any eventual business of health feedback reflective in the stock or is it zero now? >> it's healthy from early days. this is the legacy of apple in the longer term. when you look at the longer term, what all can happen? look, that's a call option it is a free call option at the moment >> we have to go i don't know why it's a three-hour show, but we do thank you. you like the new set >> it's great. i haven't been to this one >> you've seen it. >> it be salutely. everybody has. >> when we come back we have the
two deadly crashes the second hour of "squawk box" begins right now ♪ ♪ >> good morning and welcome to "squawk box" right here on cnbc. i'm andrew ross sorkin along with becky quick and joe kernen. take a look at equity futures at this hour. we'll show you what is going on right about now. you can see there on the screen. the dow looks like it would open off about 72 points, we'll call it nasdaq up about 10 points, and the s&p 500 off about 6 points at the moment. >> let's get you caught up on today's headlines. shares of apple are up in the premarket trading. apple reported better than expected earnings and revenue for its latest quarter despite a drop in iphone sales the results got a boost from stronger demand for ipads and ipods. apple's growth and services business we'll have more on apple later
this hour. the stock is up by 2%. we are also watching shares of facebook this morning. facebook shares up after the company reported better than expected results on both top and bottom lines they beat forecast for average revenue peruser. facebook shares up 4% this morning. also shares of generak, maker of back up power generators for homes and businesses up 1.4% this morning after better than expected profit in sales and the company pointing to the rolling power blackouts in california. they say that is that's a key factor that's boosting demand. shares have doubled so far this year the fed cutting rates for a third time this year and chairman j. powell indicating that the central bank would be hitting pause at least for now steve liesman joins us and has all the details. good to see you. >> good morning, becky the fed reserve cut rates and launched into a new phase of policy call it the hold or high bar phase where fed chair j. powell said there is a high bar to cut
and a high bar to hike >> so, we think that the current stance of policy is likely to remain appropriate, likely to remain appropriate as long as incoming information about the economy is broadly consistent with our outlook, which is a positive one of moderate economic growth, strong labor market, and inflation moving close to 2%. >> okay. so the rate cut brings the fed's overnight rate down to 1 1/2 to 1.75%. remember it was 2.2% and forecast ahead above 3% this time last year the chairman cited trade concerns and global economic weakness among the reasons for the cut. powell saw improvements in both areas that suggests the fed provided help to the economy morgan stanley don't see the fed moving again through all of 2020 markets, they place at 21% probability to a cut in december you have to go to march 2020 before the chance of another rate cut rises above 50% in the statement the fed dropped that critical phrase from other announcements where it said it would, quote, act as
appropriate. that was a signal to markets that rate cuts were on the way instead the fed now says i will, quote, assess the appropriate path of the funds rate and that's a signal for perhaps being on hold. the next critical event for the fed, trade talks between the u.s. and china if they fall apart again, a new round of economic worries, markets are going to be back and they're going to test powell's resolve to keep the fed on hold. and, becky, one question we have now, is the bar as high for the fed to start cutting again as it is for the fed to start hiking again? there was an interesting comment that he made there where he said, you know what, we have to see significant rise in inflation to hike, and that really took that issue off the table. >> yeah. and i think that's probably what's bolstering the markets, too, just the idea we're going to be at these lower rates for a very long time >> i think that's right. i think that's right and i don't know if, you know, if we have more bad news on the trade deal that brings the fed back in. it will be interesting to see if the market starts to price it. and if powell and the fed push back against that pricing and
have another cut >> interesting, steve, he said we already helped the economy quite a bit and we still only did 1.9. so if we really didn't need to do any rate cuts, and we were all fine and we didn't need any cuts and, you know, there wasn't any warning signs on the horizon -- cramer has been talking about seeing things. other people push back that there wasn't any weakness three cuts ago so he does three cuts, helps the economy, get to 1.9. obviously it needed help >> yeah, he said that for sure i mean, he said, look, we're having the same gdp outcome we expected, which was 2% but we had to do it with a lot more help to the economy joe, i know you don't want to do a little math this morning, but i went back and looked back at october 2018 the funds rate was 2.2 the forecast from the fed was that it went up to 3.4 so now we're at 1.62 so 3.4 to 1.62, that's 1.8
we have provided almost two percentage points of easing in the form of not doing the cuts that were expected and the actual cuts -- sorry, the hikes that were expected and the actual cuts. 75 basis points of cuts, and a percentage points of hikes that didn't happen. >> i know. i just mean -- >> factor in with that, joe, the balance sheet. >> we were a long way from neutral supposedly, then he was dragged kicking and screaming into a couple of cuts and now says, yeah, we did provide cuts the economy needed >> the facts changed substapgsly, remember? we had this thing called a trade war. yada yada yada we had a trade war. >> three people in the world said this yesterday. people that blame the trade war, people that blame the trade being too tight. >> two people believe what you believe. that's another story >> three types of people people that believe both >> you used to do the market cap loss and stock market every time something happened with the trade war. we're back to new highs, steve the trade war hasn't been that
much of -- >> joe, come on. we're flat we're flat over a very long period of time, joe. >> after consolidating 20% of gains -- >> what's the average return you haven't really hit it, joe you did a trillion and a half tax cut and we got nothing to show for it probably because of the trade war. i'm glad you're happy. it's good to be happy. >> consolidating the gains of 40%, 50% after the election is -- >> when you average it out you don't have anything -- >> you can't have it both ways, steve. >> no, you can't have it both ways >> when you say it's down a trillion dollars, oh, my god, look what happened back to new highs, you say it's flat you can't have both ways >> joe, read the op-ed in the journal today. there is a lot left on the table because of the trade ward. look at what they say. i'm glad to be on that side over there where they're saying -- and i expected this. some bump to potential growth because of the tax cuts. instead what you have is the old potential growth going, i didn't
expect the percentage point. i thought you could go 0.3 to 0.5. we can do the run rate higher. >> there's dog people and cat people i think there's a lot more dog people, though got to be -- >> lot more dog people >> cats, do me a favor when they come over to see you oh, thanks anyway, you can see some of the reaction in the two-year, ten-year spread drifting downward over the last week. let's bring in beth hamok, treasurer at goldman sachs, chair of the bye wing at the treasury not just any markets commentator, right cnbc senior markets commentator. >> clawed my way through all the rest of them >> i mentioned he recalledieear, i'll get to you in a second, beth we're at new highs trump has house money to play with again >> it's been the pattern obviously. on the other hand, i think there have been 220 new highs during
this bull market it's not as if as soon as we -- >> a question whether we were going to get back again. in the face of the trade war >> always a question by the way, though we did 1.9% gdp in the quarter when they started the rate cuts. it's not as if the rate cuts they've done in three or four months had any effect -- >> maybe they will people think they're not going to have any effect pushing on a string. are we pushing on a string or they still work? >> i think they still work they need time to work three rate cuts since july is a short period of time 9 economy takes longer to work through it to your point why the stock market is so high, this issue between fed cutting and the trade war that's ongoing, i think those two things -- there's a lot of interplay between the two of them. i think the stock market wouldn't be quite as high unless you had the confidence in the fed they were going to continue to do their jobs to support the economy. >> not confidence this trade war is somehow working >> correct >> want to be clear about that >> what do you mean it's
