Transcripts For CNBC Squawk Box 20140813

The International Community is warning russia the mission should not be using as a predecks for an invasion. Kiev says it wont let the vehicles cross on to its territory. Meantime in iraq, the Obama Administration is sending 130 military advisers to northern part of iraq to advise those on the ground. Well have a live report in just a few minutes. Among the other tests for the u. S. Markets today, we have earnings and economic numbers. At 8 30 eastern time, we get july retail sales. Well be talking more about the economy in the next half hour with squawk master and blackrock chief Investment Officer russ koesterich. Scott. Thanks so much. Shares of candy crushmaker king plummeting this morning. Results were hurt as people spend less mon. Analysts warn king needs tovent another successful hit. If not, they say face a similar fate as zingah. The Justice Department wants more information on tysons deal for hillshire. It would be the biggest transaction yet in the meat markets. Flooding from maryland down to washington, d. C. The flooding is slowing production for the automakers. They ended up sending workers home because so many people were out. Three of its other plants are now running, but at a slower rate than usual. Meantime, General Motors suffered flood damage at its tech center. Did you see the pictures . Unbelievable pictures coming out of those areas. I was watching costello, our old buddy tom costello. Hes got like five or seven inches if not more of rain in detroit and these other areas. Unbelievable in a really short period of time. You can lead with weather every night if you want. In my life, i dont see much difference compared to when i was growing up. Now we have satellite and social media and it seems like its never happened before. But you know how i feel. A couple inches of rain five inches is right. You see what happened last night. Its funny how that works. We get it like a day later. I was thinking about this russian situation, convoys, theyre all moving in. Its not troops. Theyve got this huge horse that theyre moving in as a gift to the ukraine. Its a here we go. Allowed to put it in the center of town. Its this huge, huge horse thats nice. It is nice. Theres definitely nothing happening here. Why people are suspicious of putin, i mean, who cant tru trust anyway. Wait, is he riding on the horse . Bare chested, yeah, he is, right . Meanwhile, you did the challenge. I did. Oh, my gosh, i saw this last night. You tweeted and you asked me whether i saw it. And i said do you think im going to miss the opportunity to see you in a wet tshirt . Appreciate that. How did it go . I could have worn a white tshirt. Well have more on that later. You knew it was going to happen yesterday morning. I kind of saw after your after you challenged me to take the stool challenge lets do that. Testing for colon cancer by giving a stool sample. On air . It wasnt they. Lets check the really cool test. 1 1 different markers, early stage poll yops, 95 totally noninvasive. Gross, but thats noninvasive. Theres nothing great about the colonoscopy, either. Id take the test. Just to be clear, nobody wanted you to do the stool sample live. Some people did. My fans love me, okay . Both of them. I am used to people lets check the broader markets this morning. We were unable to do the three Straight Days yesterday. The volume was so claim yesterday. It was. But it has been almost every day, at least that weve been up. But having watched this less being in the force and looking at each individual tree, having been down watching it from afar, that one week scared me. You remember . I said is this beginning of something . Last week we were down. Now were sort of we dont know. We could still go down and make the ten this time, or it seemed like it made a pretty good stand. Why wouldnt it when you have german bonds at 1 . We didnt go anywhere, even with the big gdp number. Treasuries, ours were down at 2. 3 and change. I volumed some of your tweets. The viewers were watching you say the wrong numbers and your coanchors were oblivious. No, i would think so. I listen to everything other people say. Anyway, check the oil. One viewer, only one viewer cause me. Theres another guy that all he does is talk. Anyway no, no, not true. You always listen. I do. I do. Lets look at the tenyear note. We have no loyalty to anyone who is on in the afternoon. Afternoon. Good afternoon. 2. 46. The Index Futures . Yeah, dow futures up by about 55 pints. Almost time to schedule a visit. Its getting a little cheaper. And it takes 54 points. Hopefully we have a guy who was listening last week tweeted again with a smily face. He did well. Thank you. Thank you. Like the s p 500, we have tens of dozens of faithful viewers. There it is. Down ten cents. I did miss you. You did . I did. And then you were gone kind of like my work husband. I will say one thing about your tweets. Youre very private and you tweet pictures of scenery. But most people want they can see zeebry anywhere. They want to see you, they want to see i didnt see they want to see im naked in some of my shots never mine, then. Im standing on a beach with penelope and im holding a fish. I tweeted things that people you caught a fish this big . Ill show it to you. But these are things people can sink their teeth into. Theres a reason to follow me. I can see those shots anywhere. I dont like tweeting out picture of the family. Why tweet . Why exist . More signs of an economic slowdown in china this morning. Eunice yoon has a look at the latest data thats legion coming out of the country. Eunice, its good to see you. Thanks a lot. And i probably wont be tweeting out the numbers. A lot of people here are talking about how disappointing those numbers were. The factory output numbers were probably the best of the lost. Retail sales figures came in at 12. 2 . And the fixed Asset Investment came in lower than speak 13ek9ed at 17 people. This figure is a huge driver of the economy. Now, the most disappointing and probably the most disconcerting number that people were talking about here today was the credit figure. The credit figure for july came in at seventh the level for up. That means the credit is flowing at a very slow pace. A lot of people were talking about how its the slowest in nearly 60 years. And there were a lot of people very worried about this. In fact, the government came out with a statement saying the credit growth is reasonable. Theyre trying to reassure investors. They also say theyre going to maintain their policies. And there were a lot of explanations today as to why that is. Companies are paring back their loans, banks are more risk averse. There was a lot of discussion about how that people are just not taking out mortgages the way many economists had expected because the credit number really threw cold water on a lot of the excitement we saw back in june when the june figure, which was so huge, came out. So a lot of people now really wondering about the recovery and whether or not the government is going to be able to meet its target, guys. The u. S. Is sending 130 military advisers to iraq. Duncan joins us now. Duncan. Hi, good morning. That help desperately needed. Last nights four u. S. Cargo planes dropped more than 100 bundles of food and water on to the mountains to yep the people that have been up there for more than a week and driven them from their home. Some have been able to make it down. The United Nations estimates between 20,000 to 30,000 yezis are still stranded up there in desperate need of help, without sheltd er, many people dying of dehydration and starvation. Duncan, thank you. I was watching one of the Obama Administration deputies, something talking about it was a reasonable, smart guy that i was glad was in that position. Because theyre stuck on a mountain. It drove home a point to me that we can try to be isolatationists. Theyre suffering religious persecution because theyre not muslim and theyre not christian. But were basically going over there and enforcing our view. Its almost like the United Statess role in the world is to make sure people arent flattered. If we completely ignore this, isis sets up a breeding ground. They are going to be exporting their brand of terrorism. Thats for our own interests. But this is just watching people that are going to be buried alive or kids with their heads on spike. Isis is with these people. People, rwanda, thats what everyone mentions, we sat there and then you found out afterwards that it was tuly genocide. And the United States position in the world probably means we shouldnt let that happen, right, scott . But it may mean people on the ground. And thats a big question as to whether what theyre doing after that works and if not, what do you do . Tension necessary iraq escalating as iran is praising iraqs nomination as a new Prime Minister on the squawk line in iraq with the latest developments is erica sullivan. Shes a financial with the reporter times. All the all news here is that maliki at this point seems to be on the short end of this stuff. Has he got the support he thought he had yesterday . No, i dont believe he does. I think maliki is sort of backed down. I think that in this case that issue is on its we to being sorted. I spoke to the deputy Prime Minister today and he was saying that he believes that, you know, its pretty much settled that will take on the next Prime Minister role. So then the next question is about getling everybody back on board so they can start to strike back against the offensive of isis that highways taken so much area from iraq. Is it that simple, if they dont do anything, then he realizes this is the way its going to go . What changed between yesterday and today . Interaction support is pretty much uniformly against maliki staying, including iran, which was pretty much the only people backing him still. The military, we didnt have any clear signs that the military was going to back him. He made some suggestions that that was going to happen. But my understanding is the military went and indicated to iraqi officials that they would not support some action like that to keep maliki in support and would go along with the transition. Im not in baghdad, so if there have been reents developments in baghdad this morning, i cant speak to that. Im in the north. From what ive heard early this morning, that was the status quo. Pretty much people thought maliki was going to have to back down. Erica, what is the situation in mobile at this point . We know things have gotten more tense there. How did it feel to you right now . Beyond the still is a huge calm. People trying to buy weapons, and that was only ten days ago. Now were seeing a lot more confidence that the you know, the kurds with the help of the american strikes will be able to at least defend or question the territory that they lost is still i think open. Right now im standing in the town that the kurds retook on sunday. Here, theyre feeling quite confident and really that the american strikes helped them. But earlier today, i was near another town called havia where the poon was much, much more pessimistic. People were feelings like the strikes are not that helpful. Its easy for a strike and a half appear effective impact. Its a little harder to stop is impact of the isis threat. Over here to the southwest of ervil, the picture is looking brighter. People are feeling like they can hole the territory. Sounds like maybe we erica has been working under some difficult conditions there, erika solomon who is calling in from that region joining us 37. So the iraqi grand total who is obviously close to ron, but iran has been in the sky all day lo long. Its a very complicated situation. We will continue to monitor it. When we come back, taxing america. Fight or flight . Do politicians have the guts to overhaul the tax code or will lawmakers kick the tax can down the road . Plus, the ice challenge coming to cnbc. And upping the ante. Thats coming up later on squawk box. Stick around, well be right back. What were doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. I think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when its needed by the consumer. A smarter Energy System is made with the ibm cloud. The ibm cloud is the cloud for business. Where the reward was that what if tnew car smelledit card and the freedom of the open road . A card that gave you that im 16 and just got my first car feeling. Presenting the buypower card from capital one. Redeem earnings toward part or even all of a new chevrolet, buick, gmc or cadillac with no limits. So every time you use it, youre not just shopping for goods. Youre shopping for something great. Learn more at buypowercard. Com okay. Thats ledgendsary actress Lauren Bacall who passed away yesterday at the age of 89. That was 1944. That was pretty racey for 1944. She made that film with her future husband, humphrey bogart. She was also married to jason robard, was engaged briefly to frank sinatra. She was nominated for an oscar for the mirror has two faces. And remember when we lost hepburn, and bacall was the last of the great. Im