Transcripts For CNBC Squawk Box 20140619

Into 2015. You can see this morning that the markets are barely budged overnight. Well see what happens as we get closer into the opening bell. Right now, take a look at the tenyear note. At this point, the tenyear is yielding 2. 577 . Still below 2. 6 based on some of those dovish comments, again. On todays market agenda, we have weekly jobless claims. First time filings are expected to climb by 3,000. In addition the economic numbers, we have investors continuing to Pay Attention to the situation in iraq. White house Officials Say the u. S. Is likely to use air strikes due to the lack of clear targets. Meantime, the wall street journal reports the Obama Administration is using without. First, andrew has this mornings top corporate news. The story on the front page of the wall street journal this morning really makes you think. This oped, did you see that from Rupert Murdoch this morning . First, corporate millions. Jeff immelt, the General Electric ceo is flying back from paris after a new round of talks with government officials. How long has this been go on, about two months from now . Alst alstoms board has until monday to decide, but is it alstoms board or is it, as we just discussed, paris . And its not hollande, either. Its another guy. Theres a number of people involved. And they are making it very difficult and which minister is that again . Hes making it tough on ge for almost personal reasons at this point. I think its an antiu. S. Sentiment. For a company that employs more people than all the other suitors and right. Eats pretty friendly with prior ge is well known in france. But it shouldnt be this hard. Te connectivity to buy sensor maker measurement special tilts for 86 in cash. Thats rough lay 10 premium to the stocks Closing Price on friday. And if you were up early trying to check facebook, it was briefly unavailable in the United States and several european companies. A message read sorry, something went wrong and were working on getting that fixed as soon as we can. Anyway, Services Back up about 17 minutes. Joe, what did you do during that 17 minutes . I had to to face someone person to person and try to communicate with them. And i couldnt. I didnt know any more. They were right in the same room and it was so foreign to actually have to like i had trouble i cant poor baby. Its okay. It will be back soon. People around the country unable to you know, they had no keyboard to communicate with someone and they had no pictures of what the people were doing. Seriously . 17 minutes in the morning . Its the morning somewhere but the nice anywhere. Yeah. Facebook has been down 24 hours a day, seven days a week. Marks dorm room 2004 . I know because we had him on bulls eye. About 2004. Are we sure . The internet was going to be a phase and it was going to about a fad and it was not going to be going on. Are we sure theres not going to be a day where smnl goes, oh, yeah, facebook. Are you sure . I dont think. I think weve pushed beyond that. We might be stuck whit. Think about mooem, if your ema email went down. I actually have a yahoo account. Is that for real . Is that 168 billion . Thats real. I dont know if its real, but thats what the os ticker. 1234 they have more than 150 customers. What do what . I dont know. Some day theyre going to know how much about these people that theyre going to sell something to those people theyve done very well with mobile ads. They ramped it up. Im fighting a losing battle. The amazon thing yesterday the phone was cooler than i thought it was going to be. How much is amazon worth . Hold on, hold on. Im like facebook. Amazon is worth 153. So amazon, which sells Real Products all over the world, and you guys you like the phone . I was more impressed than i thought it would be. You could sort of tell it was 3d on tv. I dont know where they cant put that app there is an app. You can get an app for your iphone where you can look at you put it up at anything. Its unclear to me it seems like a smart move to get the consumer and get more of a foothold. I understand trying to build the ecosystem. If someone told you a year ago, hey, i know you like this apple, but wait until amazon comes out with their phone. Some say amazon is going to compete with appearing in innovation . But they had a reader, too. Its not first product. But i need to buy something. Everything i buy is online at this point. You could be walking to your car and its like, oh, i dprot b forgot to buy that. I have an app on my iphone. Like you with sports, i need to recuse myself with this entire no, with any high tech. I thought he would subsidize the phone and it would be a very cheap phone. You get amazon prime free for it with this. So if its a is 99 phone, its really a 99 phone. I hope youre up to speed on the world cup. Anyway, weve got to go. Wait until you see this one goal, though. Wow. We had that ready to go. That was a goal. But wait until you see this did you see the greatest goal in history . No. I was on a plane yesterday. Have you hear about it, the australian, cahill . No. Were going to talk about that in just a moment. But in the meantime, we want to get an update on iraq. Michelle carusocabrera joins us now from northern iraq. It is of course, an eyewitness is suggesting theres a black flag over the area right now. The government here claims that they are in control of it. Its extremely unclear what the situation is there. What we do know is it is offline and as a result there are long, long gas lines here in kurdistan. Take a look at the video here. Hundreds and hundreds of cars long. Thats if the station has some gas. Weve seen many, many stations without gasoline at all. These people are waiting in line for hours at a time. One guy told us he waited four hours in 209 heat. Here in kurdistan, they have capacity for around 1100,000. Down in basra, exo and bp are declining to comment that exxon has evacuated their ex pats and bp has evacuated nonessential staff in the uj facilities in the south. This is a very politically different situation tore these companies. The head of the Iraqi Government controls southern Oil Companies and went as far to give reporters an interview criticizing those two companies and going on as far to go say any weather Ford Schlumberger have not evacuated any employees. Baghdad has questioned air support. The s p is not so it that ping the video wering showing you was uploaded by the u. S. Navy to its website. The wall street reporting in their conversations with dip hoe mats in the area. I guess they are looking for someone else that they can push forward that hopefully government would push around to have a more inclusive government. Are we in the position of trying to do another government that we build ourselves or are they looking for somebody else to lead up to an election . I dont quite get it. Yeah. I asked that question myself. Anterior we in a tough position or arent we going to be criticized for doing that as we have done repeatedly throughout history. Its unclear. I dont know the reporting on that story. Maliki is accused by militants and this area. They gave very little resistance. Are they going to be able to find or can someone come forward what everybody is rally around and be seen as northbound who is inclusive and can that be done wholistically instead of the u. S. Doing that and appearing to be the puppet master again. Right. We were supposed to be doing this for democracy. But then when you get so involved with who comes next, that defeats the purpose. Anyway, michelle, that you know. Another day, another record high for stocks after the fed may have affirmed or reaffirmed the oh, the dove birds were flying everywhere. Did you see that quote from yellen . For a second, a light bulb went off in my head. No wonder the market is off highs. Both of them are craving to keep the party going. She said where employment is and where inflation is, both of them are going to fill in the same thing and thats like filling up the bunch bowl again. But they did say theyre going to go up a quarter point faster in 2015 or 16 on rates. And they did take down did you see the 3 . Were no longer anywhere near 3 for the year. Were at 2. 25 or 2. Something. 35, he was krndz because the feds is essentially buying the same a. Of of tresh remember i issued. The training wheels are still on. Now it really doesnt matter at all. Were not there, anyway. Lets get to paul schatz. Hes president we were talking about 6 . We went up the last time, anyway, didnt we . Werent we at 6. 7 . I thought it was 6. 4 . We arent going to get to 6 anytime soon. I think we should get some birds and keep them on the set. Liesman was right here. Hawks are pretty cool. But doves, who doesnt like doves . And you tuckel them and they pooh. On the phone, we have lindsay prospect you down where the fed is so were not doing 3 any more . Will we end with a quarter of 3 or 4 . You know what was so interesting about what we saw yesterday was the updated Economic Projections from the fed. There was a clear contradiction between the downgrades for the assessment of current Economic Conditions and the acceleration in terms of the Committee Members expectation for policy serving. Joe, you alluded to the fed that the fed committeed to 3. 5 next year, mon tale policy plus in terms of their forecast, and yellen has consistently said she will wait for that optimism to come to fruition prosecute changing Monetary Policy. And paul, we heard yellen it was simple to me. As far as stock market, she said everything prints at earning more money. Doesnt it seem like a no braber that asset prices will continue to rise . Yeah. Europe, theyre just beginning. Europe is where we were essentially in 2008, 2009, so certainly europe. And dont forget japan. Theyre not done. Theyre going to have to really crank it up. Regarding the feds forecast, sadly, the feds know better than frankly anybody else in forecasting economy and any reasonable runway down the road. So the punch bowl is needed. Its the only thing you ever disagree on is whether we should continue to print money. Once you start, you have to go to the end. My worry is that even all that yellen said, my worry still is that the fed is going to stop qe early and the economy is not going to continue and theyre going to be kind of in that conundrum, what do we do now . We tailed it off, we tapered it. When do you think theyre actually going to stop, though . Obviously, the printing of money is going to be done this year. And yellen did the amazing walk back on the considerable period of time. Thats a footnote from now. So theyre probably going to raise rates next year. Again, becky, i think were in the typical post financial crisis recovery. It kinds of stinks. Its stodgy. You dont get out of your own way. How come no one is talking about obamacare, the payroll tax increase and the raising of the rates on the top tier . All that is dragging on the economy. How can anyone be surprised the economy cannot get back to even trend growth . Yeah, but as far as the tock market goes, you can keep saying, you know, the fundamentals really dont live up to where the market is, but does it really matter if the fed is printing, printing, printing . You can argue until youre blue in the face that the markets shouldnt be here, but the markets should be here. What would he know about the stock market . Whether its high or low. Whenever i hear that, i dont even think we found out really how long it was. He said he was there. Let me see. Thats 35 right there. If you miss a third of the market then i said if the market keeps going up, will you ever turn bullish . He said no, i could never turn bullish. Operators have a view of whats going on in the economy. With the fed doing this, it has nothing to do with the markets. But thats your distinction. But the market should be here. Why is he arguing against the market . The market should be here. Its the only sadly, its the only game in town. Theres nowhere else to go. So liquidity flows, money goes, they treat it best in stock. Lindsay, whats the highest print on the gdp that we get in the next three quarters . In the next three quarters, were not looking at anything above 2 at this point. We continue to see lackluster growth. For the year . We wont see a 3 print when we get some snack back from the weather in the First Quarter . No, i dont think so. Retail sales rebounded, but at the expense of a decline in service. Thats virtually the trend we saw at the beginning of the year. What happened to my world cup story . They moved it. We talk too much. Lets get to the next topic. The next block after the commercial break. I downloaded a fifa application on my fifa. Whatever. I know every group all the way to h. I think its like march madness. Theres eight and double elimination, right . All right. Anyway, the password, its not mine. Anyway, paul, thanks. Lindsay, i cant believe that. 2 . Thank you, guys. Its not very optimistic. I wish i could say it would be higher. Thank you, guys. Market is going to 18,000. Well take that to the bank. When we come back, were going to get to joes world cup, plus jon fortt sat down with find out what he has to say in todays executive edge. And last month, larry fink said they present a Structure Problem that could blow up the entire industry. Here is a quick refresher on leveraged etf. A leverage etf is an sxang traded fund that ames to amplify the benchmark. That could be a number like the nasdaq or the s p 500. These funds are financially engineered with leverage which comes from derivatives and debts that had be super charged to deliver two to three times the index. A leveraged etf aiming to amplify the s p 500 can deliver twice the daily from the from the ept. That leverage magnified the lawsuit, as well. The leverage etf from its 4 . Now, theres another problem with leveraged etf. Because they reset he day, you may not be making the return you think. That two times return you are offered is only guaranteed for that day. Over time, your returns may differ significantly. The bottom line for the average investor is this. The Financial Engineering used in leveraged etf makes them complicated to understand and much riskier than a traditional etf. The defending world champs are out of the world cup. They lost to chile 20. Their second loss, so theyre gone. Cameroon is gone. They had great, great uniforms. Red and green and yellow. Spain lost to the netherlands, 51 on friday. Now, i was hoping that the netherlands would lose and ill tell you why. Its because of that ox noxious skating coach who said were idiots over here because we like football. Hes so pc about it. And then he said were so great at hockey and were so great at soccer. And they really do look like theyre pretty good at