working? no one's saying it's working i'm saying it hasn't had the deleterious effect on the stock market that many people were hoping for or were predicting. >> that's because you've seen the fed come in and provide that accommodation. >> people are open for a recession. >> but listen to what beth is saying part of the reason is because the fed has been so accommodating. that's what's happening here >> they hadn't been at first if you think three cuts make a huge difference -- i think -- >> the president is begging for them every single month -- >> compared to last december or when things really started to go haywire, look at what the fed has said since then. that calmed markets. >> instead of a half empty view of what's happening here, we're confronting china. >> not very well >> you don't know that we're confronting china. you don't know what the end result -- everything is awful. >> you just said that rick scott was right, and then nothing would happen >> i'm not saying don't try. that really tickles you? look, andrew, we're confronting
china on a lot of issues, long-running issues, decimating the entire midwest 70,000 factories have closed stealing our intellectual property most people think -- your friends in the democratic party, chuck schumer thinks we need these tariffs now. we're confronting all this and still at new highs in the stock market so at a time where you thought a trade war would have decimated the economy and decimated the stock market, we're still at new highs. so be happy that something might happen from this that's a half full view. am i wrong about that? >> joe >> i think the view is that engaging and protecting the u.s. economy, the trade war we're engaging in with china, there are a lot of good reasons behind it your points are well taken for a long time we've been possibly taken advantage of. >> there could be a payoff down the road because -- what is it you can't unscramble an egg. it's front and center that china is unfair in the w.t.o. has not done enough to keep them -- >> that may be the case. i do think it is definitely
weighing on business investment and definitely weighing on corporate sentiment. so you haven't seen the level of investment by corporations into the economy that you would see otherwise just because of the uncertainty. >> that is where the fed is pushing on the string. the fed can't fix that problem >> the fed can't fix that problem. they can do as much as they can. we have this mid cycle adjustment, three cuts that will help, but we need to give it time to wait and see >> we've also been impacted by the rest of the world is not helping us in terms of growth -- >> in a given year or two or three years, there's a lot of macro factors that can swing growth expectations as much as the trade war did. right? if we got an oil spike, that would have been the pressure that the fed said, guess what, things have changed, we have to adapt to that. what i think is telling about the markets is in july, when the fed laid out the idea that we're doing a mid-cycle adjustment just a temporary phase of rate cuts, then we're going to stop, the market rebelled against it it was not good news to their ears because they wanted the fed to have a greater sense of urnl
si to be open-ended easing the bullish scenario is we have three rate cuts. everyone is talking about 1995, 1998 when we got that. i think it's an attitude adjustment the lower yields have bridged us through this soft patch. we'll see if it lasts. >> guys, just real quick it's great discussion on trade i don't want to lose the opportunity. beth is one of the experts in the repo market. she funds goldman sachs' day to day. and i just need to ask beth, are we in good shape going into the end of the year? has the fed provided enough liquidity? what about the idea that mnuchin the treasury secretary talked about possibly changing the regulatory regime and now we hear it's not going to happen? give us your 2 cents on this critical issue here. >> sure. the fed has done an excellent job in terms of providing liquidity into the system. they've been buying bills to get the level of reserves up they've been engaging in repo transactions to make sure there is liquidity in the system the year-end could be messy. every year-end the past several years since the regulation has been put in place we've seen
repos spike up high. right now the market will tell you repo is going to print 3, 3 and a quarter relative to the 1, 1.5% >> will it be chaos in the equities market? >> it's the bond market that's paying attention to this you're not able to get the cash from where it is in money market hands into the funds who need to buy treasuries, some of who need to buy it on a regular basis this is something we need to continue to watch. >> all right great to have you on set thanks >> coming up, when we return, earnings just coming out from a altria a closer look at the $4.5 billion writeoff or write down, i should say, of juul that continues to unravel as the fda cracks down on e-cigarette makers we're going to hear from a lawmaker after the brek about the push for regulation. atndornsitalofetur wh l th a me in just a moment
earnings just out from tobacco producer altria. came in with a profit of $1.19 a share. that was 4 cents better than the street was expect being. revenue beat expectations. they took a $4 billion write down with e-cigarette maker juul that company citing the possibility of future fda actions as well as various bans
on e-cigarette products by cities and states. altria shares are up just over 1% we are now six weeks past the white house announcement of the plans to ban flavored e-cigarette products congress is pushing for a ban next friday. joining us is raj who wrote the letter and is leading the charge among congress congressman, thank you for being here today >> good morning. >> so, what have you heard back from the administration, from the white house since sending that letter? >> we haven't heard back anything yet and the reason why we wrote the letter is that about six weeks ago as you mention, the white house and president trump citing our investigation proposed a ban on all flavored e-cigarettes which are what really primarily attract youth to vaping. unfortunately, despite saying that we see a regulation within a couple weeks of that announcement, which was six weeks ago, we haven't seen anything so we wrote this letter
yesterday asking the office of information and regulatory affairs at the white house to basically come up with this rule within the next ten days as they have in the past with other regulations because it's so important that we put this in effect asap to prevent more kids from vaping. >> what happened why the delay? what do you think happened behind the scenes? >> we don't know honestly, we don't know. and what i fear is that members of the industry are basically lobbying against putting out the rule, or putting in exclusions within the rule for certain flavors. namely, mint and menthol mint is the most popular flavor right now for e-cigarettes and it's also the most popular flavor for youth who vape. and there's a reason why mint is in our children's tooth paste, because it's very appealing to kids so we want to make sure there are no exclusions and we put this rule out asap >> mint is the most popular flavor among children who are doing this, too?
>> yes, ma'am. 90% of youth who take up vaping take up flavored e-cigarettes, and 60% of youth are actually using mint e-cigarettes. and so this is something that, you know, as a parent of three children, i'm very, very personally concerned about, as i'm sure many of your viewers are. >> the argument for keeping mint or menthol flavors in has been that adults who are trying to quit smoking, that's the most popular flavor for them as well. how do you balance those two arguments? >> sure. i think the cost of allowing more youth to vape far exceed the benefits of certain preferences that adults have i'll just give you a couple statistics maybe your viewers are already familiar with it 28% of high schoolers are vaping and 5% of middle schoolers are vaping and these are -- these statistics are alarming and the trend is not good. it's growing by the day. and so i just think we have to
put a stop to this you know, our kids are not for sale >> have you looked into these recent reports that suggest that juul was actually knowingly selling tainted or outdated materials? there is a whistle-blower who worked at the company who charged that >> i'm not aware of the specific allegations. we haven't investigated them yet. however, it's very disturbing to know that a company would, in the first place, sell such products and then secondly, continue to do the things that we uncovered in our investigation, such as going into schools, paying high school districts and other schools to go in and basically present their products as safer than they are. that's what we revealed in our investigation. we're asking for further documents from juul about this and other issues and i'm sure that we're going to be following up with them very soon as well >> if the administration comes back with a rule that allows mint or menthol to continue,
what will your response be >> well, i think that obviously we're going to lobby heavily for that not to happen but if it does happen, i think you're going to see legislation which basically calls for ending those exemptions to the flavor ban, and making them permanent >> congressman, it's good to see you today. thank you for your time. >> thank you thank you. have a great day >> you, too. >> coming up, when we return, apple beating estimates on both the top and bottom lines reaction to the results and what investors can look forward to in the near future. all coming up right here on "squawk box" after the break >> announcer: time now for today's aflac trivia question. nevada became the 36th state to join the u.s. on this day in what year? the answer when cnbc's "squawk box" continues coach saban, how is aflac's program different from health insurance? well aflac gives you money directly, for things health insurance doesn't cover.
