Transcripts For CNBC Squawk Box 20140722

We are going be talking about it literally almost every 15 minutes over the next thee hours. Keep your eyes on attention on inflation. And the june Consumer Price index, economists say headline cpi likely rose 0. 3 . Also worth watching, existing home sales for june coming out at 10 00 a. M. Eastern time and sales expected to rise by 2. 2 there. A dip from jumps that we had seen the previous month. Joseph kernen, i see you staring at a screen. What do you see . Dupont. Its a couple of cents shy. 11. 17 was the estimate. Its posting 1. 15, but the revenue number is above, which will be interesting if they miss on no, its operating earnings of 1. 17. So right in line. Operating earnings, 1. 17. So in line with expectations. And the revenue number is slightly above. We were looking for 9. 7852. And i think we got above that. Maybe that is that Second Quarter sales . 9. 71. So maybe its in line with expectations. The dividend has been no, revenue is 10. 11. So sales, they obviously have something other than sales. Revenue slightly above. And then weve got different reasons. We should point out the company did raise its dividend from 47 cents a quarter from 45 cents. It was yielding 2. 7 cents. So two cents on 45, thats not even thats sanl digit increase, but i guess the shareholders will take it. Its the third time in like two years. Dupont, the second half adjusted earnings, 1. 25 to 1. 35. And the estimate is 60 plus 66, so what is that . Thats 1. 36. So maybe at the low end of what were looking for. Fiscal year, 4 to 410 and 403. Keth nelson at bay . We just saw him at delivering alp alpha. The company is saying they were impacted by the agricultural sector, that earnings were declined 105 million, down 111 on lower corn seed volume, lower north american herbacide. I dont like if you put an h there, id say it. Otherwise, dont put it there. Do you call him Herb Greenberg . No. Higher seed inventory writedowns, as well. They also saw a decline in electronics and communications operating. I think thats probably a real quote were seeing there. So that is after all was said and done, thats what it looks like. Thats where we landed. Exactly. I dont think a whole lot of people are landing there. Trading in dupont, but a few people, obviously, right now. Thats number one. Did you know that 6,000 of what percent of the dow is that . You know what . Just like you werent watching me when i wasnt watching punish i dont know. And you cant figure it out . No, im fought going to do math at this hour. Six, four, 21. Its a fifth. It is a fifth. Thats 30. What percentage is that . Its a fifth. 20 . I said that out there. You didnt have to listen to me to know its 20 . Oh, i know. Sorry. Apple is reportedly planning on launching the latest version of its iphone with a significantly larger screen. The wall street journal says the company is asking supplierses to make between 70 and the company is asking suppliers to make between 80 million and 80 units of tweess with a 4. 5 inch and 3. 5 inch display by the end of the yoer. Im excited for that. I am, too. The keyboard is killing me. Thank you. Its going to change everything. I just want to put it out there. It matters. It matters so much. You do not understand. What are you watching on your iphone . I want to put the prediction out there. This is going to change the value of apple. Its going to put them back in a whole new place. This is going to be mind blowing. Its that big. Its that important. We cant trust you on what you i dont like beats. You dont like the beats. No. Whats the wrob . Excuse me . Theyre great. Texas instruments reporting better than expected revenues. That was funny. Go ahead. I like its Texas Instruments is telling investors to expect higher Third Quarter revenue. What . On a white shirt. You have to be very careful. You can put on your lobster salad. The old man looks good in among the drivers for Texas Instruments, improved demand for chips using cars, Industrial Equipment and communications here. Customers appear the be holding lean inventory of chippes and that should help maintain demand. Chipotle results beating the streets. The burrito chain raised prices and still attracted more diners. Samestory sales boost 12 . Shares rising on the news. 10 gains for chipotle to tell you about earnings or not, but were seal. Look at the stock price. Youre talking about the oneyear . Yeah. Its below 100. Its now 649. But it should be the growth industry of the you like screens on your you know, on your electronics. For me, its mexican food. Its great. The worst mexican food is great. Look at that. 2010. Burritos are my favorite thing in the whole wide world. Actually, thats right. Youre the one that likes mexican food. Theres another food scandal sweeping china. Mcdonalds and kfc apologized to chinese customers have a report that a food supplier had given the chains now were getting word that the scandal is spreading fast, dragging in starbucks, burger king they tell that not a lot. Chicken . Yeah. Or maybe some of those weird breakfast sandwiches. But its dragged in burger king, papa johns and others, the dhans pulling products with meat from the supplier and mcdonalds saying some tainted meats was used in burgers in japan because in japan . Mcnuggets are already for i eat them once in a while, my son eats them, but theyre questionable. Are they really chicken . Theyre chicken, but have you looked at a chicken . Yeah, i have. Fy bassomitic. The whole chicken goes into a blender. And thats what comes out . No, but my fear piques. The one thing to say about china, the issue is we went from such a pleasant thing, and that is mexican food, to not only chicken mcnuggets, but past their due date. On meat that was used in china. On top of Everything Else. Im not surprised to see this spread like wildfire to other companies. Because the media there is not necessarily stuff that you can believe, right . Usually its controlled or deeply influenced by the government. You can see this news spread like wildfire on the internet even if its not true or even if its not that big of a deal. Im spoiled with how substantial all of our Food Supply Chain is in this country. Anywhere, i can remember being in portugal. You go into the normal butcher shop or meat section of the small sort of whatever you call them and its still the smell is a little stronger. Things that are hanging that look like and the Chinese Government has made a very big decision that te finally going to do to agricultural what they did to manufacturing for the last 30 years. Its mostly mom and pop farming in china, which means the supply contain can be sold. Ooifgd private equity people telling me 80 of everything you you eat in china, its dirty. Pigs in a river, 30,000 they have supply chain issues. They have to deal with it. Youre going to get i think weve been discussing geopolitical news, have we not . This is probably more weighty and a little bit more potentially more weighty. Were going to talk about geopolitical news right now. European minutesters are meeting to discuss further sangs against russia. Hadley gamble is standing by with more. Hadley. Andrew, the buzz here, two words. Arms embargo. As we were coming into this meeting, there was a bigger question about how effective the eu can be of 28 member states, 28 separate agendas and no appetite for further economic sanctions. Those sanctions have hit germany particularly hard, but there seems to be growing concern about western companies supplying russia with weapons because we dont know where theyre going to go and are they going to enup in the hand of separatists. So the buzz here is all about the weapons, who has them and what do we here. I have tof 4 yesterday on the streets of donesk. They come in increasing numbers across the border in spite of our commitments and in spite of our demands. Now, one country that is notably silent on this is france. The French Foreign minister earlier arriving here in brussels, taking no questions in english, only talking about the situation in the middle east and the situation in gaza. And the reason wind that could be the fact that the french have a 1. 6 billion deal with russia for two warships. President hollande says hes going to go ahead with at least one delivery in the fall. There could a again of moo the space will get involved. Well just to have would it and see if the frefrt come. Heather, weve had a huge issue there. So frustrating, youre right. In this day and age you would think and whenever you try to you want to have a conversation, but you really cant have a conversation. Sometimes it happens with cell phones, have you noticed . Yes. And you see it come. Here is one person talking and you can see it coming. When we work overseas, we try to always figure out what is the fastest fath, always. Okay. Netflix surpassing 50 million subscribers. Quarterly earnings falling a penny short. Anthony, i shouldnt, but i muft ply the net number by four and look at what the Market Capital of the stock is and i always go, thats unbelievable, right . I dont know what it is this time, and theyre not going to make what they made this quarter. But its still incredibly rich in terms of valuations and its going very quickly. Some people, its not just about being able to access content. They actually have some they make their own content now. So theres a lot of exciting things about it. Is it worth what its selling for . I think netflix is a little bit like amazon in the sense that the domestic business is much more mature, its proven to be more profitable as the contribution margin approaches 30 in the u. S. And then internationally, their inve investing, so theyre initial losses, they talked about launching in france and germany. I think what im trying to do is value the domestic business, value some of the analyst businesses. But it is true whether it becomes more difficult to value net yix. Its difficult to look at it as the company invests. You cant use normal metrics on it. Then i was reading, making comments about the big merger, the media landscape. He goes, you know, the comcast Time Warner Cable just thats just we cant really deal with that because it affects netflix directly because its overloading all the pipes and they expect it to be free for them to overload everything and not have to pay anything. They also pander to the left that thinks Net Neutrality is like some god given right. It was from the Old Testament or something that youre entitled to, which youre not, because if we build the pipes, its like a normal free market. But then, so the fox 21st century fox, that acquisition, time warner, thats fine because theyre both big already. So hes a content guy. So hes against the distribution merger, but its fine with the content. Its so transparently obvious that hes talking his own book. Well, on the Net Neutrality issue they are heads in the sense that they believe very strong in that neutrality and their policy is they would like to see that merger blocked. They know what to do that. Supposedly. But it seems like they they know theyre not they cant sanity phi that kind of a deal. And there are some small incremental costs that have to do with that. But i understand what youre saying in terms of the policy. In terms of warner fox, they said these are powerful companies already. Basically, it did not continue a combination of those two. Really, you have to give them credit for negotiating directly with the producers. Thats his hedge there. So theres this issue of a netflix being hedged whether or not the outcome is comcast and time warner gouges netflix when theyre trying to sell them content because theres one less player. You do recognize, joe, and as you know, im not against this transaction, but i do realize which one . The comcast time warner deal. I want comcast in my own home so im selfish. You do know there is no free market in the context of the theres no free market anywhere, right . Its legitimately not a market sale. If im going to spend billions upgrading the pipes, im not going to just eat that. If youre going to take 60 of what ive built so theres no delay on downloading your stuff, youre going to pay for it. Joe, you have there is no market. We have netflix, which is the prime content. Whats that . You have netflix, which is supplying the contents. So in the media world, in the content is king type world, you charge the distributor, right . The content i have is the pricing power. It should be fine. In this world, why isnt netflix the content owner here that should be charging the guys . They are. And god bless them if they can. They should. I dont see how at 8, theyre sort of you know youre right. It is like 8. 99 a month or whatever it is. So theyre doing that to build their Subscriber Base globally. But in the meantime, it should cost more than that. The last time he tried to raise prices, it was a debacle a couple of years ago. I have two questions for you. The context of netflix and the context of price and value for hbo, there have been reports that inside fox 21st century fox, their valuing that company around 20 billion. This company, netflix, clearly valued at much more than that. Does that make sense to you . Is hbo too little or is netflix too much . I think its probably a little bit of netflix being fully valued. I think the opportunity is they can go direct and that gets a lot more exciting. Is that a code for overvalued . Is fully valued a code for can you speak english . Netflix trade is double the multiple. Have you noticed netflix is now selling their original programming, not just on netflix, but what appears to be on other networks. So if im a fios subscriber and i do not have netflix, i can pay to watch this . A content provider can set things on fire. Thats kind of you know, thats a benefit of owning the contents. There are other ways they can monetize those rights. So its sort of like their hedge in terms of dealing with the studios. This is another hedge in terms of dealing with the cable issue is they own that content. I literally just saw this. Theres an argument made about whats called reverse Net Neutrality. One day, netflix or google is going to say to comcast, actually, you know what . Unless you pay us directly, in addition to what were going to charge the customer, your customers cant have us. Well be running so much sports by then and or google is going to say what has google got . Youtube. I dont want to watch youtube. How about h you will you . How about that . Were not going to gouge ourselves. No, no, what happens when directv let the markets work. It says, you know what, actually . I know you have this content, but youre going to have to pay us in addition to what the conseamer is looking at. Can someone come in and build you say its not a free market. Can someone come in and build well, thats a problem. Its not just challenging economically. Do you want to get into that business, youre free to do that. In this country, youre free. Other than