trying to think. And, you know, you get to 89 and sometimes a little younger, we dont remember who is still with us and because as they say, sometimes you just fade away, accepting the very unfortunate cases of robin williams, obviously. This is the way i wish it would always work. Youre 89 and because its hard to lose smnl that you think you know because everyone has seen so many things. So many kids, so many people knew robin williams. That was a double whammy with his whole passing, that it happened and then the way it happened. So you wish it would always be working, he has three or four films that he had just finished. You wish he would be 95 or, in fact, 1 00 and a guy who is 1118 and still smokes. Just one, though. Anyway, my buddy, harwood, did you see all the press he got yesterday from his appearance on our show . No. Oh, my god. Well talk to it about it. John, youre the man. Weve missed you, john. Its been way too long. Big press yesterday. Hey, joe . Yes, sir . Youll be glad to get to the studio this morning and realize youre still with us. You know, i woke up this morning and im thinking, joe is getting on there. Is he going to be, you know, on the show . Did he go the way of bacall or whatever and youre back, youre here. Because im that no, i was talking about your comment. Did you see how many people picked up your comments yesterday . Your just your people, but the other side picked them up. I did a radio show last night and he was calling you a lefty. And i go, look, did you see what june said yesterday . He will call it like it is because you were very blunt. You know who i heard about it from . I heard about it from the Hillary Clinton team. Im sure i did. Because you said that im sure you heard about it. In fact, getting an interview with them anytime soon. You said that the world blowing up all around president obama probably isnt a good thing for Hillary Clinton because it was under her watch sort of that a lot of this started festering. That was pretty good for you to say yesterday. What did the clinton people say in response, john . Oh, they were just noting the way the other side was using it. It was not a heavy iraqi. It was just like, wow, did you see what the free beacon and, you know, these other conservative groups were saying about what you said about hillary. Because i had not i look at my twitter feed and i didnt hear anything about it on twitter the. Are you kidding me . It was everywhere yesterday. A lot of people saw it, john. I think that it just you are a journalist and i think it did a lot to bolster your credibility on both sides of the aisle. I need to do Something Like that. Thank you, joe. Youre welcome. Anyway, john, youre here today to talk about your next tax series that weve been talking about, tax in america, fight or flight . Becky, the question is, as we watch almost every week another tax aversion deal with companies are going overseas for a low tax rate, why hasnt washington reformed the Corporate Tax system . There are a lot of answer toes that question and one of them, of course, is that anything is very difficult to do in washington. But its more fundamental than that. In this particular case, were talking about something that no player in the process, not business, not republicans, no democrats, and certainly not voters has the will to push this forward right now. Let me just review some of the stats to begin with. On the magnitude of the problem, it ought to be manageable. Corporate taxes provide about 10 of the governments revenue stream. Thats five times or 1 5 the amount that the personal income tax provides. You would think a small chunk like that would be able to be altered. Now, when you look at the tax rate, compare the United States with other countries, with our competitors, this is a clear divergence. We have a high nominal rate at 35 . The uk 23 , china and japan, 25 . One of the big reasons why it doesnt happen is look at these industries. Look within the Business Community and look at the divergence in effective tax rates. Who would be the big winners . Wall street, buy your text. Theyre in the 30s because they dont have a lot of production. But Industries Like construction and real estate that are 20 or below with their effective tax rate, they would lose by having deductions taken away. The National Association of manufacturers says they would fight a Corporate Tax plan that would remove the large tax credit for domestic manufacturing in order to lower the rates for other people. And so the Business Community is divided. Democrats might accept tax reform, but theyre not motivated to lower Corporate Tax rate. Republicans are motivated to do it, but they also want a broader reform of the individual system. And thats really hard to do. So if you ip cyst on Something Big and broad and you also have fundamental disagreements over whether you raise more money, raise the same amounter on cut revenue to the federal government, it adds up to a situation where the gridlock of washington is encouraged and until the problem appears to be so compelling and the political stars align just right, its hot going to happen. Although, john, really, if you take a look at all these industries that want to preserve the tax breaks that theyre getting at this point, if it was brought out in the light of day, they can say sure, theyre going to argue for all of those things, but then they are going to have to continue to do that and do it with the American People not knowing what theyre up to. And its not just tax breaks. Their composite rate is much lower. If its a purely Domestic Company that has no offseas corporation, of course theyre going to pay 30 to 35 . You get some, but that didnt even factor in. Some of them have very legitimate reasons. Youve got half on your revenue coming from abroad, your domestic tax rate is half of 35 . These things that start off as legitimate Tax Deductions and get used in every industry, every industry calls its a manufacturer. We need to make a more attractive manufacturing in america. We need it to make it more attractive for manufacturing capital to come here. There is an effort in washington to push that rock up hill. It is not easy. Yeah, i know. Foreign companies can come in here and buy our companies and theyre worth more to them. Its a bad capital flight away. Your head is in the fan if youre not going to fix this. Still to kol, up, up and away. This time its about the man of steel, the orange comic book sourpmans first ever appearance is going up on the auction block. One of the holy grail items in the comic world. It could go for 2 million. A comic book is a super investment . Coming up in the next half hour. [ woman ] if you have moderate to severe Rheumatoid Arthritis like me, and youre talking to your rheumatologist about a biologic. This is humira. This is humira helping to relieve my pain. This is humira helping me lay the groundwork. This is humira helping to protect my joints from further damage. Doctors have been prescribing humira for ten years. Humira works by targeting and helping to block that contributes to r. A. Symptoms. Humira is proven to help relieve pain and stop further joint damage in many adults. [ male announcer ] humira can lower your ability to fight infections, including tuberculosis. Serious, sometimes fatal infections and cancers, including lymphoma, have happened, as have blood, liver, and nervous system problems, serious allergic reactions, and new or worsening heart failure. Before treatment, get tested for tb. Tell your doctor if youve been to areas where certain fungal infections are common, and if youve had tb, hepatitis b, are prone to infections, or have flulike symptoms or sores. Dont start humira if you have an infection. [ woman ] take the next step. Talk to your doctor and visit humira. Com. This is humira at work. Welcome back, everybody. Investors continuing to keep a close watch on flareups overseas. Is it enough to stop the bulls here in the United States . Joining us now, rich kostrich also jonathan gull. Guys, its good to see both of you. Thank you for coming in. Good morning. Let me ask you this, ross. What do you think . We did see a bit of a panic, but things have come back a bit. Is that a one off or do you think there is more concern because of what weve seen overseas . I think there is concern. Stocks would be higher if it wasnt for whats going on in ukraine and the middle east. Why is whats happening in the middle east and ukraine relevant for the Economic Outlook in the shortterm . Probably the key factor to watch there is oil. To me, the reason the market has been fairley well behaved is that theyve pulled back from those highs we saw in july. So oil spiking, that would be enough in itself you think to really i do think its sustained and it is blinking over 1. 25. Wti would need to be over 115 . 115, about 10 to 15 above where we are. Today household spending, the economy, that would grab investors attention. John, the big issue is if youre not interested in stocks, where do you put your money . In stocks. Hold your nose and do it, anyway . Yeah. If you look at the earnings, they have been coming in surprisingly well. And, you know, to your point, if you look at the cost of capital Interest Rates versus the yield on stocks, it would be dividend yields or the pe or what have you. Stocks are just, you know, look undervalued, pretty significantly,. I think that you can see, you know, years of double digit returns as this very slow and steady recovery moves forward. So youre not talking about a situation where you think stocks are just the best house in a bad neighborhood. You actually think stocks are undervalued here. Yeah, i do. And i think its a mistake that undervalued . Yeah. If you think about it, the bond yield right now is implying over 20 multiple on stocks, just simple math. Right now were at 15. Even if it got to a 17 multiple on stocks, which would be a really big jump, stocks would still look relatively you just says news of digit digit returns. That means youre going to double your money in if you can do double digit returns year after year, thats why you invest. And its not forever. Its between now and how many . Three to five years. Youre undervalued then. 100 . I dont think its even close. The mistake were making is people are looking at a weak economy and equating that directly to an overvalued stock market. And your response is really bullish. Valued because right now the consensus that we bring to viewers every day on this network is that things are overvalued. Or at least fairley and fully valued. Exactly. The stock market is up 180 , it must be expensive. But if the stock market is up 180 and earnings are up the same amount, that doesnt mean that its expensive. It just means things have rates are multiples. I agree with jonathan to the extent that multiples can go up. The economy is getting stronger, markets will go up even if rates go up. What i would push back a little bit on is the notion that stocks are cheap. You look at what happened last year in the u. S. The u. S. Is definitely the best house on a bad block. But its reflecting the price. 2013 multiple on the s p 500 went up by 22 . To what . It went up about 17 times on trailing earnings. So previous peaks that reflect the end stage right. Of the enthusiasm of the bull market, what is the last the last 25 years, youre normally not peeking multiples over 20. Id be a little bit moore cautious with double digit returns. You look at longterm multiples. If earnings go up 7 to 10 , you dont need much on the mumt manies front. Are you going to get 7 to 10 Earnings Growth in an environment which margins are already at a record peak. We havent been able to do better than real growth of 2 . I think were going to finally do better than 2 unless youre Stanley Fischer and you think were stuck here forever. I dont think youre stuck here forever want but there are factors that suggest youre not going to go 2. 5 over the longterm. Thats sad if were not going to grow back at 3. 5 again because thats what the United States economy was capable of. Its what it was cable b of. Its not morning in america . Who are you . I dont think i know you any more. Look at what technology is going to bring us for the next ten years. We can have great technological gains. But here is another raemt. The population growth is much, much slower than it was 20 or 30 years ago. Enough jobs for the people we have now . We dont need more people. Faster productivity growth to offset that slow growth in labor. Hes a downer. Take it away. Take us to break. I think who i think is i think a slower, stubbornly disappointing recovery means that this thing goes on for way longer than people think. I dont think this is a sevenyear recovery. I think this is five in a 10or 12year recovery. And thats the rope i think this thing keeps going and going. When you mistake a smaek in stock is when you go into your next recession and buy before it goes over. Youre comfortable still with that 20 75 number on the s p . 