soccer. So im watching the netherlands. Who went up first . I think australia no. I think the netherlands may have one of them went up fist. But you have to watch this goal from cahill. They did eliminate australia. Look at this. It looked like about a 40yard pass in football before it hit the ground. This guy, cahill, as it was getting close to the ground he kicked it into the left corner of the ball. Look at that. Came down, he saw it come over his shoulder. That kind of thing is just this is an awakingly. He also plays for new jersey, the red bulls. I think australia scored and then the netherlands scored and then australia went up 211, but then the netherlands dominated for the rest of the game. I watched this. Alajandra bedoyi, who got cut from the team in 2012 who started the other night against ghana. No kidding. Yes. Hes a local boy. You know, i saw im sorry of just getting into this. A lot of americans, and there was an article yesterday that said its finally turning the corner. On this thing i downloaded, ive got each i didnt know there were a through h and i think theres eight in each. Thats 64. And then we dont this is the group round and we find out who goes it really is like march madness. It really is. And the u. S. Plays portugal. Portugal got beat pred badly, but theyre supposed to be good. Tonight, japan is playing. You know nbc is big with soccer. We have the premier league. So its all aligning when does the season begin . Thats below my pay grade. Im new. Im a neophyte. But youll be able to watch it, andrew. Youre basically nascar is your thing, right . Yes. Because, you know how much i love do you know the starspangled banner ends with gentlemen start your engines, right . Thats the last line . You have an inappropriate joke about how you watch nascar. Tmobiles ceo wants to lure customers from rivals so hes announce ago new Internet Radio service up limited music streaming free of data charges. He sat down with jon fortt to explain. Were unleashing music. So for our customers, all music streaming on we announce seven services, which account for about 85 of the music streaming will be free and will not be allocated to the high speed data bucket. Were doing this for, amongst other reasons, they can. How about the other guy . Either they cant or theyre greedy. Is that the ceo . Thats the ceo. He wears tshirts. Hes a record producer . Hes not a record producer. That was the stock trade, still . Tmobile as part of as part of a larger company, Deutsche Telecom the haircut and they do a deal with sprint. But yes. Thats the guy . No, its a type of a trade stock. Just kidding. Some people say is that the guy who snuck in yes. Some people think that his game has not to offer such cheap phones and to buy people out of their contract hes with the hope of eventually forcing somebody else to buy him because he does so much damage to their bottom line. Isnt the print guy, thats the guy that wears the trench coat at night in central park . What . Yeah. He has the ads where hes in central park wearing a trench. So i dont know, thats the compensation, thats tmobile sprint . He thats what it is. Im going with verizon and at t. Well tell you what he said about this amazon phone. Outside of the fact that the phone can look at things and tell me what it is, i usually know what im looking at except late on a friday night, and personal the phone is going to tell me what im looking at. The much a hardware announcement. It is tmus is the stock. Its a 26 billion and tease the company that spun off from deutsche. Right. Youre not one of the dominant players, so you sort of need yeah, yeah, i guess. Thats the game, though. And the good news is theyve kept prices down. Thats why i we were arguing we have analysis saying we dont think thats the same Business Model. May not be. When we come back this morning, bp unveiling its annual review of the Worlds Energy markets, a very timely topic driving Prices Higher for crude oil. He says the fed is looking at the markets. Thats enough time to record a memo. Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business. Built for business. Dad hes our broker. He helps . Look after all our money. Kid do you pay him . Dad of course. Kid how much . Dad i dont know exactly. Kid what if youre not happy . Does he have to pay you back . Dad nope. Kid why not . Dad it doesnt work that way. Kid why not . Vo are you asking enough questions about the way your wealth is managed . Wealth management at charles schwab. Thank ythank you for defendiyour sacrifice. And thank you for your bravery. Thank you colonel. Thank you daddy. Military families are uniquely thankful for many things, the legacy of usaa Auto Insurance can be one of them. If youre a current or former military member or their family, get an Auto Insurance quote and see why 92 of our members plan to stay for life. Good morning. And welcome. Welcome back to squawk box. Theres four in each group. Theyre down to 32. Group a group a is brazil, mexico, croatia and cameroon and cameroon is going home. Anyway, im joe kernen. Im learning. Work with me. People are happy because in the past i have told me for years. I know. The guy who has an app called the score, which apparently has the world cup, he wants you to download it. He said he wants to be considered for the disrupter series. Really . Not for this year, but he says for joe its cool, too, because theres a bunch of different stadiums in brazil and its beautiful and sunny, everybody is so psyched when theyre watching it. Im into it. As a citizen of the world, im kind of into it. Becky is here, andrew is here. Youve got to get up to speed. But you have to start with football, i mean regular football before you move on to this. We will start slowly. How about nascar . Ic still have nascar. Making headlines, prosecutors want to know whether Congressional Staff helped tip trade toers a chanrs to a chang. Subpoenas have been send. No word yet on whether these are the same employees that blew up the hard drives where apparently were never going to see those emails. Have you seen that . I did. Apparently the permanent nobody was they dont know. They claim the hard drives crashed and then they threw them away. You know what this is . This is like one of these moments. Remember the 17 but neckon got in trouble for it the. She had to have her foot over here going like this. But slees quoted as saying in fact she may have used the word shih tzu. She said shih tzu happens. And the other piece of it is when hard drives crash, there are people traditionally who can still get the stuff off it. Does either the nsa or google have these emails . One of them must have them. The. The nsa would have a better shot unless shes using a gmail account. Please move on. Bp is out with its annual review of the world energy markets. Krzysztof is Vice President for bp. Steve liesman is here today. Chris to have, its great to see you. Thank you for coming in. Good morning. When i think about the energy markets, the though things that jump to mind is whats happening in the United States, new ways of finding this energy we didnt know we had. When you look around the world, everything thats happen from a geopolitical nightmare standpoint, how do you put those two things together . We look at last years state. Oil has been throw. The lowest threeyear volatility since 1970. And underneath, when you look at production, you have these two developments wsh massive growth of production in the u. S. And a very, very high level of disrupgs in the middle east and north africa. In the u. S. , Oil Production last year, thats the second Consecutive Year where you have another record growth in u. S. Production. And dubai has been producing oil since 1859. If you want to fine tune it and do the numbers, it turns out there are nine other big increases until the in the history of global markets, all in saudi arabia. But six of those were based on the spare price existing capacity. So if you talk in terms of organic growth, expansion of production capacity, what happens last year in the u. S. , that was the fourth biggest increase in Global Oil Markets ever, all countries, all times. And on the other side of the coin, what you have is since the beginning of 2011, what people call the arab spring or the civil war in libya, ongoing disruptions of key producing iran, syria, sudan and so on. The interesting part is, you may ask with all these movements, why do prices keep stable . Because of the cumulative amount of disruptions over the last three years. So its an absolute fair statement to say if we had only had the disruptions which we have seen in the last three years, you would have seen oil prices shooting up, talking about reserve, damage to the economy. And if we had only seen the title production increases in the u. S. , talk about oil prices under pressure. Where did it go . In the United States, how big can it again . So far this year, it has been even bigger than last year. Up to 1. 3 million barrels. You think it would go up and gently start to decline in the 2020s. Where . What number . I dont know how much more because were sweeping the benefits of having invented this new technology. So Energy Economic detective work, and something doesnt square. If im not shaken but you show Energy Growth levels not expanding much but Energy Country congress in the United States is above it. What weve seen last year is a rebound very Strong Energy consumption growth in the oecb countries, the industrialized developed world, despite slowing Economic Growth. And a very sharp slowdown in the growth of Energy Consumption in the developing countries despite relatively robust Economic Growth. So who is wrong here . The energy numbers . Are the energy numbers wrong or the economic numbers or are we getting more or lessee efficient on either side . Before you answer that, you ever to see where it comes from. Massive growth in north america, massive slowdown in asia. Before then, its two countries. Its the u. S. Which drives china. And in china, its a massive, massive slow down in consumption and also a big slowdown in Oil Consumption. Last year, for the first time in 15 years, u. S. Oil consumption was stronger than the increase in china. In the u. S. , the acceleration of Energy Consumption comes from oil and 80 of that was consumed by the industrial sector. In the u. S. , people look at industrial but it cant be that the industrial sector is lessee efficient. That cant be. It has to be that theyre actually conassumption stuff and putting stuff out and were not measuring it. No. The story here, because of the legal restriction owes crude exports, theres a lot of light in refining and petro chemical stand. Why do you have this increase . U. S. Oil consumption last year, up the 11110,000 barrels every year. And i dont know why i waited with cheap and eventually into a stronger economy. I have a very hard time understanding why allegedly very strong growth, Economic Growth like in china should be combined with this massive slowdown in Oil Consumption and why that should only affect Energy Demand and eventual Economic Growth. One thing for jerry joe on the way in, i asked christoff about Oil Production. He said it could be better still. Im sure. In german . The world cup. Yeah. I missed the german game. They call it the german game because in the u. S. You have apparently a lot of players either born or raised in germany. Youre doing fine. This is fascinating. You know, they had to qualify to get into the world cup. And there were 820 mamps play. So get out of the 820 matches, guess how many goals there were. 2350, about three per game. Hockey is the steam tieng. Youre into it, too. Oh, man. What time i dont know what time it is, but im there. Michelle, thank you so much for coming in. And youre going down, by the way. Youre going down. I was listening to your oil. Okay. Were talking about oil and the world cup. First time in a row its an economy. No, no, the energy economy. What did you say . What did you actually its a little bit of american when we come back. Okay. Stick around. Yeah, girl you know, ive been thinking about us and, uh, i just cant fight it anymore its bundle time bundle mm, feel those savings, baby and thats how a home and auto bundle is made. Better he learns it here than on the streets. The miracle of bundling now, thats progressive. Alright, that should just about do it. Excuse me, what are you doing . Uh, well we are fine tuning these small cells that improve coverage, capacity and quality of the network. It means youll be able t post from the breakroom. Great did it hurt . When you fell from heaven awkward laugh . A little. laughs im sorry, i have to go. At t is building you a better network. We stathat the kid onhe thought the back of the bus might have a song that he has in his head but he just cant get out. With the technology of cloud, we change all that. I can sing something into my device. Up to the cloud it goes. Back down it comes sounding better. We break down the walls of creation, and we give music creation for the masses. Still to come, a special hourlong conversation with larry fink, the blackrock boss. Hes getting ready right now and were going to talk to him. Were going to talk about the fed, the economy, the markets and much, much more. But first, were going to welcome to the table franks. Hes going to discuss a deal with equity giant kkr when squawk box returns. Okay, listen up im reworkin the menu. Mayo . Corn dogs . You are so outta here aah [ female announcer ] the complete balanced nutrition of greattasting ensure. 24 vitamins and minerals, antioxidants, and 9 grams of protein. [ bottle ] ensure®. Nutrition in charge™. [ bottle ] ensure®. 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Tell your doctor if you have had tb, hepatitis b, are prone to infections, or have symptoms such as fever, fatigue, cough, or sores. You should not start humira if you have any kind of infection. Take the next step. Talk to your doctor. This is humira at work. Welcome back to squawk box this morning. Global payment processor first data announcing a 3. 5 billion private placement led by kkr. When we explain what it means i think it has some big ramifications. First datas chairman and ceo, good morning to you. Good morning to you. Whats fascinating to me about this is kkr is making an investment in your firm, but it is not kkrs lps, limited partners. Its not their fund that is doing this. It is kkr proper. It is the company kkr making a huge stake in your company. They dont normally do this. They dont normally use their Balance Sheet or historically havent. This is sort of a shift for them. What does this mean . I think when you look at the investment, and see 3. 5 billion you see previous investors, about 1. 5 billion, 1. 