Transcripts For CNBC Squawk Box 20140718

Gaza, the vix up 35 . The markets on high alert. Well take a look at 2. 50. The dow during yesterdays session tried to hold up. Earnings have been pretty good. Yesterday Morgan Stanley was pretty good. Were always going to move on geopolitical events and yesterday a lot of people were just saying, can we do in this entire day we need a doover because a lot of disturbing things happened. Theres the vix, closing up 32 after trading even higher. Now some levels, obviously, but in past breaks, the vix has gone right back down. Well see whether thats the case this time around. Take a look at oil. Thats pretty well behaved, given all this everything happened in the world at this point. But still over 103. Here is the tenyear. The now 2. 48 , which you would expect as people move into the dollar. 2. 44 yesterday, yeah. Rushed through that to buy u. S. Securities. And then there is the euro and the pound and the yen. Check out gold. Which, you know, has been just difficult to really figure out. What beat which drum gold is marching to at this point. Theres been plenty of things happening. Its been tough to move it higher. Theres a lot of factors. Mostly probably that the at least the Second Derivative in the United States is away from more simple Bank Accommodation and thats what had gold the anticipation of it i think moved it up to near 2000. As you get over the peak, they slowly start pulling back, gold has been unable to get any right. The crash in ukraine, that plane crash, the gaza invasion, both developing stories this morning. Michelle Caruso Cabrera has the latest. Weve got people in those places, but the basic headlines, 298 people on board dead, plane shot out of the sky. Tea thats what u. S. Intelligence sources believe what happened. Exactly who . The focus is on russian separatives. That is not deaf innive at this side. Ukraine is blaming the russian separatists and russia is saying, well, if this mraep was shot out of the sky, ukraine is to blame for fighting against the separatists instead of trying to work on peace. Thats the wording thats come out. Putin said it happened on ukraine territory. That was his right. And so what does that imply . Well, no matter who did it, theyre saying dallas beg piece in the journal, putin, the only one at this point that already has assigned blame to someone before right. None of us know anything except what weve read and seen on tv. Thats why its impossible to say anything at this point . Right. Just that we know it was shot of the of the sky. Nbc news believe it was a russian product that shot it out of the sky. 32,000 feet. I dont i cant imagine. Something going that fast and how do you even do it . Does it track it or do you have to aim it . Its locked on. You see it on a radar based on guests we had on yesterday. No american passengers identified so far though plane, but 20 people so far, we dont know their nationalities. Malaysian airlines this movens defending its use of the routes saying Many International flights have been using that route and announcing they were still waiting to find out 20 different individuals. The russian market got hit yesterday already because of sanctions that had been announced before. The russian ruble has gotten hit, as well. Were showing you chart of the dollar here. The dollar has strengthened dramatically against the ruble. You can see it is off the highs. The ruble is coming back just a little bit, but certainly a huge move there. Lets show you whats happening with israel, which is the other thing that happened very late in the session. It looks like the u. S. Markets actually might come back, then the gaza offenses started. Yields struck even lower on the ten year. Theres been video handed out by Israeli Defense forces showing this night vision video. This is actually live video that we showed last night. These are flares, rockets that have handed out some night vision video, as well. They are saying theres 15 pounds as a result of going into gaza. The palestinians are saying there are 19 dead and israel says they have lost one soldier in this process. Benjamin netanyahu, the Prime Minister of the country saying within the last hour, that they are ready to expand the offensive even more in an effort to clear out tunnels and rockets. Implications of both these stories, i think number one when it comes to the malaysian plane, more sanctions against russia if its believed that they were supplying separatists with the military equipment that made this possible. The second, much broader and scarier thought is the movement of weapons around the world, what if the terrorist group really did get ahold of a surface to air missile, right . Nobody has taken credit for this, which suggests whoever did it made a mistake and did not want to do this. Right . But what if there is a you saw this just weeks ago with the missing uranium thats gone, with the idea that it is much toughtory contain when youre not talking about an eastwest standoff alone, when there are terrorist groupses, not separatist groups nonstate reactors like what weve known in the past. It seems there were some separatists that seemed to be celebrating shooting down a cargo plane. But you dont know. You do not know at this point. As far as israel goes, they usually are very tactical about this. They go, they know exactly what they want to do and they usually dont stay longer than it takes to accomplish you were talking about thoughtses of boots on the ground, not hundreds. Five years has gone by very quickly in our lives now. I didnt know it was five years ago, but last time you worry about a ground offensive, but shall theyre limited and theyre calling this a ground incursion, not an actual invasion. Michelle, lets get to sri. He is in kuala lumpur, where the jet was supposed to land. Sri, what can you tell us . Well, i can tell you that this is a huge blow reputational damage for Malaysian Airlines. Remember, its only trying just now to recover from the aftermath of mh370, still unresolved, biggest mystery in aviation history at this stage. Now with this. There is a palpable sense of despair after disbelief after whats happened here. And now, i suspect that that upset and that grief is going to turn quite quickly to anger. A lot of questions are going to be asked here as to whether this disaster was preventable. Why in the first instance this aircraft, a commercial airline all right. It sounds like we are having trouble with sri. Well get that connection back up and running in just a moment. Joining us with the latest on the Geopolitical Impact of the Israeli Offensive in gaza and the crash of Malaysia Flight 17 military analyst colonel jack jacobs and matthew rajanski, director of the Russia Program at the wilson center. Colonel, i know the president expect to Vladimir Putin yesterday. Was it before, during, after . I cant imagine when a conversation was like on either telling him we just put in much tougher sanctions or what happened here. Do you know . Do you have any insight into that . Well, the information we have was that it was during or just after and it was putin who told president obama that the event had taken place. Theres a lot of consternation in washington because it appears that the intelligence community, certainly the National Security apparatus got caught flatfooted by this, didnt know that, and had been instructed bit by putin is something of an irony. So apparently our president found out about it from putin not long after the event kerd. I didnt know that. Matthew, is that what youre hearing, too, and the nsa knows so much about so many things and so many people that this really was not on their radar, so to speak . Pardon the expression. Well, i actually thinking that theres been a lot of information coming through Eastern Ukraine directly. Remember, were living in the 21st century. Youve got social media literally on the ground posting in realtime. Then you have the interest of the various parties involved. You have the russians, the pro russian separatists and you have the ukrainians themselves, all of whom are constantly sending information to the left, including directly to washington to try to persuade us to viewing things according to their preference. The bigger problem here is the needle in the haystack, how do you figure on out whats Accurate Information and whats coming out in the last 24 hours in that respect has been fascinating. If its true, number one, that the rebels captured a piece of Ukrainian Defense equipment last week, they tweeted about it and their official tweet and then it was taken down. If thats true, it supports Vladimir Putins case that this was not a russian action. The russians may morally and politically separate the russ n russians, but if the russians were not calling the shots, the Silver Lining of that might be we can work with the russians to try to get a ceasefire and to try to do an investigation, kind of give them that off ramp that gives them plowable deniability and give them some face saving. My concern is that we created, what you guys showed about the markets indicates perfectly where the default attitude of the International Community is. Hey, we have a confrontation east and west, lets ramp up sanctions and find a guilty party here. The reality is were going to have to work with the russians, somehow or other, to bring the situation in Eastern Ukraine back under control. Theres tremendous domestic pressure on the ukrainian leadership, poroshenko is still fighting for stability to be seen as the rightful heir of the revolution. Theres huge pressure on him i think to go guns blazing to try to get some just and retribution for the ukrainian people for was been done to them. The disaster itself put puts pressure on the countries. These are countries, the netherlands, the uk, belgium that have not previously felt like they had a dog in this fight. And i worry that this is going to push europeans who have been very careful about turning this into an eastwest confrontation. Around the corner theyre going to go with heavy handed situations against the russians. Come on, if youre putin and youre going to be bashed by the west wab what do you do with tab roll of and play dead . Not likely. Youre going to dig in. Do you think cooler head can prevail in all this . I think economics is going to drive all this. One of the things, sanctions have been lagging behind and have always been skeptical about it is the very close Economic Situation with russia, particularly with the oil and gas contracts. So i think if theres going to be a break at all on additional sanctions, its going to be the european reluctant to bite the hand that feeds them. I think things are quiet down after a while. The real problem is the rhetoric and thats not going to stop. And the fighting in the area is not going to stop, either. People in the Eastern Ukraine are predominantly russian. They are separatists, they want to align themselves with russia. Russia is not going to stop assisting them in doing this. I cant see how the local fight is going to get any better than it is now. The relationship between the east and the west is liable to get better. But as long as people stay off the air and stop being inflammatory on both sides. Then we might be able to get something done behind closed doors. My kids yesterday, they dont know about the but you worry, is this some kind of flash point. That is the two super powers still we still worry about russia and whether you could get drawn into something. Is this the i really dont think that that in todays world, everybody seems to be you know, thats the one thing mutually that was given to us is no one really thinks another situation like that can happen. But to kids that get scared about whether theyre going to be living through something you heard wwi, wwii, three is after two, but its very unlikely that thats possible in todays world, isnt it, colonel . Its unlikely but but not impossible. Nobody thought it would happen again just before the second world war. And yet it happened again. Nobody wanted a confrontation at the time of the time of the cuban missile crisis. I remember being i was in college at the time and everybody was convinced we were all going off to war and that there was going to be a nuclear exchange, despite the fact there were all these checks, despite the fact that we had mutual assured destruction and nothing bad was going to happen. A war would be so horrible to contemplate that it wasnt going to happen. And public rhetoric tips these things off the balance. Michelle brings up a good point, a lot of times when you have nonstate actors, when its more complicated than just two super pileup powers going head to head, that can be more difficult to control. What happened yesterday, the idea that no one is taking visit for it, the idea that maybe this was a mistake. It almost assuredly was a physical mistake. But the airplanes have beacons, which identify themselves as friend or foe. This system has the capability of discerning, discriminating between friend and foe. And what you have basically is a fairley sophisticated weapon in the hands of a group of people who know how to use it but are undisciplined and poorly led with very few controls and not probably very good engagement protocols. And so you see how Something Like this would happen in that area. Weve got to get, matthew, but real quickly, weve focused on this more than gaza. Is it because weve seen this before . I think this is crucially and global importance. Not to denigrate whats going on. But that is a conflict that has been relatively routine and relatively contained and were seeing cycles continuing there. This is a sea change in security and stability on the european continent. And you know from markets that underpins prosperity. I think this is going to have longterm impact. They know theres a lot involved here. Thank you. Well see you there. Michelle, thank you. You can come back. Okay. When we come back, the Market Reaction to these two major global events, plus the big corporate stories of the morning with results last night from google and ibm. All that coming up next right here on squawk box. Here on squawk box. Ved 760 bucks. Love this guy. So sorry. Okay, does it bother anybody else that the mime is talking . Frrreeeeaky [ male announcer ] savings worth talking about. State farm. Frrreeeeaky i take prilosec otc each morning for my frequent heartburn. Because it gives me zero heartburn. Annc prilosec otc the number one doctor recommend frequent heartburn medicine for nine straight years. One pill each morning 24 hours zero heartburn. Poib. Abbvie is going to buy shire for 54 billion. It was a 53 premium to where shire was trading the day before. And fedex has been indicted for shipping packages from illegal online pharmacies. The Company Received repeated warnings from u. S. Drug enforcement officials. The indictment includes charges for conspiracy to distribute controlled substances. Fedex gained 820 billion for the conspiracy. In a statement, fedex says it is innocent and it will plead not guilty. It was a pretty strong statement that came out from fedex saying we have repeatedly asked the United States to provide us with lists of companies that are selling illegals from pharmaceuticals and the United States has repeatedly refused to give them any lists like that. It sounds like its a little more complicated and theres a lot behind this. They also say they have a long history of working with Law Enforcement officials to make sure theyre not shipping any contraband. And how often every day you get something on the internet about buy this, buy that. I cant imagine with as many packages as fedex handles. It seems like a daunting task. When i initially read the charges from the government, i