7 over five months, yeah. I dont you know, thats a pretty reasonable number. Good for you. Stocks go higher theyre not. Jonathan, ross, thank you for coming in. Thank you. I dont have a in this, really. Next, a super auction batman creator bob cane tapping into his personal collection, putting the first appearance of superman up for sale. Speaking of the man of steel, im going to show some of my tweets. I thought it was my read when you said that. No, but were going to show the ice going on you in your wet tshirt and then were going to show me shirtless because why tweet if youre not going to show yourself . Stick around. The comic book with super mans first appearance goes up for auction and it could catch a super price. Morgan brennen joins us with the is super man worth more than batman . Yes, a lot more. Starting tomorrow, we have this rare issue of action comic number one and that is hitting ebays auction block. Its a 1938 book where super man makes his debut. Because of that, superman is considered the birthplace of the entire super hee roar genre. The last copy was owned by actor nicolas cage which fetched 2. 1 million. This copy is in Even Better Company and its widely expected to break that record. Why are we saying this . The market for rare comic sess growing. A purchase of the class and metropolis collectibles is one of the biggest comic auction houses in the country says this space has taken off since its a rel ofly safe place to park some cash. Probably 20 years ago, comic books were not seen in the same light that they are seen today. I think the advent of the movies, i think the increased visibility of comic book prices, the realized prices at marketplace have helped to galvanize customers, bidders, people looking for alternative investments to find comic books. So this company is getting ready to sell early issues of the batman series, the detective comics. Thats owned by creator bob cane. Those are expected to fetch six figures apiece. But the majority of comic books dont ever appreciate. Many are only worth pennies. The key here to checking is key issues, key blot twist. The older, the better. The 1930s to the 1940s are some of the gold. Age of comics. Some of the most prized titles are do we have a rundown of that . Anyway, its important that theyre in good condition. So theres two kinds of people in the world. D. C. People and marvell people. Is that right . Im not sure. I defer to my son on this. The san diego comic conis like the biggest thing in his live. Have you ever collected . No. But we have a lot. Are you a superman or a id a batman guys because he did it all. If you watched seinfeld, did you see that they would argue about what you are and im a superman guy. Nobody can do that stuff. Batman did it with grapple hooks and he did it and he was not ben affle affleck. But he couldnt fly. No, he couldnt fly, but you cant fly. If you want to be someone, youre going to be spiderman because its cooler. You can if youre superman. Are you come back . Yeah. Batman is a lot buffer, too. Thank you, morgan. When we come back, problems at the post office. The postmaster general Patrick Donahoe will be joining us aus our special guest in the next hour. But first, scott takes the ice bucket challenge and raising money for als research. Squawk box will be right back. 24 7 its just im a little reluctant to try new things. Whats wrong with trying new things . Feel that in your muscles . Yeah. I do. Try a new way to bank, where no branches equals great rates. water dripping and dont juspipes clanging ncisco. Visit tripadvisor san francisco. soothing sound of a shower with millions of reviews, tripadvisor makes any destination better. Who dont have electricity 400 Million People and i just figured that its time i do something about it. What were doing right now, along with ibm, is to actually transfer data through a satellite from our wind farms directly onto the cloud. I think we could create a far more efficient system across the whole network where we could actually draw down different kinds of energy based on when its needed by the consumer. A smarter Energy System is made with the ibm cloud. The ibm cloud is the cloud for business. Welcome back. The sweeping the nation has reached cnbc. This is a picture of scott about to get, there we go, and theres the icy waters, scott getting a cool blast of waltzs and support for a. L. S. Awareness, then scott made a challenge of his own. I put it to Mark Zuckerberg and mr. Costolo will be taking the challenge today in fact on the halftime show about 12 15. He will do it and postit to vine. Oh. We will check that out after the fact. I got to give him credit. He accepted the calgary been 10 to 1515 minutes. Way to go. Of the gauntlet sort of being tossed. You didnt hear anything on facebook or off . Not that i know of. Now it turns out governor christie of the great state of new jersey took the ice bucket challenge as well. He challenged zuckerberg and cory booker as well. Will is the governor. Hess two schern and jimmy fallon also challenged. With all do due respect to the governor the challenge was made, there is nobody in the world. Im surprised. The governor probably got the idea from you. I would think so, right . What about . I dont care. Id rather have Jessie Eisenberg do the challenge anyway. I was looking for a more original idea. Would you take Jessie Eisenberg . Yes. Who in my view is a better park zuckerberg than Mark Zuckerberg. I would take that. Before we run out of time . I dont know, heres the thing, if we do it, i want to do it like so its like a snap tack, its so instantaneous, do it. Take it down. All right. There. Thank you. One more time. Lets do it again, a little longer. Who is that guy with your wife . With his daughter is what you are saying. My question to you is, okay, all right. My question to you is, youve changed out of your suit, dress shirt and tie, you put on another shirt to get it all wet. Why didnt you just stand there like a pan stand there why didnt you stand there . You felt it was more appropriate for putting on the golf shirt. You called me inappropriate for showing that porn. Does she not, she is, anyway, thats hot. Is your head superimposed on somebody else . That is a hot couple. You got it. Are you with me on that . I am with you. Now i wish i would have taken the challenge. You, i cant see your fingers on the lens, own it. Enough of us here. Let your followers see something. Im going to get a lot more followers, im willing to do the full on, full monty. Anthony weiner here we colt. Why are you flexing in that picture . The u. S. Postal Service Delivers mail to the 153 million addresses, it handles 43 of the worlds mail volume and it does it six days a woke. Why does it keep losing billions every quarter . The postmaster general for a special interview a few minutes from now. R me, it starts with the opening bell. The bull set to charge ahead, markets shrugging off weakness in china. How long can u. S. Stocks beat back the bears . U. S. Mail makes it through rain, sleet, snow and the dark of night, but the losses keep pileing up. The post master joining us to talk about the u. S. Postal service. Place your bets. At the casino, your laptop and smartphone is the fakes suffering from gambling gone wild . The man lays the cards on the table as Atlantic City faces a major cold streak. The second hour of squawk box begins right now. [ music playing ] good morning, everybody, welcome back to squawk box here on cnbc. Im becky quick along with joe kernan. You talk about the post office, hes a genius. He is good. Andrew is off this week. We have been watching the futures, they are indicating a higher open. Take a look, you will see the futures are indicated up by about 73 points. That is an improvement from where we were a half hour ago. You see the s p futures indicated up by ten points the ten year in the meantime sitting at 2. . The government will be out with july retail sales in 90 minutes, economists expecting a rise of. 2 of a percent. Thats one of two reports out today at 10 00 eastern time, we will get a Retail Sector at 8 00 eastern, macys is expected to report a share. Data firm retail metrics, though, says the round of reports soumd see the biggest earning es we have seen in a year. The maker of the candy crush saga online game is seeing it get crushed. Its revenue was short of stills and it cut its full year outlook. The Company Announced a special dividend of just under 47 cents a share. That does not appear to be helping the stock in the mornings premarket trade. You can see its down by about 22 . This morning, developments on the international front. A russian convoy of trucks is on its way to ukraine. Moscow says they are bringing humanitarian aid, kiev says it wont let it cross into its territory. They are warning the mission shouldnt be used as a pretext for an invasion. In iraq, 130 u. S. Military advisers arriving in the northern part of the country today the Group Includes manners and special operations forces. The obamaed a men strax says the advisers will assess the humanitarian situation on the ground. So far isis is showing no signs of backing down, joe. China, which weve already been watching for signs of any further slow down. We saw a little bit of. That germanys economy is limping along. Italy is in recession. Are we if danger of sweeping the blue . The chief economist of j. P. Morgan and our guest host jim paulsen chief investment strategist at capital management. Bruce, i dont know for how long, if you cant be in this business and realize that you can argue either side for all these issues, so europe is slow, so that would make me worry about catching something, catching the flu. With german yields at 12 1 , these continents at low yields, it seems we will be low here a long time then i look at that bullishly. Is it good or bad there is a slow down in europe . It helps a little, doesnt it . I think there is no doubt from the point of view u. S. Growth europe weak is not a good thing. Okay. What about for the fed . Well, for the fed, growth is what they would like now. I think the fed would like to be in a position where they get enough growth and healing to start normalizing rates. Growth is what we need. I think growth in the u. S. Is looking on solid ground right now. The question is whether the global picture, which by the way was a big drag at the start of this year, whether its going to improve consistent with where our expectations and most peoples expectations are. Right now i say europe is disappointing. Some of the weakness into the middle of the year we den think is situated. It may be technical. We are worried about sentiment effects doing further damage. That said, i think whats happening in asia and mexico and broadly globally is modestly improving. A little less than we leak t. Direction is better for a better backdrop for the u. S. We have been seeing in our export performance in the last few months. How about structurally in europe . Portugal thought they were doing better, then the Bank Situation happened. Over the weekend i read everybody lives at home and spain and italy. Nobody is working. They seem to have gotten used to austerity. They have done some structural things to improve. When you see articles leak that like theyre never going to come back. Doesnt that sort of mean we are probably at the bottom of, you know, the secular decline in european economies, arent they on their way back up eventually . I think we are in the process of exiting from an existential pricing than malaise. We have structural changes. We are making slow progress in healing the banking systems, but the stance of the ecb the underlying position of Credit Conditions in europe is not enough to get you a real recovery. Something in the range of 1 to 2 growth we should expect which is better but not all that good. Europe is kind of like a theme park for u. S. Citizens. It will always be a great tourist destination. They dont need to make anything anymore, bruce. We will keep going there, spending american dollars, cant that recover from that . 