2 being kkr. Right. But the right preemptive that was kkr Balance Sheet or kkr fund . This 3. 5 is 1. 2 kkr, part fund 500. Right. From the fund. And 700 from the Balance Sheet. But you also see fabulous investors in there. And i think the whole thing is a testimony to the work thats been done for the past year, and the fact that theres a great belief in the future of this company. And that theres great belief that this is both a growth story, and a deleveraging story, in a what was a payment processor, and now is a Technology Innovation and solutions company. Right. I know you cant speak for kkr. But im fascinated by this, because as youre watching the big private equity giants now using their own Balance Sheet to do investments that i assume are strategic, so my question is longterm, do they try to pull you in to kkr . Well, i think you know, when i took this job a year ago, you know, i went in to business with kkr, i mean, and that was a Great Attraction to me. And its actually been way better than i even imagined. And when you work that closely together, and you work on a property that closely together, i mean the reality is kkr had owned a lot of this company already. So i dont i think this is an extension of what was already done, and a lot of sounds like kkrs fund owned a lot of this before. Yeah. Its not the firm owning it. And that to me is a huge distinction when the firm starts buying stuff. Anyway, that points been made. Lets talk about security right now. Because one of the i mean always sort of the issue du jour. Youre taking on the banks in some regards as youre doing a lot of the services that they have provided historically. Where are we in terms of where we were the last time you were on we talked about target and where that was. Right. And you talked about the new chips and all of the things were going to be seeing. But i think the was a couple months ago. Are we still continually advancing. You know, were in business with 4,000 financial institutions. Were a huge provider, were a partner with mastercard, visa, amex, discover, and as you watch this unfold, emv will happen. You know, theres those are the chips. That was the chip. Its both on the terminal. Right. Emv enabling it. And on the card, a chip. And we see a tremendous Movement Towards it. Right. I have a question that joe is going to laugh at. What would be the one so i was out in San Francisco two weeks ago. I have been a skeptic on bitcoin. Were going to go to income inequality and how youre adding to it with your high ceo conversation. That is not where i was going. We wont have time for that. Real quick, how much are you getting of the 3. 5 billion . How much, huh . Tell me. Dont go out. Really, where are you on bitcoin . Well, bitcoin i think the issue is Virtual Currency. Not bitcoin. And i think we should really think that we need to be enabler of what are good means of currency. And so we dont really focus on bitco bitcoin. But we focus on there is the potential at some point for a Virtual Currency. If that Virtual Currency doesnt have the risk in it, and that it becomes a way that our clients were in a client focus based. Were going to do it if they want to do it. Okay, frank, thank you for coming in. Congratulations. Huge number. We appreciate it. Thank you. When we come back our newsmaker of the morning. Blackrock chairman and ceo larry fink. Were going to be talking about the fed, the markets, and why he says companies should manage for the longterm, rather than the shortterm activist investors. Squawk box will be right back. Fifteen minutes could save you fifteen percent or more on car insurance. Yeah. Everybody knows that. Did you know there is an oldest trick in the book . What . Trick number one. Lookest over there. Ha ha. Madeest thou look. So endeth the trick. Hey. Yes. Geico. Fifteen minutes could save you. Well, you know. Welcome back to squawk box. For the next hour black rocks larry fink will be guest hosting. Many market moving topics to cover with the chairman and ceo of the Worlds Largest asset manager including the feds latest move. The crisis in iraq. Politics on the hill. And the impact on investor confidence. This squawk exclusive starts right now. Who was that . Our voiceover guy needs vacations, and he couldnt do the voiceovers before he left because he hes never gone on vacation before. Who was that . Was that an inhouse guy . Who . Brian lee. Werent you available to voice over were so used to our the fees are so high that they they came to me, i had to pass. You sure your insurance is high for your voiceover then we have a policy. Anyway, good morning. And welcome to squawk box. It could be names, im joe kernen along with becky quick and andrew ross sorkin. The futures at this hour. Whats going to make the market go to new highs . And i dont know if anyone really thought it was going to be the fed again. Because we wanted good news. Now we dont need good news anymore. Were back to 2. 25 for the year. And were back to being happy that the fed stays involved. Here we are again. Thats all we need. We dont need anything else. Which has some people worried including maybe our guest host. But well talk to him about that in a moment. Lets get through some of the head lines real quick. This morning investors are going to be getting a look at a number of key economic reports following the s p 500s 20th record close of the year. The labor departments weekly report on initial jobless claims. Thats coming out at 8 30 a. M. Eastern time this morning. Economists there looking for a slight decrease also going to get the philly fed index that comes at 10 00 a. M. Along with the index of leading economic indicators. Also a takeover deal in the Electronics Industry this morning. Former tyco unit finds sensor maker measurement specificsties for 86 a share. Thats a 10 premium over yesterdays close. Measurement specialties makes sensors used in medical, industry and consumer applications. Tmobile offering potential new customers a oneweek free trial. Consumers can sign up online to get a free iphone 5s and pay nothing if they return the phone a week later. Our own jon fortt spoke with the company ceo. Well have highlights of that conversation. And pier 1 imports today, that Company Reported quarterly profit of 16 cents per share. Missed estimates by four cents. Also cut its outlook for the year because of what its calling a highly promotional environment. The fed cutting an additional 10 billion from its bond buying program. Our guest coast had some pretty strong views on the feds tapering strategy. Heres what he said in an investment conversation just last month. The Federal Reserve is actually causing more disorientation in the marketplace, because theyre purchasing more than is being created by the treasury. And so and so i think they should just get it over with, and move on. I dont think it will be disruptive of the marketplace. Since they started talking about tapering now, rates are down 75 basis points. And, that tells me they have not been aggressive enough. Joining us right now on a squawk exclusive interview with larry fink the chairman and ceo of black rock, and larry, thank you for being here today. Good morning, everyone. When you said that we were all a little stunned. We played that sound bite the next morning and spent a lot of time talking about it. You think the fed should have been more aggressive. I think that the Federal Reserve purchases bonds they need to be aware of of the supply and the deficits have been being reduced because of tax increases, a little stronger economy. And as a result of it, the fed is actually more aggressive in 2014 in terms of how much they are purchasing versus the amount of issuance than they were in 2012. In 2012 we had a deficit of about 1. 2 trillion. They purchased a trillion dollars. Our deficit appears to be hovering around 400 billion. And you add up all the purchases this year, even with the idea that they are going to continue with 10 billion reduction every meeting, theyre going to purchase around 600 billion. So theyre actually more aggressive than they were in 2012. You meant that larry wanted the fed to be more aggressive in getting out. Yes. Is what you meant. Because it sounded like you said more aggressive. More aggressive. You get out more quickly. And i think theyve been more disruptive as a result of it. They havent gotten out quickly enough. Rates are much lower. Obviously we had other issues. You have ukraine. You have the uncertainty over iraq. You have the uncertainty around oil prices. Im not trying to suggest theyre singularly responsible. Since you were on saying that. I think afterwards, kohn came out and said theres no volatility and citigroup said were going to be down 25 . Is that what you were alluding to theyre somehow masking what the markets would normally be doing if they werent involved . I think central bank behavior has reduced the supply to the extent now that we are seeing more muted volatility. Thats what i think theyre referring to. Unquestionably youre going to have more volatility when all Central Banks behaviors are complete. I think the ecb is going to become more aggressive. Youre going to have central bank behavior but we havent seen the negative effects youre talking about. Were at new highs. Everythings great, larry. The central bank is making are you sure . Are you sure that they shouldnt be here . I mean it seems pretty good. I believe they should have been much more aggressive in reducing even if it meant we were 400 points lower on the dow or 200 points lower on the s p . If thats what it takes, sure. I dont think thats a problem. Another component of my views is i dont think we have bubbles in the marketplace. If you look worldwide were still seeing deleveraging going on. That doesnt mean we dont have mispriced security. Theres a big difference between mispriced securities and mispriced valuations versus bubbles. There are a lot of things that appear to be that once the Central Banks finished purchasing bonds, whether its the ecb or japan or the Federal Reserve, we will have different valuations. But one thing i do believe is certain, the options of the ecb last week is going to make certain equity markets are going to go higher. I think youre just making equities even cheaper. Especially when you look at where credit is in europe, lower yields than the United States. Would you buy italy at a lower yield but i would think that the worst Case Scenario that you describe, if its something really bad happened from this it would have to be brewing inflation. It would have to be stirring up really inflationary and it just doesnt seem like thats really the case. Although, we did have a pretty hot number recently. Theres no question that i believe were going to probably have higher trending inflation in the United States versus europe. I believe today we are seeing shortages of high educated labor in the marketplace. Theres now becoming more pockets of areas where people are finding it more difficult to hire people. And so we have this very Fragmented Society now where we have technology gutting jobs on the low end. Ultimately that transforms new jobs. Were seeing in some cases shortages of great workers in the high end. We believe even this year interviewing at College Campuses we have more competition this year than we did in the last few years. So youre just seeing, you know, a change albeit modest in the labor market. So youre going to have higher wages in the high end, and unfortunately youre still going to have wage pressure on the low end. You didnt think that yesterday . Yellen . Well, my struggles with the Federal Reserve they are not officially admitting the structural unemployment. Right. The problem is if they admit theres structural unemployment its a kruger argument. Then you cant do quantitative easing. And they dont see it coming supposedly. In his view. It already came. I think its tight on the high end. And obviously very loose on the low end. I think the problem is its so fragmented. Larry, let me just clarify when you said you dont see bubbles building in equities, but you do see some dislocation, does that mean you think things are potentially getting a little frothy in the stock market . I think the central bank behaviors worldwide, and also higher petroleum prices. We have more investors investing. Central bank behavior puts a floor on equities. So my view is what the ecb did is theres a risk in europe we could have a meltup in equities, not a meltdown. Theyre putting a floor, theyre making, you know, bond prices so expensive that youre going to be forced to go into other asset classes. This was the behavior of the Federal Reserve. Where are we now, here . I think the markets more fair priced here. The sun trael bank is further along. The u. S. Economy is further along. I would not expect to see large price increases in equities over the next year or so. Unless we see corporate earnings continue to do better. Were not seeing as much topline growth as wed like to see. Were seeing still great efficiencies. Companies are still able to have higher profit margins, but its more from expense reductions if its fairly priced now does that mean theres greater risk on the downside. Than relative to two years ago . Sure. But theres still upside momentum and were going to continue to have upside momentum. I still do u. S. Equities today. Youre a young man. You dont even have any gray hair and you built an incredible Investment Firm in and youre still young, based on your being an Expert Mortgage guy really. Thats your expertise and somehow you translated that into building one of the most i mean you have more money under management property than just about anyone at this point. So tell me about mortgages. What has the fed done right now, all this dislocation that youre talking about. Are Mortgage Rates totally dislocated . Should they not be here . Are we building another bubble . A bubble is predicated on leverage. So were not . You know, would i want to own Mortgage Rates at this price . No. Youd like to get a mortgage at this price . Sure. This is a you have a low rate that you probably are not going to see. Is it fake or should it really be here . No, its Monetary Policy doing its job. Purring housing. We have structural issues in housing that are, in my opinion, lower rates dont make that big of impact. And thats connected to student loans, and things like that. I think were going to have a structurally lower Housing Market relative to our economy than we would because of some of the indebted innocence we have with young people. Wealth creation this guy. How many jobs have you created . We started with eight and now we have close to 12,000. 