that, you dont want to pay it, dont pay it. Anthony, weve called everything here. Everything is fine. I still havent seen any of those netflix offerings, though. Can you do that . Theres a picture of her in there, too. Are her eyes on that . Who are you talking about . The picture on theres a picture of her in like all the right. No use with the eyes, its crazy. Crazy eyes. Before we go do you know what im talking about . I know who youre talking about. The malaysian Prime Minister Just Announced they have control of the black boxes from flight mh17. They appear to be in good condition. Near not looking at a oh, the train has appeared i think its arrived in Eastern Ukraine, yes. Thanks. Coming up, when we come back, were going to continue a little bit of this debate around the media. Time warners board moving to prevent its shareholders from calling a special meeting. That company trying to prevent any quick move to approve a potential takeover by rupert murdoch. We have that story when we return. Welcome back to squawk box. Time warner playing defense. The media giant announcing a big change in its bylaws that move shareholders ability to call a special meeting. Joining us now with more insight is jeffrey jacob. He is a former attorney with the federal trade commission and with federal governance angle. We have jeff sonnenfeld, senior associate deal at yale school of management office, cnbc contributor. Let me start with you, jeff. From a Corporate Governance perspective, is what they just did okay with you . Yes. I think its really a great idea. It slows down some of the frenzy on of this deal. Basically, theres a provision that they had in there in their bylaws, these are bylaws, of course, which require annual reelection of shareholders. Everybody is up for reelection. They dont have any poison pill or that kind of stuff. So you can turn this over next june if need be. What this does is prevent any kind of preemptive panic misinformation that you can confuse people. Theres a lot of confusion out there, i think, actually among analysts when they talk about a 75 overlap of shareholders. Its important at this given time to realize the pace of those people with the 75 overlap is four to five times ownership of fox and not time warner. So basically, its 90 and a minority owner is trying to the terms for the majority of the ownership. Youve got succession issues on antitrust funds. I want to get to the other side. Jeffrey . Yeah . You put this in the category of best practices . Well, what happens frequently with hostile takeovers is there are blocking actions by the board. What it as gives them is the ability to try to negotiate a higher price from fox. Thats what they probably will intend to do. So from an antitrust perspective, this happens frequently and it really doesnt affect the authorities all that much in terms of their overview from that perspective. No, i hear you there. What im trying to understand is here is a situation where clearly the company has now blocked arguably the rights of certain shareholders. Not certain, all shareholders in this instance. Do you put that in the category of best practices . Well, the question is are they acting in a fiduciary duty towards the shareholders and are they trying to argue at a higher price . If it ends up in a court of law, that would be their argument. So as far as best practices are concerned, its a discretionary action. And theyve got a good supporting argument there, too, andrew. Take a look at the 25 compound ets vote. The price should be way higher than that. They can argue this is very much it tripled the stock price in this company under 3 in the last five years. When you think about this deal, does this make it more likely or less likely that a deal ultimately gets done . Well, really, the deal will be looked at separately. It doesnt get done, the antitrust authorities will look at whether theres direct competition, theyll look at direct competitors. For example, cnn will likely have to be divest. They will look at the film studios. Those are the different acts. Im looking at the specific issue the shareholder votes. Does this indicate that the board of time warner says, you know what . We are ready to negotiate . Or is this effectively talk to the hand and we are never going to negotiate . I think theyre open to negotiation. I think its a publicly listed company. I think if they have the right price and right terms, the company which has paired itself back to a core business is the most profitable media enterprise out there. Its just there are a lot of questions. Do you care about the dual claes chas share issue . You are accepting a dual class share or nonvoting share. Having said that, i know you were disputing the overlap issue, but there is a lot of overlap, arguably at least a large portion of the time warner shareholders. Theyve made their bed with fox. Theyre already okay with that. An 83yearold guy has run the cup for 63 years, to try to deal with potential sesson, giving one son one piece of the business, one poor performing son. The other poor performing son, james, another piece of the business. You are not a fan of the Murdoch Family, it sounds like. Well, theyve not distinguished themselves as leaders. This news corp. , this liberation of sorts, and 21st century fox, james has soiled him with the phone hacking scandal with all the rest in the uk. Management oversight is awful. Even foxs shareholders given that you have just dismissed the entire Murdoch Family as, you know, unacceptable and thats most of the board of directors. Is there a price at which you would then accept stock in a company thats going to be run by these people that youve just suggested are effectively misfits . Its not just the price. Thats a great question. The price maybe should be 200 rather than people talking about 100. But on top of that, whats the quality of it . Theyre basically coming up with a minimal cash portion by leveraging the assets. Time warner could do that now by taking a lot of debt they dont need. Jeffrey, one question before we go. Despite the fact ive put mis t misfits in your mouth, and im not sure that that is what you think, they have outperformed time warner bay wide margin over the past decade. Well, theyve been all over the place. This newspaper business, which has been in the red, has been a strong performing unit . Right now, i think you can take a look at the soaring success of hbo, time warners last quarter, theyre up 9 , 10 but shareholders apply a higher multiple to the Murdoch Familys business than they do to time warner, therefore, are giving a higher value to the management of i shouldnt say news corp. , i should say fox, than time warner, correct . No. I think its a temporary restructuring out there. You look at the time warner board, look at the quality of the board of 21st century fox, they dont even compare. Theyre a bunch of cronies and family members. Here you have on the the fox, on the board of time warner, you have Jim Barksdale who did the netscape aol deal. You have steven b on olenbach, did the abc deal. He ran hilton and sold that to blackstone. They pulled off a lot of the pharmaceutical industry from scheringplough to mercks, respectively. These are not filled with nostalgic players. This is not the old aol time warner disaster. We have to leave the conversation there. We appreciate it. But weve got to or there are two jeffries. Theres a jeffrey well call them jeffrey and jeff to make it easier. Thanks. Were going to thank them both. Then he could have answered some questions. Its sad his last name prevented him from thats part of the whole discussion. Sorry, youre out. I cant say your name. Anyway, thank you for participating in the conversation. Im not sure what the right answer is any more. Verizon reported 91 cents a share and that was a penny ahead of expectations. There are all these records. What is a good number of 0. 49 . I dont know what analysts were looking for. The stock initially is trading down just a little bit on this. What are these other which one of these are important . New fires did you know that . New fires, customers up 100,000. Is that good . Internet customers up 139,000. In the revenues for fios, 14. 4 year over year compared to other areas in the business where wireless is up only 5. 9. And the revenue number is above, 31. 8 billion versus 31. 15 billion. But ebitda margin expansion, it backs what its targets were for that. Continues to target at 16. 5 billion to 17 billion. I guess thats in ebitda. And cites, as you said, strong wireless, fios revenue and continued margin expansion. But just a one cent deal of i think. The adjusted number is 91. Can i point out one oddity . They actually saw an increase in landline revenue for the first time in seven years. Quarter over quarter. We have no landline. I know. Thats why im shocked. I still want one, but kids dont want them any more. Wait until the next blackout happens. Youll wait until you had an Old Fashioned landline. Landlines will be okay. As long as you have a phone thats not powered on battery, too. So thats two thats lets see. Thats one were getting six. So thats 33 of the 20 . Of the dow that weve got soever today. So coming up, double the data, double the guess. Earnings reports economics week is a lot for the markets to digest. Were turn to go robin and brad. Morning. Welcome. [ 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. A negative start to the trading week, markets finishing well off session lows. With volatility back in the market, how should investors be positioned . Here to join us is lisa chalot. Brad freedlander is cofounder of angel capital and has a morning star five star rating. Lady and gentlemen, good to have you here. The evidence in the markets for the last six months, ul until we get alternatings reports today, suggest that geopolitical events do not matter. What matters is what the Federal Reserve is doing. And do either one of you disagree . I think youre in the bond market youre not seeing that. The bond market is reflecting a little of those ghee your political tensions. When it comes to sovereigns . Yes. I want to talk about high yield, though. I see two things happening in the market that maybe are a risk of what we might see when the fed really starts to have to react to maybe perhaps improved economic data. Small caps, underperforming in a very big way. And high yields looks like its really start to go roll over. Do these worry you . They do. Look, i think that those two things, historically, have been the canaries in the coal mine and we are concerned. I think the one thing that you need to remember here, though, that you didnt note is the strength of earnings. I mean, we have had one of the best periods of positive earnings revisions coming into this earnings season that weve been in three years. Our beat ratios are really pretty good. Everyone said, you know, how can the market be at these levels . The s p is up about 6 , 7 , and thus far in earnings season, were seeing some of these Companies Put up 9 , 10 year on year earnings growth. I always made folks remember what drives the market is earnings. So what i see happening in small caps and whats happening in high yield, not a precursor to the overall market rolling over, necessarily. I think they could be canaries in the coal mine. Im watching it opinion but im not concerned yet. And what youve seen in alternatings season thus far has been very constructive . I look at earnings, as well. Im more of a bond manager. I spend my time there. Earnings have looked good, revenues, that gives me confidence over the long haul, notwithstanding a short selloff here and a short run. In bonds youre talking about . Notwithstanding that, in the short run, when you look at earnings, you would think over time equities can keep up with earnings growing towards double digits. As a bond manager, are you shaking in your boots . Im thinking at this moment, where were not just seeing this unprecedented action by the Federal Reserve and its beginning to unwind, and we have watched the bond market rally for decades now. Yes. Are we at a moment . Are you worried at all . Weve seen that moment now for a few months and weve seen a tug of war with the tenyear treasury would be a Perfect Place to look. Tenyear treasury still under 250, still reflecting some of the weakness that we saw over the winter, the winter doldrums. But now really stuck on some of those geopolitical tensions that exist. I think ta tug the of war will begin to shift in the other direction, to your point, and into the second half of the year, you will begin to see rates rise and thats something that the fed will be watching, as well, as theyre looking, much more focused on payrolls, on jobs, on inflation. We had cpi figures this morning. Those thats the feds mandate and well begin to see these reverse some of this through the end of qe and eventually youll begin to see some of the rhetoric thats been so deafish begin to switch over so youre talking about an improving economy. Does that mean high yield is now an opportunity . Those bonds can perform as the economy gets better, know . Sure. High yields can hold up to a certain extent, but i think from an investor, putting my investor hat on, youre now flirting with precrisis type of valuation. There are other places to be within the bond market that i think make much more sense. I tend to focus on the structured credit markets. These are the areas that are still, to a certain extent, reflecting a stigma associated with the housing crisis. So you get better yields. Exactly. And as rates rise, this space is largely floating rates. So youll benefit as an inve investing from rising income and over time valuation. What are you telling investors at this point . We want to be global, we want to be highly diversified and we want to cherry pick. This is the time for active stock picking. We want to be in some of those large cap companies. We think were going to see a pick up. So energy, industrials, technology, those would be key places where well be cherry picking. We call them smokestack stocks. There you go. Lady and gentlemen. But theres only one gentleman. Gentleman, yeah. Amid a food scare, mcdonalds is set to post Quarterly Results when squawk box comes right back. Welcome back. At 8 30 eastern time, you get to huge Consumer Price index. The headlines cpi likely rose 0. 3 . Then at 10 00 eastern time, were going to get existing home sales. Sales expected to rise by 0. 