apple's earnings and iphone sales expectations and then a new wave of wildfires is cutting a path across southern california this morning. we are going to hear from former california governor gray davis in just a bit. and at the top of the hour, he was an early investor in sonos, tivo, and netflix. jeffrey yang will be our special guest. "squawk box" returns with all that and more in a moment. you should be mad that this is your daily commute. you should be mad at people who forget they're in public. and you should be mad at simple things that are unnecessarily complicated. but you're not mad, because you're trading with e*trade, which isn't complicated. their app makes trading quick and simple so you can strike when the time is right. don't get mad, get e*trade and start trading today.
♪ my baby takes the morning train ♪ ♪ he works from 9:00 to 5:00 ♪ he takes another home again ♪ 77 >> welcome back to "squawk box." take a look at futures now dow looks like it would open off 76 points. s&p looking to open down nasdaq, though, looking up about 6 1/2 points joe? >> boeing under pressure after a second day of questioning by lawmakers on capitol hill. phil lebeau joins us now with more the house never disappoints, did they, phil >> not yesterday i mean, it was bad with the senate on tuesday for dennis mullenberg yesterday probably even rougher because they came out point
blank and said to him, you should not be running this company. >> is anybody at boeing taking a cut or working for free to try to rectify this problem? like the japanese would do >> congressman, my board conducted comprehensive review -- >> so you're saying you're not giving up any compensation at alma you're continuing to work and make $30 million a year after this horrific two accidents that caused all these people's relatives to go, to disappear, to die you're not taking a cut in pay at all >> again, our board will make those determinations -- >> you're not accountable, then. you're saying the board is accountable. >> my intent is to see this through. i think that's part of my -- >> mr. mullenberg, if you had an ounce of integrity, you would know the right thing to do is step down. >> you're the captain of this ship a culture of negligence, incompetence or corruption starts at the top and it starts with you you padded your personal finances by putting profits over
safety and now 346 people, including eight americans, are dead on your watch today you said you made mistakes and you're accountable >> now that those two days of testimony are through, the focus for a lot of people will return to the situation with the max and getting it fixed and getting it back in the air guys, i know we've talked for sometime that the fourth quarter is critical because this is when they say they have to return to service. november is really the most critical part of that. they're hoping that by later this month -- it's not written in schedule for sure, but by later this month, they would like to i do a certification flight, and then turnover the materials to the faa if they can't get it done this month, guys, it's unlikely they're going to get the faa to sign off on this plane by the end of the year. >> phil, just watching that, how difficult would it be for the faa to actually sign off on something like that right now? realize watching -- >> right you're talking about the pressure they're facing. >> right how much the last two days
ramped up and put the faa under pressure, put boeing under pressure and how likely is the faa going to say three weeks later, say, okay, all is well, go ahead, this looks good to us at this point. it seems to me this is a huge part of the calculus >> it's a huge part, becky the pressure on the faa, while most of the headlines and the bites you saw us playing from this testimony were focused on dennis mullenberg and on what happened at boeing over the last five to seven years as the max is being developed, a lot of the questions centered around relationship between boeing and the faa and a lot of the senators and representatives came out and said, this relationship makes no sense. what's going on with the faa as much as they were saying with what's happened at boeing. so there is increasing pressure on the faa to show that they're just not rubber stamping this. and we know that there is constant dialogue and that the faa regulators have been much more diligent in terms of making sure that the max is fixed having said that, you know that they are facing the pressure to
really show everyone on capitol hill, no, we are keeping boeing at arms length and making sure that everything is being done that needs to be done. >> just a theoretical. if dennis mullenberg is there and continues in that role, does it make it more difficult or less difficult if you bring in someone new, wouldn't they also have to have time for the regulator and potentially some key members of congress to get to know them i don't know what the answer is. >> i think it depends who you bring in, becky. different people have a different amount of credibility with the faa, with the airline customers. and not only that, regulators overseas i think congress is taking the approach here of they want to keep an eye on the faa they wouldn't to make sure they do a better job and the rules are changed in terms of how the faa and airplane manufacturers work when it comes to certification. >> right >> but i'm not sure that if there was a new c.e.o. who was brought in, the calculus is less about capitol hill and more about the faa.
that's the primary focus >> phil, what kind much support do you think there is inside boeing, both from a board perspective, but also from an even employee perspective right now for dennis mullenberg? >> it's eroding. and i know that sounds like the obvious statement of the day but clearly it's eroding look, he is somebody who has said time and again he is not stepping down. he is not leaving. but it's clear that under his leadership, what started out as, you know, a situation with the max that they thought they could resolve, it's drop after drop after drop of headlines and revelations. i think this has gotten away from them frankly speaking, and his performance the last couple of days was average, at best, and i think that that likely has a lot of people within the company and likely on the board saying, okay, if he can't do it, who is the person who can do it? and if we do believe that dennis mullenberg is not the person,
when do we make that switch? do we do it soon do we wait until the max gets up if you do it soon, that adds another element of uncertainty into this entire process it's critical. the next couple months are critical >> to keep somebody that they clearly have all kinds of issues with, try and bring in someone new, either way seems like a path that is fraught with potential risks along the way. >> right i think their main focus, guys, right now, get the plane certified. get the plane certified. then you can go back and say, okay, if we don't think dennis mullenberg is the person to run this company, let's make the change then. now, theoretically, they could do it now. i mean, you saw that -- he was hit hard, very hard yesterday. you know the board was watching and they saw everything that went down on capitol hill the last couple of days. >> phil, thank you it's good to see you >> you bet >> when we return, we've got reaction to apple earnings and iphone sales expectations. what the analysts are saying this morning and how the street
is reacting. check out the futures in the meantime apple obviously feeding into the dow. apple shares have been up. dow has been down, that's because of concerns about what might happen with the trade talks with china we'll talk more about all of that dow futures right now down about 80 points. s&p futures down by 7. the nasdaq up by just over 5