thought, wow, thats pretty out there. And then i read fedexs statement and i thought, theres some confusion here. In earnings news, ibm posted betterthanexpected earnings and revenue, but software shares were weaker than expected and the shares fell on the news actually significantly down almost 2 . Some mixed results from google. Werings falling short of expectations, but revenue beat the street. One of the ceos is leaving the company. Joining us now to talk about it all is anthony diclemnte. Anthony, what do you make of this . The stock was up initially after the news. Yeah. I think the main concerns around google are deceleration, healthy expense bills and cap ex. And the company beat on revenue over 20 Revenue Growth for a company that trades as less than 20 times earnings. That alleviated some concerns, i think. And the expense is still very healthy. But i still think google is a core holding in technology, a very reasonable earnings estimate. Which continues to be very impressive for a company googles size. How about this lieutenant that is leaving. Hes the chief officer at google, very well respected. I think hes going to be ceo of a different company. Softbank is a Conglomerate Company that has many investments immediately globally. They own sprint, and nikesh can go to softbank and achieve his ambitions as being a ceo in the internet media space, something that he was not going to have the opportunity to do at google. Its interesting because it indicates the kind of ambitions and goals of softbank perhaps in media. Anthony, would google ever buy time warner or an old Media Company . Yeah. I am a believer that youtube would benefit from professionally licensed content, joe. It would increase the likelihood of using some sort of streaming device to watch youtube in your living room. I dont know if they go and buy a company of the size of time warner. They can throw us a couple of dollars at some drones or Something Like that. But, you know, were talking starting at 80 billion and going up from there, right . Google is an enormous company. It got a 400 billion market cap. Time warner is roughly a quarter of that. Still a lot. Its almost like when a growth stock starts paying a dividend. Its like what, you couldnt think of anything else . I cant imagine that they would do that, necessarily. Yeah. So i dont know. I mean, i wouldnt rule it out. I do think that its possible that a Big Technology company realizes the Strategic Value of content. But i just theres been rumblings that they could license from the nfl and they could do something maybe just buy part of cnn, buy 5 billion or 6 billion for cnn. Specifically yeah, typically theyre not creating the platform, not necessarily vertical content, more of a horizontal strategy. But there are hundreds of companies out there where its like things are going theres a bidding war for this company, maybe google would come in and buy it. Google has the answer to a lot of questions. I dont know how realistic that conjecture is. Anthony, your rating on the company . I have a buy rating on google. I think its a core holding. I think theres upsides. In thank you. Anthony, great talking to you the. Thank you. Coming, how the markets react into aublt global flare up. First, though, results from General Electric. The numbers are expected right after this quick break. Squawk box will be back after those numbers in just a minute. During the cadillac summers best event, lease this all new 2014 cts for around 459 a month or purchase with 0 apr and make this the summer of style. Good morning. And welcome back to squawk box. I know that the dow component ge is Just Moments Away from reporting. But welcome back. Im joe kernen along with becky quick. Andrew, i dont know where the heck he is today. Hes off today. Time off . Business . Just some time off that he had. Personal. Good for him. Two Major Political stories that you know that were talking about. I dont even have to tell you, by i will, anyway. Israeli forces launched a ground offensive in the gaza. This is after a tenday air war. That weve been reporting on. Israel says it is targeting rocket launchesers and tunnels in more than a hundred other targets. This is the first large scale Israeli Ground offensive as youre trying to remember when they went into gaza about five years ago. Here is General Electric reporting. 39 cents a share. Adjusted. That is right in line with expectations. Revenue is 36. 2 billion versus estimates of 36. 3. But industrial revenue, which is what people look at to gauge, you know, how the company is growing, that was above estimates because the overall revenue number continues to fought be as high as it would have been if they werent trying to shrink ge capital faster. Weve known this for five years, really, that the company has tried to shrink its finance operations and replace those with fast growing industrial like oil and gas and other things. Speaking to that, ge is announcing instead of targeting the ipo of its north american Retail Finance business for the end of july, thats the first step in a planned stage exit from that business. And appliances theyre trying again. Remember, they finally figure out how to deal with the french, the buyout, and that was be a credence to earnings in to 15. The goal is to be at 75 of earnings being generated from industrial by 2016. As weve seen in recent quarters, backlog continues to be 246 billion up from 238 billion a year ago. And industrial organic revenue, so just, you know, you factor out currency, up 5 in the segment profit was up 9 . The stock did get caught up a little bit yesterday in the overall selloff of 1overall 60. Maybe not down quite 2 . It was down 40, 50, 60 cents. Lets get reaction to these numbers. Joining us as he does is jack negan, chief investment officers of harbor advisory. Its almost a carbon copy of the last few times youve been on, jack. Its such a big company. Analysts can actually, given whats happening in the world, you can actually get a pretty good idea of how the company is going to perform. Its so big and its so predi predictab predictable. This is basically in line with what people thought. It is, joe. A lot of moving parts with ge, especially with the acquisitions and dispositions going on and the shrinking of ge capital. Thats the hard part to predict because, as you point out, if they shrink it faster, revenue comes in lighter. Revenue comes in about 1100 shy of expect ages, but aus point ott, due to shrinking net, ending investment quicker, which is a stated goal and its good for the company. So thats why the shares arent performing poorly this morning after this release. Which is only in line. Yeah. And its basically 2651 bid, 2670 ask and, you know, if we look at the year estimate, jack, its 1. 700 for 14, 2015, 1. 83. So figure out what the growth rate is. The next year, 1. 96. 2014 of 1. 70 with the stock at 26. 60. So you can see its not at its not at 20 times earnings. So jeff immelt for his tenure has been dealing with trying to figure out how to get a stock up to trading since you came on board. And it deserves pretty maybe above a market multiple because of its quality and its stability and because of its yield, which is now back to 3. 3 . But right now its not its not cheap, jack, based on market multiples. Probably above the average market multiple. Did you do the whats the math . Ill do it. The 26. 50 divided by 1. 70. Go ahead. The s p is trading about 16 1 2 times 16. Yeah. Its in line, swroe. I think whats important is as you mentioned, ge over a cycle can probably grow earnings 1 to 2 Percentage Points faster than the s p 500. Agency you said, dividend about 1 percentage point higher than the s p 500. So over a cycle, you should be able to expect ge to perform better than the s p. And i think whats really important here in the focus of investors, because thats the way were looking at this stock is from the point of view of our clients is that mr. Immelt is really accelerating the rate of change in the portfolio. With the three transactions going on right now that you mentioned, alstom being the third, thats going to change the competition of total revenues by over 15 . And his legacy, and i dont mean to imply that hes leaving anytime soon, because as we know, hes a very young man. He was born in march of i was born in january of 56, he was born in february of 56 and so hes a very young man and he doesnt need to leave anytime soon. But his legacy will not be what the stock has done. It will be the way that he won, navigated through the financial crisis, which happened the week that he or no, it was 9 11 and then he navigated through the financial crisis and repositioned the company into an industrial, more fastgrowing industrial business, got rid of insurance operations, got rid of now appliance and other things. But that will be his legacy that he positioned this country for the 21st century and a global economy. It will be. And, you know, he couldnt have started at a worse time. No. With the stock nobody needs to start at 50 times earnings with the jack welch premium and the blue chip bubble, really, of 1999 when coke was trading at 50 times earnings. I dont know what people were thinking, but you never know except in hindsight. Thats right. And, you know, we were heading into a decade of subpar gdp growth. A decade where there was tremendous turmoil in the in the finance business, which had grown to be at least 50 of earnings. Time bombs in there, he had to diffuse and get rid of and been legacy losses related to that right up until this year. When was the last dividend increase, jack . 15 in december, joe. What month was that . I had to look at it and i was looking at the the year earnings and i had to remember that this i thought 14 might be next year. This is 2014 right now, right . Things start getting all and its early, jack. But okay, so it was december and its now is it july . Uhhuh. And its once a year normally, right . So i think. Yeah. Yeah, joe. I think theyve normalized it to once a year now. I think we can expect it in december and expect a growth rate commensurate with earnings growth. All right, jack. Thank you. Good to see you this morning. Good to see you, joe. Thanks. Hello to the wife, a former Merrill Lynch colleague. Did you know that . No, i did not know that. We worked together. I did not realize that. Thats not why hes on. Hes on because hes brilliant, handsome. And we love talking to him. When we come back this morning, russian president Vladimir Putin says ukraine is responsible for the Malaysian Airlines tragedy. We have a report from moscow just ahead. Right now, a quick check off whats happening on european markets this morning. At this point, the ftse is down by close to 0. 5 . The dax is down by just over 0. 5 . Squawk box will be right back. Welcome back to squawk box. The futures are indicated slightly higher. Dow futures are up by close to 20 points. S p 500 is up by just over 2 points. This comes after some major declines yesterday, given all the geopolitical news thats out there. The dow had its worst percent decline since tuesday. Also take a look at what happened overnight in asia. Youll see that the shanghai was up slightly, but you did see the nikkei down by about 1 . Oil prices climbed yesterday. If you look at oil prices over the last two days, it was actually the best two days for crude oil this year. It was a gain of about 3. 2 yesterday, but again, were used to higher prices recently. Its only been in the last several days weve seen ohio back at 103. 53. The tenyear note, 2. 482 . But i did see 2. 484 yesterday at some point. The dollar this morning looks stronger against the euro, which is trading at 1. 35221. Its up against the yen, 101. 37. Gold prices yesterday were up by about 1. 3 . That is the best rate gold has signs since june 19th. 1,311. 70 answer ounce. Coming up next, will they be the start of the pullback everyone has been talking about for years . It will be more of a knee jerk reaction. And then the diplomatic response from the u. S. And the eurozone. What to do with both of these very tense situations. Squawk box will return in just a moment. Ronic plaque psoriasis ronic plaque psoriasis was also on display, id had it. I finally had a serious talk with my dermatologist. This time, he prescribed humiraadalimumab. 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Clearer skin is possible. A Malaysian Airline was shot down over ewe crepe. Kiev and moscow are blaming each other for the tragedy. Joining us right now with the latest from moscow is jeff, moscow and Central Asian correspondent for the financial times. Jack, tell us what you know from where you stand right now. So the latest we know is well, very little exactly with 100 confidence. But it seems like the plane was shot down by missile attacks. Thats what both the ukrainians and now the u. S. Are suggesting. All people on board were killed, 298 people in total. of them were dutch, some australians, malaysians, indonesians, britains, germans, belgiums. Today theyre beginning to get an investigation under way. Weve seen the observers flying to the site. And there have been some reports that theyve recovered some black box reporters, but its very unclear who has recovered these reporters or where they are at the moment possibly on their way to moscow, which is where the separatists who control Eastern Ukraine have said they would like the investigation to stay. Is there discussion there . What are the discussions there about the possibility of future sanctions or increased levels of sanctions against russia at this point as a result of this . Is that being discussed in the press there . Is that feared by the Business Community there . I think its certainly very greatly feared by the Business Community. The sanctions were announced on wednesday night. Came out something of a shock to most of the business and investor community. I dont think anyone expected the u. S. , first of all, to act union lat rayly and secondly to target such blue chip names in the russian market like gazprom bank, beb, novatech. And clearly if this does turn out to be an attack and if it can be clinked to the operatist webs that is not yet fairley clear. To serve for tougher sanctions in europe and the u. S. Already the sanctions announced this week, i think its fairley significant that the ability of many western companies and investors to invest here and do business here. Michelle, weve been talking about some of these tensions, what they mean. Who stands to benefit . When it comes to International Community . No. At this point, no. No one has taken credit for this, right . So this is not your classic terrorist act where somebody was proud to have done it. Clearly, this was a mistake by whoever did this at some point or else they would have taken credit for it. We did briefly have igor slokov, one of the military commanders, the separatists in Eastern Ukraine who posted some things on social media at about the time the plane was shot sai it was an arsenal 26 and then those posts were taken down. Its unclear whether that is referring to the same plane he was trying to take credit for shooting down a Ukrainian Military plane at that point. Thats the distinction . If it was an honest mistake that they shot down a civilian plane, rather than rather than military. Michelle, you said that, i mean initially there was over here people saying what was that plane doing in that air space . But youre saying that the faa, or they had not said dont fly there. The faa had issued warnings about flying over crimea. Which is a different region of ukraine. This is how many this is totally different . Yeah, this is far north of i mean far relatively. This is donetsk which is an area where theres absolutely been fighting. Phil lebeau had said on the air yesterday more than once that there have been passenger jets flying over this area, one, and Malaysian Airlines has been defending itself saying that there were numerous planes that flew there. And we should say that as a result of this airline after airline after airline said were not going to fly over that region anymore. Thats what i was going to ask you. Which suggests they were flying there before. The air space is empty at this point . Oh, yeah, i no, there will be no planes flying over the eastern part of ukraine at this point. No. I mean i hear you. Yeah, exactly. Thats what we were saying. That im sure everybody is fine with that. Takes a little longer to get where youre going, right . Nobody will have a problem with it. Jack, thank you for joining us. Right now lets get some perspective on how geopolitical unrest is affecting currencies and gold right now. Joining us is Boris Schlossberg from bk asset management. Weve been focusing very much on whats been happening with the airliner that was shot down. Right. But how can you break down whats happening in both currency and with oil . How much of it is whats happened in gaza . How much of it is whats happened with the plane . I think the most interesting thing about the currency market is just how little it has affected the currency market. The euro basically was unmoved yesterday, moved like 10 pips on this news and still remains above the 135 level. I think thats probably the single Biggest Surprise is that youre not seeing this kind of a massive, you know, risk aversion flow to the dollar as a result of this. It tells me two things. One, theres clearly a nonmarket sensitive buyer in the euro. And a lot of people have been speculating that the pboc, the bank of china is still doing a reserve diversification so theyre basically buying the euro on the dips. And the other thing is, of course, that because u. S. Rates continue to dip below this 2. 