12,000 jobs. 50 plus billion dollar market cap. Yeah. Brown hair. 4 trillion in whats the total . I something north of four. Youd make a really good republican. How did they lose you, larry . What happened . What do we do . If we leave the lights on in the last week ive had three republicans visit me. Im pretty balanced in my views. I mean, i may be more biassed towards being a democrat you like the private sector . I enjoyed my career. You feel guilty. No, i dont feel guilty. Do you . No, i dont feel guilty. But i dont pretend, either. You know, i may have very different views ceo compensations okay . Im not complaining about that, either. Especially complaining about other people . You think it adds to income inequality . Well get andrew on this in a little while. We should. Youre going to lead number three. Larry is with us for the rest of the hour. We will sneak in a quick break. Well have more with larry fink in the next hour. Plus, a live report from iraq, where the Prime Minister could be losing support from the white house. Squawk box will be back in just a moment. Welcome back to squawk box. Lets check the futures out. This morning after another high. And i was looking i looked, becky, 20 records highs in the s p this year, up 5. 8 . So thats kind of weird. Its like its because of the lack of volatility we were talking about. Youve seen fewer 100point moves. Youve got to divide the 6 up by 20 new highs. So youre talking about getting new highs when youre up 0. 3 of a point. Theres where we are today. Treading water so far. I guess weve got some numbers. What numbers matter now that we know the fed told us about the next two or three years . Then the imf says we should stay at zero all the way through 2017. We said that for years. We dont need earnings. We just need janet. Put your faith in janet. Blackberry. Were watching them today. The company posting smaller than expected loss. Revenues were slightly better than consensus. Were you watching it today. I wasnt focused on it. But now . I am you werent watching it. You werent focusing or watching. No. Now are you . Im considering it. Then ive done my job. Going to put blackberry into the ticker. What is blackberry going to end up as . If amazons got a phone, who still besides becky who still has a blackberry . Larry does, i bet. The wife. I have an iphone and a blackberry. For typing . You get twice when you dictate on iphone you have so much fun because you cant believe the stuff that she thinks youre saying sometimes. Its worth a laugh. But it does work most of the time but then you look at something, its like i believe the black bearry will continue as an andrew advice. The blackberry will continue as an android they will put the android on top of a blackberry and you will use your phone and be able to type why hasnt that been done already . I dont know. I think if theyd done it three years ago theyd be in a much better place today. Lets get an update on iraq. Michelle carusocabrera joins us from northern iraq. Michelle . Hey there, becky. Oil is at a ninemonth high. Brent trading at 115. Near 115 per barrel over in london as there are concerns about disruptions. So far, theres been no effect on iraqs exports. Even its production. By the baiji refinery under siege by militants. Its unclear who controls it at this point but it is offline. So in this part of kurdistan in this part of iraq to the east there is a gasoline crisis. Take a look at the lines that are all over the region of kurdistan and northeast of iraq, because 300,000 barrels worth of capacity were Refining Capacity has come offline as a result of the baiji refinery being under attack. And the number of people who are now lining up here because they escaped that part of iraq to come here to try to buy gasoline and escape violence has surged dramatically. And so the lines are extremely long. We went by one line that had at least 500 people. People waiting hours at a time. And keep in mind, its 109 degrees out today. We visited the largest refinery here in kurdistan. Its got a capacity of 100,000 Barrels Per Day produces fuel, gasoline, jet fuel, diesel, et cetera, also kerosene. Theyre running at full tilt. But when you have such a sur surge we may have just lost michelle obviously there are some difficulties when youre trying to get these satellites up and running. Well get back to her in a little bit. Shes been bringing us these constant updates. Larry your thoughts on whats been happening in the situation . At this point there are no easy answers. There are no clear solutions. No, its a very difficult situation. Its just its hard for me to understand where we should take this. The United States is supporting the sunnis in syria. When they cross the border theyre the enemy. It just does not appear theres a consistent prensive policy and i think this is the position were in. When maliki became the president , he stated that he was going to be an inclusive government. This is a number of years ago. It has been anything but an inclusive government. And i think this is some of the problems we have today. So the question he could raise is why havent we raised this issue about inclusiveness before we had this rye sis . You know, larry, were going to have Richard Engel on a little bit later. He made the point that we didnt support the sunnis when we could have and that they turned in to, when they were rat callized, they turned in to the isis now. So its not really specifically just the sunnis initially. Now its this radical group and if we had supported the more, you know, the more Mainstream Group initially maybe it wouldnt happen. I dont know what we can do either. But in your investment thesis, youre not even thinking about ukraine now, are you . Are you thinking about either one based on what to do with money . I mean it hasnt seemed unless you think oil, none of this seems to have affected the financial markets. Well, i was in europe for a true weeks, and i had 50 bilateral meetings and nobody brought up ukraine. I was kind of surprised and i left europe a little more worried. I think the uncertainty in iraq is going to make europe a more difficult place. The problem we have in europe and this is why im medium term bearish on europe is their Energy Policies are terrible. They have the highest energy the highest energy cost of any Major Carrier in the world. Germany right now has the highest electricity costs, so, its going to theyve given up on nuclear. Yes, they gave up nuclear. And france has not begun ever fracking. Theres even a pipeline from algeria to spain. But it tops at the pyrenees. So theyre so actually spain is not harmed by all this because they have a source of energy because the rest of europe is much more dependent on russian oil. And natural gas. Well continue this conversation. It does lead to a lot of questions. You said youre negative on europe but you also said the potential is for a meltup, not a meltdown in the short run. The short run, yes. A meltup here in the u. S. A little bit. No. Not meltup. Were up 5 , 6 . Can we be up another couple percent between now and year end . Sure. Were going to talk much more with our conversation with blackrocks larry fink. Later in the show a disruptor 50 member. Going to find out how the company is breaking ground in the biotech world. Squawk box returns right after this. Time now for todays aflac trivia question er that in. Nice. Wrench . What . Aflac so this is who you brought to help us out . Oh yeah, hes the best. He doesnt look like hes seen a tool in his life. Oh, he doesnt know anything about tools. Aflacacacacacacac but when i broke my arm, he lent a hand. He paid my claim in just four days. Four days . Wow find out how fast aflac can pay you at aflac. Com. Better. In a we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Over 1. 2 billion eyeballs are on us during the two weeks at wimbledon. True tennis fans want to know whats happening, they dont want to just see whats happening, they want to know and understand why its happening. Anybody can just put data up, but we want to get a reaction, make it far more interactive. We rely on the cloud to provide that immersive digital capability. Now the answer to todays aflac trivia question welcome back. American apparel has now suspended its founder ceo and plans to terminate him for cause. I dont know if youll have comments about this. The board citing an Ongoing Investigation into alleged misconduct. The Company Cautions the move could leave it in default under its credit agreement. It says that it will talk with its lenders, and a regulatory filing in april said that charney has been caught up in several legal cases asserting claims of sexual harassment, assault and battery. First the nation through the internet defamation and other related claims. That was a boring story. You obviously know a lot more about whats the real story here . There have been allegations for years. Yes. That he has been involved with employees. Okay. That he has taken pictures. Hes invited people to his home. Im not saying the post has been running there have been allegations for a very long time. Youre still dancing around. All bosses have involvement in some way with employees. Youre talking about some some other type of involvement. And they took pictures of us here all the time. Be more specific. Youve seen the ads for american apparel. Theyre very suggestive, could i just suggest. Suggest of . Sex. Sex. The new tesla car models, arent they . Year. All right. Weve got to go. Well talk to larry more when we come back. At optionsxpress our clients really appreciate our powerful, easy to use, platform. No,thank you. We know youre always looking for the best fill price. And walk limit automatically tries to find it for you just set your start and end price. And let it do its thing. Wow, more fan mail. My uncle wanted to say thanks for idea hub. He loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. Open an account and get a 150 amazon. Com gift card. Call 18003303136 now. Optionsxpress by charles schwab. Last year our first ever disruptor 50 included Ten Companies that filed for an ipo or went public. Welcome back to squawk box, everybody. Financial information provider Market Pricing its ipo at 24 a share. Thats the midpoint of the expected range. That values the company at about 4. 3 billion. Red hat raising its earnings and revenue forecast driven by strong subscription growth. The companys ceo says that red hat is benefiting from an improved i. T. Spending environment for open source enabling technologies. And House Republican lawmakers will be meeting privately today to elect their leadership lineup for the rest of this year. The gathering comes after leader eric cantor lost his primary race. Kevin mccarthy is expected to win the number two job. Lets get back to our special guest host larry fink chairman and ceo of blackrock. I thought of a couple of different ways to launch into this, larry. I was going to do some off ram ka stuff that we talked about. But maybe just lets start with what just for investors now. You manage a lot of money. And people talk about how difficult it is to get any type of volatility to distinguish yourself from an index fund or Something Like that. Where is it . Youre stuck with the stock market right now that you feel just by definition is not really necessarily trading on midals . Is that what blackrock is telling people to do . Blackrock is trading on fundamentals. The fed is here. The fed is here. Thats a major component of what you think about in terms of investing. Its trading on that youve had raising earnings from whether its top line or bottom line, youre seeing better earnings across the board. And you have just a huge pool of money that needs to be put to work. If you also know include this whole concept of longevity and people are living longer the concept of focusing on longerterm investing is very important which leads you more to equity investing, too. I think the combination of longevity, combination of a very dovish Federal Reserve, a very dovish Central Banks in japan, and in europe, and as a result i believe equity markets will do youre not going to have as much volatility and this is why, i believe, the lack of volatility force you to have a longerterm view because youre not going to make as much money trying to move in and out of the market. As an asset allocator at blackrock would you increase your cash position higher than your bond position right now . You still could make money in some Credit Strategies if you believe the Central Banks will continue to be dovish. Youre making higher yield earning in intermediate bonds than you would be in cash. And so, there is time to continue to earn. Is it lighter right now than historically your bond, what you would allocate for bonds right now, blackrock . Is it a lighter percentage than historical average . Youre seeing more allocation towards alternatives. You said you agree with that at blackrock. It depends where. I mean, alternatives could be real estate. Could be infrastructure. Could be hedge funds. And private equity. But were at i dont i would have a higher allocation in equities than i normally would be. I would have a lower allocation in bonds. Ive been saying that for three, four years. Youre not changing . No. What would be the Tipping Point for you . Corporate earnings starting to fall. Corporate earnings starting to decelerate. A more hawkish Federal Reserve, a more hawkish ecb. I dont think youre going to see that. I mean, what the Federal Reserve said yesterday, theyre going from extremely dovish in my mind, to just dovish, and so and were still talking about low rates are going to remain low for many years. Thats a Great Foundation to be in higher yielding fixed income. And thats a Great Foundation for equities. Activist investors get a lot of time and attention from the media including right here. They come on and talk about their strategies. Youre a longterm investor, and you have a bone to pick with some of the activist investors. If its a situation where the activist investor gets in and pushes for changes that are shortterm profitable but not good for the longterm investor. So 70 of our equity ownerships in the form of index funds or etfs. We have to own these companies. Whether we like them or not. If theyre part of the index we have to own them. We have no choice but to be a very longterm investor, because were going to own these stocks as long as these Companies Remain in indexes. So, we have to make sure that the companys behaviors are focused on longterm. So my letter i did not have any words suggesting activists. I think the media made a play that it was an activist statement. It was not an activist statement but its sexier to us. We also want to hear from the longterm investors. There needs to be a voice. A louder voice from longterm investing. This ladder that we went out we received more feedback than anything weve ever done in the firms history. Feedback from the ceos. Ceos, but also from different sources, like people think we need to now focus more longterm can you speak, though can you speak to the activist investor issues . Do you think of i mean if bill ackman were here or carl icahn were here they would suggest to you that they unto themselves are longterm investors that theyre in stocks for a year, two, three years i wouldnt call that longterm. That becomes the question. What is the definition of longterm. 