it's that time for a look at this morning's market movers don chu joins us >> continue to dominate the stories out there. we'll start with a look at the shares of altria the u.s. tobacco company is up. thanks in part to better than expected profits and revenues. altria also did say it would have to take an accounting adjustment to lower the fair value of its investment in e-cigarette maker juul by 4 1/2 billion dollar remember, altria paid $12.8 billion last year for a stake? juul labs. then there are shares of estee lauder which are down 5% or so -- 3% now, 15,000 shares premarket volume the cosmetics and personal care company posted better than expected profits in revenues, but estee lauder cut its
full-year profit forecast due in part to a slow down in china and the effects of the hong kong protests it raised the dividend 12% sealy is up fractionally they've been moving around premarket, roughly 1500 shares of premarket volume. the mattress maker posted better than expected profits in sales thanks in part to stronger sales in north america and improvements in gross profit margins. and, of course, we've got shares of apple which are up about 2% or so premarket. roughly 165,000 shares premarket. as you can see here, it's been a nice move after earnings let's talk about some of the analyst commentary coming out of this particular company and the analysts that cover it first of all, you've got some -- a few different themes citi is looking at the holiday shopping season. the company's new product announcements are setting up for a healthy christmas shopping season we believe the new air pods pro will be a big hit for stocking stuffers for christmas as will be the apple watch so the outlook a big key bernstein analysts are a little more pessimistic they're looking at iphones
our biggest question going into apple's q4 whether we can be more confident in the iphone cycle. the short answer, not really u. not all positive we'll look at the iphones and apple tv plus. we believe apple tv plus will be the new service that will change the growth profile given the bundle with new hardware purchases. we believe apple will be able to quickly ramp up subscribers for the streaming service. so you have the holiday outlook. you have the iphone, andrew, and what's happening with streaming video, all of that being weighed upon by analysts this morning. back over to you >> thank you, dom. for more on apple's results and the stock reaction, want to bring in angelo zeno, analyst at cfra good morning to you. >> good morning. >> you saw your colleagues, your peers in the business have a few on this. are you worried about apple sales? >> we're not worried about apple sales -- >> iphone sales is what i meant. >> iphone sales. we look at the results here, really what investors should be
looking at is the high quality beat and really from that, we're looking at wearables as well as services you saw nice beats on both ends. we think that continues to be the story. we think investors continue to value those businesses a lot higher than the iphone side of things and even if we did see that 9% decline in iphones, again, we're not looking for any sort of growth here over the next cycle. 5g -- >> you're expecting a major -- what do you need for that to happen because there's so much weight now put on 5g. >> absolutely. when we look at 35 g here, right, when we look at fiscal 21 estimates, i think it's important to note the street is only looking at 7% growth. we think that number is way too low. as a result, you know, we're looking for mid single digit growth on the iphone unit side of things. in fiscal '21, nothing, no block buster type of hit we actually think it's going to be more of a multi year cycle in terms of 5g. >> in terms of wearables, we've
been talking a lot -- people talking about stocking stuffers. expensive stocking stuffers. cheaper than a phone >> as a gift not a stocking stuffer >> $250 for headphones is quite remarkable when the phone itself used to be able to get a phone for 300 bucks. >> right i actually think that kind of gravitates to the pricing power that apple has out there apple has continually been able to increase prices, you know, throughout the years they've been able to do it -- absolutely with the phone, despite the fact that they did a very unlike move with the iphone 11 in lowering the price point there. i think kind of it really speaks to the pricing power of the company here >> you know, there is a question on twitter that's a good one apple generated less in terms of sales and less in terms of net income for the full year 2019 than 2018. the stock is up pretty sharply why is that? >> it's interesting because, you know, i think especially when it comes to apple, i think
investors are highly anticipatory in nature when we look at the last 12 months, we're looking at unit volume down about 15% for iphones. when we look at the next 12 months, we're not looking for much of anything again, we're looking for flat to slightly up in terms of the unit side of things largely because of the favorable comment o comps that we're going to see. they're forward looking in nature because of the 5g cycle they're looking at the mix here in terms of wearables and services >> it will add to that, they continue to buy back a huge number of shares earnings per share is only down by two cents >> they reduced their share count by 32 cents since 2012 that tells you the free cash flow that monster that apple is -- >> 3 trillion. reducing the flow, still going to be a trillion and a half maybe. it will be a trillion 1/2, you figure -- >> over time we think it can go higher than a trillion and a half again, we think we're in the early innings in terms of services we think we're maybe in the second or third inning
over the next decade, that's a business where we think could actually triple over the next -- >> early innings was when it was worth 9 billion before jobs came back you remember that? >> yeah, yeah. >> don scully. >> angelo, what do you make of the margin and wearables relative to the other products >> it's interesting. you know, obviously on the services side of things we're more optimistic in terms of margins. 2 x on the hardware side of things in terms of wearable side of things, i think the pricing power is going to come in there. the problem is on the margin side of things, we just haven't seen any of the wearables or the services really flow through into the higher margins. that kind of speaks to the concerns on the actual hardware side of things in terms of iphones. >> in terms of pricing, right now $250 for headphones is pretty amazing >> absolutely. >> do you think those types of products become commoditized or
by interaction with the phone by default they have a leg up >> the adoption rate is extremely low in terms of the watch as well as air pods. there are so many legs to go in terms of that. so our view is over time -- especially on the watch side of things, as it becomes more of a health care feature, we actually think there's actually more up side potential to the price point in terms of wearables. >> okay. angelo, thank you. >> thanks for having me. >> when we return, wildfires in california spridieading rapidly we'll get an update from jay gray after the break plus we'll speak to former california governor gray davis "squawk box" will be right back. they changed how the world fights cancer. blocking the pd-l1 protein, lets the immune system attack, attack, attack cancer. pd-l1 transformed, revolutionized, immunotherapy. pd-l1 saved my life. saved my life. saved my life.