5 level it still makes the dollar a very unattractive trade at this point. But i think when you have the accumulative effect of all these events happening, with the sanctions, with the pressure on russia, with the isolation, and with the fact that german business sentiment, german Economic Activity has clearly slowed in Second Quarter were probably going to be looking for much worse growth out of eurozone over the next couple of months, and i think the market is just not properly pricing that in. So the pressure on the euro i think remains to the downside, and it will probably drop below 1. 35 to 1. 33 over the next couple of months. I feel like weve heard that again and again. We have. And the key thing thats been holding it up has been the low the low yields on the u. S. Side. But ultimately i think reality is going to face the market that there is a disparity of growth between u. S. And europe. I mean of course, this assumes that there will be some longerterm impact of this. If there isnt, if the market the market seems to be saying this is horrible but its a oneoff event. Were unconcerned, were nonplussed. But i think the business relationships, political relationships, everything happening between russia and germany are going to be affected and it will translate itself into slower Economic Growth in germany eventually hurting the euro. You know, i know this isnt what we usually talk about with you. When we start looking at the yield on the ten year below 2. 5 thats got to throw some chaos into some of these other markets, too. It does. Its a function of the fact that all the Central Banks dont want to see their currencies appreciate, and you know, miss yellen, i was surprised when the market kind of thought that her testimony was initially hawkish because she was essentially as neutral as she could be and reaffirmed the fact theyre not going to do anything until theyre absolutely certain that, you know, the economy has grown. And i think again, i will go back to this one single metric that will determine whether the dollar is going to rally or not, and as a matter of fact where all the other currency is going to rally or not and thats going to be wage growth. Were past the point of job growth. The thing that central bankers are looking for is wage growth. Its only when you get wage growth that youre going to have real and sustained movement in rates, and thats when you hopefully will get a rally in the dollar. Lets talk very quickly about oil prices, because we saw a big bumpup over two sessions for oil, but again, this is just getting us back to levels that weve gotten fairly comfortable with over the last several months. Right. Thats very, very difficult to say, with geopolitical ramifications are going to be. You know, israel made a bet they want to clean up gaza at this point. They used yesterdays events as a Tactical Advantage to come into gaza. The bigger question is, is this going to turn into a quagmire for them or will this be a surgical operation in which they can achieve their ends quickly and come back out . If were talking about israel and gaza two weeks from now, i think thats going to be a big drag and that could have a bigger impact on oil prices as we go forward. Okay. Boris, thank you very much for joining us today. Thank you. When we come back, our guest host is neil wolen, former deputy treasury secretary. His expertise is in international economics, Terror Financing and sanctions. He also served on the National Security council. Hes ready to talk about the fallout from gaza and ukraine. Squawk box will be right back. [ male announcer ] the mercedesbenz summer event is here. Now get the unmistakable thrill. And the incredible rush. Of the mercedesbenz youve always wanted. [ tires screech ] 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 july 31st. Share your summer moments in your mercedesbenz with us. But hurry, offers end july 31st. 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, everybody. Welcome back to squawk box here on cnbc, im becky quick along with joe kernen. Andrew is off today. Relations between russia and the west becoming more intense by the minute. World leaders demanding answers after a Malaysian Airliner was downed over ukraine yesterday. And israel announcing its first casualties since the start of the ground operation. One soldier was killed following a night of heavy fighting. We have more on both these stories in just a moment. First lets get a check on the global markets. After severe drops yesterday with the dow down 160 points because of all this geopolitical news you can see that they are bouncing back today. The futures at this point look like the dow would be indicated to open up about 38 points. S p futures 4. 5 points. Right now in europe you will see in the early trading theres still some red arrows with the ftse down about 0. 4 . The dax down over half a percent. The ten year note weve been watching closely because the yield has been under pressure yielding 2. 482 . Cnbc International Correspondent Michelle Carusocabrera joins us on set. Shes following the latest developments out of ukraine and gaza. Will we see you here monday . I dont know. Youll let us know. Youll let us know. Thats my life. We never know where im going to be. No, i know. Im trying to figure out if i were an assignment editor, trying to figure out what id do with you. Lets go over some of the head lines. So if youre just waking up, u. S. Intelligence sources believe that the plane was brought down by a surface to air missile, exactly who was in charge of the missile at the time is what is unclear at this point. When it comes to the americans on board thus far, no confirmed americans on board this flight but Malaysia Airlines say there are still 20 individuals whose nationality they have not yet determined because they transferred within amsterdam and therefore they didnt go through passport control so were waiting for final confirmation of that. The international blame game is now begun as to what happened. President of russia, Vladimir Putin, blaming ukraine. Not suggesting that ukraine shot down the missile but saying because they werent in control of their territory, because they have been fighting against the rebels in the east, and not searching for a peaceful solution, that is why this plane went down, Angela Merkel just this morning were showing you video from a Cabinet Meeting that they had yesterday. Angela merkel this morning pointing squarely at russia, and saying that russia has to take responsibility. Russia is responsible for what is happening in ukraine at the moment. The latest in gaza, as well, late in the session yesterday, which is what pushed the averages lower once again and the ten year treasury yield even lower, israel began the incursion, as theyre calling it, invasion into gaza. Theyve been releasing video. This is nighttime video last night where theyre showing tanks rolling across the border into gaza. This morning, Prime Minister netanyahu saying that their ready to expand this incursion as they call it in order to end the situation there and end the firing of hamas rockets into israel, and then john harwood interviewed the u. S. Ambassador to israel last night. Hes going to air a big chunk of it later on, about a half an hour from now. We want to play you a small part of it where he asked about the situation where children died on a beach in gaza as a result of an airstrike by the Israeli Military. Take a listen. Even though we will make the most surgical attacks, surgical attacks possible, sometimes we get it wrong. And sometimes theres a mistake. And we regret the loss of any civilian lives. I have no doubt that hamas was celebrating when these children were killed. No one in israel was celebrating. What hes suggesting there is when it comes to the pr war, that the situation with the children there actually served hamas purposes. Which just shows you the level of dialogue here which is incredibly intense. And whats remarkable, guys, about that is the parents of those children. Its very tough. Last month we had the council on Foreign Relations said unfortunately the situation is routine. When it comes to how the International Markets are going to react. Whats more important, the situation in russia or israel . The situation in Eastern Ukraine represents perhaps more of a sea change about the way we think about the world. Whereas unfortunately the situation in gaza and israel, routine. Has germany been on board with us totally behind the scenes with sanctions . She always says things but now shes expressing its an extremely good question. I think thats for your guest. I think thats a better question for your guest. Whered you come from . I dont know. Just popped up. Well be with you in a second. Neil wolin, former deputy secretary, big job at the treasury. And youre here today. Im here today. Michelle just showed us those pictures from last nights ground offensive in gaza. Nbcs Martin Fletcher joins us from tel aviv with a sense of the mood in the region. Martin . Hi, well the region is looking at whats going on, as you say from the outside it may look as if this is another routine explosion, its the third round of fighting between israel and the palestinians in five years. As you can imagine, locally, it looks a little bit different. Gaza is under a tremendous siege at the moment. The israeli invasion began last night about 10 00 local time with a massive bombardment from the air and from the sea, as israels softened up the target area before launching the troops across the border. 68,000 israeli reserves now called up to join the regular army. They rolled in with a full force last night, along at the north, the eastern edge, and the south tanks armored personnel carriers, and especially combat engineers whose job it is to take out those tunnels. Find the secret tunnels and destroy them. The tunnels that hamas has been digging from gaza into israel and using them to attack israeli civilians and soldiers. That, the government said, is the main goal of the first stage of their operation to find and destroy as many of those tunnels as possible. They say that could take between 10 and 14 days. So thats a long time for the israeli army to be inside gaza, and it raises the possibility, of course, of any kind of complication, unplanned escalation, the first direct fighting between israel and the palestinians has already taken place in gaza. The longer the israelis are there the more fighting there will be. At the moment they seem to be, were not sure, but they seem to be mostly confined to the border areas where the tunnels are. But in the north at least, slowly moving towards the more urban area. Those areas where, if you remember, theyve been dropping leaflets over the last few days warning the palestinian residents to leave with for their own safety as the troops move in and now thats exactly whats happening. Troops beginning to move into urban areas inside gaza. Martin, very quickly. I know that the israelis have called ahead, pam letted, said get out and go somewhere else. Where can they go . Ive also heard from reporters on the ground in gaza, that the strikes are everywhere. Well the strikes are pretty much everywhere along the peripheral areas. So israel said leave those areas, go towards the more centers of the cities, which suggest that israels not planning to hit the centers of the cities. It sounds as if they have nowhere to go, thats for sure. But the most dangerous areas is where the israeli army some rating. Less dangerous one for the time being is in the center of the cities. Most of those refugees are being looked after by the United States relief workers association, mostly put up in schools sleeping on the floor obviously theres not enough food. Theres not enough water. Theres not enough anything. And its a lousy situation for the palestinians to be in. But i guess its better than being in the direct line of fire of the israelis. Martin thank you very much. Martin fletcher from nbc. Bring in our guest host neil wolin former deputy treasury secretary. Also with us for Market Reaction, Paul Christopher chief International Investment strategist for Wells Fargo Advisers and from washington david gordon is chairman of the eurasia group. You spent time dealing with all the people in charge in the u. N. And i remember hillary had an ad when she was trying to win the nomination about if the phone rings at 3 00 a. M. Who do you want on the other end answering it as president of the United States. The phone is like ringing off the hook it seems like in the last six months. I guess thats you take on the job and you know thats possible. How do you think weve been handling this. Hows the administration doing every time the phone rings . I think hes doing pretty well. I think in the case of Russia Ukraine, theyve put in place an Effective Coalition i think with the europeans and others trying to navigate this complicated environment in which really the objective is to get putin and the russian government to be constructive, to start to withdraw their support, and their assistance to the separatists in the east of ukraine. We put on a set of sanctions which have tried to encourage russia and weve been tightening it up. Of course, the last round of them on wednesday, and well do more. Wednesday we had that was the news before this news hit, was that the we were responding, watching europe respond, and what russia was going to respond. I think he was calling putin to tell him about the latest sanctions when this happened, as well. So a lot of flashpoints. Lots of flashpoints. Complicated world. And a lot to navigate. But i think in the range of things, in terms of israel gaza, this is obviously something for israel to work through. You know, its understandable. Israel has no appetite for missiles being lobbed into their cities, into their communities. Quite concerned about