2 . In washington, the Senate Committee on veteran affairs are holding a hearing with bob mcdonald. That is todays squawk planner. Coming up when we come back with a flood of quarterly reports just Getting Started. We heard from dupont and veri n verizon. Were going to get mcdonald and a lot more. Uhhh. No, that cant happen. Thats the thing, you dont know how long it has to last. Everyone has retirement questions. So ameriprise created the exclusive. Confident retirement approach. Now you and your ameripise advisor can get the real answers you need. Well, knowing gives you confidence. Start building your confident retirement today. [ 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. Offers end july 31st. Thats keeping you from the healthcare you deserve. At humana, we believe if healthcare changes, if frustration and paperwork decrease. The gap begins to close. So lets simplify things. Lets close the gap between people and care. Developers are all about speeds and feeds. Its all about latency. Its all about how fast does it run. I often sit with enterprises who ask me about how Mission Critical and hows the performance of the cloud. And i tell them, if you can make gamers happy, you can make anybody happy. Speed is made with the ibm cloud. The ibm cloud is the cloud for business. Welcome back to squawk box. This morning calling in on the squawk newsline with a preview is peter saley. Walk us through what we should be looking for and what to expect. Thanks for having me on. I would tell you the focus will be on june samestore sales globally, and definitely in the u. S. I think the expectations are for a slightly positive global u. S. Calm in the month of june, about 0. 3 . I think if it comes in, you know, stronger than that, thats good news. Although, i think sentiment is fairly negative, also i think focusing on what the commentary is around july samestore sales, if those are stronger than 1. 5 or 2 , i think, you know, the stock could rally on that news. Otherwise i think its kind of slow and steady for mcdonalds, you know, its a big shift. Do you the of mcdonalds as a singular name or do you think it represents something larger . You know i think mcdonalds is a great global brand, in our opinion, you know, its just great global brand with still some growth and certain pockets around the world. But again, you got to really focus on Different Countries and different its a different brand in every country. And its really tough to, you know, really move the needle around the globe in our opinion. How much should we be worried about this scandal or problem in china with the food thats also impacting yum . Well, for mcdonalds, its not chinas not as big a part of their revenue as some other parts of the world, or it is for yum. So it shouldnt be as big a deal. But there will be a focus for the read across for yum. Investors will be focusing on the China Business for mcdonalds to find out what the read across is for yum brands. If you could buy one restaurant chain right now, what would it be . If i could buy one restaurant chain what would it be . Id buy starbucks right now. I think they are operating on a very high level, mid single digit comps and getting growth from all from different products and from different parts of the world. You dont have to put all your eggs in one basket with starbucks in terms of their revenue growth. Right. And where would mcdonalds fall on a list like that for you . Mcdonalds would be a little bit lower on the list. They just dont have a lot of growth. Theyre fairly saturated. More than 30,000 restaurants around the globe, so not a lot of growth left. More of a cash flow story in our view with the dividend and the share buyback. Real quick, where would you put chipotle in all this . Chipotle is going to have a great day. Its going to open up probably around 10 , fairly neutral on that although the fundamentals are fantastic. I think the multiples, then valuations up is pretty up there. Okay. Peter thank you for joining us this morning. Thank you. Appreciate you helping us. Coming up, Quarterly Results from coke, comcast, travelers, united technology, and well hear the actual number from mcdonalds among many others. Well have that and well give you some instant analysis on all these numbers. Plus were going to welcome todays guest host, aei, American Enterprise Institute President Arthur Brooks. He will tell us about the road to freedom. The battle is still being waged, too. Unfortunately join us on set when squawk box comes back. Well talk. We do . I took the trash out. I know. And thank you so much for that. I think we should get a Medicare Supplement insurance plan. Right now . [ male announcer ] whether youre new to medicare or not, you may know it only covers about 80 of your part b medical expenses. Its up to you to pay the difference. So think about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement insurance plans, they help cover some of what medicare doesnt pay and could really save you in outofpocket medical costs. Call now. With a Medicare Supplement plan, youll be able to stay with your doctor. Oh, you know, i love that guy. Mmhmm. [ male announcer ] these types of plans let you visit any doctor or hospital that accepts medicare patients. And there are no networks. You do your pushups today . Prepare to be amazed. [ male announcer ] dont wait. Call today to request your free decision guide and find the aarp Medicare Supplement plan to go the distance with you. Go long. Thats why i always choose the fastest intern. R slow. The fastest printer. The fastest lunch. Turkey club. The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast Business Internet and get the fastest wifi included. Comcast business. Built for business. Strike up the band, the earnings parade is here. Quarterly results from six dow components. Du pont, cocacola, mcdonalds, travelers, united technology, and verizon. The numbers, what they tell us about the health of the global economy, and instant market reaction. The second hour of squawk box begins right now. Good morning. Welcome back to squawk box im joe kernen along with andrew ross sorkin, michelle carusocabrera. Theres travelers. It looks at this point like its a little shy of expectations, but i can just tell you that travelers always has different items. Its very complex business, property casualty, but that is the number that theyre giving 1. 93. Ive seen it be way above, below and then totally changed based on what the company says. There was 82 cents for example of catastrophic losses in the quarter, the revenue number is well above expectations. 6. 15 was the revenue number and the company did 6. 79. And as you can see the stock is not reacting very much to the number at this point. There were some other things that sound positive, that the company is talking about. So, like for example, net written premium. The book value of the stock is 75. 32, and on an adjusted basis talking about 1. 93. All of those are below expectations. But a return on equity was 10. 7 and return on operating return on equity is 11. 4 . So well see whether that stock actually ends up selling off, whether, a lot of times the company will call us and tell us take this out, put this in, whatever. United technologies, too. Eps of 1. 84 which is better than expected. Top line and bottom line increase the lower end of 2014 eps guidance, now expect eps of 6. 75 to 6. 85 per share. Sales of 17. 2 billion. Its 3 of organic growth and i havent been able to get commentary from the company here. Lets go. We do have the Parent Company network. You want to do it . Comcast is reporting right as were talking right now, and it was 76 cents a share ex items which is above the statement of 72 cents a share. As we always this is like theres so many bells and whistles. Transactions with the Time Warner Cable bit. But that didnt do yeah, if you adjusted it was 75 cents. So it was either, you either keep it in and there was a gain in there, as well. But four cents above, total consolidated revenue, and and drew and i have been talking about this when we saw the 6. 8 billion 16. 8 billion dollars is up 3. 5 and was actually 16. 84, 16. 85. The estimate was 16. 96. Thats 100 Million Dollars based on 16. 5 so thats about 0. 6 . But it would take the growth rate which is 3. 5 it would have been 4 if you included 100 Million Dollars i dont think thats what they necessarily what it keys off of. I think it keys off of what is happening at nbc more than anything, and for nbc universal, there was a 20 jump in operating cash flow. 20 jump which includes nbc which for the first time in awhile finished the season in first place among adults 18 to 49. I dont know why i dont for all of that. I dont matter worth a whit. I guess i dont have any money to spend. 18 to 49. It was the only network that had ratings growth versus a year ago and the theme park continues to be pretty impressive in how its done. I think a lot became a much more bright spot than come cast thought about when it acquired the company. Remember blackstone had sold something, remember, and it was valued yeah they sold it at one valuat n valuation, and suddenly it looked like it was worth five, six, seven times what the going right was at that point. Let me see, theres some other methods when we talk about this. Cable revenue up 5. 4 to 11 billion. Video had its best Second Quarter in six years with customer net losses improving by 11 . See i think, you know, i cant tell you whats going to happen today, andrew, but i were up 73 cents. I dont think that that half a percent on revenue which you felt was going to i dont think that is. Its a video see the stock up . Yeah. Will you grant me that or not. Absolutely. I thought the stock would go up. Off revenue. I think the revenue issue is going to be with all the growth that its had recently because it continued. The other question i was going to look at you said video customer net loss declined 144,000. If i remember correctly over the past couple of quarters prior to this, we had actually gained video subscribers. So what im trying to understand year over year theyre showing that it narrows the number. Right. So youre narrowing the number that was lost in a wereago period. Right . So sequentially that might not be the case. In the yearago period it narrowed from how much lost. Joining us for the next two hours to talk about the geopolitical and economic landscape is Arthur Brooks, president of aei, and normally we talk, i mention the road to freedom which is a great thank you. Hate andrew, read a dollar a page. Was it worth it . They tried to charge me for the free market. There were 40 pages how many pages in the index, in the back . I wanted fullon the citations . Like 30 pages. I had to pay for that. He didnt read it. He didnt read the index. I think you should have paid me more. You didnt read the index. Thats going to cost the battle which i wonder how much of the battle because when was the battle written . 2010. Battle was written in 2010 and you probably have how many different numbers that basically showed that the country still was central right. Whenever you look at but its four years later, i would have thought for awhile that first mood left when we embraced hope and change. Now were back to where your book were even better. We never moved. Center right all along . Yes. People in new york would not tell you this is a center right country. This is new york. If you go to america you can find i read every year that, and certain publications to base anything on what people in iowa think is a huge negative and something that doesnt represent the country. Certainly doesnt represent new york city. Thats actually wrong. It doesnt represent new york city. But basic what people say in new york and los angeles thats a mistake. Sort of the cultural milieu that we live in is represented by this place. But if you want to see what people who actually have lives where they go to soccer practices and choir rehearsals. Those are the people that i say still have the american dream. I say in st. Louis and kansas city and people going to work every day that are raising children and they got iphones, they go on vacation in cancun, and if you work you can still earn your success. Yeah, yeah. The hope thing that we got was nothing more than a campaign slogan. That was like i hope i win the lottery. I hope the government does something nice for me. Actually had a better chance of winning the lottery at that point. Two questions, one you just suggested you think the countrys the center right. Right. Some of the research ive seen, pew and others at least when you look sort of under 49 years old. Yeah. There is an argument being made that the country is becoming more left. I dont know if its true or not. Do you think thats right or wrong . What they based that on is asking kids, asking college kids, and people in their 20s, you know, whats better capitalism or socialism . Well, they dont know what socialism for us, socialism is gulags, the soviet union. The only socialists that people were 25 might ever have seen, guys that look like me. Theyre calling and i also they that liberal when we say liberal were talking about the size of government. When kids say it today theyre talking about gay marriage, and theyre talking about social issues. Social issues. They dont even correlate being and thats why many people would say im liberal socially but that doesnt mean you want a huge government. Yeah, right. In every aspect of your life. Let me ask you a second question which is you just suggested that the dream or the hope is still very much alive. Yeah. You dont think that the middle to some degree is being hollowed out . That you dont believe that theres a greater challenge today, if you were in the middle, than there was 30, 40 years ago . Its not just that the middle is being hauled out its that the whole bottom is left behind by obama nomics. This whole generation is a pluto contractic we can blame anyone we want. This is the phenomenon of our age. Were going to have numbers coming in about gdp from 4 to 3 or 3 to 2, whatever the truth is we have 5 or 6 Economic Growth in the top 20 and we got zero in the bottom half. But two minutes ago two minutes ago you just said that hope and the dream was still very much alive. And everyones going to picnics on the weekends. Because they still have a life. The truth of the matter is, just because you have zero percent Economic Growth doesnt mean you stay in and feel depressed. But it is the fact that economic mobility is being hollowed out. Its not just youve got no middle. Its not that the top is the bottom is stuck at the bottom. The bottom is stuck at the bottom. But joe i think you tell me i always thought the argument you were making was that the middle was not hollowed out, everyones at Football Games im saying that the middle that every group of every socioeconomic group since 1980 has done better. Probably 40 the lowest group is up 40 . The top group is up 200 . Also when you look at the bottom group, make people move from the bottom to the next quintile, and thats never measured when you say theres been zero growth. A lot of people have moved up into subsequent only 8 of the bottom 1 5 ever make it to the top onefifth. Make it to the top. Im talking about moving up so that you cant say that theres no growth. Because people move from the fifth to the third or the fifth to the second there was an article two or three months ago. Is that your measure of success . That somebody goes from the very bottom to the very top . No, no. Thats not 8 is a pretty good number. No from the bottom onefifth to the top onefifth. That would be tremendous from the bottom quintle to the middle quintile. You want to look from poverty to the middle class. Since the 80s thats fallen by a third. Thats actually mobility from poverty to the middle class has fallen by a third. Youre saying its not as good as it used to be. Just making a point. Full stop 2009 till now. We all talk about the from the top to the bottom. We talk about the romney 47 . There are disincentives in this country right now to going out going out and pounding doors to find a job if youre making if you can make what can you make right now on disability with food stamps, with this is the welfare argument. It depends on what state you live in so you could make between 25,000, or 35,000 a year. You get a job you got to pay for gas, you got to pay for clothes, youve got to get up. Leave the house. Theres a lot of you know what . Americans actually, the data are overwhelming. It is true that a lot of people are taking but it doesnt mean they want to. No. I literally, its a sad thing, anybody who says i would prefer to have my kids see me get a welfare check than a pay check. And the fact that we dont have serious gdp policies that reach all the way to the bought up. The mystified look on the policymakers faces when we say its only 2 growth while equity markets are cranking. The reason is because all of the growth is concentrated in the top 10 of the Income Distribution. 