40 on unemployment and spain and italy. When you go to italy. Theyre living at home. Do you care . Zblits beautiful. But, look. How about the food . No complaints. What about the rich creamy sauces in paris . If are you the four out of ten. Horrible. Its unbelievable. Did you read that article over the weekend . Was ton believable they show the pullout couchs where tlichyearold osmp. Your parents house. They are getting married and living with the parent in the house. And they have 100 year motherinlaws after what they went through. Do you live with your parents . I did for many years. Not m anymore, though. Do you tweet in the basement with your parents . Will you, what do you think . Does that enter . You dont think of europe, do you . As far as europe i dont think it will go back into recession. I think the changeover from austerity to adopting Ben Bernankes ease now has altered. That i wont disagree it will be weak growth. What i like, joe, i think its a good place right now. I do. I think because the word is out. Is there anyone that doesnt know that there is a problem over there . Yeah. I think its down and people have, its underperformed in the United States right now and i think the biggest thing right now is it allows you to diversify away from the primary risk that domestic investors face here and that is moving to a tightening cycle in the United States. You can take some of your dollars and put it in a region of the world thats not anywhere as close to a tightening cycle while the u. S. Moves there. I think thats a good place to put cap right now. Not all of it. I think eighth good place to diversify. You probably want to be there. Take a look at shares of deer in the premarket, deer is reporting its earnings. You can say the stock is under pressure down one and a third percent mostly on the outlook which is probably not all that surprising that their outlook is a little weaker than expected given what is expected to be a near bumper crop for corn this harvest, which is pushing prices into commodity space down soft light corn and some of the other grains, thus, you know, less money in the hands of farmers, you have less money to spend on equipment the kind of deer sales. They see their Fourth Quarter Equipment Sales down 8 . They see their full year Equipment Sales down 6 . So as those earnings continue to be, you know, parts through, whatever, you have the stock on pressure and down 1 or so. They say that includes a translation effect. Thats 1 . We have seen it be an issue with a lot of multinational Companies Come through, too. Okay. So, when im listening to you, you at this point as far as the s p wouldnt be surprised if we were flatter down by the end of the year. Youd say youd almost go to europe the rest of the year . Not europe. Probablyt the United States. Id do it to europe and japan and canada and australia. If there is any kind of overheat for this year, we get a hot wage number, then you will see these resource based economies do better. I think theyre already outperforming the u. S. , both canada and australia. Id pick up the emerging markets in here. Even if those economies slow down, they will sustain the growth rate in the emerging world twice the rate you can have in the developing world. You can boy that for a little over 13 times earnings vs. About 18 here. I like being away from the u. S. Dollar, everyone is saying the dollar will be good. I would now go the other way and you think its best . A few minutes ago, they were sake you will get double digit growth. The next three to five years. Double dinlt returns, right, in the s p for the next three to five years. Three to five years. I dont disagree we got more to go over the next few years. I think the market has got to digest, if were growing 3 in the United States finally. I think we are. Lets see what bruce thinks. Jim will stay. Are you at 3 for the next couple years here . I think thats about right. I dont think thats a great number. It will be modestly held back. 50 , ive rubbed that all over myself. I have 3 the next couple now that you know what im running on. What you lock leak. Exactly, 3 , thats 50 higher than what we are used to for the last five. Its a step up from where we have been. I think its a performance that we should be happy and happy as we watch it move the feds towards normalization. Are you still in minnesota . You work for wells, how did you end up as part of all those you know i dont want you to move. I dont want you to move because you, are i always call you the grsson kieler, you look, you got the midwest sensibility and you speak plainly and clearly. Thats a part of your minnesota charm i think. Why is wells in minnesota . Was it one of the precursors . Minnesota is the center of the universe, wells is everywhere. Never mind. There is some reason why. Thats along the way. And you will read us a story when we come back, will you . Slowly. Also when we come back, we will talk about the run up to results. Macys about to roll out quarterly results. We have the numbers and instant analysis at 8 00 a. M. Eastern time the master challenge of running the Postal Service. The losses keep piling up. Post master general and ceo of the United States Postal Service Patrick Donahue will be our special guest thats next right her on squawk. With the technology of cloud, we change all that. I can sing something into my device,. All right. Take a look at squawk. Right now it looks good, dow with an implied open up of 74, nasdaq and s p following suit. All right. The United States Postal Service reporting a 2 billion loss despite raising prices on all of its products. They say one of the big reasons the losses pile up is congress. The post master general is joining us right now. Patrick donahue, thank you very much for being here today. Good morning. Explain to us how this happens. I think its a little confusing for people who know prices go up at the post office. Heres the situation were in. We are from an operating revenue perspective growing the revenue. Were up about a billion dollars the last year. Our costs are down about 400 million. If you just look there, we are having a pretty good year t. Problem we face, though, we are roird to prefund retiring Health Benefits to the tune of 5. 7 billion a year. We dont have the money the make that up. Thats the bulk of the losses. Patrick i remember speaking with the head of the post office two years ago. There was the problem then. A plea to congress at that point was to allow to you fund things differently. Whats happened since that time . Unfortunately, from the legislative perspective nothing. We have worked very hard in the Postal Service to fwroe the revenue. Packages are up 50 compounded in the last four years, we have been able to stake substantial costs out of the organization. We are down the last six years about 200,000 employees. Things we have been able to control weve done. We need congress to act to resolve the retired Health Benefits. We are also pressing to move to go to a six day to fiveday mail delivery program. We are delivering packages in many cases seven days a week. Thats what the market demands, just that move on a six to five day saves us about 2 billion a year, too. Its a complicated issue. Its easy to pass the post office. We were talking yesterday or the Postal Service about how really good the service is. Then you figure you dont charge what you need to charge to do what you do really. So its kind of subsidized. Then you ask yourself, do we want to subsidize this service . Maybe we do. Maybe as taxpayers its something that works so well. In itself parts of the world you pay a lot but you dont get your job. We talked about that yesterday. We did. Then you said something about the pensions. Im trying to physical out are the pension benefits too rich . The health fund. Its the health fund. Were they negotiated by federal by government or public unions where we see the problems and all the states where when you see it this incestuous way you are negotiating with your own people to get these rich benefits. Is is that what happened . Are they too rich . I love my mailmen and the guys at the post office, do they make more than a private sector employee in terms of benefits . We had three pension fund, two retirement funds, one is 95 funded. The Health Benefits very simple. We are asking congress to take our Health Benefits and allow us to integrate medicare. Were the second largest payer of medicare in the United States. We do not get an opportunity to take those funds. If we integrate with the medicare funds, the losses that are out there right now, the under finding for all intents and purposes goes away. So we will be fully funded on two retirement funds, fully funded on Health Benefits for over a Million People. Our benefits are not that high, nothing like what you see in the state or local. Then youve gotten over the years, when you think about, you look at how many quarters the post office lost money. Some of that is operating inefficiencies. Yes. Its not all because of pension and healthcare, you are saying you have gotten some, you paid progress in making this a more efficient organization. Absolutely. What you said, though. To put it in perspective in the last six years, weve lost 30 of our volume, 2006, we delivered 213 billion pieces of mail, this year 150. Weve reduced the headcount in the organization by 43 and changed, substantial changes. The mail is down because consumers arent spending as much mail . Thats correct. Our biggest intet competitor is the internet. Thats exactly right. Do you guys have an estimate when they will bottom out or houch how much longer that goes on before ultimately it bottoms out for the u. S. Post office . There are three things going on, fir of all, bill payment the single piece, thats dropped about 60 in the last ten years. We think there is another 20 drop there. It will settle up on a 4 or 5 billion pieces a year. Bills and statements have been dropping fairly stable. People like to get that hard copy. Advertising mail, fact, has been growing. People have been linking it up with the internet. You get a card, it tells you to click here. You can go to a website. Make a purchase like that. We see a lot of strength there. Sorry. I dont know how you ever really reverse or recover from a situation where people are going paperless the way they pay bills. They are ordering from amazon and Everything Else. How do you turn that around . It doesnt seem you can do that. Well, we have been able to stabilize the advertising. Mail is the direct way to get in front of a persons eyes. There is definitely value there. The key is infrastructure. We have to give you an idea we have 26,000 post offices in the last two years. Weve reduced half of them to a parttime situation. You have to cut that infrastructure out. Same with six day to five day mail 2 billion thats worth. At the same time the demands of the market are that you got to deliver packages seven days a week. We know thats where the Growth Opportunities are, we have to cut back on the costs associated with mail. When you said you are 95 funded for one of these Retiree Health funds, how does that match up to other industries, other states . I think about new jersey and illinois that have massive pensions, why do you old that to a different standard . We have funded historically for years. We made our payments, on both of the plans we got and have been very intibl about that. And congress has been responsible in terms of the federal funds that way. So we are in much better shape than you would find most state and local governments. It seems in terms of scale, you could have over the years competed better with ups and fedex because you had scale. Packageages, you cant send stuff over the email. Thats still going to be here. Thats going to be a great business. It seems like you were big enough and had enough presence and you are spread out everywhere, you could have competed with these guys. We are competing. We are competing right now. We have grown the package business in the last four years increased 50 cumulatively. Like you and get accountability and trying to earn a profit and become like a private sector proxy. We got the best visibility. We got the best service the best price. The eagle logo and everything. If there is further layoffs down the road does that help your Health Care Problem . Weve never laid anybody off. Weve managed to reduce the headcount since 2000 without layoffs. We will continue to do that. On tap this year coming up about 7,000 additional. We will continue to shrink it down. We take advantage of people retiring, use a little overtime with temporary help. We manage it. Thank you for joining us now. Oh, boy, the mailman is like a stew ward es imstory mail carriers. Did you foe that . Mail carriers. I did not know that. What we know about the zombie apocalypse. We are predicting something worse than the 2008 crash, investing for life or investing to survive. That will set up our bull bear debate. In a world thats changing faster than ever, we believe outshining the competition tomorrow coming up, snake eyes for the gaming industry. Hard times in Atlantic City claiming another casino. Is this just an ac problem or a sign there is a gambling glut . The president of the borgata steps minutes from now. Plus confusing backtoschool behavior that has retailers running in circles. Whats the deal with consumers . Thats next when squawk box returns. Dont just visit san francisco. water dripping and pipes clanging visit tripadvisor san francisco. soothing sound of a shower with millions of reviews, tripadvisor makes any destination better. Welcome back to squawk box, cnbc first on Business World wide, the number of people applying for mortgages falling, this demight lower Mortgage Rates than a year ago. Strong sales of construction and forestry equipment offsetting farm machinery. Deere shares are declining because of cautious outlook. Card readers and merchants can take payments through smartphones and tablets. Amazon taking a direct shot at square and pay pal with that offering. Retailers reporting a mixed back for july same store sales as earnings are heating up. Joining us to tell us what is ailing retail, is retail reporter courtney reagan. Hi, retail sales havent been inspiring for some time. The governments more inclusive Sales Results are decent. Today they expect sales to grow 0. 