tunnels from gaza. That can be used by terrorists. You saw the video yesterday of terrorists going through those tunnels, and into israel proper, and so israel understandably wants to defend itself. And so, as martin just said, it will be interesting to see how long these operations will take. But i think that its obviously a tragic circumstance. And frankly, hamas is, i think, doing this because they are weak. They are financially weak. They are not popular within gaza. And i think they are, to the detriment of the Palestinian People living in gaza, really wanting to absorb a fair amount of pain so as to perhaps get the International Community and political actors across the world on their side. David, when we think about, and were a financial network, so lets just for a second talk about Market Reaction, the two situations were talking about, if there was one that would cause more concern, it would most people have said it would be whats happening between, you know, in the ukraine. Is that your view, too, at eurasia . Yes, i think that from a from a market perspective, really, the ukraine crisis is a lot more significant here. I think it really affects particularly perceptions of russia in International Markets, the potential here, i think, is for a much more rapid, and unified escalation of sanctions against russia. I mean, in the last month, the u. S. Has been pushing very hard on the europeans. We acted on wednesday. The europeans have acted, as well. Angela merkel very clearly, shes way out in front of even what any u. S. Official has said, and i think that this is now going to mean that european willingness to move on sanctions is going to be quite a bit higher, i suspect. Well, you know, that remains to be seen because theyve got much more of an economic interest and you know, if they take a hard line. She needed to say you know, she can say it and then she can pull back maybe on the actual well, but see i think this is where this is where the markets have had russia wrong. I think the markets have felt that because of European Economic ties, there was just no way theyre going to move towards heavier sanctions. And i dont buy that. Angela merkel is willing to take on her Business Community here. Europeans, many, many, many have been killed. I think we are heading towards a much tougher sanctions regime than i would have suspected. Although i remember a couple of months ago, as the troops were amassing right on the border, you know, the worst Case Scenario was putin was going to invade ukraine. Supposedly our intelligence was telling us that thats the kind of movements were seeing. And he almost, i mean hes a master at this, but he almost seemed reasonable at times, which is scary by saying that, look, these are our people, and they clearly feel that theyre russian in this part of the ukraine and all were doing is trying to protect them and he never did move in and that was, you got a false sense of security that the situation was not as bad, and this came out of nowhere to just totally exacerbate it. So putins been playing a double game of this this underground warfare, the socalled green men. Theres been a huge flow of arms and materiel across the Russia Ukraine border. While publicly hes blaming ukraine and talking peace. I dont think his actions had been have been peaceful. Youre right that he didnt do an overt invasion. Thats a pretty high bar for bad behavior. I would say russian behavior in ukraine has been pretty abominable. All right. So what do we do at this point, paul . What are you telling clients . Well, look, theres obviously a synchronized escalation here in both of these parts of the world. Whats interesting to me is that were seeing markets move in the directions youd expect, gold and oil higher. Treasury bonds, stock prices lower. The dollar getting some bid. But its not being its not been extreme. Its not been as sharp as weve seen in previous outbreaks of such problems around the world. Especially in the middle east. So im encouraged that people are beginning to see, or at least weigh the chances that as your last guest said we might get stiffer sanctions on russia, and then we night get a response from russia against the western europeans. But thats being weighed as a probablistic scenario, not something thats inevitable. I think were going to have to wait and see how things going and the markets at this point seem willing to wait for the next clues. Back to the original question that joe posed about germany in particular. We hear a lot of very tough rhetoric out of Angela Merkel and then ultimately, it seems like the europeans dont go along as deeply or as strongly as the United States. I mean, which is it . Well, i think that the europeans have been moving quite rapidly on the sanctions. Just as recently as wednesday announced some additional sanctions. Obviously, as joe mentioned they have economic interests which are very much intertwined with russia, in particular, on energy. But also with respect to trade. I think that what you see here in the last 24 hours is a real event that will galvanize european thinking and european leadership thinking on sanctions in the way that Angela Merkel spoke this morning in germany, and so i think that although the u. S. , and the europeans, have been moving quite a lot in lock step, meaning you never have sanctions regimes that are perfectly congruent, but each of them moving forward i think you will see the europeans take increasingly a leadership role on these sanctions in a way that is slightly different than what happened at the g7 last month. What are the chances we get sanctions where they say the whole Banking Sector is going to be punished for the entire gas sector is going to be punished . Well i think again its not likely that theyre going to go from zero to 60 in one fell swoop. I think theyre going to put them on increasingly. Arent we at 50 already . I think again the goal here is to put pressure on pruten to do the right thing and to go too far too past is likely to disincent him rear than to incent him. So theres a very complicated balance to be had. Paul id like to ask you one more question. Were discounting today the situation in gaza. Assuming that this is more of what weve seen in the past Martin Fletcher said something that surprised me, though. He said that the israelis are now saying that this will be 10 to 14 days. It will take them on the ground to clear up their objectives. Is that something the markets prepared to see . That there could still be israeli troops in gaza on the ground in two weeks . Oh, absolutely. As youve heard one of your reporters say, this is the third time in five years that weve seen this. I think the israelis are trying to be much more measured in what theyre doing this time as opposed to what they did in the past. Because they know how their opponents will respond. So yeah, i do think the markets are prepared to wait. And what theyre looking for, i think, is a sign that things are going to get worse. For example, what if southern lebanon starts lobbing more rockets into israel. What will israel do then . So its still a question of waiting to see how different parties will respond. The markets, as i said earlier, seem ready to wait. All right, gentlemen, thank you paul. And david, neal will be with us for the rest of the show. Michelle will be back. Where we going . To break . Right now were going to head to a break. In fact were going to have more on the washington response to the events in gaza and the ukraine. But first, ibm is a stock to watch this morning. Well break down the big blue results and get you caught up on some of the other stocks on the move this morning. Squawk box will be right back. 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. Give fans more then just the game with the ibm cloud. The ibm cloud is the cloud for business. Welcome back to squawk box. In Corporate News this morning, drugmaker abbvie is going to buy britains shire for more than 54 billion in cash and stock. This somes after shire rejected four previous takeover bids. Shire shareholders shire shareholders will hold about 25 of the combined company. That is above the 20 threshold that allows u. S. Based abbvie to move its tax home to the uk. And dow component General Electric has now responded in a positive way, significantly positive, getting back most of what it lost yesterday back above 27. After the dow component reported 39 cents a share in profits, which was in line with expectations. Revenue slightly below but industrial revenue was above. Ge also says its targeting the ipo of its financial unit for the end of this month. Ibm reporting higher than expected Second Quarter revenue and earnings after the bell but the Software Sales fell short of estimates. You can see that that stock was down in reaction. Joining us right now is senior tech analyst at Deutsche Bank research, and whats the head line here . The company beat on the operatings number was a little better than expected revenue. But revenue also was down for the ninth quarter in a row. Yeah, so if you look at the head line. The Services Business is a little weaker, the Software Business is weaker. The beat came on the hard ware side where the company did better main frame business this quarter. But the key segments, the services and the software segments, were weeker than ibm would have wanted. The eps also was helps by buy backs. So the beat was a beat but it was not strong as a beat. You know, on this particular stock you have titans lining up on either side. Warren buffett has been a buyer of this stock. But now we hear from Stan Druckenmiller who is short. He thinks this is a stock you should be going short. Who do you think is right . Well, we have a hold on the stock. And i think theres a lot of headwinds for the Company Going forward. If you think about their traditional i. T. Hardware business, the services and the Software Business, those are really under pressure from the cloud at this point. But theres a lot of secular headwinds for ibm right now, revenue line is not growing for them. Theyve been declining for the past couple of years. So theres a number of headwinds. Its hard to get really excited about the name, even though it really is an inexpensive stock at this point training at about ten times forward earnings. Who is a big problem when it comes to the cloud . Is amazon with its aws . Is it a huge threat because its offering Cloud Services . Its not really any one company thats a threat, obviously amazon does come up as a name that people talk about. But generally, the move to the cloud means that you need less hardware on premises, and you need less consulting services, and youre buying Less Software for the company. So, just the trend itself moving to the cloud means that theres probably more efficiencies in it. Its a problem for the Traditional Hardware and i. T. Services vendors. What do you think about the partnership that struck with apple announced earlier this week. Is that good for ibm . Yeah, i think its positive. Obviously ibm wants more exposure to the mobile side of the business, where they dont really have that much exposure. And apple is the perfect partner there. Clearly its a good move for apple because they are not traditionally seen as a enterprise company. Theyre really seen as a consumer company. So i think the partnership is a net positive things. Okay, sherri thank you very much for joining us. Coming up were going to touch on Corporate Tax reform and inversions with our guest host neal wolin and later on squawk box, former new mexico governor Bill Richardson, he was also Energy Secretary and an ambassador to the u. N. , were going to talk to him about everything from ukraine to the border crisis here at home. Squawk box will be back in just a moment. 2011, on average 17 manufacturers a day shut down in america. Theres no reason we cant manufacture in the United States. Here at timbuk2, we make more than 70,000 custom bags a year, right here in san francisco. We knew we needed to grow internationally, we also knew that it was much more complicated to deal with. I cant imagine having executed what weve executed without having citi side by side with us. Their global expertise was critical to our International Expansion into asia, into europe and into canada. So today, a customer can walk into our store in singapore, will design a custom bag and that customer will have that American Made bag within a few days in singapore. Citi has helped us expand our manufacturing facility; the company has doubled in size since 2007. If it can be done here in san francisco, it can be done anywhere in america. 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So prepare your car for any road trip by taking it to an expert ford technician. Because no matter your destination good maintenance helps you save at the pump. Get our multipoint inspection with a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup only at your ford dealer. Next up the washington response to gaza and ukraine. Whats the next step for president obama and his dealings with moscow . Squawk box will be right back. [ male announcer ] if you cant stand the heat, get off the test track. Get the mercedesbenz youve been burning for at the summer event, going on now at your authorized mercedesbenz dealer. But hurry, offers end july 31st. Share your summer moments in your mercedesbenz with us. Welcome back, everyone. Some of the head lines for you this morning. Fedex has been indicted from shipping packages from illegal online pharmacies. Charges include conspiracy to distribute controlled substances. In a statement fedex says that it is innocent and will plead not guilty arguing that its Transportation Company and not Law Enforcement. By the way, fedex also made some statements about how it has cooperated with Law Enforcement in the past and asked the u. S. Government to provide it with a list of the names of some of these companies that have been providing illegal drugs. It says it has not gotten that even though it has asked. Also abbvie reaching a deal to buy shire for about 54 billion. That offer represents a 53 premium to shires Closing Price the day before abbvies first offer. Abbvie down 1. 7 . Shire down 1. 