5, 10, 20, 30 years. Warren buffett style. What would you do i think wouldnt worry about volatili volatility. Its a wall street problem, its a trader problem. It is not an investor issue. 30 years ago you bought eastmankodak. 30 years ago you could have bought 30 years ago, apple. Better be right. From a policy perspective what would you do, though, to actually create more longterm holdings. And by the way, i dont know what the average turnover the average turnover in active funds these days is close to like 99 in 12 months. Correct. Still. So im not trying to suggest and some are active funds. Some are active funds. We may have that type of turnover. So i mean, so so then are you a longterm investor or shortterm investor . Were both. And but 70 of Equity Investments are index based. And so, unquestionably some of the activists have done some really fine investigation, theyve actually forced better behaviors from some companies so thats what im saying we did not attack activism, we attacked the notion that ceos should be focusing on longerterm outcomes, not just shortterm outcomes. They should not be just focusing on stock repurchases and dividend increases. They should be focusing on what would be the best outcome for longterm investing. Dan lobe called me and said he thought the letter was good for what he was doing and what were trying to achieve. So this was not an attack on activists unless an activist was suggesting, go issue a largescale sums of debt and buy back equity. But larry, what you did was provide cover for some of the ceos who have felt pressured by activists, who i think your point is not respond to just one group of investors. Make sure youre looking at the long term. Correct. I dont know if weve given koufr. If the bad Leadership Team in a company, i hope i didnt provide cover provide cover from reacting to quickly and improperly to just one group of sharmds . Longterm investors need to be louder. And they have been pretty silent. The letter was, that we are going to be louder, were going to talk to our companies that we own stocks in. We are we develop this whole proxy team that blackrock that is independent, that is having dialogue continually with companies. And, because of that, we are not going were not outsourcing our vote to these we internalized it, and were were just suggesting to companies have a dialogue with us. Talk to us before youre involved with a proxy voting company. Talk to us if there is any issue, and we could provide you with our views. And our views tend to be focusing on the longterm opportunities a company can provide. I do believe were starting to see a change in capital expenditure. So if you look in the First Quarter were beginning to see Rising Capital expenditures. Another reason why i think the economy is doing a little better, and more importantly, why i think equity markets are going to do better. Were not focusing on that enough. Capital expenditures are starting to improve. Now, hopefully our letter had something to do with. And maybe that was already happening. But i do believe we need to be getting back to the basics of building, you know, more manufacturing in the United States. Hopefully through that process were going to create more jobs. Larry, stick around. Were going to keep this conversation going. A lot more to talk to larry about. But youre not ordering im not ordering larry to stick around. Hes changing the seat there. The fed decision and your money. Were going to talk about it. What should you be taking away from yesterdays meeting. Steve liesman is going to join us and guest host live to discuss all of that. In the meantime check out the futures this morning. See how things are setting themselves up. Dow looks like it will open off 5 1 2 points. [ male announcer ] the mercedesbenz summer event is here. Now get the unmistakable thrill. And the incredible rush. Of the mercedesbenz youve always wanted. But you better get here fast. [ daughter ] yay, daddys here here you go, honey. Thank you. [ male announcer ]. Because a good thing like this. Phew [ male announcer ]. Wont last forever. See your authorized dealer for an incredible offer on the exhilarating c250 sport sedan. But hurry, offers end soon. Share your summer moments in your mercedesbenz with us. Welcome back to squawk box, everybody. We are speaking with blackrocks chairman and ceo, larry fink. Were going to get back to larry in just a moment. But stocks have been liking what janet yellen had to say. Steve liesman joins us with more on yesterdays fed decision. It was interesting Market Reaction, becky. The market reacted almost immediately at 2 00 p. M. With the statement. And perhaps to the statement that made clear there were no serious concerns with inflation. It was kind of like i sounding the allclear signal on the issue. Then it takes off after journalist questions asking fed chair janet yellen to directly respond to the recent uptick in inflation in the Consumer Price index. The recent evidence we have seen abstracting from the noise suggests that that we are moving back gradually over time toward our 2 objective. And i see things roughly in line with where we expected inflation to be. I think if you look at the sep projections that were submitted this time, you see very little change in inflation projections of the committee. So what happens is the fed funds futures actually, theres a december 15, you can see that it comes down. The yield comes down, and this is part of the stability. Larry was talking about lack of volatility. It is an extraordinary time period to live through right now where what were talking about is where the fed is going to be in december 2015. And this has been in about a 30 basis point range for about eight or nine months now. Okay . And then take a look at the new fed funds forecast. This is the median. 1125 is really the number there which was up 0. 8. 20162. 5 up a quarter the long run 3. 75 thats down a quarter. But i have been calculating by the way this hawkless. Warren picks out the top three guys and its much more muted. The long run, the top three is 2. 5. Goldman saying changes to the june fomc statement were limited and on balance just slightly more dovish than expected. The weakness in wage growth remains a key policy driver keeping an eventual rate liftoff pushed back probably not until the second half of next year. This is how yellen thinks about wages. Noninflationary wage growth is inflation which is at 2 plus productivity is 1 , thats 3 . Were currently at 2. Yellen pretty specifically has said, shes willing to abide wage growth of 3 to 4 . Larry how sensitive is the market right now when it comes to these Inflation Numbers . How much time does yellen have to say, its noisy if these numbers keep going up . I think obviously if the noise is loud you know, more than 0. 4 , and gets higher, then shes not going to have as much time. I just dont i think it is noise. I dont think there is that much inflation within the economy. So, i think she has more time. I would like to see wage increases too. I think thats one of the big problems we have in the economy. But marketplace is has been always understatementing janet yellen since she became fed governor. How . I think she is more dovish than expectations were and she continues to be quite dovish. We need to see what the new with stan fisher joining the Federal Reserve is as vice chairman. We need to see how that changes and does it move a little more to the center in terms of the debate. But right now i think its heavily more dovish than weve all expected. Do you think shes more dovish than bernanke would have been . Yes, i do. Do you think that . I dont. I actually think theres a case to be made. And this is a slightly depp rat argument, that yellen is more like greenspan than bernanke in the following way. Yellen doesnt let the dee tails get in the way of the big picture. The same way greenspan did. Bernanke, i think, overestimated the markets ability to handle detail. Yellen is like you know what . I got inflation problem, its noise. My idea is im dovish, im dovish for the long run and kind of discarding some of that. I think yellen, as a governor, or as a president , is going to be different from yellen as the chair. I think her inclinations are dovish. Im not going to be able to follow through with that, larry. What im saying is pretty consistent with what you just said. I do believe she has a foundation that tends to be more dovish than bernanke did. I think she actually is more worried about income inequality than maybe bernanke is and i think this is one of the foundations of her views. I think her whole foundation of being a berkeley economist is an indication that, you know, she is more focused on thats great that savers can make nothing and yet all the money flows to guys with access in the stock market. That really helps for income inequality, larry. She must be really concerned. Maybe we can stay at zero forever and never be another saver make a dime. That was totally contradictory to whats happening what you just said. How could she be concerned with income inequality and continue these policies . Because, joe, because she is trying to find ways to keep you know whats the other side of the rap . The other side of the rap you dont think the reason that that the last five years weve seen, i mean its been housing, because its been the owners of assets youve got to own assets. Bernanke who said assets and the owners of assets made money bernankes view that would have suffered even more talk the talk and say i i dont get it. I dont get it. You give the fed a job to do. If youre only playing the equality game. The big problem is we have government not doing anything to assist. Were not creating jobs through infrastructure. Theyre doing plenty to not assist. The fundamental problem is the only game in town are Central Banks. This is a problem we have worldwide. This is one of my fundamental views. Were not going to have as much central bank behavior in the next two years. Are you in the krugman camp, larry, that the government didnt do enough . Hes in the kruger camp. Were going to get larrys answer to that question when we come back Steve Liesman thank you for being here. Were also going to get the latest on the situation in iraq. Markets on edge this mornings investors watch that situation closely. And then the 26th annual morningstar Investment Conference is under way. Cnbcs going to be bringing you guests all day long in the next hour aerial investment chairman john rogers is going to join us. Also chairman of the president s add viedry panel for Young Americans. And larry fink when we come back. Lets get back to our special ghost host, larry fink, chairman and ceo of blackrock. Before steve left we had he asked you a question about whether you thought that you were more aligned with krugman in terms of what type of stimulus needed to be done earlier. Well, im not going to talk about the timing of stimulus. But i do believe Going Forward we need to have more governmental policy. I think the Federal Reserve cannot do it alone. I think this is why, you know, i think they believe they are only doing it by themselves. And thats why they have been more dovish for longer which joe is correct in talking about what it does to savers. So i agree with him. And we need some form larry, the government policy mean reforming the tax code . Sure. Okay. So thats we need to have youre not talking about a keynesian government stimulus policy. A little bit. I know he is. I want him to say it. I want him to i believe one of the great if you look in the 1960s and 70s and 80s we spent so much more governmental money on infrastructure. Do you have a place where we could fill the holes to build back up again. Airports. The grids it should be publish private. It should be states, too. The problem is federal government is i just spent a couple days in mexico. And zkz one afternoon . And the government there is now working with investors worldwide to invest in infrastructure there. So theyre making it, theyre cooperating and creating this Public Private atmosphere that foreign capital can come into mexico and work side by side as they do the reforms. More and more countries are putting more and more effort towards this Public Private. Weing were go to repatriate some earnings abroad but they wont we need a comprehensionive tax reform. We need to be focusing on infrastructure. And that is one way of creating jobs. And were not going to have the same strength in housing for the next ten years because of the student loan issue. And were going to need to find ways of creating jobs and thats going to be an infrastructure, and i think its a huge mistake, and joe you may disagree with me. But i do believe there has to be a Public Private type of combination is there a fix on student debt . We have to besides lowering the cost, obviously . Maybe changing fico scores a little bit so the biggest problem is there are 40 million americans who have student debt. Average student loan is 27,000 today. And so, this is why were seeing a housing not accelerating. Because theres so many young people sitting with this debt load. Theyre not going to be able to qualify for a home because they have this debt load. And unless we change things like fico scores, or were just going to have to accept were going to have a less dynamic Housing Market, because so many Young Americans are going to be are going to be priced out because they dont have the savings to offset their student loan and having enough for a down payment for a home. Can i ask you a blackrock or industry question . Yes. You talked a lot about policy today. Yes. Pimco your biggest competitor. Who . No. Theyre one of your competitors. They have been losing assets. There has been obviously a lot of commotion around whats going on. What do you think is happening there . What happens to that firm. You must have views. Its a great firm. Ive known bill gross for hes got a lot of putting it on the same level with blackrock is what he was saying. Take great offense to. I mean he immediately took issue with that. You have a high bar we have more business in equities than we have in fixed income. They are a great fixed income house. Blackrock is a great mixed income house. There are going to be moments where they pick up market share and those moments are going to lose market share. Moments were going to pick up market share and other times well lose market share. Were at a point now where were picking up market share. Thats what you get what do you expect from me . I dont know. They were like in the bottom 5 of all bond funds. Can you say that . You could say that. I dont want to say that. Oh, you did. Were going to thank thank you for a wonderful hour. Thank you guys. Come on back. We enjoy this very, very much. Thats good. All right. Coming up the feds upbeat outlook and where markets may be headed. Pantheon Macro Economic chief joes Ian Shepardson is here. And then value is the name of the game. Ariel ceo john rogers joins us live. In a world thats changing faster than ever, we believe outshining the competition tomorrow quires challenging your Business Inside and out today. 