what we do here at dana-faber, changes lives everywhere. everywhere. everywhere. everywhere. everywhere. we're changing what's possible every single day. with technology that helps you offer shoppers a better experience. take your company's app. we can add in all sorts of capabilities, which help your customers manage rewards, offers, and payments on the fly. and now, applying for credit can happen in a flash. that way, more people can start shopping with you on the spot, wherever they are. how's that for changing what's possible? weveryone, looknk isn'tat your phones. the design thinking, the digital engineering, security, blockchain, and we will be first to market! yes. when we do we launch? unfortunately, in 2 or 3,
welcome back to "squawk. california wildfire spreading after a day of gusty winds jay gray joins us from the reagan presidential library in simi valley. good morning >> hey, good morning, andrew those winds haven't let up much at all it feels more like a tropical storm out here we have seen burn scars surrounding this facility, evidence of what was quite a fire fight here. more than 800 firefighters working to save these buildings. and many remain on campus looking for any signs of new fire we have seen new wildfires pop up from early yesterday through the early morning now on thursday at least ten burning, the latest
in san bernardino, and it seems to be spreading as well. there are new evacuations in place. and the real issue, the real driver here has been those strong winds they are expected to continue for at least another full day across the area. you've got fire teams moving in from across the country to help out. many of these strike teams working 24-hour shifts they're on the front lines and trying to maintain what they have here with the winds grabbing embers, pushing flames. and it's been a very difficult fight. it's going to continue for quite sometime no containment really to speak of, and some of the biggest fires in this area, in the south part of the state, though they are making some progress to the north and that's good news, those that were evacuated beginning to move back into communities there. but again, they will tell you and be very quick to tell you, we don't have containment and we won't for several days so this is a fire fight that is going to continue through the
weekend and really full containment is going to take much longer than that, bianecky >> jay, thank you very much. jay gray from nbc. our next guest knows firsthand the complex challenges facing governor newsome. let's welcome right now on the "squawk" newsline gray davis he is the former governor of california governor davis, thank you for your time this morning >> my pleasure, becky. >> you lehear what's happening now. it does sound like this is something that's built up over decades, under investment in infrastructure what do you think the main cause we're seeing now is? >> i couldn't put it any clearer than you did pg&e has literally endangered lives and property through years of -- actually decades of neglect through under investment if you look at san diego gas & electric, they have a world class weather forecasting unit pg&e does not. san diego was the first to adopt these infrared cameras which i believe will be the solution to this problem probably in the next 18 months
pg&e was the last. san diego gas & electric works closely with local government officials when they're going to have a precautionary blackout. moreover, pg&e was found responsible for starting the camp fire last year which killed 85 people in paradise. i have two relatives there, both of them lost their houses and had to flee for their lives. so i know something about that and they're the only -- and they were found responsible for the fire that started in the wine country in 2017 that killed over 20 people. and they really don't have -- the only utility that's been in bankruptcy twice in the last 18 years. so if they want to know who is responsible for their problems, all they have to do is look in the mirror >> the fallout is likely to land in a lot of different locations, though potentially with governor newsome. i mean, you know a thing about this as well when there were california rolling blackouts in 2000, 2001, you wound up facing a recall
vote in 2003 and lost in that vote what do you think happens to gavin newsom here and how much of the blame will be put back on him? >> trust me, i know electricity is good. blackouts are not. my situation was totally different. so i don't want to dwell on that i think gavin newsom has done more than any governor since the mid '70s to prepare for this kind of natural disaster he was working on it in his campaign he was responsible for getting pg&e to commit to employ some of these infrared cameras as he said, and it's true, we've never been better prepared to fight wildfire seasons than we are now. and he also said we have much more to do to fight it in the future and he's accurate about that as well i think, becky, we ought to have like a wildfire summit because in addition to over 100 lives that pg&e bears some responsibility for and all the loss of property, there is just the incredible angst of fire victims who are trying to
rebuild. the federal government makes you prove the soil is not contaminated that takes another six months, you have to get permits. people are in limbo a long time. the focus ought to be how to use technology to up our game and ensure we get on top of this problem. i think we can in 18 months. principally the southern part of the state where the infrared cameras are employed, very little loss of life. san diego no loss of life. >> governor, i don't know if you saw the piece in the op-ed page of the "wall street journal. it was entitled fliers and blird blackouts, made in sacramento. it goes into the last couple of decades where regulatory issues, green -- the green lobby, certain things that had to be done in california for renewables or for emissions or whatever used so much of pg&e's resources, the conventional grid
was neglected. is there any truth to that or the journal was just way off base here? >> there is some truth to that having said that, i'm a new yorker i was born in columbia hospital, went to columbia law school. i know new york likes nothing more than to rev he wiel in our problems out here. that having been said, we need to have a wildfire summit. we need to put all things on the table. we need to upgrade our technology i mean, at the beginning of this year, we were flying helicopters. i was in the vietnam war and flew in the very same helicopters, been used 50, 60 years later. happily governor brown signed a bill we can have helicopters flying at night, using infratread cameras we need to use the technology. i believe in the next 18 months, california will turn this around, but it won't happen without acknowledging somebody has some part of the blame to bear, the collective responsibility now is to find a
way to save property and to keep people from the horror of not only blackout, but planned blackouts presumably to stop wildfires. >> governor, we have heard from governor newsome that he would like to see berkshire hathaway or someone else step in and bid for pg&e to maybe run it better than it has been run to this point. we had tom fanning from southern company on he said no way would he invest in this because california politics is too hard to get your hands around and try and figure out what would happen here >> as you know, becky, utilities are guaranteed a rate of return. no other corporation is. and with that comes a certain responsibility to act in the public interest because you know you're going to make a profit. a warren buffett would make a lot of sense to me we need to look for responsible capital, people that realize when you're in the utility, a large part of what you do has to protect safety, ensure power is delivered, and to act first in
the public interest. everyone else has to worry about making return on their investment for their shareholders utility executives and boards of directors do not so the leadership at the top of pg&e and on the board is very important and obviously warren buffett was interested, i think he would be fantastic. >> governor davis, thank you for being with us this morning we appreciate it >> my pleasure >> futures are still down. "squawk box" will be right back. >> announcer: coming up, founding partner venture capital firm red point ventures, and at&t board member jeffrey yang we'll talk ipos, the streaming wars, and tech earnings. that's straight ahead right here on "squawk box." robinhood believes now is the time to do money. without the commission fees and account minimums.
>> good morning. welcome to "squawk box" here on cnbc live from the nasdaq market site in times square we're surrounded in splendor on the new set. i'm joe kernen along with becky quick. >> thank you you are surrounded in splendor >> it's true not happy thanksgiving happy halloween. >> thanksgiving is coming. thanksgiving is not far off. >> i'm wearing my costume. >> there is something -- christmas is called the best time -- this for me is the worst time because of the candy starts now. the candy starts now that goes into turkey, dressing, pie. >> which goes into christmas cookies. >> alcohol which goes into christmas cookies. anyway, our guest host for the hour, jeff yang, founding partner of red point ventures, at&t board member, friend of the show >> thanks for having me. >> you are welcome
and i just booked him for pebble you'll be on -- >> thank you >> -- when we're out there have you agreed to that? >> yes, apparently >> because it sharpens your game it sharpens your game when you get up -- out there it's almost 2:00 a.m. you have to get up >> wake up in the middle of the night. >> futures were up -- wake up in the middle of the night four times. there's the dow indicated down 73 points. it had been higher i like what cramer said about -- he tweeted about this bloomberg story, a long-term deal -- >> china >> -- china, might notbe an issue. he said talk about an evergreen story. l in the news business, evergreen is something you can run any day. it's going to be relevant, always going to be -- >> potential for it every day. >> is it really news flash it's an evergreen story.