81 of the stock Market Growth has gone to the top 10 of the Income Distribution. Thats because of president obama policies. Because of policies that are simply not progrowth all the way to the bottom. Were biassing the whole economy against the bottom kwientile at this point. Remember john edwards . He blew himself up and he was ridiculous and wrong on everything except when he said we were two americas. He was just early. He doesnt see obamanomics. Are the mistakes bipartisan . Of course. I mean the falling mobility started happening in the 1980s. The problem is its accelerated since 2009 because of the inadequate responses but the responses is to raise what percentage say are paid the minimum wage, and arent working as college kids or second job . Its like 1 . Thats president obamas answer to all of this you have the minimum wage increases, andrew in favor of minimum wage increases . Im not im not one way or the other on that. Youre not in favor heres why you shouldnt be in favor of the minimum wage increases, okay . Is it not that some people wont get ahead. You know whos going to get ahead . My teenage kids an asymmetric impact. We have 30 africanamerican teenage unemployment in this country. Its going to be over 40 with the minimum wage increase. It hurts the people youre supposed to help the most. Thats why we need the eitc expansion earned income tax credit. You need a program that makes work pay. Im much more supportive of the earned income tax credit. You got to be. You got to be. Than i am the minimum wage. The government can do a lot to make work pay. Particularly for single men with noncustodial care of their kids. Thats a really big deal. And if we dont do that, i mean, what good are we . If we can basically try to force the companies to try to pay more and hurt the people were helping. Its pretty bad. Okay. We are going to be with mr. Brooks for the next two hours published in the New York Times. Did you see the piece . I did of course i did on sunday. Trying to reach some of the people that i love publishing in the New York Times. Its a new audience. It is. And its a great paper. Were going to continue our conversation with arthur in the meantime when we come back verizon posting Quarterly Results earlier this morning. Shares coming under a bit of pressure at this point. Were going to get to the streets take in just a moment. Get music. Call me maybe. Totally there. And wage okay exactly. Were waiting to hear from fellow dow components cocacola. Were going to get cokes ceo muhtar kent live at 8 00 eastern time to talk about his earnings, the consumer and much, much more. Squawk box returns in just a moment. ] 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. First day of my life by bright eyes youre not just looking for a house. Youre looking for a place for your life to happen. Welcome back to squawk box. Lets show you whats going on with the futures right now. All the earnings reports weve had this morning the Dow Jones Industrial average would open higher by roughly 36 points. The s p by 3. 5 and the nasdaq higher by nearly 12. Making head lines, cit group is buying the Parent Company of privately owned one west bank for 3. 4 billion in cash and stocks. Those are two old names from the financial crisis getting to the. And harleydavidson shares under pressure. The company posting better than expected Quarterly Earnings, but it is lowering the full year guidance for motorcycle shipments. Andrew . Talk about verizon for a second because it beat the street. The company adding 139,000 net fios internet customers in the quarter and 100,000 fios tv users. Joining us on squawk news line is michael mccormick, Equity Analyst at jefferies. Walk us through the head lines as you see them. I think theres a few things to be focused on. Three key beats that should dispel some of the competitive fears. Number one, arpa growth or what the average customer pays per month was up more than expected. Churn a little bit lower and wire line margins beat. So those are the three things people will be keying on today. The caveat is wireless margins came under just a bit of pressure so thats probably around promotional activity for tablets and a bit of an elevated marketing spend. How do you think about whats going to happen towards the end of the year . Theres a lot of reports out today around apple and their bigger screen. How is that going to impact verizon as you see it . Its something weve been focused on is the back half of the year and whether or not were going to see increased upgrade activity. Clearly any time apple comes out with a new device you tend to get very high upgrade activity. This one will be the same. And theyve been moving into proven financing plans something that verizons been hesitant to embrace. When you think about the margins on wireless is there a way to explain whats happened here when you look through it . Yeah, you know, weve had conversations, made public announcements regarding the marketing activity into the quarter. Clearly theres been a much more Competitive Landscape in u. S. Wireless driven primarily by t mobiles activities. Verizon i think is reacting to that. There could be some low end activity that took place to maintain the subscriber but tablet is the key driver. Whats your target on the stock now . Our target on verizon right now is 55. What is your i looked at that immediately i can remember i always you know i like to talk about churn because its something that used to matter. What when it was really promotional and people were churning all over the place how high did it get . So verizons had industry low churn for a long period of time. Weve had carriers go up to on the post side nearly 2 thats people that in any given quarter switch or something . So yeah, thats customers churning up to competitive carrier typically point nine theyve had a good and 0. 9 is really good . Yes, 0. 94 on the post base side. We were looking for 0. 97. Thats a really good result. The key pigging it apart is looking at the churn at the low end so they reported 2. 3 million 4g lte adds but total adds were 1. 4 so that would indicate that youre losing that low end subscriber potentially to other competitors at lower pricing. It was expensive to roll out i remember how much money they spent for fios. So success now they making money everythings good . Yeah, so it sounds like margins within the fios unit are above the overall wire line margin profile for the company so thats a good thing. Clearly operating at a much better scale now. They reported today 35 penetration. And i think youre seeing a lot more success in the urban market. Theyre going after the multidwelling units or apartment buildings or having Great Success particularly in broad band only subscribers. So its not video really. You have to look at fios and really take into account and thats what i dont know maybe its a Great Service for is it a Great Service for internet i dont its fast. Yeah i dont love the videos. But i dont know how to work it as well and it was you know i got some flak yesterday for that gee. Its a miracle you like exfin ty because its more than fios. Nobody in my family can figure out user interface. User interface. I want it back to xfinity. Ill get it back. The churn number i assume is just from personal experience depends on the reliability of the networks the most . Youre talking about on the wireless side . Exactly, yeah. Clearly theres a view that Verizon Wireless has got the best network in the country and that can be perception or reality. I think at t and verizon are sort of largely viewed as substitute products but the churn has been a result of Better Network quality, clearly. Mike, before you go. You just talked about them being substitute products, at t and verizon. With this directv deal do you see pressure on ver susan in terms are of the content that at t may be able to deliver as a function of that transaction. I think over time clearly having scale within video subscribers is going to be a benefit when it comes to content negotiations. Are you handicapping that verizons going to have to go out and do something on the other side to match what at t is doing . I mean if we were to sort of project out 18, 24 months competitively in the merger landscape . I think you have to look at those foot prints a little differently. Verizon dont want to go out and buy Something Like dish network for example. But verizon fios covers about 75 of verizons foot print. At t universal is a relatively small overlap. So for at t this gives them instant scale. And frees up capacity for broadband as well. Very, very quickly. Land line revenue actually went up for the first time in seven years . Whats the explanation for that . Well, oddly enough, consumer which has been an area of weakness for a long period of time within telecom has become a good grower. To joes fient fios has been successful, 5. 3 growth in consumer and a little bit better loss rate on enterprise customers. Michael, thank you. I havent picked up my home phone in a very long time. People are getting more land lines . We dont really have a land line its over cable. Its Something Better than the bubble. Major tech players including microsoft and intel are creating at levels not sin since early 2000. The tech stocks that are worth having. E financial noise financial noise financial noise financial noise coming up, the earnings parade is just Getting Started this morning. Still to come were going to get quarterly ruts from mcdonalds and cocacola. Then at the top of the hour, coke ceo muhtar kent will join us for a squawk box exclusive. Stay tuned. Well be right back. 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. Welcome back to squawk box. Du ponts earnings matching estimates, revenues coming in a bit better than expected. The company raising its Quarterly Dividend by two cents to 47 cents a share. Higher by nearly 3 . Verizon beating the street. The company adding 130,000 39,000 net fios internet customers in the quarter and 100,000 fios tv users. In the premarket it appears to be lower by a little more than 1 . Comcast earnings topping estimates. The ceo saying hes seeing strong content across the table. That stock higher by 2 3rs. European ministers meeting to discuss further sanctions against russia following the flight of mh17 over ukraine. Cnbcs hadley gamble is following developments. Hadley . Hey, michelle, thats right. So the big words, the buzz words here in brussels, arms embargo. Coming into this meeting everyone had thought what can the eu really do . You have 28 member states. You have 28 separate agendas. Theres not much of an appetite for more economic sanctions. Sanctions have hit germany really hard as we now know. The italian finance minister weighing in saying more economic sanctions would be a big mistake. But really the conversation has turned to growing concerns about western weapons sales to russia. Where are these weapons going . Whos got them . The separatists in Eastern Ukraine . And really what is the eu going to do in response . Look, everybody wants to see a balance set of measures as we go forward. But the world has changed since the European Council last week. The events of last thursday have changed public expectations on us, and we have to send a clear signal from our meeting today that we recognize that and that we are going to go further as a consequence. Now that was Philip Hammond the uks new foreign secretary. Hes been thrown into the deep end of the pool coming in as he has with the situation in the middle east blowing up, as well as what were seeing in Eastern Ukraine. But one country thats remained silent on this issue is france. And that could be because at the moment, they have a 1. 6 billion deal for two warships, one of them is supposed to be delivered in the fall of this year. Francois hollande indicated that warship is going to be delivered. Facebookious, the Foreign Policy from france was refusing to take questions in english today and was only speaking on the situation in gaza. Well have to wait and see if the eu can get france on board for some kind of arms embargo. Thank you hadley. Okay we should also talk about some big tech earnings because were going to be getting some of those. Apple, microsoft all coming after the bell. Major tech players trading at levels not seen since early 2000. Dominic chu joins us to see which tech stocks are worth more than at the height of the dotcom boom. Heres how it goes. 500 stocks in the s p. 51 of which are in the tech sector. Now those 51 stocks make up nearly a fifth of the entire market value of the index. The current list of stocks includes household names like intel, qualcomm, ebay. How many can say theyre worth more than they were during the great dotcom bubble . That list goes down to less than half. All right . So among those stocks that have really eclipsed their bubble peaks theres a blue chip. In fact its big blue itself. Ibm. Sure its been a relative underperformer so far as of late but longerterm investors can still say, look, that theyre up 70 since the end of february back in 2000. All right. That was interesting. Of course, a lots happened since those days. The companys much more of a services company. The worlds biggest, any kind of a hardware one. So ibm a real change. Then theres san disk. Maker of removable cameras, and flash memories that go into mobile devices. Those shares are up 180 since the area of about march 2,000. Heights of the internet bubble. And theyre up just 33 this year alone. San disk a nice run there. Then theres apple. A stock thats really been in a massive turnaround here. Its up a whopping 2400 plus percent since the dotcom era. Apple reports after the bell today. And i just want to highlight one more stock. It also reports today, microsoft. Which is just well call it a stones throw away from reclaiming its bubble peak. Just about 8 away from there. Maybe just one good earnings report, maybe two, and this things right back to where it was, back where it was during the height of the dotcom bubble. Back over to you. We talked about it here. The wintel juggernaut. Windows, and intel was where its at, in the pc world. Now weve been conditioned to think pc is on the way out. And here are the wintel juggernaut is a juggernaut again. Can you tell me why . Why did both stocks finally broke out at the same time, after six, seven, eight years of underperformance. Why . Well heres the interesting story about that. A lot of investors say that they like the fact that these companies, whove been you know, they havent had the hypergrowth that apples had during that time. What they have had is a mature business that keeps on spinning off cash to shareholders, keeps on buying back stock in some cases, so with Large Cap Technology names, oftentimes its about investors returning back to companies that reward investors not just by growth but by steady income check and remember all those baby boomers out there, they dont want bonds that just pay 2. 