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Ceo of moderna is going to join us as the final hour of squawk box begins right now. Welcome back to squawk box, 8 00 right now. Were all here. We are first in business worldwide. Im joe kernen as you know. This is becky quick in blue. Hi. Resplendent in blue. Andrew ross sorkin is over here. Hi, everybody. The man of three names. And the dull ties, typically. Dull ties . You dont wear yellow. I dont wear yellow. You dont wear red, you dont wear green. That red is bright. It is bright. On blue, though. Okay, looks good on camera. You know who had a good tie on. And its thin. Its thin a little weird though. Think had a good tie on. Larry good a good tie on. This tie is making its debut. Were all here. We all, look good to at least in our own mind look good to ourselves. Futures this morning is, trying to consolidate yesterdays gains, after we hit another new high in the s p. Thats the 20th this year. Were up 5. 8 . And theres been 20 new highs and its only moved 5. 8 . So that shows you it has been sort of not a lot of off and not a lot of volatility. And that makes people complain although do they want volatility if it means stocks going lower . I guess they do. Then you can buy them and make more money as they go back up. Lets get you through some of the head lines. We told you earlier blackberry, getting a boost in early trading. That Company Posted a smaller than expected loss. Still a loss though and Gross Margins did improve. Revenues slightly better than consensus. Also prosecutors want to know whether Congressional Staff helped tick traders to a change in health care policy. Theyre gathering evidence for a grand jury probe. Wall street journal reporting that the s. E. C. Has sent subpoenas to the house ways and Means Committee and a senior Congressional Health care aide as well. Weve been talking all morning about the amazon fire phone this morning. The pricing surprising some. People had expected it could be a little bit cheaper than competing products. There you can see him jeff bezos showing off that phone just yesterday. It is the firstever amazon smartphone. It goes on sale for 199 for 32 gig bytes. And 299 for 64 gig bytes with a twoyear at t contract. Its exclusive with at t. And john forbes is zbg going to join us more in the next half hour to go over the details. I think were all a little perplexed about this. Well see. Yeah, okay. Shop from your phone. Its just that, you know, whos going to compete with apple in terms of innovation . And if someone said amazon you think thats not what they do. They have big warehouses where they get things that they send them to you and whatever you want you can get. Theyre moving into food and all that. You dont think that they innovate phones. Maybe its not that hard to get a base level phone . Theyve innovated. You can get the 3d thing. Id like to see one in person. The phone market must be wide open. Has google made any money on the phone . No, googles lost money. Its not necessarily a bad thing though, right . I wouldnt think that theyd say its not worth it to have it out there. Right. Once i got it, its really good. It is. I havent downloaded that many apps. But the ones i have i use. Investors continue to Pay Attention to the situation in iraq. White house Officials Say the u. S. Is unlikely now to use air strikes due to a lack of clear targets. Meantime the wall street journal reports that the Obama Administration is using iraqi policymakers in an attempt to form a new government without Prime Minister nuri al maliki. Joining us on the squawk nzline from baghdad is Richard Engel. Nbc chief foreign correspondent. Is this a new story . Did you have wind of this, that this guy does not have the support of the United States anymore and does it matter at this point . Are we still kingmakers in iraq . We are not still kingmakers. To be honest, we really never were kingmakers. I dont think u. S. Officials had a lot of confidence in maliki from the beginning. But yet we still backed him. And this is one of the weird things about u. S. Policy. And ive been watching it now in action in war zones for a long time. We never liked karzai in afghanistan, either. We had no confidence in him yet we stood behind him even when karzai stole elections, and got elected time and time again. And then when things started to go badly with karzai, and i know im confusing countries here, but ill get to the point, then when things started to go badly we blamed karzai, hes the problem. But we always stood in his corner until then. Now you hear these unnamed u. S. Officials coming and saying well malikis a problem. Its all about maliki. Well malikis been there for a long time and hes been to the white house and hes had u. S. Support all along while hes been doing these disastrous policies that have led to what were seeing now which is the collapse of this country. Everybody knew it. I reported on it. Others reported on it. This is not a new problem. Half of the people in the u. S. Government thought maliki was sectarian and wouldnt be able to lead this country. So now its a little bit disingenuous when you see these unnamed officials talking to the New York Times and wall street journal say well, you know, we want a new government that doesnt include maliki, because we dont have confidence in him. Well, where were you when he was doing all these policies for the last several years . What are we going to whats going to happen next . We seem to be in almost not a news lull, richard, but what theyre sort of outside baghdad, theres not going to be air strikes. What do you think is next thats going to be on the front page . I think the next is probably this political thing. There are meetings here. This is why im saying the u. S. , were not kingmakers but by making these leaks, by putting these statements out there, were signaling other iraqi politicians that hey, theres now political space. The game is afoot. And ive been watching and listening to iraqi media, and listening to the raid yeah, and there are plenty of other now politicians in this country calling for malsy to step down. And i think this is going to get solved internally. I think its going to be solved at least on the government side. Within the shia camp, there are meetings going on in najaf. Hes always been the kingmaker in iraq. It is the holy shiite city where the religious clerics sit. Theres meetings going on in that religious holy city behind closed doors. Where they are looking at the chess board. And the u. S. Is now signaling to them, hey, it would probably be a good idea if you got rid of maliki and put some of the other figures on. I think thats the phase were in right now politically. I dont know if thats going to be enough to stop this conflict. Because if they just, you know, pick another name out of the magic hat, and its another name that weve all heard of before in this country at least then i think we still have back to where we were, which is ethnic divisions, religious divisions, and violence. Youre listening to the radio how is that for cheery . Im trying to figure out how you can listen to the radio. Youve picked up enough arabic to be listening to i speak arabic. Ive been working the middle east for 18 years. [ speaking arabic ] i resent that. I resent that. You dont know come on i resent you the questioning. Ive been working in this region for almost 20 years. There you go. Its amazing. Okay. Figures. The figures, richard. How else theres not someone there translating for people listening on the radio. Richard engel we hope to speak to you soon. Well get you in front of a camera. Thanks for joining us. My pleasure. Getting back to the u. S. Economy fed chair janet yellen say the fed expects the chairman to move back to the 2 target but many were surprised she didnt have more to say. Joining us is Ian Shepardson. Chief economist at Macro Economics. Were you in that camp of people who were surprised that she wasnt saying more . I wasnt surprised. I was hoping she might say some more. I wasnt surprised that she didnt. Its too early. The upturn in inflation in the data is really the last two or three months. For a fed, you know, concentrated on mediumterm policy its easy to dismiss it as noise. When steve asked the question in the press conference yesterday she just said its noisy. Well it is noisy but there is some stuff going on there that i think theyre kind of deliberately downplaying. Im worried theyre going to find themselves blindsided as inflation picks up further through the second half of the year. Then theyre going to have to scramble. Thats when the markets get upset. Thats what theyre set being themselves up for. Weve got pressures on rents, drug prices, airfares, Hotel Room Rates, Business Confidence and margins are rising steadily. Quite sharply in some cases. A lot of stuff going on. Airfares are going nuts and Hotel Room Rates are lodging away from home in the cpi. This is not an accident. This is because demand is picking up. In the case of the Airlines Capacity is being reduced. Theres scope for margins to be pushed higher. Thats an interesting argument about market expectations. Youre saying she could have missed an opportunity yesterday to easily gradually let a little bit of air just to let a little bit out. But theyre stuck, you know, the fed statement after the meeting stuck pretty religiously to the usual line which is that all the risk is downside and weve got to be concerned about the risk of excessively low inflation. This was an opportunity just to tweak the language a little bit. Not enough to scare anybody enormously. There would have been panic. But to pull back a little. Maybe see a drop of 100, 150 points in the market. Not a big deal. Not the end of the world. Its better to have those expectations of a change in policy come through than to wake up one day and say oh, we werent expecting this and we now find ourselves with core inflation on the core pc deflator the number that they target could easily be above 9 end 50, you know, end 60 target by next spring the way that its moving at the moment. Theres been a lot of very favorable onetime factors that have pushed it down the Financial Services component. The Health Care Services component. These things are technicalities that are in the process of unwinding already and at the same time were seeing margin pressure in the ppi. Theyre picking up quite rapidly. This is not an accident. I think businesses are looking around and saying hey, we cant find the people we want to hire. Were going to have to pay more for them. Wed better start dont agree with you on any of this i didnt say me. I said she doesnt agree with any of the things and i agree politics. But she doesnt agree and your keynesian stance. She at this point was like music to a stock market bulls ears yesterday. She said both of our mandates are satisfied by just that were below on the inflation target and still too high on unemployment. Id rather be cant we be ostriches and just stick our head in the sand and say that, you know, theres how many people are not working . Always 92 Million People are not working. You point out and larry fink pointed out if you need someone to do something specific, you may have to pay up and theyre not in that 92 million. You cant find them. The yellen view is a lot of these people whove left the labor force will gradually come back in as demand picks up. But employers dont want them. Employers are not looking at them. You look at the Small Business nfib which has been running for 30 something years its reliable its telling you Small Businesses cant find the people that they want and theyre expecting to have to pay more. Theres a very serious divide between what youre saying and what most and what other people say. I think about 50 50 when i mentioned fieldsteins piece that the fed doesnt understand that inflation is coming back other people say hes absolutely wrong. Theres nothing to indicate that theres inflation on the horizon. There is its amazing. An awful lot of evidence. It is amazing. A lot of people dont want to believe it. It feels good. Of course it does the markets going up. We could do both. Theres no theres no risk. But this you know this situation to me is getting to be sort of reminiscent to where we were back in, you know, in 03 after the fall of baghdad. The economy almost stalled during the iraq war. The first fall of baghdad. It hasnt fallen again yet, has it . That was the second. Were waiting. But in 03. Everyone was very gloomy. The economy had stalled. The fed carried on on the gloomy deflation tack they cut rates in june 03 and the economy grew nearly 7 in the Third Quarter of 03. It was a huge mistake to cut rates. Were not quite at that extreme and im not looking for 7 growth in the Third Quarter of this year but the risk is, i think, to the upside and looking at Small Businesses again, their sentiments at a sevenyear high. This is not an accident. You know, this is a real change. And the market is just choosing to ignore it. Ian want to thank you very much for coming in today. Always a pleasure seeing you. Thanks for having me. Okay coming up. The morningstar Investment Conference kicking off yesterday. Were going to bring you guests all day today right here on cnbc. Up next he has 9 billion under management and hes also squawk platinum portfolio member. I think thats probably his biggest title. John rogers, of Ariel Capital is going to join us. Check out the squawk box market indicator. Youre seeing some green arrows across the board. Back in a moment. With all the opinions about stocks out there, how do you know which ones to follow . The equity summary score consolidates the ratings of up to 10 independent Research Providers into a single score thats weighted based on how accurate theyve been in the past. Im Howard Spielberg of fidelity investments. The