2 . So whats the problem with retail . Wolf Research Says not so fast, to help track the consumer they have created a company and quarterly income and balance statements. The firm says whats happening is not joes fault. Q2 is up. Disposable up 14 spending may not be spent on retail. Consumers are spending on cars, home, education and financial services. Many say the main problem is retailers arent selling what Consumers Want to buy. Retail strategist says the recession pay have officially ended years ago, consumers are still concerned about the cost of living, jobs, economic stability and what the future may hold. The future as we see it is not uncertain, but it is a bit cloudy in that we dont see a huge economic change necessarily. What we do see is the consumers holding back and trying to insure they live a very safe, comfortable life. According to thompson reuters, 50 reported stronger than expected q2 revenues compared to all of the staples. Worse beating on revenue expectation, analysts consistently ranked macys as best if class. We expect them to report 86 Cents Per Share on revenues. If that retailer doesnt deliver, we are all in trouble. That is one of the best in class. I go back and forth. I think about the Shopping Patterns in my own home. We are dealing a lot more online. There are a lot of families, both people are working out of the home. People are stretched thin. Sure. Just on time. I wonder how that plays out. You think of a company like gap or staples. They say we dont care if you shop online or in store, in the end, revenue is revenue. Gap will report revenue. Thats online or in store. I think id buy amazon, you can get it there for days for free with prime. Again, 90 of shopping, online growth is growing exponentially faster, the vast majority of sales are still in store. Amazon is pulling stores for certain, the government number, that does also include nonstore. Eh, theyre okay. Theyre not great. You are making the point with pacies that macys has been doing well relative to most of its competitors. If it doesnt deliver with all of its numbers, all hope is lost. The stock is up 22 over a year, 12 yeartodate. J. C. Penney, though, has been on the comeback street. Its been doing better tan it had been. Though is jc pen figoing to be a story for the long run if are you in there to make money . It may not be tomorrow. But its maybe taking a little of the mark share back that they lost. Perhaps. Not all of it, obviously. True. At least little bits and pieces. J. C. Penneys online operation is much better now than under ron johnson who put it aside and said well worry about that later. Macys is particularly good online. Thanks. Well, from shopping to spying. Chosen accusing tech giant cisco and the u. S. Government of cyberespionage. Cisco says its done nothing wrong but its been hard to do work as tension gross. Reporter scott, when cisco reports earnings after the close today, analysts arent expecting much good fuse when it comes to the chinese park. That country accounts for about 5 of ciscos total revenue or some 2 billion. Bes there is weak. Orders in china have been in the red. Quarter after quarter. Thats disappointing because Companies Like cisco are counting on china to be a big source of future growth. Ibis world says it will reach 111 billion this year that would be a 7 increase over last year. Cisco combektives are blaming the companys disappointing results if part on disclosure of activity businessty nsa, which they say worried chinese commerce. The Chinese State media is fanning the flames of concern saying beijing should punish what it calls the pawns of the u. S. Government, specifically pointing to cisco as well as microsoft, google, yahoo and facebook. So what is the Chinese Governments real intention in analysts say its all about promoting domestic Tech Companies over foreign rivals. This is an opportunity for the Chinese Government to say, hey, you know, we had no concerns about our own products. We understand how those are made. And at the same time its a way you know for china to promote their own indigenously made products and try to drive those products forward. Reporter and its not just cisco in beijings crosshairs. Microsoft, qualcomm also facing challenges in the chinese market. Hark stewart rbc says they are counting on rapid growth in carolina, given how beijing is now acting that doesnt look like something many of them are going to be able to deliver to investors any time soon. Guys, back to you. Okay. Josh, you got it. Thank you. We appreciate it. Coming up, the gaming blood hitting another casino in Atlantic City, rebel now the fourth casino to go bust. So whats the borgata done . The ceo and president coo is here to tell us, plus the top of the hour on market, apocalypse, is it coming . Okay. Yeah. Terminator was the first. A major wall street bear says the feds actions are going to cause a massive market destruction. David dice set to square off with David Paulsen at the top of the hour. Welcome back, everybody. We have been watching the futures this morning. They have been up above point value. S p futures up by ten. Atlantic city casino announcing they will close stores after two years. Did you see that there is a fly on my forehead. You keep swinging it my way. I didnt foe what that was. Did you see it. Why is it bothering you . You cant sit there and pretend nothing what there. Warm enwhen his teeth came out. There was a fly, i have to admit it. It was two years in business. Its a beautiful building. Remember the end of psycho, im not going to do anything. Revel failed to find buyer making it the fourth casino to go out of business. It says here to walk us through the wreckage, the president of the Borgata Hotel and casino, the place is being called the only bright got in Atlantic City. I would think its nice to see competitors not doing as well as you falling by the wayside, but you dont want a city with only one casino, right . There but for the grace of god go everyone, right . Whats the right number . Its funny, im the only coo in the country that doesnt like increasing market share. But i would love to see revel continue to be opened. But its not going to be. You know, i mean, at borgata, we will continue to boy, to you know the best service, the best pro positions, the best entertainment. The best restaurants and well trained key members to satisfy the needs of our customers. Thats how you make a living in Atlantic City. You got to give people a reason to drive that extra 16 miles, that extra 75 miles and invest that extra 90 minutes. Maybe 75 worth of they have options closer. I thought revel was a part of the same vain, it was luring in high end people to come down, a new building. Lots of flash around it. What happened . What did they do wrong . Well, ity that when we opened, we knew we needed to create a product that would grow the market and that we feed to have somethingwell compelling and something inclusive, not exclusive. Thats what we were able to do and when people come to borgata, they come for an elevated experience. For whatever reason, the package that refb el put together wasnt able to accomplish that. I wonder, tom, what you feed from Atlantic City and maybe you are right. More gambling. Sports gambling. You feed something from the city, too. Im thinking of las vegas. All right. I dont like the feeling i get when im gambling. It makes me nervous im going to keep going to the atm machine or something at least in vegas, i know what experience i will get. In Atlantic City if i dont want to gamble i dont want to be in Atlantic City i dont think. I think there is a lot of misconception, there has been billions in investing. It has a great new stopping district. We have a terrific new mayor working harold to change the position of the city. It does not look like boardwalk, is eight different . Thats totally different. Its certainly different, its changed a lot really in the last ten years ago since weve opened. You have seen a lot of nongaming investment that wasnt there before and will is a lot more things to do. We did a great job of 30 years convincing people Atlantic City is the place to gamble. The part is we have to unweened the perception weve created over those years, the Atlantic City alliance a Marketing Agency that has been advertising. One of the things to do in Atlantic City, our great mayor is, you know, really working hard and look Atlantic City the supply was built to satisfy a mon monopolyistic city to make it sustainable in the new gettive environment. Bill is thinking there was no other game if town so you didnt have to be good at what you were doing . Into the you had to be good, you created so much supply. Because you were the only place for people to go. Now people have options. They have options closer to home. In order to get them to come to Atlantic City, you cant be just as good as they are and some of the assets that are closing, thats all they were. It was just as good. So people will go to the closer space. Was sports gambling the answer . Well, i dont know that it was the answer. I think it was a long shot from the very beginning. You know, it was unlikely that anything would get through congress at a federal level to help us out and you know the governor and senator lesniak worked hard to get the lawsuit going. That failed all the way to the Supreme Court and so it didnt happen. Would the revel be closing if there was legalized sports gambling in Atlantic City. I dont know that legalized sports gambling would have been enough lift. It would help us, the places healthy be healthier, drive some fawn gaming revenue, particularly on some of the soft periods, i dont know that it was a cure all at all. I dont think it was. I think if you got like the ultpat branding expert down there, do you need help from the city i think . Think what you got going for you, john, the oaks, the boorldwalk, if you can bring in big names you tow what i mean at night and stuff that people want to see. I still think its a perception if you go out at night you might not return to your hotel alive . Isnt that afternoon. Partly Atlantic Citys problem, isnt it . Well, yeah, look. The city has a rep takes as being a city. It has the same urban issues as the urban development in the country have. We are working to overcome a lot of it on the face of it. It has a perception, you see Atlantic City men in the single piece bathing suits, you think of the old days, its not a place that comes up on your radar screen. If you had a branding expert that can go in. I just think Atlantic City could have a huge rebirth if you have someone to do it and the cooperation of the city somehow with zoning and everything. I dont know what the answer is. Couldnt you . I never thought i want to go to Atlantic City . Why not . There is an ocean, a boardwalk, casinos, entertainment. Borgata. It should be possible. Thats why i dont understand. I dont know. I dont know. Taliban lies the underlying problem. You know i think you are absolutely right. There is a lot of misapprehension. We had incredible entertainment, 80,000 people on the beach watching Blake Shelton a week ago. Keith urban at the borgata. We have huge entertainment. Our entertainment schedule can stack up against any city in the country. People dont give us credit for it, though. Thats our fault we got to work that out better. You feed a branding guy. Leave your phone out. I got some ideas, you know, from branding. I dont expect anything, upgrades, a suite or any of that stuff. Tom, thank you. Come down, see us any time, joe. Appreciate it. Thank you. I got the fly. You will spill a couple water every day. He was trying to kill the fly. He killed it. Did he spill water yesterday . There was smoke. It was slick. Were trying to have a water cup challenge, for you, thats drinking. It was a middle eastern splash. Do you have a drinking problem . Like the guy on the airplane. It happened again. Well, i was going after the fly. I think we have video of that fly. Did you get the ply . I cant get remnant of it. Pulverized it. The water spilled everywhere, i dont know. We got video. After the break. Thats a good tease. Thats anticipation, norman bates. No, no, im fine. Coming up, a market crash worse tan 2008 . And its going to happen within the next two years. David teis explains why and tells us what investors need to do to survive the oncoming market apocalypse. Up next on squawk box, dont start your day without knowing the names that make you money. Joe has your list of stocks to watch right after the break. Okay. 20 years, i dont ever remember, i dont ever, it looks like its stuck on my toupee. Its almost like caught in a web. It looks like im a spider or something. Eat it. I dont ever remember. Now, the question is, what do you do . I immediately. I do what you did the right thing. I saw it. I killed the pour thing. Couldnt you have maybe caught it and released it or something . Are they going to come throw a tleng of red panty on my shoe . Im not sure. I think i would have freaked out. I dont think i would be as