we'll talk to jim maybe a little bit later. certainly it's in the back of all of our minds about whether there is really a long-term deal possible >> me time, stories we are watching, a stumbling block in u.s. efforts to reach the china trade deal we want to get to aman javers who has details on where things stand. evergreen story or not >> it is an evergreen story. it happens to be true. this is the bloomberg report that's gotten everybody's attention. take a look at one key sentence in that piece. they're talking about chinese reservations now, any deal going forward past the phase one deal that's been described and apparently agreed to what bloomberg has written here, they remain concerned about president donald trump's impulsive nature and the risk he may back out of even the limited deal, both sides say they want to sign in coming weeks. so ultimately what bloomberg is reporting here is the chinese
are worried about the president's personality specifically, and that even any agreement they reach on a handshake basis with him might not be enough to get a deal to the table. so we'll see whether those reservations in beijing register in washington during the course of the day today the president has been saying he's eager to get to phase one, and yesterday when we saw that news at the apex summit was canceled in chile, that was the venue they expected the two sides to come together and sign the deal the white house put out a statement saying, no, we're going ahead with this. we expect it in the same time frame. the open question has been over the past 24 hours or so, where exactly are they going to sign this thing now with this report from bloomberg, it adds a little more uncertainty to the idea that there is going to be a signing at all and we'll see how washington responds to that as we go through the day today, guys. >> the other part, eamon, i read the same piece you read, is that china feels that it's unlikely that it's going to be able to
agree to any of the most contentious things that -- that's part of the story, isn't it it's not just trump's i am pinch wi impetuous, impulsive nature. they may not -- enterprises. >> the phase one deal, the bloomberg report is suggesting the chinese have some worries about the president's nature on that one being impetuous and on phase two and phase three and however many phases out you go, they've sort of punted the most difficult stuff the intellectual property stuff, forced joint venture stuff a lot of the most difficult issues that would require structural change on the part of the chinese communist party, those things are in the out years or out months, anyway, of this negotiation the question is can they get there anyway remember xi jinping is a strong leader and he doesn't have a democratic system, but he does
have his own domestic politics and it may not be possible for him to agree to some of the things that the president wants from him >> eamon, thank you. we'll check back in with you soon among this morning's corporate stories, kraft ties is out with the quarterly numbers kraft heinz adjusted quarterly profit of 69 cents a share that was 15 cents better than expected revenue came in below forecast, but organic sales fell by less than expected, that stock is up by 6.6%. and a big auto deal to tell you about. fiat chrysler and pugeot parent group psa announcing their intention to work toward a merger the automaker's tentative proposal would see each company shareholders own 50% of the newly combined organization. fiat chrysler shares up 3.6% on that psa, those shares down by 13%. and facebook beating wall street estimates on the bottom and top line for the third quarter. facebook's average revenue
peruser came in better than expected check out that stock this morning. it's been up by over 4.5%. right now it's up 3.8% the other big stock to watch today, apple that stock rising after the results beat the street. josh lip ton talked to the c.e.o. last night and he joins us with the highlights hey, josh. >> becky, iphone sales dropped to 33.4 billion. that beat estimates. it was an improvement in q3. iphone revenues dropped 12%. there were new iphone sales in the quarter. c.e.o. tim cook telling me the 11 was the best seller of the three. iphones could be hit with tariffs in december, but cook thinks a trade deal gets done. even if it's a limited one tell me, i'm still optimistic that in the end there will be an agreement between the countries where if it will not solve everything, but it will be a better position than where we are or where we've been. beyond the iphone, the category including wearable surging 54%
to 6.5 billion and services jumped 18% to 12.5 billion with new all-time highs for the app store and apple music, apple pay over 3 billion transactions. exceeding pay pal. apple's new video streaming of course launches on friday. would cook consider raising the price of apple tv plus you told me $5 is where we are starting, but we'll see what the future holds i don't want to lock ourselves in to one side or the other. apple got q1 revenues above consensus. guys, back to you. >> very good, josh joining us now for more on the state of tech, our guest host for the hour, jeff yang, founding partner at red point ventures you worked early on so many different things, yang, right? >> i've been lucky been in the right place at the right time >> you can either say that or you have great people on the team working with you at red point. there's a lot of ways of deferring the compliment anyway, what is the current state of tech right now?
a year ago i felt like it was unstoppable, and it was the future and, you know, mankind was going to benefit and we all were going to go into the futures singing and all together now it's so contentious, so many different issues, so many -- on a daily basis we even argue about political and privacy, libra, all these different things happening >> certainly we're in the hot seat there's no question. i believe in the long term ramifications of what technology can do in bringing, bringing productivity improvements, bringing new ways of doing things, disrupting industries. and i think that long-term trend is definitely intact but it's clear that the profile of technology industry and maybe we've gotten a little bit ahead of ourselves, particularly as it relates to certain public policy matters and the affect on opinion and the effect on disruption, it's definitely -- we're definitely under fire.
and so i think it's very hard not to -- it's very hard to ignore those realities of what we're facing you kind of have to understand it or at least have an appreciation of where it might go and right now there's a lot of uncertainty. >> what do you mean when you say we could have gotten ahead of ourselves? it's that move fast and break things sort of ethos >> yeah, you look at facebook as an example i mean, its global reach is astounding and what you can do the good you can do on the platform, reconnecting people with others and sharing opinions and reflections with like minds is absolutely a wonderful thing. it's analogous to what the telephone and the telephone network was. but the flip side of it is people are abusing it and there are a lot of people with black hats that are doing things that were unintended consequence of the same wonderful platform. and i think, you know, i don't think our industry is really
prepared for all the ramifications of that. >> it's interesting that you bring up the telephone industry because that was eventually broken up. you think that happens here? >> so, specifically with regard to facebook? >> facebook is probably the target number one. you can probably point to four or five other big companies. >> let's talk about facebook for a second the first thing to understand is by its nature it's a natural network business it's useful because everybody is on it and because everybody is on it, you want to be on it. right? if others weren't on it, you wouldn't want to be on it. >> unless you're yogi berra. nobody goes there any more it's too crowded >> exactly it's one of these things by its nature, if it's successful, it's going to be a highly concentrated business. like market places, you're likely to see businesses that have real value with a lot of people on it so then the question is, is it too big, right and should it be broeken up
one thing conceptually, my belief is it provides a lot of great things, just like a communications network provides great things being able to link everybody to anybody else how great would it be if you picked up the phone and only a third of the people were on it it would have much less value. you have to be careful and think about the good that it's doing, not just the harm it's doing >> the question that i'd ask is there have been some very controversial decisions mark zuckerberg has -- including political advertising and other things that he has done. he would say or suggest it's more for philosophical reasons necessarily even economic ones i don't know if that's right or wrong. would you agree, for example, with him or would you agree with jack dorsey at twitter in terms of how you think about some of these issues >> personally, i mean, we are plowing new ground from a public
policy perspective and facebook in particular is at the forefront trying to figure out what's right and i think regulators are trying to figure out, hey, what's the best thing to do? skpings and i think the reality is the regulator is going to be behind the platform something has to be done that's a lot of the public outcry i think for the argument for breaking it up and when you -- but i do think there have to be more rules, rules of the road. when you ask about the question of do i think it will be broken up, as i look into the subject about kind of antitrust, i don't really know nearly enough, only enough to be dangerous, i think it's kind of a little bit of a murky argument about what the consumer harm is on a free service. so then you go to restraint of trade and market power i think it's a hard argument to make, as i understand it, from a legal perspective because antitrust, antitrust laws and antitrust framework wasn't really contemplated for this
type of environment. >> i would have said the same thing about at&t/time warner >> fair enough >> we may be dealing with new rules that get made up along the way. >> i understand. but we're dealing with the new rules that are being made up as we go along versus traditional case law and traditional framework. >> right >> i think there are definitely issues with regard to privacy, with regard to data portability and with regard to freedom of speech and i distinguish freedom of speech from freedom of expression it's kind of yelling fire in a theater issue. and i think there have to be rules of the road on what is acceptable speech. i think there need to be rules of the road in terms of privacy and there need to be rules of the road in terms of data portability. >> right >> i think all those can be handled outside the framework of a break up personally. something analogous to a consent decree >> makes sense jeff is going to be with us the rest of the hour we have much more to talk about with him >> coming up in just a moment, twitter as we were just discussing, banning political ads while facebook seems to be
doubling down on its support them that big fight and what it means for investors when "squawk box" comes back ♪ ♪ that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. from the day you're born we never stop taking care of you.