5 for ten years. Maybe they want a stock and maybe we love netflix, and its earnings and revenue. Microsoft, you know, they dont sell anything anymore. Only 24 billion a quarter worth of something. So i mean, you know its like chump change, right . 24 billion starts adding up after awhile. But yeah, theres still something that theyre some market theyre satisfying. Dom, thank you. Check out the futures right now. Well see with all these dow components weve even were doing a little bit better. We are. Yesterday was a pretty good stand. We were down over 100. Looked like geopolitical environment. People were going to say wow, im just too uncertain. But comparative losses yesterday, small caps got hit again and today were higher so far with big numbers coming up. Much more squawk box when we return. Up next, blackrocks emerging markets guru on the state of latin america. And at the top of the hour, supersize earnings from mcdonalds. Thats scary. And you cant have mcdonalds without drinking a nice, cold coke. Ceo muhtar kent joins us to discuss business. Squawk box is coming right back. In a world thats changing faster than ever, we believe outshining the competition tomorrow quires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Yeah. I heard about progressives name your price tool . I guess you can tell them how much you want to pay and it gives you a range of options to choose from. Huh . Im looking at it right now. Oh, yeah . Yeah. Whats the. Guest room situation . The name your price tool, making the world a little more progressive. All right, weve got some cocacola earnings and thats the knee jerk reaction down a little bit to start with. The adjusted earnings per share number was okay, a penny ahead of expectations at 64 cents. That was a penny ahead. The Second Quarter revenue number was below the 12. 83 was the estimate, and it was 12. 57 worldwide unit case was up 3 op obviously, we need to still look at how important the American Market is. North america, case volume, zero percent growth. Latin america zero percent growth although International Overall was up 3 . Asia pacific eurasia and africa up 5 . But and bottling investment units case volume was down, 1 now if it was comp currency, if you made that, if you took that out the net revenue was up 3 . Which would have been better, i guess, so currency exchanges did hurt 2014 operating results. And the Company Continues to expect a threepoint headwind on operating income during the second half because of currency. And weve now got that stock down 40 cents or so. And we always have this discussion, too. Should you have salty snacks that make you want to drink more . Or should you not have salty snacks to make you want to drink more . Should you be coke or should you be pepsi . You should be coke. Warren buffett thinks pepsis fine but nelson peltz says thats because hes undermined i like i mean i love you think theres a synergy there . Peanut butter and jelly . I love yeah like smucker. Smucker buying. I think anything that ends in toes i like. Mementos . Cheetos, doritos, tostitos. Why do you have to like them connected to the drink part . Because it makes me want to have a a remember thats the problem. The carbonation. Makes want to have a coke. I like coke better than pepsi. But you have your tostitos with the coke. Which undermines the issue. No it doesnt. At least im buying something from pepsi. But you oh, okay. I guess or you could be buying it from a separated im also getting the salsa from pepsi, the tostitos salsa. Hot. Right. So why now youre making the argument that thats because those are better than any thats got to be a latin brand. With the hairs coming out of it . Man thats like you know. When people say that thats what you got to substitute for the carb snacks its like ive tried. Whos saying that the pork rind lowe carb. Frying a piece of think of a diet where you can eat fried pork rinds. Cheddar cheese and pork rinds. Wash it down with warm tap water. This is like punitive. All right. Anyway were going to talk were going to talk to muhtar kent. I know. Because turning our attention south of the border our next guest says now were talking about investing in latin america, now much more about the results of political elections, rather than shortterm market fundamentals. Will landrieus from blackrock. You recently returned from brazil and our guest host Arthur Brooks is with us, who is fluent in spanish, if you didnt know. Will, last week brazilian stocks were the best performers in the world bus dilma rousseff, the president , her poll ratings get worse and worse. Looks like shes in a tie now with, and the bar is low in brazil, a guy who appears to be promarkets or pro business. Did i give a correct assessment . Absolutely. Since march when her poll numbers started to come down the equity market has been going up over 30 since then. Sure emerging markets became more en vogue in that period but brazil has been outperforming. If you look at the gdp numbers, Inflation Numbers theres no good economic data. In the shortterm except that its almost like abd, anybody but dilma. If dilma loses the market could move up in the shortterm. For people who arent familiar lets remind people what she does. I mean, she thinks she runs petrobras, she thinks she runs valet, theyre frequently talking about those two names. Very interventionist in an old kind of Latin Aamerica a la 1970s . Oil prices have been under control. She tried to bring Interest Rates down, or actually the spreads down in the banking system, forcefully by using the state banks to do that. So had some troubles in 02 and 03. Several sectors, none of it has worked im shocked. Its one of those things that maybe government does not know best. Think of some of the discussions you were having earlier. So, you think that if she loses, you think theyre going to turn around and markets continue to go up in brazil. You think thats a bellwether for the rest of latin america . Its been very depressing to see what happens ecuador, argentina. Fill in the blanks. A lot of the problems that were tully seeing with law and order in Central America today, immigration, migration, northward is a direct cause and effect on the fact that weve got these political dynamics going on. Whats going to happen . Is this the bellwether of latin america going insane . Already had the role model to a certain extent in mexico. Two years ago doing several reports you see the migration but its not from mexico. Theyre actually going back because there are a lot of new opportunities. Its a total. Absolutely. Brazil is the biggest economy, its got 60 of the equity market and falling. Used to be 70 of the equity market. Theres been a lot of value destruction because of the failed policies from the last four years. So i think if we can show the world, show latin america again that promarket policies do work, and benefit all the population, like we saw during the lula years where brazil being one of the two countries where Income Distribution improved during a tenyear period. Very little time left. Are we at an india moment for brazil . When we see probusiness, the stock market rallied like crazy, is there still time to buy brazil here . Absolutely. Theyre still trading less than ten times ex last years earnings. Youre probably going through an adjustment, and from 2016 on you have much better growth. The risk being if she wins against we could go back to the levels. Thank you very much for joining us. Coming up next, why the next big economic and political debate could be about inflation. Steve liesman our guest host Arthur Brooks going to sound off on that when we return. Tomorrow on squawk box, the earnings parade kicks into high gear. Dow chemicals ceo, pepsis cfo hugh johnson, and Delta Airlines ceo richard anderson. Plus, slicing up apples earnings ahead of the first trade on wall street. Its all on squawk box, starting at 6 00 a. M. Eastern time. [ 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. Cpi data will be out in just a bit and the inflation data is going to be kicking into high gear. Steve liesman is going to be here to tell us why is it possible it could be a nasty surprise. I think part of the thing is theres been an absence of data, and so markets are going to cue in on this data. If its toward the high side, there have been some debates on inflation, is there inflation or not. The feds Balance Sheet run away inflation. It hasnt been debated much is this. What happens when and if we really get there . Wall street looking for 0. 3 rise in Consumer Price index. That would be the third month in a ray at or above that level. The highest three month run since october 2012. The year over year inflation rate about 2 below the feds target. Especially since the fed uses a different numbers that runs below the cpi. One side on the fed thinks the 4 trillion Balance Sheet is a tinder box that could blaze if any inflation sparks get even a little bit close. That viewpoint argues for preemptive and earlier moves by the fed than the market expects right now. Another side argues that we run substantially below the inflation target for several years now. Wages are lackluster, theyve not kept pace with the productivity or inflation under this argument, for wage growth, add inflation to run before the fed will need to clamp down. So there are Economic Issues here, also important political and cultural ones. Whats the tolerance of the body politic for inflation and what is the blowback on the fed if they clamp down just as the middle class starts to make gains in their wages . Thats the real inflation debate. For that we turn to our expert at the table. So the 70s created a massive antiinflation sentiment among the public. Right. Have the what do we call the double offs change that at all . Yeah. The truth is that most people who are in their 20s and 30s and 40s have never really experienced any sort of inflation, so theres no cultural bias necessarily against it. On the contrary, anybody who is paying attention knows when you have a deflationary threat its even worse for the economy because its horrible for the labor markets. If you have anything approaching deflation you get more layoffs and thats the kind of environment we tended to be in. The troourt is that the fundamentals suggest based on everything weve learned over the past 75 years that sooner or later were going to pay the piper. But you dont know how much run room is left. Its exactly the way that you set it out. What actually is going to happen, two things really have to happen. Number one, velocity velocity is lets talk about velocity. I give a dollar to andrew, hes going to give it to michelle, shes going to pocket half of it, give some of it to joe and joes going to give it to you. Im going to pocket it. Whatever happens thats velocity and theres not a lot of it right now. Its very low. Its almost historically low. When velocity is extremely low you can print money all day long and it doesnt pass around the economy, doesnt spark inflation, doesnt drive the price level up. When you print money, when youre the reserve currency of the word, because everybody elses currency sucks worse, which is effectively what were talking about, no matter how irresponsible you are, you can keep printing money and foreigners will keep youre basically finding gold in your hills. You can see seniorage in economics so it doesnt come back those things sooner or later have to change. And what about this . So we have macaulay on last week, huge win longterm win. Victory. Victory lap for janet yellen and the fed. Broke the back of inflation, its gone forever. Therefore, all the worries about qe have been misplaced. And we can paul krugman we can bury it, close the book on it. What if its not commodity inflation . What if all of the stuff is what if the stock market really is asset efficient . What if the bond market is asset inflation . What is the Housing Market is not what if all of these things, what if a lot of the decisions that companies are making on the risk curve have been misplaced because of where it is. What if the entire world, and what we see as justified is really asset inflation are you suggesting its possible were on another bubble . Thats what im saying. And if we dent it has nothing to do with commodity inflation or Wage Inflation it has totally to do with what were seeing in savers being penalized and people not being able to get enough income in retirement. What if its all about that weve moved money to where it shouldnt be in an artificial way . So, let me just give you a little background here. Then i want to ask arthur, is that possible . Yes. That is possible. Look its not unprecedented. Weve got how do we declare victory . We might be heading right into you cant. Look you cant declare victory. I mean there are too many fundamentals that are upside down. Theres a lot of stuff we need to do. In the meantime, prudent economic policy, fiscal and Monetary Policy is something that we have to look. You could destabilize the American Economy. We might be destabilizing the American Economy as we speak right now. And we could be two years away from something thats almost as bad as and then when we look at growth rates, look at these counterfactuals saying that the fed helped by what would have been much worse, when we add in the terrible break two years from now, just like when you add in 09 to what happened prior to that, suddenly the 2002 to 2010 growth rate doesnt look that good anymore. Who knows what 2010, 2020 looks like after all this. Its been debated for many decades the extent to which asset prices should be folded into the measures of aggregate price levels. And its been decided by a lot of guys who have thought about it a lot that for example, housing prices dont belong how do we have any idea what stock prices are worth . How would we even do that . Joe i push back on you. Ive been talking to a bunch of guys about, which lets say we accept the notion that the fed is boosting the stock market. Whats the mechanism . If arthurs concept is right that theres no velocity just move it you cant get anything because you dont get any return anywhere else. So its a decision. So, but is there a lot of extra leverage in this system . Is margining extra high right now . Theres this notion that companies are borrowing to buy stocks but we dont really see debt versus say asset levels or debt versus revenue levels being all that high for companies. Their Balance Sheets are in excellent shape. So, theres two although individuals are bad. I keep talking about this idea thats right. This idea in leverage. This notion things can be overvalued or highly valued. And not be a bubble. A bubble is a specific thing when it busts, its messy but we never knew about it the greatest economist of all time thats happening thats how bubbles work. But how fearful should you be . I dont know. That youre going to cross the street ill tell you, when someone tells me that the fed has won and they should take a victory lap ill get really fearful. Mcdonalds serves up earnings. Plus an exclusive interview with the ceo of cocacola, muhtar kent is our special guest. Right here on squawk box. You used to sleep like a champ. Then boom. What happened . Stress, fun, bad habits kids, now what . Lets build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. Introducing the sleep number bed with sleepiqtm technology. It tracks your sleep and tells you how to adjust for a good, better and an awesome night. The difference . Try adjusting up or down. Youll know cuz sleep iq™ tells you. Only at a sleep number store, mattresses with sleepiq start at just 999. 