calm. What are you trying to do if you read. None of us went to school. Its obvious. Activision remedial work is kneeled. Okay. Got i. We see it. Activision, thanks, activision says its upcoming destiny scifi shooter game set the most preorders ever. That happened even among the violence act games. They have invested 5 million to promote shares up 31 . Did you get it . During the last. Was it literally hanging on . My hair. It was. Creepy. It was almost like a helipad. Almost like a web. Come in my web. Done they say that . I should have. Okay. In other tech news the last thing that fly did after what you did to it, though. Right . Dont come around my world. You know, this is like. Your whole body is a weapon from what i can zblel yahoo has bought almost 40 startups in Marissa Meyers two years a ceo. A business pencer says the company is killing everything it buys, take clicker, in an interview, the photo sharing sites founder says its experience has been frustrating. In part, it was so hard to get the resources we missed out on opportunities where fleckr could have been more successful because of yahoos internal screwedupness, a blog read, write, web . Right. Read, write, web. You didnt go to tv school either. I see. Go on. I dont care what school you went to. No one here went to school at all. Blog read, write, web. Read, write, web. Says yahoo has shut down 82 of the startups that it acquired since meyer took over the company. He said i got to fly through these. Okay. Ill do it quickly. Shares of candy crush maker king digital plummeting. The social and possibly game company cutting its full year forecast after same quarter revenue missed the mark as people spent less on the candy crush game. Strong sales of construction and forestry equipment offset the machinery. The shares are down about threequarters of a percent and ford was upgraded. The analyst citing better than expected sales trends so far this year. I did go to anchor school as you just saw. Did you ever do fast money or something . That was good. You have a future. Yes, i do. No thanks. Trading places . Okay. Yeah. When we come back this morning, you can thank the fed for the upcoming market crash that david dice sees. Hes our guest after the brake. Later, obama is sending military personnel to try to contain the isis threat. The latest from the front line. Squawk box will be right back. Kid hey dad, who was that man . Dad hes our broker. He helps looks after all our money. Kid do you pay him . Dad of course. Kid how much . Dad i dont know exactly. Kid what if youre not happy . Does he have to pay you back . Dad nope. Kid why not . Dad it doesnt work that way. Kid why not . Vo are you asking enough questions about the way your wealth is managed . Wealth management at Charles Schwab over 1. 2 billion eyeballs are on us during the two weeks at wimbledon. True tennis fans want to know whats happening. They dont want to just see whats happening, they want to know and understand why its happening. Anybody can just put data up, but we want to get a reaction, make it far more interactive. We rely on the cloud to provide that immersive digital capability. Give fans more then just the game with the ibm cloud. The ibm cloud is the cloud for business. Its monday. A brand new start. Your chance to rise and shine. With centurylink as your trusted technology partner, you can do just that. With our visionary cloud infrastructure, Global Broadband network and Custom Communications solutions, your business is more reliable secure agile. And with responsive, dedicated support, we help you shine every day of the week. Centurylink your link to whats next. The market apocalypse. Steven tice calling for a market melt june in the next two years. Find out why he says the fed is to blame, where you should be putting your. In the meantime. We have the numbers and the Market Reaction just ahead. Revamping Higher Education, purdue president Mitch Daniels talks about making it easier to afford for the boiler makers as the final hour of squawk box begins right now. Welcome back to squawk box here on cnbc. Andrew is off today, checking the futures at this hour, they have been up for most of the morning, wow, they got up better than 72 point or so. The nasdaq had a rougher session yesterday than the other averages. It is rebounding a little better this morning. The dow has managed to stay right between 16, five and a little below that. It never got to that 5 correction level people are looking for. Im trying to get head leans. It looks like they came in with earnings and the sales number is not far off 6. 27 billion. Stock is down 5 . This is as, we courty reagan was saying a little while ago that macys was going to be sort of potentially a make or break for retail, right . You can expect big things for macys. The stock is up 12 yeartodate. Like you say, if it is a little bit weaker, sooner or later it will catch up with even the leader of the pack. Certainly, you know the way that Terry Lundgren is viewed in the Retail Businesses is on a pretty high pedestal, right . I mean, hes a good operator, gets a lot of respect. Hes done really well at the company and for investors, shareholders. Let me tell you about the comments, again, sales came in almost inline 6. 27 billion, it does lock like that 80 cents is clean. So 80 cents versus the 86 cents the street was expecting. Terry lundgren says theyre approaching 2014 with confident optimism in the merchandising assortment and marketing plans, tempered with the reality that many are not feeling comfortable about spending more in an uncomfortable environment. How is 2 to 3 same sales store growth . Is that promotional . Hes almost in lean with sales. Its the margins which are missing. You saw the year number. So the 447. Its okay. So its okay. But it sound like he thinks the Consumer Needs to be lured back into the stores at this point. With lower traffic, people with expectations of big discounts when no matter where they go and what they buy. Im sure youre in the midwest. I mean, you probably get a pretty decent view of what the typical or average american in the midwestern part of this country is thinking when it comes to spending money. When you go in for the flannel shirts and the deputy dog hats from minnesota. You expect to get a deal on the lumberjack tee shirts . Im pretty busy. Dis. I think its been busy. Its interesting to me the retail numbers when you look at most of the data out there, scott, the economy is good. You got the retail numbers, which is like the outlier. Im not sure why that is. Overall consumer looks pretty good. Commenting a little more on the expectations for the second half of 2004. They do expect growth 2 to 3 vs. 4 that they did. It says also you were looking at some okay numbers for the second half, not able to make up for that second quarter. The hope was that you get a bounce back. Its weird that theyre saying theyre already forecasting that even the third and Fourth Quarter arent going to make up for it either. Instead of 4 same store sales, were they tougher comps . I dont know. 2 to 3 is below. I wonder how much will feed into the other stocks. As you said, this is supposed to be the savior. Theyre twoandahalf to three, so they lowered it to three. They lowered the bottom range. I dont know when jc penney reports, when it does, how these results stack up to it and any indication at all that as jc whenny tries to come back it is able to take a little play. That is a huge beneficiary. Probably more than anybody else, right . We have walmart, they have been telling us, its not great. Their consumer has definitely been hit by this. Inflation is down, rates are low. Weve had the biggest streamed six months of employment ganci. We got claims below 300,000. Why is retail looking like this . Stanley fisher writes we are stuck in something we cant right our way out. I dont know if its an outlier. Its a mystery to me. Probably never different this time. We are hearing its maybe different this time. People looking for a correction. What about if it was a start of a bear market, should you be looking for a correction or a market apocalypse . David tice says things are only going to get worse. Have you the fed to thank. Jim paulsen is with us with Wells Capital management. David, we havent heard from you in a while. You always eloquently represent the bear side. Thank you. You certainly came through in 2009, obviously, if you were listening to you that that is what finally happened and things can go up for a long time. It doesnt mean that there, they really should be there. You think thats whats happening again right now . There is another day of reckoning like 2009 on the horizon . Unfortunately, joe, it remind me eerily of what happened in 1999, 2000, i was warning people in 98 99, two early of what was to come. Certainly we saw that big decline 2000, 2002. Same ting 2005, 2006, 2007, people thought i was crazy the market went up essentially a credit bubble in the housing and cooperate finance reignited the stockmarket to go up five years so what we have seen is essentially the feds Balance Sheet going from 900 billion to increase asset prices throughout sectors, even janet yellin this july 15th was talking about pricing excesss in biotech and social media stock. Before you get involved, im sim pa thetic to this fed argument because some smart people are talking about, that there must be some, you know, some longterm effect of having these almost emergency accommodations that were seeing even in an economy not that bad. Yet, here they, are still fully involved in our lives five years after a fiveyear report. Were still at zero. You are referring to drunk tru truck drukkenmiller. If you saw the jobless claims and said we are at zero. People would say you are not a zero in Interest Rates, nowhere the fed could be that wrong about where they should be, how does it manifest itself . Is a a dislocation, rates rise too fast . How does it hit the fan . I tell you, this is such an unprecedented circumstance where we have Central Banks really around the world doing the same thing with quantitative easing. You see the chinese Credit System out of control the youre row now cutting rates. We see japan which is a bug in search of the windshield. So how it is, i think there is so much lever annual in the derivatives. There can be any teend i kind of decline, i feel there can be late ent inflation really as long as whenever the velocity of money picks up, inflation will pick up. Frankly, im thinking there will be problems in the gold market. There is issues between the physical and paper gold market where there is a lot move demand for fiscal gold than paper gold, same in this silver market. These markets, i think the price of gold is going up. That will be the canary in the coal mean. People will realize there is problems out there. We can see pickup in inflation. The economy is not that great. There is a lot of middle class people. Theyre picking up more and more part time jobs. As far as full time, high earning jobs, theyre not really there. Jim, you want to take that on . I dont think you agree with the assessment. I think with the severity of it. I do see the concern with the excess papers that are sitting out there, fontly, in our dollar Balance Sheet and the idea of money velocity turning up. The thing about this is the threeandahalf trillion dollars so far have done nothing i dont think david. I think theyre sitting outside the system on reserve. So i think if we drain those before they get out with rising velocity, they get out in the lending windows of the banking community, i dont think there will be a disaster. They have been outside the economy. If we take them out before they get many and mixed up, i dont think we will have massive inflationary fallout. I do agree i think we will have a hiccup here. Because if were growing at three, we cant have a zero short rate and twoandahalf long rate Interest Rate structure. We need a higher Interest Rate structure to deal with that. I think getting that will create a hiccup in the stockmarket. But im not looking. I really dont think the odds of a disaster are that high, although theyre not zero. This could play out in a lot of different ways. We could have underperformance in the markets for a long time. It doesnt necessarily have to be a catastrophe. With all the lever annual in the system. I think its more likely to be a massive decline. As far as taking those excess reserves back in jim, i dont see that happening. The fed is willing to cut back the growth, their q3 as far as going from 85 billion a month to 25 now. They say tail be back to zero. I dont see there is anyway they will some up all those excess reserves. I dont think there is a way in the world they can do that. And you mentioned Interest Rates are too low. Interest rates need to be higher. As you said, joe, someone came down from mars, theyd look at where the economy was, Interest Rates soon be at zero. Can the economy really take 4 or 5 Interest Rates . I dont think they can. Look at what our bucket deficit will do. Look wall street as leveraged as they are. I dont think theyre ready for higher