saying the company is banning political ads from its platform in a series of tweets, dorsey said he thinks the reach of political messages should be earned, not bought he wrote that paying to have a message amplified ends up forcing it on twitter users as opposed to the message earning a wider reach through account follows and retweets dorsey making those comments as facebook was making his third quarter results about an hour before the q3 conference call. facebook has received criticism, of course, in the past several weeks for its policy to neither fact check nor remove political ads placed by politicians. c.e.o. mark zuckerberg addressing the situation when he spoke with analysts yesterday. >> although i considered whether we should not carry these ads in the past, and i'll continue to do so. on balance so far, i've thought that we should continue. we estimate that these ads from politicians will be less than 0.5% of our revenue next year. that's not why we're doing this. to put this in perspective, the
ftc finds that these same critics said wouldn't be enough to change our incentives was more than 10 x bigger than this. so the reality is that we believe deeply that political speech is important, and that that's what's driving this >> joining us right now to continue this conversation is peter kaufman, the founder and principal of political consulting firm blue jacket strategies also a veteran of andrew cuomo's campaign and hillary clinton's senate campaign. also anis chopra joining us, he served as the first chief technology advisor under president obama. our guest host is here jeff yang as well. i'm going to start with you because you're now across from me you look at this decision. was this -- who do you side with, mark zuckerberg or jack dorsey >> i think this is a move in the right direction. >> which >> in twitter, with jack dorsey. i think this is right. the nature, the nature of these type of ads, they are so hyper
targeted they are able to gin up support quickly. i don't think this is going to make a big difference on twitter's bottom line. i think be it's a tremendous p.r. move. >> what do you make of the other side of this which is to say it just makes it harder for anybody going up against an incumbent? >> it's hard to see that -- alexandria ocasio-cortez didn't take out joe crowal i becauy beh had a bunch of political tweets. no one is promoting twitter to get in there and win an election >> take twitter out of it. let's talk about facebook, insta, all the other social media out there approaching this similarly with facebook. >> i don't know how you sustain an argument that you allow politicians and political candidates to state outright lies on your platform, pay to serve them to highly targeted mobilized groups of voters, and say that it's okay and just say
that's free speech i don't know how you sustain that >> have you seen cable tv? the different echo chambers you can tune into? what's a lie and what's not? i know, but it's just -- you need to be very discerning as a consumer nowadays to all of this stuff. we're all big boys, right? >> i'm not sure we are all big boys that's a distinction >> i don't want people deciding whether i'm a big boy or not >> you can go on cable news and you can disparage a war hero and say that he's not a real american, and if that's a debate, we can have the debate back and forth >> amy klobuchar has 17 more in the democratic party how does andrew yang, amy klobuchar, how do they earn the notoriety to compete in the election >> that's the whole process, right? i don't see sort of shutting off this one channel >> should you do it with all media, tv, or just targeting facebook where it's so targeted? >> but that's sort of what we're
talking about. and just with respect to twitter, it doesn't -- >> so these are unique situations you're not saying political advertising. >> i'm not saying political advertising is evil and should be banned. >> let me ask a different question and i'll ask of anish to me you either need to police -- do you police the advertising? and if you're not going to police the advertising, should you do it at all that was the question effectively that jack dorsey was trying to answer >> look, let me just tell you from my perspective. step one is the positive step jack said we're going to do in the interim. my view is step two is to determine if this is effective or not will the industry come together and regulate itself to make sure these key definitions are met. what constitutes harm, what constitutes political advertising. what are the protocols when there is an accusation of disinformation if twitter, google and facebook come together and reach consensus before we have congressional action, then this is going to be seen as a
positive step. if it's just one platform against the other having a different interpretation, then we've not made much material progress >> jeff, let me ask it to you in the traditional classic way. classic sense. you're on the board of at&t. owns time warner all sorts of tv channels would you support your channels broadcasting advertising that is factually inaccurate and that you know to be factually inaccurate in advance? >> well, let me first say that i'm not deep in what the regulations are. but my understanding is there are different sets of regulations for traditional media sources that don't yet apply for the online sources and so i would support some level of truth and fact checking in what is said. there is opinion and there's statement of fact. >> you know, in the old days we would make tv ads and you would sort of stay up all night because you didn't want that
little box in the paper, the fact check box and the ad box to say, oh, oh, some of your numbers are wrong. your tax cut is only going to create 10,000 jobs, not 15,000 jobs oh, my gosh. that is such ancient history now you have people just fabricating lies i don't see how you sustain that conversation going forward something has to change, and it's the responsibility of the folks running that platform to make sure that the content going out -- i mean, if they are turning a profit off of this content, don't they have an inherent responsibility there to make sure that it's actually factual? seems like a basic point >> it's a longer debate. we'll get you up against mark zuckerberg one day because he l has a different view peter, aneesh, thank you >> president dennis lockhart is next stay tuned you're watching "squk x"n bcawbo o
i recently spoke to a group of students about being a scientist at 3m. i wanted them to know that innovation is not just about that one 'a-ha' moment. science is a process. it takes time, dedication. it's a journey. we're constantly asking ourselves, 'how can we do things better and better?' what we make has to work. we strive to protect you. at 3m, we're in pursuit of solutions that make people's lives better.
still to come, some break being economic data. we have reports on initial jobless claims personal income and spending and core pce it's just minutes away we'll bring you those numbers and the instant marketreaction right now dow futures down 48 points the nasdaq up by3. 'lbeig bk. 1 an index, but which ones target your goals? it's not about quantity. it's about quality. no trendy stuff. i want etfs backed by research. is it built for the long-term? my reputation depends on it. flexshares etfs are designed and managed around investor objectives. so you can advise with confidence. before investing, consider the fund's investment objectives, risks, charges and expenses. go to flexshares.com for a prospectus containing this information. read it carefully.