98. Know better sleep with sleep number. Yyyup. With xfinity internet soyour family can use all their devices at once. Works anywhere in the house. Even in the garage. Max whats going on . Were doing a tech startup. Were going public [cheering] the fastest inhome wifi for your entire family. Only from xfinity. Mcdonalds, i think its worse than well well see. 69. 49 no i think the stock price is worse than what were seeing right there. Well see it as it trades. Havent found a lot above here. 1. 40 versus expectations of 1. 44. There may be something in there i havent seen that but the comp stores these numbers comp sales you can definitely you dont need to factor anything out. Global it was flat it was supposed to be up i think 0. 8 . U. S. Was down 1. 5 . And i think it was supposed to be down less than a full percentage point. So both global, and u. S. , are below youre down 1 when it comes to comps. Well, what was the estimate . I dont know. Thats what we need to know. The revenue is 7. 18 billion was below 7. 286 billion which what was expected. So at this point theres a reason that the stock now ive got 95 yeah, see, there thats what i a couple of dollars. The highs 103. 78. And this is not new information were getting from mcdonalds. Its been challenging for the past, id say three, four quarters in terms of comp sales. Trying to get it to grow. You can only introduce how many times can you bring back right. And they acknowledge the statements coming from the ceo, they acknowledge it being bad but theyre committed to creating the best experience and that during the quarter weve evolved our Strategic Plan on our framework to enhance our focus on the customers for insights planning and actions to reignite momentum over the next 18 months. Fortifying the foundational elements of our business by concentrating europe has been doing a little better. That was down 1 . Asia pacific mideast and africa, up 1. 41 . I always love when it comes up in europe because theres a big mcdonalds in the louvre and when i see french people in the louvre, huge lines waiting at mcdonalds. Weve won. Its just that they cant really look askance with us and say, you really youre disgusting ugly americans because the lines are bigger in the mcdonalds at the louvre than anywhere in the world in that bastion of civility and culture. And yet they love they love the mcdonalds there. Whats not to love . Its a delicious product. I agree. The mcrib scares me. Why . Because i think they have like a vat of stuff and i think they pour it into a mold which makes it look like a rib. I do. I think its stomach and its all right andrew . There are no bones. Theres the man whos got it right now. You dont want a bone in the sandwich. Thats why i never understand it. But i think it might be theres some parts of it that arent so awesome. And its molded in to look like its goes into like a jello mold. How can they ronald his outfit is a little different. He looks sort of like that. And you know, even like clowns or you think theyre creepy. We have to have the new ronald come on. The future what theyre saying the way they talk about the future you know, meet expectations, et cetera. I mean please dont get me wrong because my son and i mean anything in moderation. But a couple of those decimal points are for me. Not for me. The family. I sneak the fries. I never order my own. But theres some in the bag. Left over. You eat them . I help out. No calories if the fries belong to somebody else. Theyre your kids fries. We did the happy meals. I helped the kids love the toy in the box. Coffee is great. Im not that guy egg mcmuffin . Yeah. Its great. Anything in moderation, we go to mcdonalds. We do a couple times a week. And just one of six dow components reporting Quarterly Results this morning. Du ponts earnings match consensus. The chemicalmaker warns Current Quarter earnings will fall below estimates. Rising the Quarterly Dividend to 47 cents a share. Verizon beating the street. Results got a boost from strong Wireless Subscriber additions. Verizon this morning, also call it flat. Lower by 24 cents. United technologies earnings and revenues topping estimates, the top line the bottom line number was a big beat. Raising the lower end of its full year view. The stock is higher by nearly 1 in the premarket. And travelers earnings falling short of consensus. Revenues in line. The company says results were impacted by higher catastrophe losses, a decline of more than 1 of travelers in the premarket. Joe . Cokes Quarterly Earnings beat the street by a penny. Joining us exclusively is muhtar kent chairman and ceo of cocacola. Great to have you on muhtar once again. We love when you join us to try to work through these. You know, youre running i think coke once again out of all the brands didnt it win again globally as the most admired brand i dont know in the entire planet . But that doesnt mean its easy to run this company and give everyone the kind of growth in case volume that they need to keep bidding the stock up. And to me it looks like, with the currency surprise you again, some of the numbers are not as good as they would have been because of currency . Well, good morning first. Thank you for having me here. I think currency, we have had currency head winds, significant currency head winds over the last three years. We see them getting less strong. The currency headwinds. But, again, in the last quarter, we did see significant currency headwinds. But we do see yearonyear variance not as big as it used to be in the prior years. So the important thing here is that were focused on all our five priorities. The most important being sparkling beverages across the globe, led by brand cocacola, and this past quarter weve seen some fruit of our labor where coke grew all around the world. Brand coke grew in north america very importantly for the first time in a long time. And sparkling beverages were up 2 . In north america, it was flat. Right . Total volume was flat. Brand cocacola was up 1 . So the brand cocacola was up. But the estimate was still i think 1. 3 . And if you do 1. 3 on the amount of case volume that coke sells thats a significant number. Could you know why were at was the estimate wrong . Or was there can you point to pockets of weakness in north america . Actually, we were pleased with north america results, first because by cocacola group, secondly, because our pricing was very strong in this in the Second Quarter that just passed in north america. Our sparkling beverages was up 3 , three points. I think when you take the totality of where we are in north america, i think were making steady progress. Thats, i would say, the best way to describe north america and across the globe, on the heels of our world cup program, and also on the heels of Everything Else that we were doing with share of coke in more than 70 countries we see, again, a good sparkling beverage brand growth for our entire world. And sequential improvement importantly in europe, sequential improvement in many markets in asia, so we see some pretty good pretty good results that were happy with. Can you just explain bottling to me . It was down, 1 bottling case volume. And it was supposed to be up 5 . How can that miss by that much . Just repeat the question . Bottling. Bottling, case volume was supposed to be up 5 , and if im looking at this right, bottling case volume was down 1 . I think that is to do with structural because we sold boughtlers and when you compare it yearonyear thats what the number is. Okay, all right, good. Youre going to weve got to go to the wintergreen stuff . I think just asking muhtar while we have him, muhtar as you know, David Winters has said a number of things about the company, including compensation. Take a listen to what he had to say and im hoping you can respond to it. We have not sold any shares of coke. And you know, we love coke. But we think that theres some real fundamental issues here, not only about this bad plan but the governance and how the clarity and how this has been run. We think that cocacola needs to do a lot to restore its credibility with investors. So muhtar, youve heard what David Winters has to say. What do you have to say back . Well, ive said it before, let me just very quickly repeat it, our equity plan is a good plan. It was approved unanimously by our board. It was approved very strongly by our shareholders, and its a very flexible plan, and i think if you take the entirety of the plan, we believe its a very good plan. Can we tweak it . Of course we can. We believe that overall its a good plan approved unanimously by our board, and by our shareholders in a very strong manner. As far as some of the other allegations, look we respect every single one of our 2 million shareholders. And theyre very important to us. Not every one has to agree with everything were doing. The important thing here is that overall the company is moving in the right direction. We believe that we have a great, great category that we operate in, the nonalcoholic, readytodrink beverage category growing in the world. Were seeking to improve our marketing, increase our marketing, improve our communications with our brands. And were seeing some good results coming out with sparkling volume growth of 2 in the world. 19th consecutive quarter. Muhtar what kind of conversations are you having value shared growth and we feel that we are on the right track to bring back momentum into our business in a volatile world. Real quick what kind of conversations have you had with Warren Buffett who abstained on voting in favor of the plan and i know has said publicly that he was not a fan of it . I wont give you im not going to dwell on details of conversations with our largest shareholder, but we do often have conversations with all our shareholders, including warren. And i think the important thing here is that, you know, we will do what is necessary to ensure that our governance is best in class, the way we operate is best in class. And what we return to shareholders is best in class. Since middle of 2008 weve returned over 100 billion dollars to our shareholders. Can we were always striving to improve on that. Muhtar, the soda volume was down in the first quarter. You turned that around, first time in 15 years down and you grew it 2 in the Second Quarter. Thats what you were talking about. Thats probably one of the highlights in your view of what we saw in the quarter. This is a continuous effort. We have five we have outlined five priorities, starting with growing cocacola, and sparkling beverages. Ensuring that we play in the still beverage profitable still beverages portfolio. Improving and increasing our communication visavis brands, best improving the execution with our bottling partners around the world. And investing in the future leaders. And we are resolutely focused on those five priorities, and this quarter, again, just showing a small glimpse of early results. Youre just off a 52week high. So down a little bit today. But, well keep an eye. Appreciate it muhtar kent. Thank you. Appreciate it very much. My diet coke drinking every morning clearly helping those at least this definitely the coke brand, its the diet coke brand. I think its a soda. Are you drinking coke zero . That was the most successful launch in years and years. Im a diet coke guy. Coke zero and one is nutrasweet and one is plen today. The one is plen today is coke zero and its designed because men in theory dont like to drink coke what are you saying about my diet coke . Im not saying anything. I drink coke zero because if i had my choice it would be i would drink a six pack of that every day. So you say stocks are fully valued when theyre over valued im fully my weight is at a fully so i cant possibly drink regular coke. Do you know what made me crazy about all these people who were so anticoke was they got mad at teller swiss for endorsing diet coke. I am not its diet im with her i like diet coke. But the obesity people who are talking about the additives. The new Research Says that diet coke might actually stimulate insulin in much the same way. Theres some research on that that suggests that you might gain weight from diet coke. Im not sure. La la la la. Andrew . Okay. Coming up next the Senate Finance committee is going to be holding a hearing today on Corporate Tax reform. Were going to speak to a Harvard Business School Professor who is ready to testify. And then later the health of the consumer. Consumer prices will be released. Were going to bring the numbers and market reaction. Squawk box returns right after this. The world has gotten you far, but what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Could help your business didavoid hours of delaynd test caused by slow internet from the phone company . Thats enough time to record a memo. Idea for sales giveaway. Return a call. Sign a contract. Pick a tie. Take a break with mr. Duck. Practice up for the business trip. Fly to florida. Win an award. Close a deal. Hire an intern. And still have time to spare. Check your speed. See how fast your internet can be. Switch now and add voice and tv for 34. 