equity summary score is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Nicewhat . Nch . Aflac so this is who you brought to help us out . Oh yeah, hes the best. Hmm. He doesnt look like hes seen a tool in his life. Oh, he doesnt know anything about tools. Aflacacacacacacac but when i broke my arm, he lent a hand. He paid my claim in just four days. Four days . Wow its no accident aflac pays fast. Find out how fast at aflac. Com and remember,accidents dont hurt as much when you have aflac. Better. Cnbc is live at the 26th annual morningstar Investment Conference where top advisers and strategists convened to discuss whether finding opportunities in the markets and join us now to share this Investment Strategy is john rogers jr. , chairman and ceo and cio, that i is what were interested in, if youre the chief john, we want some names, all top down macro stuff today. We want to delve into some of your favorite stocks. You have 9 billion under management. Youve talked about certain names before. Have you hung on to them . Added to them . You got any new ones . Well, weve been adding to some of our alltime favorites Companies Like Madison Square garden that weve owned for quite a long time. The thing is its extraordinarily valuable today, this recent 2 billion deal with the clippers makes it feel like Madison Square garden is worth a lot more than ever and of course the new york knicks, new york rangers are probably much more valuable than people had anticipated. A lot of, you know what, its funny that you say that. I can name great things about everything that you just said. Youre right. The rangers obviously, all of hockey was under priced probably three, four years ago, after what we saw in the stanley cup this year. That was riveting. And then the knicks got, you know, got a new coach, everybodys excited about that. And then you mention, i think youre absolutely right. That makes sense for msg and live content is king, john, because you cant, you know, you cant fast forward through all the commercials. Youre exactly right. Theyve got a Great Television deal, which is extraordinarily valuable, continue to get more and more valuable over time. You think about that downtown real estate, and just this idea that over time, you know, sports programming is more important than ever. But you dont think theyre going to sell the real estate, right . The people have made this as much a real estate play as even a content play. You know the rumors are the dolans really like having everything together and theyre more likely to be able to do more transactions, buy more businesses, and add them to Madison Square garden than to do any types of major divestments. At the end of the day even though the dolans are controversial theyve added a lot of value for shareholders. In sports its just clear to me, i dont know its not that theres nothing else on but suddenly im sitting there for four hours watching soccer now. And i never would have believed it. But its the high def stuff. Its the high def tv and the high def programming. Your own maturation. Is it me . Yes. Might be me. Hockey and soccer, i would have never, ever admitted it. Give us some more names. Mario likes that stock. Mario likes msg . I thought it was an additive. You know some of the problems these days going on around the world we still think that companies that are related to the oil and gas industry are very, very valuable. Our favorite name is bristow. Theyre providing helicopters to get people out to where the deep wells are drilled in oceans around the world. They have this great, great brand. Theyre also big in search and rescue around the world when you need to go out to the high seas and save people. So we think theyre well positioned for this environment today. Is that an old name or a new name . Thats a relatively a name weve owned for several years. Not one of our long thytime favorites for several years. This is one weve owned for the last several years. We just heard larry fink, we kind of looked at him when he said, longterm, because we said well there are activists who are longterm. They own for two years or three years. He said im not talking about two or three years. Im talking about 15, 20, 30 years. So thats possible to do that. But i mean you might have owned you might be sitting on eastmankodak or i dont know digital equipment or something. I mean things change, dont they . How do you know . We try to find those brands, as Warren Buffett talks about, that you think will be around for the next 10, 15, 20 years and weve been able to find some of those over the years and own them, literally for 15 or 20 years continuously. Sometimes we trade around the ideas. But often well hold them. Not only t. Roe price. Companies like snuckers that have been in the portfolio seemingly forever. We have big brands that you feel highly confident and theres going to be real barriers to entry. What about bally . We own the slot machine manufacturers and the casinos off and on for more than 20 years. Bally technologies we think has really preeminent brand when it comes to traditional slot machines. They also bought chevelle master. All these table games that have all the types of things where three card poker or new types of games that theyre playing shuffle master provides the equipment to make that happen. And even Traditional Games like blackjack, you need to have fancy shuffle systems. And its a Worldwide Global business, and technology and shuffle master truly dominating. Have you bought anything new in the last two weeks, john . Havent bought anything brand new. Were looking at a lot of things. And weve got a lot of irons in the hopper. Because, you know, the markets have started to get a little weakness. Shown a little weakness over the last few weeks. A little stability. Especially in certain sectors. So were out there searching, looking, hoping to find some brandnew ideas and have some Company Visits planned to go out and see management teams that we think are quite exciting. Okay. I was asking becky something. I was going to ask you, do you know if harrison fords feeling okay . You got any info on that thats not from melody who is married you got anything for us on that . Hows he feeling . You know, its funny, melody and i had dinner with staley kates last night we talked about melody and her new baby. Give her our best and george harrison. Weve got to go. Anyway. Well talk. Thanks, john. Well see you later. Were back in a moment talk moderna and some other stuff in just a moment. Chocolate is very individual. White chocolate lovers dont like dark chocolate. Milk chocolate lovers dont necessarily like dark or white. Before we couldnt really allow the consumer to customize their preferred chocolate. We needed the scalable Cloud Solution allowing them to see all 800 products and select what they are looking for. Now there is endless opportunity to indulge. Harleydavidson has introduced its First Electric motorcycle. The company hinted at this. Consumers will be able to test ride the bike and provide feedback on it. This new cycle is not for sale but rather its being used as a basis for designing one that would eventually be sold to consumers. You are looking at the first pictures of the bike. The company is dubbing this effort project live wire and my only question is, does it sound like a harley . You have an electric bike that actually sounds and has the rumling, vibrations. You most certainly can if youre on 60 minutes. Where they dubbed in the sound, right . For tesla. I was watching scott pelley, and its going rrrr, rrrp thats weird because tesla makes no who messed that up. I dont know. Coming up, davos claims data . We can do it. They cant. And the ceo of cnbc disruptor moderna. As we head to break take a look at u. S. Equity futures, please. [ male announcer ] dont just visit hawaii. [ squeaking ] [ water dripping ] visit tripadvisor hawaii. [ whistling ] with millions of reviews, tripadvisor makes any destination better. Welcome back to squawk box. Continuing claims hitting the wire, 312,000 on initial claims. Thats down 6,000 from a 1,000 upwardly revised 317 that now stands at 318. Continuing claims moved down from 2. 615 to 2. 56. Definitely continuing to see on the alternate universe of time scale what the continuing claims are doing in the rear view mirror. Of course the big news continues to be a press conference that i dont know, maybe would have garnered a cplus in my opinion at any Major University with regard to how the questions were answered regarding, why isnt housing doing better after all the heavy lifting weve done for 5 1 2 years. Why cant we get, you know, more horse power out of the u. S. Economy. Suffice it to say the markets get it. So s ps are doing better. Record territory. The dax is about ready to go in record territory. Were at twoweek low yields on 10s. Boones are at month low yields, ready to test their 130 which has kind of been the multicycle year low of late. So everything is still firmly in place. And the band plays on. Back to you. Okay, rick, stick around. Also checking the markets for us is teach liesman. The vice chair of the isi group is also a former executive Vice President of the new york fed. Steve. Just a real quick thing on the jobless claims 312 in line with estimates. Commensurate with another this is the survey week to commensurate with another 200,000 job lift thats what the economists would say is sort of automatically if they plug it into their model. So thats alone the lines. And then we got the philly fed coming up. Ill tell you a new thing were going to be watching. Which is . Prices paid. I think the whole the wage an interesting little changeover here. We want to get to krishna for sure and rick for sure. Prices paid and inflation, i think the markets will follow more closely. Krishna do you agree with ricks assessment about just the answers coming from the fed that there were some tough questions that maybe the markets didnt get the answers they were necessarily looking for. Not that we minded that. Obviously we saw stocks push higher yesterday. The markets seemed to be happy enough with what it got right . What the market took its cue from was yellen making it very clear that the fed wasnt troubled by the firming weve seen in inflation. You know from yellens perspective, 2 on the pce measure is a symmetric inflation target. So if inflation is coming in at 1. 4, 1. 5 on the core measure its still way too low. And yellen is concerned about that as she would be if inflation was coming in at 2. 5 on that preferred measure. Remember, also, that pce of 2 basically means cpi at 2. 5. So i think the market saw that the fed is not yet getting worried about inflation. Took that as the cue to go forward. But i think the message was actually more complex than that. Then let me ask this. Ian shepardson was just with us. He laid out a very interesting thesis. He said he thinks the fed missed an opportunity where they could have maybe said a little bit more, let a little bit of air out of the markets. Not necessarily deeply disappointed the markets. Maybe seeing the markets trade down a little, yeah we are seeing some higher prices, we are seeing things that well Pay Attention to down the road. He thinks maybe in other words not a red flag, a yellow flag. So you dont have a crash later and all of a sudden you wake up and say hey weve got to Pay Attention to this. So krishna, before he worked at the new york fed was a reporter for the financial times. Yes. And he understands how to listen to these guys. Mmhmm. And gals. And one of the things he listened for is when an official answers a question you didnt ask, so i asked janet yellen if the fed had tolerance for higher inflation. Yeah. Which necessarily means temporarily. But heres her answer yesterday, and ill come back and get krishnas comment on this. We would not willingly see a prolonged period in which inflation persistently runs below our objective or above our objective, and that remains true. So that hasnt changed at all in terms of the committees tolerance for permanent deviations from our objective. I didnt ask janet about a permanent deviation from your objective. I asked about a temporary. So krishna, my takeaway, and this is not so profound i suppose, is that there is some tolerance for higher inflation, inflation above normal for at least some period of time. Unambiguously the case, steve. I think janet is just being careful. And i understand why given her reputation as an uber dove. Shes being careful about how she introduces this concept. She doesnt want to just jump up and say, hey, guys, you know, i dont mind inflation going up above 2 for awhile. The market could respond badly to that. You could have inflation risk premiums start to move higher. I think she needs to articulate, you know, more of a framework about how look, weve got a symmetric target. That means there will be times when inflation is a little bit above. Just as there will be times when inflation is a little bit below 2. Theres a very strong commitment to averaging 2 over the medium to long run. Rick go ahead. Just one thing i would flag up though is that to the point you raised, you know, from the previous guest, i think yellen did actually give us a very clear warning that theres a lot more uncertainty about the path of Interest Rates over the next two or three years than shes been given credit for. She said it in her introductory statement. She said it two or three times to my recollection in the q a. Look the base case, sure. Base case is a late start and gradual tightening. But theres some theres upside risk here. Just as theres downside risk. Krishna that is not what the market heard. Absolutely. The market didnt hear it. The fed futures pushed back. When they expect the fed to actually start raising rates, right . I couldnt agree with you more. For the listeners here i really do think that she has gone out of her way. To put down a marker. There is upside risk just as theres downside risk. I think people should listen to that message. Rick . I think weve had rorschach statements. Now we have rorschach press conferences. Our guests are totally going along the emperors design of his clothes as he is definitely in his birthday suit. Ive never heard so much nonsense of interpretation in my life. The markets, first of all, fed funds, never are going to tell you when a cycle is going to flip. Theyre never going to give you an indication of the first tightening or the first easing. Its a cycle trend that gets priced into fed fund futures. Now that we have that and it will never change, everybody will still interpret it, its just a market arbitrage spread right now until we begin the cycle. Is it wrong wait, wait, wait. Is it wrong to think that Market Players heard what she said