welcome back to "squawk box. right here on cnbc, we're live from the nasdaq market site in times square we do have some break being economic news that's coming up in a few seconds we've been watching the futures ahead of that. we've paired some of the losses we saw earlier we were down almost 100 points for the dow. now down 48 points rick santelli is standing by he has personal income and jobless numbers. rick >> we'll come out with employment cost index the third quarter up as expected, .7 just shy of three quarters of 1% if we look at now our reit for september personal income, personal income up 3/10 exactly as expected. if you look at spending, it was up 2/10. arguably a little light. both of these have positive revisions. let's get into some very important. personal consumption expenditure, the deflator was unchanged as expected. if we look on a year over year basis, it was up 1.3 roughly as expected now, if we look at the year over
year pce, personal consumption, deflator core, up 1.7. exactly as expected. and these numbers maybe are more important than they would normally be because, of course, j. powell seems to once again be pointing to the boogie man of inflation as one of the big gears with regard to the machine of how he's going to handle policy many would argue that there's many metrics that are on the firm side. finally, initial jobless claims for the week moved up 5,000 from a slight revision, 212 last week, then moves to 213. add 5,000. we end up at this week's number of 218,000 continuing claims, just a smidge of a move from 1.683 million to 1.69 million the aftermath of all this, 1.73, ten year before the numbers of 173 ten year now dollar index has been under pressure for a while now yesterday's rate cut didn't seem to really change it by the end
of the session it was under pressure as well. we lost the 180 handle, that was the break out earlier in the week we moved up above it now we are back below at 1.73. never were able to cross what many of us have considered the biggest yield resistance around 1.90 joe, i'm out of breath happy halloween. and back to you. >> all right, rick halloween, it's a great day. thanks, rick joining us now for reaction to the data, fed latest interest rate cut, former fed president steve liesman joins us dennis, good to see you. overall comments yesterday, do you agree with the latest move and agree with the notion that there will now be a pause? >> i certainly agree that there is now going to be a pause i think this is a phase change the phase that preceded yesterday's meeting and included yesterday's meeting, of course, was an insurance risk management
phase. and i now see the committee and chairman powell moving into a pause phase in which they are going to wait and see, and see how things develop but i think there is a high bar for a move in the next several meetings in either direction >> so you think that the benefits we derive from the latest quarter point outweighs whether there is some mal investment we are unaware of or bubbles in places where we're not focusing right now i mean, inflation is so low and, you know, 1.9%, whether it's the trade war, whatever or the slowing economy around the world, seems like you might as well, if there's no inflation, you might as well accommodate the global economy a little bit more >> well, you can always argue about a quarter of a point here or there i think the question you raised at the beginning of your comment was whether there might be some,
let's say financial market instability bubbles or imbalances that are developing i thought the summary that j. powell made yesterday in his press conference of how they very methodically look at all the different elements of financial security was pretty persuasive, and i'm prepared to go with what i know is a very methodical approach to looking at that. i'm not too concerned that we have fed that beast more by just dropping one more quarter of a point. >> steve -- i mean, bernanke was great. as good as he was, what was that famous quote i really don't see a big bubble in housing in '07. >> right >> we always have to be humble about these things because stuff comes out of nowhere sometimes that surprise you and starts a contagion of some kind that no
one could possibly predict you know, playing the odds, so to speak, i think the committee is pretty comfortable with the financial stability or instability question at the moment >> steve, go ahead >> i thought, joe, that powell engineered that change yesterday pretty well. i think the market was priced for it, and that's different from the prior times he's sort of spoken his mind about wanting to be limited and measured in rate cuts, and even change in policy the market was priced differently. he went into that meeting yesterday like going into, i don't know, a room of friendly people rather than a hostile room, joe, which maybe you know something about. i don't know and people were ready for that change yesterday and he did it in a sort of two-handed interesting way he said, you know what we're not going to be cutting right away any more unless the data come in differently but also that other side of the thing, he really raised the bar
for hiking rates and we needed a significant rise, you know, in inflation above our symmetrical -- he must have said that word 100 times -- 2% target. it's interesting, joe. there is a one way bet in the market now they stay the same or they go down you don't go into the market -- to your investment committee meeting and say, look, we have to prepare and hedge against higher interest rates. you would be laughed out of the room, i think if you made that call, joe. >> steve, you told me a pause was coming >> i did >> the markets were softened up. >> they were softened, like artillery ahead of time. >> and as a result there were no major surprises, i don't think at all yesterday, were there do you think it was skillfully done, dennis the pause? >> if there were any surprises, it was the shift from a rate-raising concept of normalization to one that's
based on inflation i thought he was extremely clear about that and in today's world, it is a little hard to imagine inflation just running wild, getting out of hand. so, as steve said a second ago and he also said it yesterday afternoon, it looks a bit like a one-way bet. >> well, even if i say, okay, if i could say there's no mal investment, no bubbles and no inflation, then why not keep the pedal to the meddle and try to keep it as quickly as you can without accommodation? i come to the realization that savers have nowhere to go. pension plans can't earn a return people can't retire because they used to think they had -- if they save a million dollars or whole life, they were going to be able to live on $80,000 a year now they have to live on 15,000 or 20,000. so there's always some reason why there's no free lunches it seems like >> if i could add to that list real quickly, the idea of having something left over to do in
case we get into real -- a real problem. >> right >> i think powell would not hesitate to act if you started having a serious drift up in the unemployment rate, if you started printing gdp prints below 1% i think he would act and act forcefully he wants something in the tank, joe, i think to move ahead and he's given what he thinks is a good amount of stimulus that has several months to play out through the economy. >> and, steve, i would say that that notion of preserving ammunition has sort of come back into the consciousness of a lot of people. i've noticed it just in the last few weeks. several months ago on this show, in a conversation with you, steve, i said that i felt that was in the back of the mind of some poll at this makers that they don't want to, you know, use your ammunition when you may need it in a much more severe set of circumstances and that idea now, i think, is back in play
>> all right dennis lockhart, thank you and we always love having you on and hope to see you again. steve -- >> tomorrow. >> we'll see you -- >> i'll see you tomorrow, joe. how excited are you? >> i'm very excited because i won't be here. anyway -- >> what? >> so are we [ laughter ] >> are you golfing >> thank you very much >> are you golfing >> secret undisclosed location >> sea island. >> oh. >> someone watches the show. >> let's get back to corporate news apple a big stock to watch today. the company reporting results last night our next analyst called a goldilocks quarter dan is raising his price target by nearly 15% on the stock he's looking at a 15% price target on apple good to see you. >> good to be here >> you went from $265 to 300
bucks based on what you heard last night what motivated you >> iphone demand, specifically in china we think it's tracking 15 to 20% above expectations that would serve our tracks in terms of our asia tour in terms of what we saw last night, that confirmed -- i think the numbers are going to come significantly going to the next 12 to 18 months, it's a re-reading story, but really about iphone 11 now, putting a fence around the install base. >> there were a lot of good things in the call last night. one thing that's kind of hanging out here is the story jim cramer called the evergreen story the idea china is saying we're not so sure we want to get into any sort of deal when it comes to the united states in trade. it may be bigger than we thought. how big of a factor is that for apple? apple is the poster child. >> they are the poster child for the u.s./china ufc battle. it's a 15 to $20 overhang on the stock. you kind of factor it into what that would do to numbers
it comes down to tariffs and ultimately if the tariffs came through and there's no deal, that would take about 6 to 8% of the u.s. demand from an iphone perspective. or if they absorb it, it takes 4 to 5% off eps. so that continues to be a sort of lingering black cloud around the story. but nonetheless, for somebody that's covered apple most of my career, i look at this as sort of a crowning achievement for cook with back ends to what they've done in china as well as what they've done with iphone 11 where the last two iphone cycles really have been disappointing this one off to a magical start. >> how much do you think the stock is still a gamble on what happens next year? >> well, no doubt because i think the part is you have 5g around the corner. i think it comes down to right now many are skepticalthat the can still hit those numbers.