90. Comcast business. Built for business. Okay. Good morning. This morning the Senate Finance committee will be tackling the hot topic of Corporate Tax reform. Our next guest will be testifying during the hearing. Professor of Harvard Business school joins us now. Hes a faculty member with the schools u. S. Competitiveness project. Hes also on the Advisory Board of the International Tax policy forum. Good morning, professor. Good to have you here. Good morning. Good to be here. Whats the most important thing that should happen to Corporate Taxes in this country to make us more competitive . What are you going to Tell Congress . I think several things should be done. The first is our rate has got to be brought in line with where the rest of the world is. Were really an outlier. And the second in conjunction with that is we have to move away from this worldwide tax regime that we have. Those are the underlying drivers of these inversion transactions, and those are the underlying drivers of why firms are undertaking transactions that are probably not efficient. So we really need to think about those two changes. And then in combination with that we need to raise revenue which i think can come from taxing some of the nonc corps as well as attentionly aligning book and tax profit. I cant imagine that a viewer of this program doesnt know what a worldwide tax regime. But lets just explain it. Meaning the u. S. Government taxes profitability overseas, as well as whats happening here in the United States, which is unlike the rest of the world. Correct . Thats right. So our citizens are subject to worldwide regime. Your income is taxed wherever its earned, potentially in germany or ireland or wherever. And in the u. S. Its taxed. We do give a referral and tax credits but we have ended up with a byzantine system which creates lots of distortions. Distortions with cash, to the merger market. Its a variety of things. Professor we keep hearing from people that it takes like six, seven, eight years to do Corporate Tax reform so all these inversions are happening now, and i do see theres a clarion call now someone even in the wall street journal today from usc, dont know how that compares to Harvard Business school its a great school. It is a great school. My wife is from there. But he argues that theres not going to be any Corporate Tax base left to reform if everyone is able to move so weve got to immediately pass something punitive right now that just disallows corporations to do it. Which will give congress and the president another pass on actually doing tax reform. If theyre not going to do it for six or seven years, whats the answer . Well, first off, im not sure theyre not going to do it for another six or seven years. I think these inversions are the lightning rod that gets us to the light place. In fact theres a lot of consensus about what we should be doing. I think the worst thing that could happen is if we try to do something punitive on these specific transactions. Because were in the land of unintended consequences here. So if you actually penalize something, for example, you say well if you want to do an inversion you have to actually do it with a larger foreign partner. Thats not going to serve our interests. That just means the transactions are going to be structured worrying about a race to zero. I keep hearing that. I wouldnt mind a race to zero because everybody would be even worldwide and then wed just try to create jobs and tax the people that get jobs, and maybe tax shareholders or whatever. When were all doing better it would be better. But if we go to 25, why wouldnt people still go to ireland . I think thats right. I think the rate if we really are serious about lowering the rate i think we need to get lower than 25. Were going to find ourselves antiquated as soon as we do the reform, be on the high end of things. What is the answer so i think the answer is a significantly lower rate, 15 or 18 would get us to a place where were actually comfortable. The question is where does the revenue come from to do that . You go to cambridge you dont even go across the bridge, do you . What if they recognize you . Youre on the boston side of harvard. But even no, no would you even stick your head out over there, over in cambridge . I do. 15 to 18 . I do. And proudly so. I think the thing to realize is actually a lot of consensus. We know we need Corporate Tax reform. We know we need to reform the rate. And we know worldwide regimes are antiquated. I think were getting closer to consensus on this than you think. Some of the work weve done at aei suggests revenue maximization level is 26 . That the revenue neutral level is 17 . But the optimal level is zero where we actually take the dividends and Capital Gains and we tax them among shareholders at regular rates. Whats your view . I mean in an ideal world where do we go . Clearly the Corporate Tax is not a great tax. Its an entity level tax, a second layer of taxation. Having said that we probably need it because otherwise without it you could have individuals shielding their income in corporate form. So we need a rate. Its probably somewhere north of 10 to 15. Why do we need a rate, why not zero . Hes saying people who run the corporation, individuals will start to pretend to be corporations so they dont pay. I got it. Okay. So we do need a rate. In theory i think arthurs right, Corporate Tax is not a great tax but there are these backstop features which allow it to be good. The question is where does the revenue come from . There we have to be creative. One of the trends people dont fully acknowledge is now we have more business income in nonc form than in cform and that is a potential Revenue Source to fund really significant reform on the krchtcorp side. Good idea. Ill buy you a ticket on a shuttle to go down there. Nothing you said has been i dont see how anyone can disagree with what youre saying. Well, i think the one last piece which you might disagree about is i think we need to think about the way corporations are reporting profit. So were in a world where corporations are reporting profits to Capital Markets in one way and to the government in another way. And thats got to end. And that can be a Revenue Source, as well. A lot of corporations, we we agree with that. That makes perfect sense. What about this idea is if you reduce Corporate Taxes enough theres so much job growth you make up for the revenue because individuals are paying more in income taxes. Thats feasible. We dont know i lot about what the rates are that would provide that. But we do know if youre interested in raising american wages which is presumably the most important thing on our horizon today getting corporations to invest in the u. S. Is the best path to youre already in washington. I just dont have to pay anything to get you down there. Hes not at aei though. It sounds like he could be. He could be. I do aei, i do brookings, i do them all. He does brookings. Professor, thank you. We appreciate it. Thanks. Thanks so much. Thank you. Okay coming up were going to talk about some of the other head lines making news, including lots of earnings. Tomorrow on squawk box, the earnings parade kicks into high gear. Dow chemicals ceo andrew liverest, pepsi cfo hugh johnson and Delta Airlines ceo richard anderson. Plus slicing up apple servings ahead of the first trade on wall street. Its all on squawk box starting at 6 00 a. M. Eastern. 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Duponts earnings matching consensus. Revenue better than expected. The chemicalsmaker warning that Current Quarter earnings will fall short of estimates citing weak agricultural sales. Verizon beating the street. And mcdonalds reported quarterly profit four cents below estimates. Global samestore sales were flat during the quarter with analysts having expected an increase of 0. 8 . When we come back markets are going to be watching cpi data out after a quick break. Weve got a lot more. When we return, the Consumer Price index for june. And then Eliot Spitzers latest gig, rating wall street analysts. Hes our special guest when squawk box returns. Tdd 18003452550 searching for trade ideas that spark your curiosity tdd 18003452550 can take you in many directions. Tdd 18003452550 you read this. Watch that. Tdd 18003452550 you look for whats next. 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Welcome back to squawk box. We are just seconds away from the june Consumer Price index. Rick santelli is standing by at the cme in chicago. Rick i heard the beep. Whats the number . Up 0. 3 on head line. Up 0. 1 when you strip out everything we buy, like food and energy. Lets look at year over year up 2. 1 on head line and up 1. 9 on ex food and energy. So lets take the head line up 2. 1. Up 2. 1 on the head line matches what we had actually last month, but those readings are the highest readings and lets put it this way, we havent had more than that since october of 2012. So well continue to monitor that. Lets look at core. Currently 1. 9. We were expecting 2. 0. That is better news. 2. 0 equated to the september 2012 and you have to go back to july of 2012 to find a higher one. So we can all see that we are nudging up to some of the higher levels on inflation. If you look at the index, we only wish that our stock portfolios looked like the xi and ppi index because pretty much it just keeps going up, and we argue about the white noise range of change month oaf month for the most part every month. We still have more data coming out like existing home sales and other housing data points that will be key especially as we continue to try to handicap how we can have any underperformance in housing when we have an overperformance on loan Interest Rates. Thank you so much, rick santelli. Looks like we got a little bit of gain in the futures on all of the averages there and the tenyear yield below 2. 5 krrs. I think we dodged a bullet. When it comes to inflation all the risk is to the upside. Theres not going to be an adjustment to fed policy, but there could be an adjustment to the fed policy from inflation that overshoots. I think there were some guys out there, quite a few that were looking for 0. 4 on the top line looking for 0. 2 on the core. We got the 0. 3 and the 0. 1. 2. 1 year over year on the head line number is above the feds metric. Which is the pce indicator. Yep. Which runs i dont know, 0. 5 to 0. 4. Alan greenspans favorite . There were certain indication more substitution which by the way we got a little bit from chipotle, right . Beat was higher so people bought more chicken. Thats important to explain. So if people if one price goes up people prefer another lower price one. Then the aggregate inflation level would be somewhat lower. Not everybody buying the more expensive beef product. The cpe moved more of that. Certain little less of other indicators in there. The outlook is fuel prices should be coming down. Some of the Commodity Prices have come down. So we might be in a zone here where the fed can kind of coast through. That would be the best possible hope i think. That would be an explanation of why the futures added 20, 30 points. I think you want to go into every cpi number a little bit nervous now because i think that as i said earlier, some members of the fed, and its not all the way to the hawkish right side more towards the center see this 4 trillion Balance Sheet. Same news for the president who i think is a centrist in this regard echoed Stanley Druckenmiller when he said the following, the economy is closer to normal, policy is far, far, far from normal. And so his concept is we have a lot to catch up, and that we may be running quote unquote behind the curve. Hes been on a lot and he has said stuff like that over the years. Hes been a little more hawkish but hes still sitting there when theyre deciding all this stuff. Remember he made a big turn to the dovish side when he decided we needed to peg it to unemployment and some other metrics. Hes come back incrementally joe, he said one thing then he finally said in his last speech were thats a little cya for the whole group. Thats what im saying. And michelle pointed out, you go into this number now they can say at least one guy on the fed was saying this. So we werent totally im not sure hes just one guy. And im going to go i guarantee you fisher possibly so thats where we focus on williams two fishers. Cue up the star wars i was going to say, and the e. T. You know one has the c pronounced fischer and the other without the c is pronounced fisher. Exactly. So youre asking people that are prognostication again and again whats in your crystal ball . Youre basically getting the aggregate data from all the experts, macro economists, journalists, about whats going to happen in inflation. I think that they can theyre going to get up to the 2 , 2. 25 inflation rate, and then i think theyre going to have to change policy. I think 2. 5 , 2. 5 is probably the high end of where they get to. I think theres a lot of Global Forces at work and you guys at aei have done a lot of good work on this. Its not just american capacity. Right . Capacity in china, in thailand and vietnam plays a role in the price level here in the United States. Sure. So its not just here, and honestly we havent really been through this before. Its labor capacity over there. Its factory capacity over there. Whats happening in china right now is going to have a huge impact on inflation. I dont think were on the precipice of runaway inflation. I believe in the Overall Concept which has been part of Monetary Policy the fed can pick an inflation rate. It can get to where it wants to be on inflation and its going to have to have its hammer, its foot down on the pedal for quite awhile. I think slow is probably the best course. Thanks, steve. Thank you thank you. Coming up next he was once wall street top cop now hes ranking top analysts. Its a new thing. Its not an easy job but these two men think they have the perfect formula. Former new york governor Eliot Spitzer is here, and the ceo of tip ranks are going to join us right after the break. 