25 . General electric shares getting a boost this morning. The dow company reporting earnings that were in line with consensus. Overall revenue was slightly below forecast but industrial revenue was above expectations. The reason revenue overall was down was because ge capital continues to shrink. Analyst nick heymann will join us to talk about those results. How is washington handling the situations in gaza and the ukraine. John harwood joins us from washington, Michelle Carusocabrera is here as well. John, why dont we start with you this morning. The reaction in washington. Look i talked yesterday to the israeli ambassador to the United States about the Ground Invasion of gaza. And the situation which, of course, comes as we have a simultaneous crisis in ukraine with this downed airliner and i started off by asking him why so much force for israel, and why now . The Prime Minister and the security cabinet thought that now he had to take action against these terrorist tunnels. Its a limited activity. But we have to be prepared for any contingencies, and it might expand. But we have to take the action to protect our population. How do you respond to the charge that israel has used vastly disproportionate force to the nature of the threat, to the point that four Young Children were killed on a beach yesterday . Well, i just dont think its true. And i think imagine that you would have over 200 million americans who would be in bomb shelters, and they would have 1,000 rockets fired at them from contiguous territory from a Terror Organization do you think the American Military or American Government would use less force than israel is using now . I dont think anyone can seriously tell me that. Now i think the key phrase in that response was, that operation might expand. That matches what Prime Minister netanyahu told the israeli people. And so weve got to figure out, or well have to see, watch unfold, how long this operation lasts and whether rapidly it generates enough pressure on the parties to have a ceasefire, and halt this operation. Not clear exactly how long, how many of the tunnels. There are many huh greds of them, that israel is targeting. Not clear how long it will take that operation to proceed, but the interplay of International Pressure and factors on the ground are going to determine the outcome. You know michelle earlier we heard from Martin Fletcher who is in tel aviv, saying the israelis said this could take 10 to 14 days to accomplish their objectives on the ground. Would that be a surprise to see forces still there 14 days out . Its certainly longer than some people had expected. Remember in the first hour we talked to a guy from the council on Foreign Relations who suggested that the reason the International Capital markets are so much more focused on ukraine and russia is because unfortunately, the situation in gaza is seen as routine. Right. And i think the risk is, what if it isnt routine . And Martin Fletcher suggested that even though they have incursions and invasions into gaza before, this is longer, than maybe was anticipated. And so, there is the possibility of accidents or things not going the way its expected when it comes to israel. I think the conclusion in the markets is, israels going to go in there. Its going to be very, very tough on the palestinians. But theyre going to wrap this up in a very surgical way that like they have before. And its going to be difficult. But it will get done. The question is what if it doesnt unfold that way . Right. Its the unknowns, expectations, meeting or not meeting expectations. Always the issue with markets. Right. John, with washington, what is the bigger issue that seems to be from the administrations perspective today . Weve certainly focused a lot on the plane and what that means for ukraine and russian relations. Well, i think, as michelle indicated, in terms of Market Reaction, thats the same reaction you get from the white house. That is, yes, everyones disappointed that the level of violence has escalated in gaza. But that is, if not routine, is a much more familiar problem. When you are talking about the shootdown of a civilian airliner in a conflict that has already threatened to draw the United States and russia into a more sustained kind of confrontation, i think thats the bigger worry, and we did hear from Russian Foreign minister lavrov this morning that this may have been an accidental shootdown which is a signal that russias acknowledging that, or may soon acknowledge, that prorussian rebels are the ones who shot down this plane and trying to justify it as not being intentional. And the questions going to be, does this rain down so much International Pressure on putin that he has to change his calculus, and the seizure the seizure of crimea is largely regarded as a fait accompli but when you talk about the rest of Eastern Ukraine maybe he backs off a little bit in response to that pressure. John, just watching you the other day with your fine interview of governor christie you asked questions that i could tell you just thought needed to be asked no matter how uncomfortable. I just want to ask you whether being in washington, and i saw a lot of stuff on social media and other places, the amount of time the president spent on this yesterday before launching into another speech attacking republicans, and fundraising, that got a lot of, i dont know, it raised a few eyebrows on both sides. Both sides of the aisle. Was that the was that an appropriate response . Was it too early to get their, you know, their thoughts together on how to handle this . And at this point, do you do you delay some Fundraising Efforts and to focus on this . To be ready to decide with europe how to handle putin on this . I mean whats the right move, you know, in terms of politically on how to handle this . Well, i think a lot of yesterday was about gathering the facts and making sure they didnt speak prematurely. Everybody was trying to be cautious. Nobody was quite sure initially so that was not justified in any of the criticism of that the First Response that we had . Im sorry, which criticism . The criticism of going to fund raisers yesterday . No the criticism of only spending, you know, spending a very brief amount of time and then i dont know, there was some frivolity that bidens doing this in delaware and some jokes and back to just bashing republicans on infrastructure. My general view of the whole question of president s time, whether theyre on vacation, or whether theyre fundraising or whether theyre giving speeches, i dont see that as particularly relevant, because the presidency is the 24 7 kind of deal, and the president s getting briefed constantly. I never thought it was very important that george bush went down to his ranch so often. He was president down at the ranch. And he was had the responsibility of the office while he was down there. But, john, is the spirit of joes question more about the tonality, the subsequent tonality after he made the reference, and the frivolity, and the, just a little bit of a tin ear to the situation unfolding over in Eastern Ukraine, and yet making jokes during a speech . I get it. And the same thing has been raised, you may remember, when we had the Navy Yard Shooting in washington last year there were a lot of people who said wait, how can the president , while we have a live search for a gunman be, you know, slamming republicans in a partisan speech . I do think that the reality of the political world that we live in is that we have a more or less permanent war between the two parties that goes on and on, no matter what the oscillation of daytoday events are. So i dont particularly i mean, look, thats a matter of everybody reacts in their own fashion. And you know, one person might think its inappropriate, the other person think its not a big deal. Im so accustomed to the performance of that kind of partisan wrangling that it doesnt strike me as that notable that it continues when some event happens in the world. Because events are always happening in the world. I dont think there can be any doubt that the president was focusing seriously about all this yesterday. He spoke to president putin. He spoke to the Prime Minister of the netherlands. He spoke to the Prime Minister of malaysia. He spoke to the president of ukraine. He had multiple conversations with his own staff on this. I think as john suggested, you know, to go out prematurely without knowing what the facts are, i think, is a big mistake. Its important what the facts are here and they will obviously dictate what future actions are to be considered and ultimately taken. I think the president spent a lot of time yesterday in a very focused way with this front and center. On the other hand, you know, there is a big country here that needs to be led, and the president was engaged in some important issues that have economic importance for the u. S. , and hes got to do both of those things. Thats part of what being president is about. Youve got to do all those things every day, no matter what is on a particular in a particular circumstance. All right. John harwood, thank you. Well see you again, im sure. Thats right. In the meantime lets get a quick check on oil prices given all the news. Carl larry is the president of oil outlooks and opinions and carl, this is something that we have seen Oil Prices Jump over the last two sessions. But still, its just getting back to just above 103 for wti and thats not out of the realm of what weve gotten used to over the last several months. What do you think is happening . Well, i mean, theres a lot more that can happen and i think thats the big question here, you know, what happens. When happens where at this point . We know that theres issues going on in israel, and if that spills over, how does that affect the middle Eastern Countries over there . And thats the big question mark. But the more important one that were dealing with right now is with russia. We know stricter sanctions will come if this is connected back to putin and russia. And if that happens, if there are iraniantype sanctions where were not going to be doing business with russia but were also not going to do business with people who do business with russia things get really crazy at that point and oil prices could just see a major shock. Im not talking 200. But we could see 10, 15 for sure. The markets arent acting like thats a possibility. Right . The markets sold off. They dont seem to fear that coming at this point. They dont. They dont. And its one of those things i think because were not involved in it, its not something that were directly accessing. I think thats what the issue is right now. I dont think people are understanding or see the depth of those things, you know, economic sanctions that can become so strict in russia, what happens is that you have europe that relies on pretty much 90 of their energy supplies, natural gas for sure, but that natural gas supplies electricity which supplies the refineries. It has this domino effect if europe cant deal with russia, and they lose these energy supplies, it just compounds the price pressures. I dont think people have seen that yet because we dont know what kind of economic sanctions are going to happen. All right, carl, thank you very much. Great talking to you. Great talking. Thank you. Michelle well see you back here in just a little bit. Up next we will be talking tax reform with our guest host neal wolin. Check out the futures after the big declines yesterday. You see the futures are indicated higher this morning. Dow futures up close to 40 points. Squawk box will be right back. You do a lot of things great. 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Kindle unlimited which will allow users to read an unlimited number of books for 9. 99 a month. That service also offers audio books. There had been reports earlier this week that a service like that was about to be introduced and sure enough, here it is. And treasury is urging an end to tax inversions. Will lawmakers listen . Lets ask our guest host former deputy treasury secretary neal wolin. Weve been talking about it a lot. I know its hard to change a law and i even go home and i think about this. Because of my colleague andrew that talks about patriotism, and corporate he takes umbrage with corporations trying to do this when its, you know, its totally legal. And i was thinking yesterday, you know, i understand that the government helps with infrastructure. And builds infrastructure. I understand that corporations benefit from this. But then i go back one more step, the private sector jobs created by these corporations in the private sector, you pay your employees, they get taxed, the government accrues those revenues, and that uses those revenues, tax to build the roads. So you know, you take it one step back, and its not as if the government is, through its large es and generosity is allowing is building these things for us. The government is there as a tool of the people to, you know, collect taxes, provide for our welfare, and yet if we cant change that, should we just tell these companies no, you cant move . Were going to keep taxes where they are but were going to keep you here and not change the underlying problem . Lets take a step back, joe. Our Corporate Tax system in this country is all messed up. I think everyone agrees with that. It is not competitive. It is riddled with loopholes. It hasnt been really reformed in any real way since 1986. It needs reform on a comprehensive basis. The president put forward a plan more than two years ago to do that. The chairman of the house ways and Means Committee mr. Camp put a proposal forward to do that. Of course, unfortunately, he didnt even have support within his own party. But i think what we really need is overall Corporate Tax reform and this question of inversions that youre talking about here needs to be a piece of that. The inversion question itself, its a complicated one. Of course no one wants to pay more tax than they have to. Especially not in these competitive markets. Theres no question about that. On the other hand, there is, i think, a very legitimate debate going on about what should constitute a u. S. Company subject to the u. S. Tax rules, and whats a foreign company. And there are some who are arguing that it should be a little harder to be although were the only country left with this territorialism where we get taxed over there, get taxed back here. None of it makes sense. I just we hear that you cant do a race to the bottom with the rest of the world to go to zero. But there are times that i think if the entire world did race to the bottom and get to zero on Corporate Taxation, if it freed up more money to hire more people who were then taxed then we generated more revenue from hiring more people domestically or even if the corporations were to pay more dividends were then taxed and accrue more revenue. If there was a way to make just corporations everywhere, you know, more nimble, leave more money for hiring, more money for whatever theyre going to do with it, im just not sure thats where you tax an entity. Maybe you tax the individuals that work at the corporation, or that benefit that own the corporation. I dont think anyones arguing for these are all questions that need to be answered. Asked and then answered in the context of overall i dont know if we should be afraid of going to zero. Thats what the excuse is. Were at 36 or whatever were are and were definitely before the laugher curve, everybody else is below and we say we cant get low enough so lets not do anything. I do think its important that we make sure we maintain our tax base overall. We do need to build roads and so on. We need the private sector to hire the people to generate the tax dollars to build the roads. Thats why this thing needs to be looked at overall. Weve got richard engel, whenever we can have him ill just cut you off to get to him, neal. Im sorry. Lets get to richard engel, who is in gaza, and can tell us exactly whats happening from what hes seen with his own eyes. Richard, good morning. Thanks for being with us today. Its a pleasure. Good morning. We are here in gaza city, and throughout the night, and today, weve been hearing israeli strikes. There have been artillery strikes, israeli tanks, and field artillery, infantry troops have moved into gaza, and this could be just the early stages of an operation. Prime minister netanyahu said today that he, and israels defense minister approved by the cabinet have authorized a major escalation of the ground operation. Unclear how long this could last. Perhaps several weeks. Palestinians are already reporting in the early hours of this offensive more than two dozen casualties. Most of the strikes appear to be focused on the outskirts of gaza. Just around the perimeter of the gaza strip. Israel says it is focusing on tunnels that hamas has used in the past to infiltrate into israel, digging underneath the border to carry out attacks. Or kidnappings against israelis. This could be a long fight and i think were just seeing the start of it. Becky asked a question earlier that, you know, people were asked to leave that, civilians where there might be a problem, but the question was is there any place where you could go, where you could be sure that you wouldnt be in harms way . Not really. That is one of the big ironies