rates. I think the leverage is not nearly as high as you suggest. I think the Balance Sheet, the household Balance Sheets, debt service burdens are record lows, household net worths, corporate Balance Sheets are strong and liquid. I dont think we have, what itself a big difference between previous cycles. I dont think we have an over leveraged private sector that gives us some room. I think there are a lot of good things that can happen, confidence are move upward. I think valuations are more midrange. We are starting a Capital Spending cycle as we speak. People are just starting to borrow money rather than borrowing it for to along. If you came down from mars, they saw us picking up our dogs book, tad think dogs were in charge, too. We were just there to. We are here to serve. We are here to serve. How to serve man. Its a good book. Thanks, david. Good to be with you. So a mustache. Up next, new developments in iraq this morning, the u. S. Military is sending more personnel to the region. We will get details and break down the latest right after this. Of the open road . Curbedish forces and isis militants continue to fight in northern iraq. Defense secretary juk hagel sending new and in his words Assessment Team members to iraq to see where the u. S. Can help iraqis. We are joined with the latest. Good morning again. Angie hey, good morning, those 130 u. S. Personnel arrived in irbil today. Apparently they will help with the humanitarian okay. Well, is. Reporter they are fleeing tear homes because of isis fighters and in the last few days several thousand. Has been eight make it down still the United Nations estimated 20 to 30,000 are stranded up there. The United States yesterday we continue to have obvious issues with that live shot out of the region. We want to bring in now for his thoughts on the best and worst case medal of hon for recipient and colonel jack jacobs. Good to see you on set. Where is this heading . Are we approaching an inevitable scenario where bother on the ground of some kind are going to have to happen . We already have them. We have had before this 130 evaluators showed up. We have special Operation Forces oak, have had for a long, long time. Dont forget we put airstrikes in the north and you really cant do that unless you have coordination on the ground with forcesonon the ground and so on. Now we have another 130. I think the president is not lying when he says we will not have what he says bother on the ground, that is the second armored 82nd air boernborn division to actually go and fight isis. I think we will have an increased presence of various types including advisors to be with peshmurga and assist them in their fighting of isis. We have no choice at this point. For a longerterm strategy lets say almaliki gets out of the way. Which maybe it looks finally leak he may do that. Can the iraqis organize themselves enough to push back on isis without us taking a more expanded role . On the short to medium term. I dont think we will be taking a more expanding role in any place, i hate to agree with anything joe biden ever says, but during the campaign in 0 or whenever it was, he was talking about how we should go in there and chop up iraq, chop it up into three component pieces and then its going to be feevenlt we go over there say, weve all taken a vote, we think you feed to be three countries, but defacto, thats sort of where its going. Whether they get their act together in backed or not, i think you see the northern part of iraq to be sure kind of drifting off and there is real danger in that. You got kurds in six different countries. If they all decide because theyre doing well against isis. They got 40 of the oil up there and so on. All the kurds coalesce into greater kurdistan, you will have real trouble up there. Our role on the world, now, whats more important, if there is genocide occurring anywhere, is the United States the still sole remaining super power, is that something is that we always into ed to go in and make sure that people arent being slaughtered, number one, which is more important, that or looking at our longterm interests, like if isis gets stronger and stronger and sets up a terroristtype state like the old afghanistan or something, we see its going to come back to how about us, is that the role in the world . My role is you are supposed to start and work backwards, physical out what the objective is, coordinate your activity. Who are we now . The president doesnt seem to have a good experience good or bad, the stomach americans have for involvement in the world. There is no, make no mistake about it. We have no strategy. If you were to say, what is the. What should we be doing . He asks the question, what should we be doing . Does the president have the National Command authority have any idea about where were actually headed strategially. The answer is absolutely not. If you get anybody from the white house and the pentagon and put them up against the wall and ask them that question on death, he will agree with you. What we do is make short of term objectives that have no relationship whatever. We discussed these this morning, real quebec. What do we do now, how do we get here . Do we leave too early . Is that the ultimate mistake that we make . Well, the original sin was going into iraq in the first place. Right. Once we respect that general said how many will it take to be successful after saddam husseini fails. He said 200 to 300, several hundreds of troops. He was absolutely right. There is an inexorable rule, it takes more resource to hang on than in the first place, most businesses fail in the first year on not enough resources, we failed on not enough resources in iraq. Are we staying in to save face. We cant back out. We are not there. So we have to keep doing this like vietnam . We are already out. Yes and no, i will go back to joes question, are we going to be the guy that goes in and saves people when theyre in big time trouble. Thats what we are doing. The rwanda experience, that is still fresh we cant let gen side happen. We dont leak the publicity when that happens. Thats even sadder its not the actual. You dont want to go help these people . You are cold, man, isolationists. Thats another minnesota if you carve up iraq, you want to make sure its going to be okay. I dont know what he did to you. I dont want to get on your bad side. Hes sending you a big check. Carl, we got to go. Thank you. Squawk goes shopping. Retail sales, we go pence, macys shares are down. Mitch daniels joins us, talks Higher Education in the upcoming season. Just take a closer look. It works how you want to work. With a Fidelity Investment professional. Or managing your investments on your own. Helping you find new ways to plan for retirement. And save on taxes where you can. So you can invest in the life that you want today. Tap into the full power of your fidelity greenline. Call or come in today for a free oneonone review. Welcome back, everybody. It seems that banks are actually on their doors to legal pots dealers. The walk post is reporting 100 banks and Credit Unions has them as account holders. Back in february, the Obama Administration gave permission for marijuana distributors who illegally conduct business. A lot of the banks were worried about dealing with Companies Whose products remain illegal under federal law. Retail sales data after the break and a fuse ice buck challenge for cnbc details ahead. Chic this out. One, two, three. Ah, they took it easy. The patriots owner and friend exactly. So cold. And the head coach leading the reigning amc champs. To raise a. L. S. Awareness, they had been challenged. Now theyre challenging rivals, including the bills, dolphins and jets. As we head to break, we look at the equities futures. It looks like it will be back up and opened. We are back after this. Welcome back to squawk. We are looking for july retail sales unchanged. The head leans, lets go through the xs, exautos up onetenth. Exautos in gas up onetenth, what they call the controlled group is up 110. I never understand why you take out gasoline, why selling gas at a gas station doesnt count anymore. I do understand energy is a problem with the recordkeeping for some reason. But this number miss is pretty much on all fronts. There are no significant revisions to last month until you get to exautos and gas, gained fourtenths. Thats june. That moved the control number actually down from. 6 to. 5. A big counterintuitive. No matter how you slice this number, i would say that we need stronger retail sales. Is there improvement . Yes. Its like the job, except for retail sales, we dont get parttime retail sales. The preopening stocks are looking good. They didnt do negative trading. The dax rebounded not only ab e above,000 which it did have an interday test of last week. Its above 9100 now. That accounts for the shifts in Interest Rates. We did trade up to 246. We want to continue to monitor 2. 45 for the close t. Mortgage applications continue to tell us that investors seem to be less inclined to play in the Housing Market and overall it just continues to be a exit of a disappointment and i dont think the problem is Interest Rates are too lie. Back to you. Thanks, rick santelli. Lets get reaction. Joining us now is the morningstar Equity Analyst paul, welcome, your Immediate Reaction to the retail number. Its interesting macys and the retail number were light. They were volatile the last year, really. I think consumers are still under pressure a little bit. Whats the issue here, this was supposed to be after a country him quarters in a row of issues with retail, a bounceback, macys, which has been outperforming its peers was expected to be good. Now all of a sudden were facing a scenario where two of these things we were pink our hopes on have failed us. The thing is i think consumers are still feeling worried. There is a lot of Global Political bad news out there. I think the job scene hazim proved. Now consumers are maybe saving for a new car or paying on a new, maybe theyre renting, they have an increase in their rent. So consumers arent going out spending lying they were. They arent sick like in 2009. Theyre still being cautious. So how do you deal with the you are a macys for example or xyz retail. You will get jc penney, kolls, nordstroms tomorrow. Are we dealing with a high environment that will be around for thener future at minimum given the head winds that you just laid out . Yeah, thats a great point. If you look through the numbers, the miss is, the gross margin was actually lower. They had said maybe a little lower flat. Yes, gna the cost control is there. They are leveraging a higher sales base. Its of course promote. Retailers are saying, hey, to get people in the door i gottesman to do promotions. Although theyre doing well on the omni channel initiatives. Its traffic by many measures, whether its retail track or other companys reports. Traffic has been down. So that continues to be an issue. Margins are on obvious issue given the scenario in which many of the retailers are trying to operate in. Retail is a competitive industry, macys is doing a fantastic jobs to levels i thought theyd never reechlt i cant extran late that forever. We think that this stock is fairly valued right now. You got to buy these companies when theyre a little beat up and not when everybody thinks that, you know, everything is going to be great. Is it completely ridiculous to think and ive suggested it a couple times this morning as a possibility that even incrementally, very small, that jc penney in only way, shape, and form as it has tried to recover itself has managed to take back any sort of market share from a macys that it lost during its steady and swift decline . Well, theres got somebody something some. Where macys and jc penney have said we cant see exactly where one or two stores have showed an effect. But those are sales out there somewhere. Target also, maybe, i dont know. Yes, the promotional environment. So penneys went off their promotional plans. Thats making the environment a little more competitive to get the customers lou the door with a promotion. The price action and stocks premarket would suggest if you are not seeing a big peelback in many of its peers, im speaking of macys, maybe the expectations are jc penney will deliver a surprise for another quarter . Yeah, i guess overall i dont think this bodes for a terrible holiday at the end of the day real wages have to increase, unemployment and job prospects are looking better, the rate is coming up, people are entering the work force more, if the economy is looking better, people will feel better this christmas. It wont be a disaster, but we still have yet to see the consumer really awaken from the recession four years ago. Hey, palm, thanks, a lot. Well talk to you soon. Thank you. Coming up next, no, its not. Its not. It is . I wont say this for my kids sake. You still have time. Have you three weeks. For some it may be backtoschool time. Its backtoschool shopping time. You cant go last minute. Its so depressing. For many back the young adults and parents, its time to pay a nice size tuition fee. We will speak to purdue mr. President Mitch Daniels about making college more affordable as we look at the break, a look at futures this morning. A brand new start. Your chance to rise and shine. Welcome back to squawk box. A major flood emergency amongst much of the country. Take a look at this video from nebraska. Horrified employees watched as a massive wall of water burst through the cafeteria. Wow. Thats pot just rain. Its rain that turns into ra flood severe flooding into the midatlantic as well. Creeks. Rivers. Raging rivers. A lot of rain in a very short period of time. Reported levels in many parts of the country. In baltimore, for example. Flash flood warnings were issued for the i95 corridor as rain overtook cars. Amazing video. Backtoschool season is here. That means students are about to shell out big money for overpriced college textbooks. A new effort between amazon and bur due makes it easy for college kids to stock up on materials before breaking the bank. Joining us is Mitch Daniels the president of purdue and the former governor of anyand sir its great to have you here. Thank you for joining us. Hi, becky. Tell us about this new initiative. College costs are high, what can you do in terms of cracking down on that when it comes to books . You have to attack on all fronts, you are absolutely right, nothing has risen faster than the cost of health care, except College Tuition. Nothing has risen faster than college techbooks. 