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With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price, maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Call or click to open your fidelity account today. Welcome back to squawk box. There are more than 200 Million People visiting u. S. Financial sites each month. How do investors know which calls are correct and which ones arent . Thats where tipranks comes in. Its a new financial startup that ranks stock recommendations by analysts and financial bloggers, designed to help Retail Investors to make a better Investment Decision by knowing which analysts are consistent and whos worth listening to. Joining us now uri gruenbaum, cofounder and ceo of tipranks. Also with us Eliot Spitzer, an investor and member of the board of tipranks, of course former new york state governor and new York State Attorney general. Uri, elliott, thank you for being here. El us how you got involved with this project . I got an email from uri and uri described in his email as the Financial Mechanism to lend transparency and data driven Decision Making for investors. We all see analysts all day, you watch cnbc and people are saying buy, sell, hold. Are they good . Its like going to a baseball game you have an e. R. A. , you have a wonloss record. Uri uses all the analytical data. They have 19 wizards back in israel. This is an israeli tech startup. They look at all the recommendations buy, hold sell and compare them to the actual resident and says who performs well, who hasnt. This is what the market needs. I cant believe nobody has done it before. It seems so logical. How is this different than what morningstar does here . Basically we rank financial experts. We also, since were using technology to do that, Machine Learning and big data algorithms we are able to understand like what bloggers and contributors are saying around the world. Uri, its also, it wouldnt be morning star would be i. I. , you compare to but i. I. Many times it had nothing to do with the Stock Performance or the recommendations. It had to do with how they interact with their clients. Does he call you back . And do they do good fundamental research and it rarely correlates with stock price. If you go to this website and you can adjust the metrics based on how long you hold what you want to compare it to, what the sector is, it is amazing you can see analysts, bloggers, have they performed against the market. Have we found any analysts that are any good . Oh, yeah. Timing . There are thousands of analysts, and i know you have about 15 of them that we notice that can consistently outperform the markets year over year. 15 . But the interesting thing that we found is not the analysts its the bloggers themselves, some of them are money managers, and as part of their day job. What we found is that following bloggers, you can generate much higher revenues than following the average analyst. How do you make money . Do people have to subscribe to your site . Do they pay for the date stay . Or do you get advertising . We have a few business models. We have a website like most Information Services are geared towards investors and you have a monthly subscription. Whats the subscription fee . So it runs between 10 for a lite version where we can evaluate any recommendation youre getting online, see what experts are saying and do your research there. And we have a more premium one for the 50 a month where you can do your own bench marks. Compare any analyst to the s p, to the sector, you can define the time of each investment that youre going to measure. He should have i dont know about you the two largest israeli banks have already signed up to the service and there are going to be hedge funds, trading platforms. Put that aside i just want to be clear. You remember the first case i not the first they were investment bankers. Right. But this was a different issue back then it was illegality. They were intentionally misrepresenting we alleged. Dodged the whole and everything was this is more important for investors. This is isnt whether theyre doing it intentionally. This is so simply are they good or bad . Intentionally or not doesnt matter to the investor. This is a market driven, data driven mechanism. And look, im not sure doesnt say buy, sell hold. My view is finding that stock youre going to invest but if youre in the market this is the site that says why do you want him on your board . Obviously he knows a lot. And we share the same vision of empowering the Retail Investor and creating that uri how do you cut through the ridiculous, like the jargon that every firm has a different way of not selling or so, there is a wide confusing terminology that brokers use. We basically you can tell how their track record is . So we map ratings like outperform, overweight its all a buy for us. And underperform and underweight is going to be a sell for us. So we meld them into a buy, hold or sell. Half the time merrill used to say that it wouldnt be a one wouldnt mean its going to outperform it could go down, but it would go down less than the overall market. Its all in reference to the market. So theyre never wrong. Yeah, thats how they want to show. But if youre an individual investor and youre going to get an overrating for a specific stock youre going to look into it and many times youre going to be responsive for it and were trying to look at it from the perspective of the investor. The best performers, the two names we have on frequently gene munster and mark grenadedy. Our image is on cnbc when you haved pundits and analysts you have little tip ranks and monitor beneath them giving the public oh, youre here to try to do a deal. Right after the show let me talk to you. I want to will it cost us more than 50 . We have to buy in bulk. Youre the im ready to sign up. While youre here, two other quick questions. Sure. Context history. Were on the fouryear anniversary as of monday of doddfrank. Where do you think we are . Well, look, i will say what i think most people believe, we are better than we used to be but are we ready for the next crisis . We wont know until we get here. Every crisis is different. The real question is have we learned the lesson and will we actually build a capital base . Will we create institutions that are ready to withstand the next storm . The best book i read on this was the short history of financial euphoria which was written not after the 08 crisis but in the 90s and the point he makes is we have virtually no historical memory. We forget very quickly. Two other quick ones in the news. What do you make of the settlements that bnp just had and possible Settlement Bank of america citigroup. What do you make of this whole stream of things . Money is fine. But we would probably agree, money out of shareholder pockets doesnt change behavior. Can it reimburse those whove been injured, yes if its used wisely but does it change behavior, no. Structural reform is what we needed. I would have looked for greater structural reform than we got. Would an Elizabeth Warren presidency be good or bad for the United States . Im a huge fan of Elizabeth Warren. You probably disagree with me. I think she understands some of the changes is that a yes . I dont think shes going to run but if she did would it be good . For the nation at many levels yes. Im not endorsing politics im not getting into politics you dont think that the private sector would suffer punitively . No. I dont. And we could have a longer conversation about that. And would be are you retailers of attorney general schneiderman he puts out more press releases than you ever did. Its amazing. He makes you look reasonable. I mean he is get rid of your magnetic business then he doesnt we need structural reform that permits our economy to thrive. Ive always said when i got these cases i want the economy to work. I believe in capitalism which means play by the rules, play it straight, invest your own money. One final question were going to be hearing from bill ackman later today on herbalife, hes been mounting this campaign. Mounting this campaign to suggest that the entire thing is a ponzi scheme. Do you think that investors should be able to short these companies publicly go out and is that part of capitalism . How do you think about that and theres money involved because theres lobbying on all sorts of short selling is part of the market, short selling is part of expressing ones belief that the market is going to go up, down or sideways. Ive never invested with a short because you not only have to be right on the substance but right on the timing. Might as well a bit of Investment Advice but of course shorting is part of the marketplace. You cant speak untruths. Thats the rule. Okay. Eliot thank you, uri, thank you. Tipranks we just became subscribers basically. You did. Thank you. With 50 bucks . No, no, no, multiple subscriptions. Much bigger deal. You know this you know this guy coming up . Is it jim . Yeah. What happened to his hand . I dont know. Who has ep taken out . I dont know. Coming up you werent roommates thats right. All lawyers need practice let me tell you. Coming up, jim cramer from the new york stock exchange, and more from our guest host Arthur Brooks. Well be right back. Tomorrow on squawk box, the earnings parade kicks into high gear. Dow chemicals ceo andrew liverest and Delta Airlines ceo richard anderson. Plus slicing up apple servings ahead of the first trade on wall street. Its all on squawk box, starting at 6 00 a. M. Eastern time. Profit from it. When you run a business, you cant settle for slow. Thats why i always choose the fastest intern. The fastest printer. The fastest lunch. Turkey club. The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast Business Internet and get the fastest wifi included. Comcast business. Built for business. Thats why i always choose the fastest intern. R slow. The fastest printer. The fastest lunch. Turkey club. The fastest pencil sharpener. The fastest elevator. The fastest speed dial. The Fastest Office plant. So why wouldnt i choose the fastest wifi . I would. Switch to comcast Business Internet and get the fastest wifi included. Comcast business. Built for business. Welcome back to squawk box, futures rights now, are you telling me the cpi was more important than six dow components . Because of the fed. Lets get to the new york stock exchange. Yeah, the fed. Lets get to jim cramer at the new york stock exchange. Which of the numbers we saw today, mcdonalds has troubles with the comp stores. Coke, if soda was up 2 and down for the first time in 15 years last quarter, i think thats better. What were the highlights for you . Mcdonalds and cocacola versus chipolte last night. People are moving away from what they regard as being not good for you and eating what is good for you, and i think these trends are just beginning. I think you could see a long term trend against mcdonalds and cocacola thats reversible. The cocacola quarter, trying to talk about noncarbonated. Come on, man, youre a carbonated drink company, come on, own it. Tough when sales decline, though, to own it. Right. People dont want to pay up for this stuff. Yeah. You know what . The old days of price increases constantly, the idea that soft drinks sell, i think cocacola bleeds overseas, something jim stuart said that was disagreed on, and tech is good. I like tech, tech continues to do good stuff. Look at overnight like arms holding was good, therefore good for mobile, like, sky works, so i cannot to like tech, but i think the old companies, whether its campbells soup, cocacola, mcdonalds, they dont have what it takes, generationally, they dont have it. Whats wrong with your hand . I had trigger finger and a tendon wrapped around a cysts, two incisions. I had the stitches out yesterday. I dont know, its looking better. Show it off. I hate it getting bumped around. What about the deal . Id love to know a new concept, analyst that actually would be right about timing or direction in a stock. I have not seen one yet. Look, its good to have a systematic data base. We used to have eyeeye. Thats if they returned your call. Thats if they were nice. Thats if they were nice in the conference. I have no idea. Whether the ohio state teacherss pension fund lied to or not. Anybody who holds anybody accountable, you, me, analysts, sure, welcome that, makes everybody a better investor. A real good idea. We have to run, but a quick coke question. Coke, pepsi, where do you go as a stock perspective . Pepsico is going to be good. I know they want to split them up, but i think the combination i love them. Cocacola would buy fritolay if they sfin it off. I bet. Author brooks on competitive tax reform and article in the New York Times i hope you read this weekend. John desymone, and bringing down the company. Squawk box returns after a break. Your 16yearold daughter studied day and night for her drivers test. Secretly inside, you hoped she wouldnt pass. 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All right, now people watching today, think about money, they are thinking about, you know, whats going. In the stock market to be sure. To the extent that you follow money, power, pleasure, fame, when youre actually unhappy, those are the exactly the right formula for becoming an unhappier person. None of those things have made me happy. I know. This is the key thing. My wife, my children. No, youre right. The money, the fame, the money, power, pleasure, fame. The power parts dont do anything for you . Powers good. You know, this is anybody that has not read your stuff, this is the same as when you talk about what is fulfilling, and that is earned success. Doesnt matter whether its 50,000 a year or 35 million a year, getting up, making your mark, doing all that stuff, people that win the lottery, you want to to see someone with a problem down the road. Anything you dont own. People who inherit money, its as bad as people who win the lottery. Welfare if you dont earn it, its cancerous basically. The key thing is remembering this. The tendency in modern life from the snake oil to hollywood that we get to madison avenue, it is use people, love things. Thats exactly wrong. Love people, use things, and then youre on the right track. So many times you helped me where conservatives are not going to win back the hearts and minds of people by saying it will generate more prosperity that trickles down. They win back by saying you will have a more fulfilled and selfactualized population, people that are working. That are happier. And more well adjusted, better families, better everything. The political paradox of the time is this. The political left in america today, they are materialists. They believe that the measure of suffering is economic inequal y inequality. They wrap themselves in moral language. On the other hand, conservatives are moralists, a more fulfilling life for everything, but wrap themselves in materialistic language, and thats why they lose. You see why hes president of aei. I read the book, great book. Thank you. Paid for it too. Remarkable. Earned success. Pardon me, but thank you for being here. Thank you. Great to talk to you. Make sure you join us tomorrow on toss it down to the yes mep on squawk on the street because thats next. Good morning, welcome to squawk on the street, im Carl Quintanilla with david faber and jim cramer. We have giant earnings, most beat, but high profile disappoinments, ackman, and 10year yield under 2. 5, and cpi about the same as may, up 2. 1 year over year. The russian separatists handed over the bodies and block boxes. Road map