yesterday and thought okay its going to be longer before we get that . Or was there Something Else that the market was hearing . I think what the market hears is they will say and do anything whether its ben bernanke, or the new manager of the cubs or the front office of the cubs, with the cubs economy that they just dont have the nerve to do anything but stick to a strategy. It wasnt about the inflation yesterday that traders were talking about. Its hard they know that will take care of itself. What theyre talking about is a failed strategy zero Interest Rates, quantitative easing still at 35 billion. Rick the market has a choice. Why do you think if somebody put a gun to their head and say buy treasuries . No. They can sell treasuries. They can sell tips. If you look at what happened yesterday, implied fiveyear inflation went down. Yields fell. And the fed gave a view on inflation. A view on inflation you ever talk to anybody that trade them . Yeah but rick, rick i mean you call the question is why isnt the market if the fed is so offside as you think why is the market not challenging this . I said their strategy isnt working but traders love the strategy wp. The goldmans love the strategy. I want to say with the equity positions. Nobody challenges it. But theyre getting a little nervous because the end game, no volatility. They get it. They can sell treasuries. Why would anybody in their right mind sell treasuries right now. You just gave a whole bunch of reasons. No i did not. Maybe in the old days when we really had a treasury market that wasnt owned by Central Banks. The bank of japan. The Federal Reserve. Those are the only traders that can move markets anymore. Were going to end it there. Thank you guys. Coming up next, moderna delivering the next wave of innovation to treat serious illnesses. We are continuing our cnbc disruptor 50 list with a closer look at the startups that are threatening the status quo. Julia boorstin joins us with more. Today were talking with the ceo of number eight on our list, moderna therapeutics. A biotech that uses your cells to develop treatments for previously incurable diseases and speed up the pharmaceutical development process. Modernas Technology Gives patients cells instructions to create proteins and antibodies to fight diseases from diabetes to certain types of cancer. And the company says its relatively inexpensive. That promise drawing astrazeneca to invest more than e 200 million. Last year the defense departments Experimental Research Group Awarded the company a 25 million grant to fight infectious disease. The Company Stands out among our disruptor 50 because its the only biotech on the list. And the only company from massachusetts. Joe . Thank you. All right. Lets get more on how moderna is breaking ground in the biotech world. Joining us the president and ceo of moderna therapeutics. Were going to program cells to make certain things or not make certain things and youre using rna . How are you doing . Good morning. Thank you for having me. Youre welcome. We are sending instructions, were sending mentioner like your body does 2 million times a day. What it does, if you look at the biology you have your dna in each of your cells, messenger and then you have a machinery to mix the protein. Instead of doing it the way the biotech industry does for the last 40 years for genentech, you know, what we do is we basically make messenger inject it into you and you are going to make your own protein. So you make your own drug. Okay. I mean that so not make you unique. Obviously how long whats the half life of the protein . How do you get it where the cite of action would be to where it would do what youre trying to do. That is a very simplistic example you just gave. Right. Because that would never work just injecting some messenger rna into someone and hoping it makes the protein to go to the site where it would be therapeutic would never work. If you look at the proteins in the body and we have about 6,000 proteins going through your bloodstream so what we have done already is to inject the messenger rna. Your muscle is a factory where the protein is made, and then it goes into your blood. When it goes into your blood it goes to the right site. So we dont do that. Your body does it. Oh, it does do it. Okay, number one, how do you get to so it only works intramuscular . Messenger rna its going to be broken down immediately before its expressed . Actually a bit like the first time i was to do the iv. That cant possibly work. Impossible. And as we know progress made over the last ten years that enabled us to stabilize. I thought youd use liposomes or something to deliver it to the site of where it would be expressed. Youre not doing that . No. Youve got to give us a conversation would carry the thing to it. How do you make it stable . Techniques to make it stable, depending on how you put the chem city, the tail to stabilize the rna. What you can do and then to your point how to you formulate what do you put around it to protect it. What we have now is lasting in the body a couple days. The next thing you need is something where you identify a disease where a single gene product is actually going to be therapeutic. Yes. And i cant believe theres many of those, are there . They are lots of if you look at just where this is another 6,000 you mean where theres one genetic mutation . Right. And you just go and replace it. And theres a lot of products that you can do. But diabetes or some of these diseases that were talking about i cant imagine that theyre not more complex. They are much more complex youre right. One of the beauty that you can do with rna that you cannot do with protein you can inject several in different pathways. Weve done up to eight and basically it hits three or four different pathways. The biochemistry would be very complex i would think in terms of promoter sequences to get the rna expressed and everything else. I mean in things that cause things not to be expressed. It seems like its almost easier to do an anti this is like me talking about facebook to you. I dont understand what youre talking about anymore. Are you im sorry. I understand enough to be dangerous. And so the what were trying to do is to start where the technology is ready now. And so we have a 35 programs between what astrazeneca is doing which they announced last week. Did you see the fascinating treatment that they come up with where its for muscular dystrophy. Normally the rna being expressed falls off and you get this truncated version of a protein which doesnt work. All you do is you correct one base and it goes all the way across makes a long enough thing to cure so thats antisense. Exactly. Exactly the opposite of what we do. We basically want to turn things up. Turn it off. Were turning it up. Let me ask you a quick question theres an article in the wall street journal in the last few weeks that suggested that some Insurance Companies are now paying doctors fees, like premiums to do things the way they want things done. Heres a best practices, in solving these diseases. Does that hurt if doctors are less willing to try new ways, instead of listening to the Insurance Companies. I think its all actually help us because if you look at the value of what theyre trying to deliver with moderna, i think one is to do drugs that are undoable using because we can get protein inside cells. Two is the speed. The way we think about mrna its like software. You send a message and it makes a protein. So we have a speed advantage which is fantastic. We make them in weeks. And so thats really help you in term of development which if you look at one of the drugs thats expensive it takes so much money. The rna you make the exons are already gone. Its a but is your problem all the science i have one policy question theyre going to kill me because were going to run out of time. You know we got to go. Im going to ask you during the commercial break. Well do that in just a minute. Whee we come back jim cramer live from the new york stock exchange. Well get hills thoughts on the fed and the markets. [ both ] when we arrived at our hotel in new york, the porter was so incredibly. Careful. Careless. With our bags. And the room they gave us it was. Beautiful. A broom closet. But the best part but the worst part was the shower. My wife drying herself with the. Egyptian cotton towels. Shower curtain. Defined that whole vacation for her. Dont just visit new york. Visit tripadvisor new york. [ male announcer ] with millions of reviews, a visit to tripadvisor makes any destination better. So what im saying is, people like options. [ male announcer ] with millions of reviews, when you take geico, you can call them anytime you feel like saving money. It dont matter, day or night. Use your computer, your smartphone, your tablet, whatever. The point is, you have options. Oh, how convenient. Hey. Crab cakes, what are you looking at . Geico. Fifteen minutes could save you fifteen percent or more on car insurance. All right. Lets get down to the new york stock exchange, cramer joins us now. We talked about inflation. You were one of the people i was channels because its a huge divide between people that think its going to be an imminent problem and people who think its not. You still tend to think that inflationary expectations are well under control. Well, the main kinds of things that are driving up inflation tend to be related to weather, and i think the word noisy was a good word that janet yellen used. The markets seem to agree with me. Its the stock market. Say, listen, that isnt what matters. Im stuck with the target because the people at home are stuck with the target. Im not a bond trader. Looking at the food stuff going up, if we got some rain, able to get the end of the drought, those would have gone down. Gasoline, obviously, were not related to u. S. Production, rem related to world production, hostage to iraq. Its credible. Do i want everything to be terrific . Yes. Has it been that way since 1982 with the dow at a thousand, no. But ill take it because im an equity guy and equities react to positive. Yeah, everybody that thinks its coming talks about labor that were under a false sense of, you know, that because the number of unemployed americans is so large that we can we need to hire a bunch of them back before theres any wage pressure where the other people made the point that the ones we want to hire are scarce and that the other ones are gone for good. So i dont know how that well, of course, theres a mismatch between where the jobs are and where the people are because theres ten states begging for people to come to work. Larry fink raised the point, the tuition drag on the country. Its the single biggest thing that impedes household formation, impeding construction, impeding jobs. Larry was a great guest today. He was just a fabulous guest, and he really tells the truth, and, wow, i just take a cue from him. He is so good. Excellent. All right, so are you, jim. Thank you. All right, see you later. By the way, i saw jim yesterday, had on a fifa shirt. He looked good. He did . You notice like that . I was watching on a plane. Im buff. Yeah. When we come back, tmobile offering iphone tests, and we caught up with the ceo spoke about that and possible merger with sprint. Squawk box will be right back. You used to sleep like a champ. Then boom. What happened . Stress, fun, bad habits kids, now what . Lets build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. Introducing the sleep number bed with sleepiqtm technology. It tracks your sleep and tells you how to adjust for a good, better and an awesome night. The difference . Try adjusting up or down. Youll know cuz sleep iq™ tells you. Only at a sleep number store, mattresses with sleepiq start at just 999. 98. Know better sleep with sleep number. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Welcome back to squawk box, tmobile letting iphone users test drive the product, a simple choice plan, the Company Looks to work out a deal with sprint. John ford spoke to the companys ceo yesterday, john . Hey, andrew, yeah, it comes down to if its working, why not keep doing it. They added 1. 3 million subscribers, and at t and verizon combined offering consumers contractfree access to the network, some other things as well, and tmobiles ceo who has fashioned himself as both a corporate turn around artist and the mascot for the company, free music and easier way to try out tmobiles network. Take a listen. You can go on to the website thatll be distributed, tmobile test drive, and you can sign in, two days, you get a fully loaded iphone 5 s unlimited data plan to use for seven days to marvel in the experience of the network, especially people in new york, where you are, and at the after seven days, bring it back to a store. No down payment, no charge. Put a credit card up, but thats for security, but theres no charge, no ov rang, and this is a chance for verizon, at t, and sprint customers to have a seven night stand. Cheat on your carrier. This is important because it gets tmobile iphone 5ss who think they do not need the phone or plan, and offering free music streaming services. Think of it this way, tmobile has more wireless spectrum and Network Capacity than customers. Its like a big bar offering major happy hour specials to draw a crowd. Listen. Were not a media or entertainment company. Were a wireless company. Thats what we spend our cap, providing capability to customers to let them seam leslie use services they want on our network. Thats what we do. Were providing that piece of the streaming network for free so they get used to mobility as a way they live their life. Well see how the other bars answer, guys, back to you. All right, john, thank you so much. The question is is that Business Model sustainable if not for the purchase with sprint . A quick question, we dont have time to get into it. John, was he the front man for Nine Inch Nails . Ive seen him before. No. Different guy. I wanted to get his views on the amazon fire, but i imagine well have to we got him inhouse, well talk again soon, and, yes, hell be on squawk aa all alley, the futures, barely budged after the move yesterday after the fed news. All of that is covered on squawk on the street have a great night everybody, well see you back here tomorrow. Right now its time for squawk on the street. Good thursday morning, welcome to squawk on the street. Were on the new york stock exchange, favor is off again today. Good to see you after a couple weeks away. Missed you. Beginning at the s p after the 20th record close of the year, dow 39 points from its own record, two years of 25 7, claims in line, getting phillie fed in an hour, looking for clues of inflation. Europes mostly in the green as spain welcomes a