or contradictions of this conflict. The israelis always say that hamas uses people as human shields and tells civilians to go away from conflict areas. Most of the gaza strip right now is a conflict area and the people arent able to leave. There are roughly 2 million palestinians who live in the gaza strip, the borders are sealed. Both the border with egypt, of course the border with israel. They cant go anywhere. It is difficult. A lot of people are staying in schools, theyre trying to stay in makeshift shelters. This is not a territory that has air defenses. It doesnt have a network of shelters like israel, so people do the best they can to try and stay safe. But there is not a feeling of safety here in gaza anywhere in the gaza strip. Right now, its very hard to hear over the microphone but weve been hearing all day and all night the buzzing of israeli drones over gaza city. And if you listen throughout this report, youll probably hear deep explosions in the distance that is israeli artillery fire in the area where israeli tanks are moving in on the outskirts of the gaza strip. I hear those booms. I assumed that it was from video that wed been showing. But thats what youre hearing right now live in the background . Yes. Its sort of a buzzing noise. The palestinians call them the nannette, its an on mon pia to represent the buzzing that has become very familiar to the people of gaza. This is the third time that theres been a war between hamas and israel just in the past six years or so. So the sound of the explosions, and the buzzing of the drones that you may be able to hear in the back of the microphone is something that is very familiar to the people of gaza. You know you point out that this is the third time this has happened in the last six years. We heard suggestions from Martin Fletcher earlier that this is different than what weve seen in the past. Does it feel different to you . Is this potentially a longer incursion, a potentially longer time with more boots on the ground . The statements today from netanyahu suggested that. We really dont know. So far what weve seen just with a few israeli troops actually entering gaza, several thousand, but not pushing in to the populated areas, not entering deep into the heart of the gaza strip. This is the kind of operation weve seen in the past. The question is, if it expands. The israelis dont really want to get in to the center of gaza city. Its a city you can see behind me of densely packed buildings. Some high rises. Most of the buildings under eight stories. Many, many alleyways. This is a Large Population center, a lot of these buildings have dozens of families living in one apartment building. So, if israel came in here, not only would it be complicated from a tactical battle point of view but it would also probably cause many civilian casualties. Richard, the israelis go in, they try to compromise the ability of hamas to launch rocket attacks on israel. They did that years ago. Does it slowly come back where and lately its just gotten much more frequent and israel just feels like every couple of years they need to go in and try to, you know, try to knock out the capability to do this . So lately its just gotten to the point where they had five years ago after they went in were there no rocket attacks for two or three years . There the israelis believe the deeper they go in, the more damage that is caused, the more punishment is inflicted upon hamas, the longer they break, the longer period of peace and quiet they get. Thats the israeli calculation. They saw in the first war, in the late 2008, early 2009, that was a big Ground Invasion. There were more than 1,000 People Killed and they got several years of relative calm. The last war in 2009 did not have a Ground Invasion. And that was just about two years ago. So, half the amount of calm from israels perspective. It seems now they are going for the deeper option to try and buy themselves some more time. But it doesnt necessarily its not a longterm vugs by any means. You speak arabic. And palestinian arabic, you understand and are free to go wherever you want and speak that language, as well, richard . Yes. The arabic here is common throughout the region. And people here are quite welcoming to talk to journalists. They want to get their story out. They feel that they have a story to tell, that it is a captive population that the is receiving the brunt of the incoming fire. Generally, the narrative is that it is israel under threat, and is being attacked from aggressors here in the gaza strip. And there is a narrative to explain that. There have been 1500 rockets fired in the last 11 days or so from gaza into israel. Most of those rockets fell into open areas, didnt hurt anyone. Others were shot down by israels very advanced weapons system. Its not the same calculation here. You have many more palestinians dying. About 260 so far according to health officials. Thanks for being there, richard, and sharing so much time with us today. We appreciate it. And hope to see you again soon. Thank you. When we come back, more on both ukraine and gaza. Two areas of the world that are rattling the markets. Yesterday we see the markets bouncing back a little bit today. Well get a live update on both situations and talk markets with our guest host neal wolin. 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. He cadillac summer collection is here. During the cadillac summers best event, lease this 2014 ats for around 299 a month and make this the summer of style. Geopolitical unrest. New developments in ukraine and gaza putting investors on edge. The latest developments and what you should be doing with your portfolio. Thats just ahead. Its the final hour of squawk box begins right now. Welcome back to squawk box here on krcht nbc, first in business worldwide. Im joe kernen along with becky quick. Andrew ross sorkin is off today. Two guest hosts for the next hour with us. Neal wolin has been with us. Hell be here until 9 00. Former deputy treasury secretary. And bob hormats is charmer vice chairman at Goldman Sachs international. He was in the state department as undersecretary for Economic Growth, energy, and in the environment. This is like i get confused straight flush is better than a regular flush . Who could slap the other person around if you guys were serving at the same time . Who had the bigger job . When i went to the treasury it was, of course, neal and his team. In the state department we were very inviting. But you werent in so you i cant we cant tell who had more you were more important . The secretary, deputy secretaries, undersents, joe. But mr. Hormats had a big job at the state department. We worked with him very closely. Heres a tip for you Goldman Sachs is something you might want to think about after you finish your public service. We work well to the. I will say that. Its not always the case in washington. Okay. Lets check on the markets as investors try to make some sense of the mornings big geopolitical stories and earnings here at home. The futures at this point are rebounding a little. 160point loss yesterday right midsession as initially, i looked after the plane crash. I looked after it. And it was shot down and nothing much happened. The market tried to make a stand but with the invasion of gaza, too many things for the market to stay higher. Volatility spiked about 32 . The vix up to over 14 but still historically low. Thats whats happening in europe today. Those youd call moderate losses are making a little bit of a stand. Japan getting the worst of it in asia, oil is talked about it quite a bit tis morning. Not much happening. Moving up in pennies. The ten year continues to rally as yields drop now at 2. 47. 2. 47, as there is some flight to quality and into the dollar. 1. 35 now on the euro. And finally, gold. Down on this news. The world, you know, coming apart at the seams and gold responds by going down 7. It was the biggest move since june 19th. But, relatively speaking not massive. Wedding season has more to do with gold now it seems like. As you know, those tense situations in two areas of the world rattling markets. U. S. Railly forces are rathering out Ground Campaign operations inside gaza and in ukraine a plane taken down by a surfacetoair missile today. Michelle carusocabrera is back on set with more details. Development in the last few moments. A prorussia rebel leader says no black boxes have been found. We bring this up because it competes with a statement made by an aide to a rebel military leader yesterday where there were indications it had been captured. Which raises one of the issues about the site being held. We do know emergency workers, Police Officers and off duty coal miners are spread out across Eastern Ukraine searching the wreckage of the malaysian plane. U. S. Intelligence Authorities Say a surfacetoair missile brought down Malaysian Airlines flight 17 as it flew from amsterdam to kuala lumpur. They cannot say who fired it. Ukraine government in kiev, separatist prorussian rebels are fighting in the east and the russian government ukraine accuses of supporting the rebels all deny shooting the plane down. Moscow also denies backing the rebels. Thus far, 181 bodies have been located. According to emergency workers, that is. Now, the organization for security and cooperation, the osce, they do election monitoring, that kind of thing in europe, theyve sent an advance team heading to the crash site. 30 people who have been working the country for some time already and heard the spokesperson for the osce, first thing theyre going to do is determine the security of the site. Can they get there and can emergency workers and investigators get there . Whats being done to bring in the bodies and the black box, as well is one of the questions security of course the big issue. The countries that have suffered the largest losses of life that we know so far the netherlands, 173 people, malaysia 44, australia, 27. Thus far no confirmed reports of americans. There are 20 people still though their nationalities to be identified. Malaysias transport minister earlier today fighting back against criticism about why the plane was flying over an area that has become a de facto war zone. You must understand malaysia amsterdam, malaysia london, that routes have taken for a long time. Many, many years. So i think since its route it is safe, and thats the reason why we are taking these routes. And there were Many Airlines flying that route. Subsequently weve heard from Many International airlines saying they are no longer going to fly that route. Weve also talked all morning about these tunnels moving on now to israel and gaza, these tunnels that israel is targeting. We want to show you some video released by the Israeli Defense forces hence why youre going to see a thing up at the top that says terrorists. Theyve imposed that. Showing what they say are hamas militants coming out of an underground tunnel near a kibbutz israelis say were about to be attacked and attacking those militants with rockets and killing them as a result. The ambassadors interview that john harwood did they said this is one of the incidents that really was what catalyzed them to begin yesterday. There are more of these tunnels. Exactly. Michelle, thank you. For more on the downed passenger plane over ukraine, nbcs tom costello joins us from washington. Good morning, tom. Hi, joe, nice to see you. Good to see you. What can you tell us . Well, listen, this investigation is going to be difficult, because this plane is sitting right now in rebelheld territory. And the rebels have already been walking through the crash scene. Youve seen the pictures and the video of individuals standing on the wreckage itself. Standing on pieces on the fuselage. You know, the ntsb is telling us it may or may not go to ukraine. There are serious concerns about safety given the fact that this is very much a hot zone right now. And not even ukrainian authorities have gained access yet to that plane. Theres also a question, according to outside investigators, of what value there is in recovering the black boxes. Yes, they would tell you the altitude and the speed and the heading of the aircraft. You might hear whether the cockpit the cockpit voice recorders picked up any conversation between the pilots immediately after the plane was hith. But we already have the audio recordings, air Traffic Control has the recordings between controllers and the cockpit. We already know where the plane was when it went down. They have a pretty good sense of the speed and the heading already. The investigation is really about who shot this plane down. They clearly would like to do a full, thorough investigation of the crash scene because that is the protocol. Thats pro forma, especially when you have a boeingbuilt plane, a westernbuilt plane. Typically a u. S. Investigative bloody would go in and assist in the investigation. But there have rarely been situations like this in which the plane is shot down in a war zone. And like i said, questionable how much of the ntsb would be able to really contribute to the bottom line of who shot this plane down. If, according to the ukrainian authorities it was shot down by a buk, buk, a buk missile that was built during the soviet era, you recall that of course, ukraine was part of the soviet union, and this missile exists in the arsenals of both sides here, so this is really probably going to be solved by intelligence sources and military sources looking at those infrared satellite images to determine where exactly was that missile launched from and then trying to determine who launched it. All right. Thank you tom costello. All right. And its early, and its hard to draw any conclusions, so we wont. Thats right. Thanks. Coming up bob hard mats and neal wolin will talk politics, as well as markets. Squawk box will be right back. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires 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. Welcome back to squawk box everyone. Our guest host this morning, bob hormats and neal wolin. Weve already introduced them. Gentlemen id like to get your thoughts on a scale from one to ten where are we in terms of geopolitical crisis . Neal, what do you think . I think were sort of midway through that spectrum, becky. I think these are big, important issues. But i think, you know, one has to take them one by one, and deal with them. I think, you know, in the mid range there. Mid range there. Bob, what do you think is the most concerning development, and concerning potential outcome from what weve seen over the last two days . Well weve seen several things. I think the problem is weve seen in ukraine the russians continue to push, which is why theyve now received these new sets of sanctions. And theres a feeling in europe that unless something is done, the russians will explore opportunities, or weakness all along their borders. And the middle east is really in flames. Theres really almost no stability anywhere in the middle east. Theres really no effective border between jordan between syria and iraq anymore. Jordan is vulnerable. We have iran now playing the stronger role. Actually, in ways that probably are going to deal with these more fundamental islamists. But we have to sort of reorient ourselves. So the whole area is in flames. Egypts a stable country. But we dont have very good relations with them. Israels really the bastion of stability in which we have the best relations. As with jordan but jordan is now under threat. So virtually everywhere this is an area in chaos. Michelle pointed out off air earlier today that july 20th was the deadline for some sort of a framework to come up with iran. Thats going to come and pass. We havent seen anything yet. And odds are attention has now been diverted. Well, the sense becky, is that as the original agreement between the iranians and the u. S. Contemplates that they will extend the period of negotiations that hasnt yet been articulated, announced. But you know theres only three options here. Either theyre going to reach an agreement which seems overwhelmingly unlikely. Theyre going to stop talking altogether and go back to their corners. That also seems unlikely. Or theyre going to give themselves some additional time. That will be complicated. It will not go well on capitol hill and so forth. But i think that as the secretary of state john kerry has made clear progress has been made but not enough. And theres still some very important issues yet to be resolved. Were going to have to work with the iranians, the hope is there will be a deal, but the fact is, every time it gets extended the israelis say, you see whats happening. Theyre playing you. And the israelis now are concerned in particular that the iranians think we need them more to help deal with these radical forces in iraq, and syria. And they may feel they have a stronger bargaining position than they did awhile ago because of the need for some implicit kind of relationship with them to deal with these islamic radicals, these sunni radicals. The other part of the problem is weve got to provide more support for not just for israel, which i totally agree with the iron dome money, which was needed. But also, the refugees that are coming out of syria are very destabilizing for jordan and for lebanon. So if we really want to look at this we have to look at this as a region and help to stabilize jordan. Jordan is critical here. If theres any move on jordan by these radicals by isis, the United States is going to have to take very bold supportive action. Which may include American Military support. All right. We will continue this conversation. Again our guests hosts bob and neal will be staying with us for the rest of the hour. When we come back, crisis at the border. Well speak to former new mexico governor Bill Richardson about what the white house should do about the situation along the border of mexico and the United States. Check out the squawk box market indicator. Right now the futures are indicated higher. Across the board. Squawk box will be right back. In india we have 400 Million People who dont have electricity and i just figured that its time i do something about it. What were doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. I think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when its needed by the consumer. A smarter Energy System is made with the ibm cloud. The ibm cloud is the cloud for business. Question, okay, welcome back to squawk box. Washington dealing with the politics of an Immigration Crisis and joining us, a former new mexico governor Bill Richardson also served as an ambassador to the u. N. And as the u. S. Energy secretary. Governor, secretary, bon vivant. I dont know where to start. I never know when someone says so many times. Actually governor, i just finally got it, deputy is above under, did you know that . So neal had a bigger job in treasury than bob in state. But thats neither here nor there. Anyway, governor, in this world we i think we had you coming on to talk immigration, and yet the news of the day, take your pick we can talk about ukraine or gaza. I mean the world has gotten a lot more complicated just in the last 24 hours. Well, i think on the ukraine situation because of the uncertainty on whos responsible and the unspeakable tragedy there has to be a very Broad International coalition to investigate what happened. That needs to happen immediately. A volition that has not existed before. But whats happened with this tragedy, joe, its internationalized the situation. Because now were talking about victims from many countries in europe, around the world, and so unspeakable tragedy thats just happened. So thats, i think, the most immediate effort. On the middle east, this is going to go on for awhile, this israeli incursion into gaza, because theyre going in to the objective being to weaken hamas militarily not to take it out. So, these are two crises that are interlocked geopolitically and again American Leadership is critically important. I think its good, governor, that we put the sanctions on before this happened. Because i mean we dont know all the details yet on what happened, obviously. But, theres conjecture that no matter who did it, it may not have been intentionally directed at a commercial airliner, and then youre also talking about admittedly putin has a lot to answer for in the ukraine, but to base sanctions purely on, you know, weapons that may or may not have been provided by russia to separatists, and then based on something that perhaps was an accident, that seems like not, you know, do you tough the sanctions just based on this event . Or do you just ratchet up your diplomatic efforts to try to find a solution . Well, you know ratchet up the diplomatic effort to investigate what happened. At this point, you cant blame anybody. I think the Big Questions are how did these missiles, it was a missile, who provided the missile, who shot the missile. Dont we know russia has provided s. A. M. Missiles to the separatists . Or we dont know that for sure . Yeah, they have provided missiles. The issue is are they as sophisticated as ones to shoot down a plane . I think there are a lot of unexplained questions. I would leave the sanctions that we imposed on right now, but the possibility of ratcheting them up, which will include a broader coalition, because this affects a lot of countries. The netherlands, asian countries, you know, i havent seen any reports of americans, but nonetheless, 298 People Killed in such a savage way is incredible. And, you cant just have the american investigatory agency, i think the international an International Coalition of expertise, of safety expertise, technical expertise, is needed. And they have to have immediate access. This is where russia can make a difference, because that territory by the russian separatists is controlled by them. So there has to be immediate access to the black boxes, to the technical information, and it needs to happen very soon before somebody tries to steal some of this evidence. And then you hear Angela Merkel, talking tough. But you know, germans dont want to freeze this winter either, so you just wonder whether theyre really, you know, now that this has happened, whether that will really get them more on board with the tougher sanctions or not. Well, germany is the key. Theyre the ones most affected by russias natural gas commitment to germany. And so, actually the entire european union, as you know, onethird of russias natural gas goes in to europe. So, they dent want to impose more sanctions. But i think this International Incident is explosive. And politically a lot of countries are not going to have more choice to impose more sanctions that appears that russia itself had a hand. But lets not jump to conclusions. Lets get the facts. Governor, we had to use your expertise, as a u. N. , you know, as a diplomat, and well talk about immigration on another day when that becomes im sure it will be back on the front burner eventually anyway. We appreciate your time this morning. Were out of time. Thank you. Nice to be with you. Coming up, russias response to the situation in ukraine. Well get a live report as we head to a break check out crude prices this morning. Markets remain on edge. Squawk box will be back after a break. What can your fidelity greenline do for you . Just take a closer look. It works how you want to work. With a Fidelity Investment professional. Or managing your investments on your own. Helping you find new ways to plan for retirement. And save on taxes where you can. So you can invest in the life that you want today. Tap into the full power of your fidelity greenline. Call or come in today for a free oneonone review. With a new volkswagen turbo. Turbocharged reward card why are we so obsessed with turbo . 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So our business can be on at ts network for 175 dollars a month . Yup. All five of you for 175. Our clients need a lot of attention. Theres unlimited talk and text. Were working deals all day. You get 10 gigabytes of data to share. What about expansion potential . Add a line anytime for 15 bucks a month. Low dues. Great terms. Lets close. Introducing at t mobile share value plans. With our bestever pricing for business. Welcome back to squawk box everyone. Lets take a look at some stocks on the move. Bank of new york mellon reporting Second Quarter profit of 62 cents a share. Six cents above estimates. Revenue fell below forecast thanks to a drop in fees for the bank. Network equipment maker ericsson reporting better than expected Second Quarter profit indicating that business would improve for the rest of the year. That stock is up sharply in the premarket. You can see its up by better than 7. 5 . Also shares of chipmaker advanced microdevices under pressure after amd earned two cents a share excluding certain items, a penny below what the street was expecting. Its Current Quarter revenue forecast is also below forecasts. Amds miss comes on the heels of an upbeat report by its competitor intel. That stock is down by 17 this morning. 3. 78 is where its trading. Check out the futures right now. Youll see overall that at this point the futures still are indicating a positive open. Dow futures up by about 33 points. S p futures up by more than three points. Up next we will have russias response to what happened over in ukraine yesterday. Well go to moscow for a live report. Well be right back. Monday on squawk box, allianz chief economic adviser Mohamed Elerian is our guest host. Plus the changing face of media. Mdc partners chairman and ceo miles nadal joins us nop 33 thats monday, starting at 6 00 a. M. Eastern time. Right here on squawk box. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires 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. Markets remain on edge after a plane was shot down over ukraine, and, separately, Israeli Military launched a Ground Invasion in gaza. Michelle carusocabrera joins us again. And Martin Fletcher is standing by in tel aviv. Martin, lets start with you. Again, good to see you again. Thanks, joe. Well, israels launched what it called the Ground Invasion. One of israels right wing ministers said israels gone from iron dome to iron fist and they have gone in to gaza now with massive force. Theyve launched ferocious air attacks and sea attacks to soften up the ground, and then last night the israeli army went into gaza. Theyre fighting a lot on the north, the center, and in the southern part of gaza. Mostly keeping out of main city centers. Theyre aiming their first strikes alone the border in order to find and destroy the tunnels that hamas has built leading from gaza into israel. But theyre also getting some operation now from palestinian fighters, and there is fighting on the edges of some of the towns, in particular in the northern part of gaza, joe, where the israelis drop the leaflets and warn the residents to leave for their own safety, and that is where the israelis right now are going from house to house, mosques, schools, looking for any signs of evidence of rocket launchers. Joe . Okay. Martin fletcher, we appreciate it. Thank you. Im seeing something now that i want to ask michelle about here. Here to join, by the way, the discussion on the ongoing geopolitical unrest, joining us is larry korb, senior fellow at the center for American Progress and Senior Adviser to the center for defense information. Larry, well be right with you in a second. This i havent seen at all, michelle, have you seen . So there was supposed to be a very large theres going to be a very large aids conference hiv. Starting july 20th in melbourne, australia. Now there are reports that there are many researchers, potentially, on this plane. Wellknown research up to it says may be as many as 100 advocates, researchers and others that were headed to this conference. Thats the guardian reporting that. We havent confirmed that number but we do know that there were a large number of aids researchers on there. So the question is what kind of impact are we going to see on that area of research as a result of this . People are saying here that these were the best and brightest, and this is like a real setback to the whole fight against hiv. Hiv. This is not something i was expecting to read. Anyway, larry corbett, welcome and good to see you. What are your thoughts on, you can start either lets start with the ukraine. Well, i think this shows what happens when you give very sophisticated systems to people who do not have military discipline, and people who are basically quite unaware of whats happening in the world. And no doubt in my mind it was probably these rebels thought, well here comes another plane. Because they did shoot down a fighter plane the day before. This is probably another ukrainian aircraft not thinking, but you know, 33,000 feet, and so they shot it down. I mean they have a missing that could go to 72,000 feet . Youre giving it to a group of insurgents not under control. This was a weapon designed to shoot down the i2s by the old soviet union. Yeah. And normally you would be able to tell it was a commercial flight because of a transponder, or how can you tell, larry, just for us that arent experts . Well, if you were basically a functioning government you would be aware of the fact that commercial aircraft are using this. But these guys dont have a government. Theyre on the ground, and theyre, you know, theyre trying to create chaos and theyre fuelled by russias saying the Ukrainian Government wants to come in, put you down and drive you drive you out of here. So theyre reacting to that. Again they would not know. I mean it could be, you know, a transport aircraft for example. But again, if they were sophisticated to know that you dont have commercial transport aircraft, military aircraft flying that high. So you figure its possible that russia with Vladimir Putins his, you know, he blessed this, at these sophisticated missiles were given to the separatists, and they would have said, you know, try to shut down some military planes, and well, you know, just be careful . I mean you think that really happened . Does that look like what happens and they shot down a commercial airliner . Right. I mean they gave it to them basically to shoot down Ukrainian Military aircraft. And basically, i dont think theyd of thought that theyd be shooting down commercial aircraft. But basically, these people kind of got carried away with this system. And thats why when people say well you ought to arm the ariane rebels and give them, you know, things to shoot down planes you have to be very careful. These fall into the wrong hands they can create chaos. We have a new statement from malaysian airways. Of the 298 people on word they have now verified nearly everyones nationalities except for four people. So far, no americans. Its 189 people dead from the netherlands, 44 from malaysia, 27 from australia. Those are the biggest three, 12 from indonesia and falls from there, 4 from germany, 9 for the uk, 4 for belgium. So we are going to see certainly reactions from those countries, as well, and puts a lot of onus on western europe to see if theyre going to do some kind of response relative to sanctions. All right. Larry korb, thank you. We appreciate it. Weve got a reporter in moscow now where were going to head there. So we appreciate it, thanks. Thanks for having me. Jim maceda is in moscow and joins us right now. Jim, what can you tell us . Hi, becky. Well, first of all, as a reminder that almost 300 human beings died