3x inflation. The average student here, purdue and other places spending 1,200 a more on that now. Its the third highest cost at college here at purdue, we have frozen tuition last year, this coming year and at least one year beyond that. Weve cut the cost of room and board 5 . The third biggest expense is textbooks. So we are really pleased to be selected as amazons first partner in a new program. Theyre going to call it amazon student. 30 average reduction we estimate in the cost of textbooks that our students buy plus a lot more convenience. Its the same textbooks for less money or different textbooks . Its the same textbooks, ordered by a pursue professor, our analysis says 30 off new techbooks. I can tell you, im going to teach a course this fall and the one book that im asking people to buy is 25 less new, 61 less used. Wow. President daniels, we talk more about books in just a moment. I want to ask you someone sitting there as the president of purdue university. What has College Tuition outstripped inflation . People had power, people would use, there was an unlimited about it appeared to raise prices, a lot of back door discounting going on, when you can raise the price of the product and provide essentially no prove of its quality or valued, you know, people took the path of least resistance, it was very unfair to students and their families. And something that finally had to end. We at purchase do you think first of all its not right. Secondly, that that Business Model has run its course and now students and there is a lot of evidence in the last year or two are looking for value as you do in every other realm of life. So where do you cut the fat . If you are not going to see increasing tuition, if you roll back room and board and some of these prices, who suffers . What do you have to do about . There is a lot of good around. The observation apaid i saw this in business, too, there are only a few places where you can just as you can say take a cleaver and take off a big piece. The fat is marbled through the animal. Universities tend to be decentralized. A lot of duplication. A lot of services arent shared, doing a lot of things for themselves that maybe someone else can do less expensively. Its a stepbystep process. One way to do it we said, look, i said on arrival. Lets try Something Different instead of asking our students families to adjust their budgets to our spending, lets try to adjust our spending to their budgets for a while, wince we imposed that tuition freerksz people began looking for those efficiencies that were always there is to be found. I wonder if you think that this will happen at other universities as well. Saw i you think the time has come yet the number of applicants for these schools hasnt dropped. They are allowed to turn people away while they continue prices, why do you think a change is coming . There are some with brands so big and endowments so big they can cruise along a. Lot of predicting a very big shakeout. Creative drugs. It may finally visit itself on this insulated world of higher ed. My personal view is we have the finest universities in the world. Its really important that we preserve that, but some changes are in order and i do, their applications remain strong, becky, but a record percentable of this years applicants did not atens their first choice and cost was almost always the reason so i do believe the market is finally beginning to speak. Its just important that we preserve this prices will asset, make it even better and keep it available to people of all income levels. Id like to get you to weigh in on the record if you would on the obannon case. You got a couple high profile athletes among the many thousands of athletes who play intercollegiate sports at purdue university. A. J. Hammonds, center on the basketball team, probably going to sell a lot of jerseys. There is a gentleman on the Football Team widely viewed as one of the fastest player in the country. He will get a lot of publicity and sell football jerseys. Should those play es ought to be able to make money off their images and name and likenesses . I think this is a very troublesome development if it comes. I would point out there is an enormous value provided to student athletes the value of a championship and other things that go with it well up into six figures already, now we support modernizing for instance the stipend, you know, that by the way was once there for other incidental expenses, things like that that could occur. Obviously, well abody by whatever ruling the court provide, there are a lot of unintended consequences that could come to a system already suffering from wretched excess of overmoney and overemphasis on sports, here at purdue, we have genuine student athletes. That i have outperformed every their dprad point average has been higher than the student body for years. Our Athletic Department pays for itself. We dont ask other students to subsidize it. Sports is is up a terrific part of the collegiate experience but in certain sports and at certain levels, its gotten out of hand. Governor, lets hope, becky called you president daniels, you saw you, it sound good to you for a second. You used to be in politics at one point, you were thinking of running for president. What do you think is going to happen this next election cycle . You got a favorite for who the republicans should run if they were to ask you what kind of guy it should be . Well, when people bring it up i say i held out and got a better job. Im leaving that, im just another citizen on a partisan matters these days. I still got very strong views certainliant those things that affect young people like the ones on this campus the national debt, the unconscionable transfer of income and wealth from young to old. These sorts of things are things i still care about and occasionally talk about. I will leave the partisan forecast to you guys. I dont think we stopped talking about that. All the articles written over the weekend, it was all about the elderly, the older people are doing great of all the social safety nets. That leaves nothing, for the resources for the young people, its like the ghost of future whatever it is, if we dont do something it will happen here. We are back rolled into this sense we dont have any longterm entitlement problems. I dont know what happened because of the stupid sequester we dont think we have budget problems anymore. Maybe a distraction by other serious events. I understand that. You are right, this subject is not going away. It has very serious implications for higher ed, too. The research that we need to do and should sponsor federally, for example, is suffering like all the discretionary programs. Because the entitlement monster is eating the whole budget. Would you say you think the country should elect a republican . Are you not saying that . I took a vow of celibacy on the day i took the job. Are you kidding me . Wow, you are on top. You want democrats and republicans both at purdue i guess, right . We do and you know i dont think its out of bounds to express in some states particularly on the issues that people who disagree about other things will come together for the survival of our whole system. All right. Predecessor daniels, thank you for joining us. Oh, that sounds good. He gets a glimmer in his eye. Thank you. There you go. Anyway, coming up, whats on cramers radar screen this morning and whats his take on the macysness and what is happening with candy crush . Plus, if you missed it yesterday, scott, the judge,wapr took the ice bucket challenge and passed it on to Mark Zuckerberg. But he just cant get out. With the technology of cloud, we change all that. I can sing something into my device, up to the cloud it goes, back down it comes, sounding better. We break down the walls of creation and we give music creation for the masses. Unlock the creativity in anyone. With the ibm cloud. 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Okay, down to jim at the new york stock exchange, and we were talking about before hand, jim, macys has to be the one that is different than the others, or maybe Something Bigger is happening, and the retail sales number, and now down two or three points, although from an alltime high. What do you think of it . Pushed hard, a couple upgrades, obviously, mistaken. A point thats made that the analysts diss is wrong, and 5. 5 billion up for grabs from jcpenney. What they lost after the clown almost lost the franchise. They are coming back, the big pickup in amazon, so while lund jgren stressed the release, brick and mortar goes to penny, omni channel to amazon, stock shouldnt have been hiked as it did. Be careful. Those guys got it dead wrong. Thank you, jim. Paulson, jim, was saying, though, that Everything Else seems to be do you think this you dont understand this retail weakness at all. I dont. I have trouble with that. I think most of the country, i think most people now think that were growing, you know, in the 3 plus. One of the strongest rates. Is this a lagging thing based on confidence, jim . People think they will be fired or lose their house . No, i think all of iraq, russia, ukraine, its cooled things a bit. Amazon taking sales were not tracking. Auto seems to have pooled. Look, its a difficult its a difficult world because we got food prices coming down, Natural Gas Prices going down, gasolines going down, so should be a better time. I want to wait and see what jcpenney says friday. Thats the outlier. 5. 5 billion in sales, some is coming back. You know, macys was the huge beneficiary of the absolute collapse of jcpenney orchestrated by guys who did not know about retail who do not get enough criticism. We have to be careful to see whether they didnt take back business. Sometimes, jim, when theres a conundrum, you buy, and it works out. Inflations coming down, and there was a woman, janet yellen, everyone made fun of her, the ideologs, but look at chicken, pork, beef, corn, look at what was said today, it was so noisy at the moment she said that, i say, hallelujah, yellen, she did not like small biotech. Looking fabulous. See you in a while, and carl has the challenge, did you see that . Yeah. Yeah. I took the ice bucket challenge yesterday, and then passed the honors on to find out to who, and if they accepted after the break. There it is. Check out the futures as we head to break, oil higher after the disappointing retail number. Bad news, good news, who knows what. There it is. Back after this. Welcome back. Yesterday, as you may know, i took the ice bucket challenge for als. Ready . Three, two, one i hope that was all right. Momentary sing, but it was not as bad as expected. Its a social media phenomena so it only made sense for me to call out two kings of social media, facebooks Mark Zuckerberg and twitters and within five minutes of the show, mr. Costello replied with a tweet with a twist saying Carl Quintanilla has to do it at the same time. He did the documentary on twitter, knows the Company Better than anybody, so today on the halftime show carl is going to take the ice bucket challenge for als. Good. Check it out. Good because you put on a challenge to do it, and the challenge was to take off the shirt hes wearing, do it shirtless. The gauntlet is thrown down. And joe will reciprocate. No, i showed myself. Thank you, and now its time for squawk on the street. Good wednesday morning to you, welcome to squawk on the street, im Carl Quintanilla with jim cramer and david faber on the new york stock exchange. Around the world, china create growth, eurozone industrial production, japan, gdp plunges overnight and a miss from macys which well get to in a moment. 10year