on that plane, today here in moscow, mourners were out in the streets, they were laying flowers outside specifically the malaysian and dutch embassies for the reasons you just said. Almost 200 victims were dutch and malaysian. Its still unclear if any americans are on board. But, were hearing now, that as many as 100 top hiv researchers were on that plane. They were heading apparently for a conference in australia. The loss has, we understand, shaken the profession. Meanwhile, theres a lot of recovery left to do at the crash site. You mentioned the number of bodies. Theyve found 181 bodies in that area controlled by the rebels, remember. There were, of course, 29 passengers and crew. So a lot of recovery left to do. In terms of what Vladimir Putin is doing next, some kremlin watchers here say that theyll simply continue to do what he does best. And that is to continue playing this very clever game which we have talked about for months now, of casting himself as the peacemaker, as the statesman. While at the same time behind the scenes doing what he can do best to destabilize ukraine with what started out as a low grade insurgency but is now getting more and more lethal. What really worries people, analysts here in moscow, that weve spoken to, is that putin will try to lead now any investigation into the crash. Control those black boxes. There are conflicting reports about the black boxes. One rebel leader is quoted as saying they havent been found yet. But according to a daily beast report, the flight and data recorders, and by the way, the actual missile launcher that was used to take that plane down, are, according to the beast, under lock and key somewhere here in moscow already. Becky, back to you. Jim, we know what this looks like from our side of things. But what do the russian people think about this . How do they see this entire situation . Well the russian people see it as Vladimir Putin sees it. The russian people dont really and i speak of russian people, i mean the 70 or 80 who support unwaveringly support Vladimir Putin. They would say that they want peace. That if there were peace, a ceasefire right now, and if the Ukrainian Government, the military, hadnt rescinded on that ceasefire, unilateral, by the way, and hadnt rekindled, or relaunched their antiterrorist operation, then thats horrible tragedy wouldnt have happened. So putin blames the other side. Putin blames the Ukrainian Government. So do 70 and 80 of the russian people because thats all they know. Thats all they hear on staterun television. All right. Jim, thank you very much. Again, jim maceda joining us from moscow. When we come back, we have more from our guest hosts today, neal wolin and bob hormats. Take a look at shares of Gentiva Health services. That stock getting a bump after it rejected kindreds offer to buy a stake in the company. It favors a buyout offer from an unnamed party. That stock is up 11. 5 . Squawk box will be right back. Dad hes our broker. He helps looks 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 at every ford dealership, youll find the works its a complete checkup of the services your vehicle needs. So prepare your car for any road trip by taking it to an expert ford technician. Because no matter your destination good maintenance helps you save at the pump. Get our multipoint inspection with a Synthetic Blend Oil change, tire rotation, Brake Inspection and more for 29. 95 or less. Get a complete vehicle checkup only at your ford dealer. Indicated to rebound a little bit up 40 points or so this morning. And the transportation sector, dow transport fedex has been indicted for shipping packages from illegal online pharmacies. Charges include conspiracy to distribute controlled substances. Fedex says that its innocent and will not plead guilty. In a statement the company argue outs plead not guilty. Yeah, its a Transportation Company and not a Law Enforcement entity. And it says that the dea never supplied it with a list of pharmacies that were engaged in illegal activity. Do you know can you buy like pain relievers on the internet without a doctors prescription . Can you just yeah, i think theres ads for all kinds of crazy stuff. But that actually i was wondering could you buy pot from colorado and try to have it shipped to you and is fedex responsible for knowing whats in every box that it ships . I did read one thing that all the rental cars out in colorado, did you read this . Smell like pot . No that people when theyre leaving the state on an airplane you cant take it and they bought a certain amount so they leave it . Huge amounts of pot left in all the rental cars out in i usually leave my water bottles. You leave your water bottles. Well you can make that a bong. There you go. Does that add to the premium you pay for your car . I read that and had to laugh, though. That makes sense because you cant take it on the plane. Honestly i left half a case of water last week because we had drank all the water. Here guys, you can have the water thats left. Good to be a hertz attendant. Thats right. Lets get back to our guest hosts. Neal wolin is former deputy treasury secretary under tim geithner. Bob hormats is former vice chairman at Goldman Sachs internation. Hes also a former state Department Undersecretary for Economic Growth, energy and the environment. And gentlemen, lets dig in a little bit about what happens next in this game of chess with putin. Because we were just talking to bob mess said today who was talking about how putin is not stepping down and still has 70 to 80 of the russian citizens who are strongly backing him in this scenario. What happens next . Whats the excalation potential for this . I think that, you know, threshold question is whether international unhappiness about what happened yesterday, and about the events that were happening already in Eastern Ukraine builds in a way that causes putin to back off, to decrease the support of the russian government for the separatists in Eastern Ukraine. I think the early evidence is not likely. You see putin, for example, already blaming kiev, and the Ukrainian Government for what happened yesterday. And so it may not be that putin will be chastened by this event. On the other hand International Pressure is likely to grow. The second important question is what will the u. S. And what will european governments do to further increase that pressure . Whether its sanctions, or have you. Many of these countries have lost citizens. And i think that the political need for them to really intensify their unhappiness with what the russian government is doing in this sort of indirect and subterranean way to stoke up opposition in Eastern Ukraine is going to be a big deal. And so i think likelihood is, sanctions will ratchet up. Pressure will ratchet up. Youll see countries not just looking at sanctions, but looking at how their regular kind of interaction with the russian government is. I think it will definitely intensify pressure on these governments to strengthen sanctions. The United States, as you know at the least. The United States, you know, took a number of sanctions a couple of days ago. The europeans have yet to match the u. S. , the pressures are going to grow bob, they slowly lost their nerve and resolve in europe from the first time around. They didnt do you really think this will cause i think to not worry about their own economic i think they will continue to worry about their own economic wellbeing. But i think the pressure, particularly from countries that lost people, britain and the netherlands, in particular, are going to intensify. These are sovietmade rockets. Who fired them, we have to determine. That is what the evidence needs to does this go all the way back to the soviet or russian . Yes think were used to shoot down u2 all the way back to the soviet union. Thats why they go up so high. Is it wrong, one of the things i thought of last night it reminded me of which brought the United States into world war i. Is it wrong to think of that . Is that a faulty comparison . It probably wont be that extreme but i do think the United States has to do a number of things now not just because of this. This will intensify pressure. Im sorry i shouldnt say bringing the United States in. Does this bring europe in a much bigger way . I think it will put increased pressure by the europeans because of the outrage of the human loss on russia to do something. Who fired it, we have to determine before we make accusations as to who actually did this. But where the rockets came from can we do that if all the evidence is in moscow at this point . Thats going to be one of the challenges to make sure that we get accurate evidence and that is not going to be so easy in this murky situation. The other is we need to find ways of strengthening unity between the United States and europe in the area in which, if the sanctions do increase, by europe and the United States, the russians could exercise reverse leverage. Thats energy. I think what we need to do is have an Energy Summit among the europeans and the americans to demonstrate that we cant be divided by the russians if they want to use the energy lever on us in response to additional sanctions. This is going to be where our vulnerability is and we have to get together and prevent it from being used. Neal, quick last word. I agree with bob on the increasing pressure. The world war i comparison we have to be careful. I dont think theres any probibility of the use of force or that kind of reaction. I do think the energy piece is important. Its also an opportunity for the u. S. Now over time this isnt going to be a quick thing to increase its exports of l g and crude oil in ways that will lessen the russian leverage over western europe and germany in particular. We were threatened in 73, 74 by leverage from the middle Eastern Countries on energy after the war in the middle east. We were worried they would use Energy Leverage on us. We need to be worried that the russians will do that. We can escalate our sanctions. We have to be prepared to counter their escalations. Well have more in just a moment. Coming up corporate head lines. Also stocks to watch. We give you the most Free Research reports, customizable charts, powerful screening tools, and guaranteed 1second trades. And at the center of it all is a surprisingly low price just 7. 95. 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If youve had a heart attack be sure to talk to your doctor before you begin an aspirin regimen. Welcome back, the wl street journal has a wider reach. For example, the companiments to show tweets are embedded on other sites or shown on television. Currently, twitter metrics do not take audiences into account. A number of stocks to watch today, General Electric shares are now oh, they are up a little bit on this news, up 18 cents. Dow component reporting earnings that were in line with consensus revenue, just slightly below on 40 billion, close for government work. I used that for my two guests. Here we go. Revenue above expectations, and ibm posting better than expected, soft ware shares weaker than expected, and google earnings weaker than expected, however, what do you think people wanted . Revenue beat the street. Stock soaring. One of ceos larrys leaving to move to japans soft bank. He was a main liaison to wall street. I dont know, hes getting a good job. I dont know if its signaling anything no, it was good. Exactly. Abbvie reached the deal for 53 billion, the day before the first offer, and got so much going on, i cant ask about your reasonable im sure you dont want to just outlaw companys ability to redomicile, but change the entire law. I think we need a lot of Corporate Tax reform, and this could be part of it, but maybe this will be what finally gets people serious on both sides. What it would take is the department would have to, you know, even if the holders know and talk to people on the other side, showing no inclination. They worked hard and the treasury worked hard we know about the bully pulpit and what president ial leadership is capable of, neil. The house of the ways and Means Committee hes not president. But he put forward proposal. And secretary lew it back saying its all wrong. Not at all. The money abroad is not working for us, get it back here. If its not use for jobs, greedy shareholders, no one wants to do it on your side. Should be used for a lot of things, link it to support i crack you up, dont i . You crack me up. Youre not employed by them anymore, are you, but you got we should have Corporate Tax youre not employed by the white house anymore, but youre im not. But youre on every bullet point. Bring it back, some of the money should go into infrastructure, which we need, creates jobs, good for the private sector. Coming up, wrapping up the week, bob and neil, plus what you need to watch over the weekend. Coming up on squawk alley, commissioner of the fcc on net new tr neutrality. I want to ask about the politics of murdoch so powerful. The fcc can Say Something about that, right . During the cadillac summers best event, lease this all new 2014 cts for around 459 a month or purchase with 0 apr and make this the summer of style. Humans. Even when we cross our ts and dot our is, we still run into problems. 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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. Lets get back to the guest hosts for thoughts. I thought, bob and bob wanted to say i dont know how long we dont have that much time left, but people mention what the russian stock market had done since the last sanctions, up like 35 or something indicating they were not tough enough so we did new ones. You think they are tough. They are, they make it difficult for two banks to finance in dollars abroad, and they need to finance. They are part of restructuring in russia, big debt rollovers coming for boept of them with a greater impact. The others were targeted. This affects their financial sector, not all of it, but affects it more than those in the past. Neil, maybe i got the wrong idea, but people in russia are used to suffering for the state, for long periods in history, right . I mean, do they will they be mad if their economy becomes, you know, even worse than it is . I think so. Its true they suffered a lot over the years. On the other hand seems a little better. To see the economy not doing well, that will increase, i think bobs right, the most recent round of sanctions intensifies that, and they opened up the sector sanctions so respect to the energy and financial sector, there may be more of that to come increasingly bite in ways the average russian citizen can see and feel. Putin cares how they feel . Ultimately, he has to. How he balances with respect to the other objectives, well have to see, but whats clear is that the u. S. And europe are committed to ratcheting up pressure over time if putin does not take steps that are responsible. The uncertainty in the markets of whats to come is very important. Its going to be very hard for big Russian Companies to borrow on International Debt markets, and they dont have an effective Capital Market in russia. They have to borrow. They are a lot of rollovers. If you cant buy the new debt to replace old debt, thats going to cause problems. They have reserves, but they are not unlimited. That affects russia and his supporters and the russian economy. Thank you for joining us today. Been a pleasure. See you monday. Right now, its time for squawk on the street. Good friday morning. Welcome to squawk on the street, im Carl Quintanilla with david faber, hobs, and jim is off today. The crash and offensive takes a toll, and futures show resilience with tech earnings and m a. 10year yield saw the biggest drop from february yesterday, just above 247. Europe in the