Transcripts For CNBC Squawk Box 20160826

Thats largely on the back of currency moves. Shanghai is roughly flat. Hong kong is up. 5 . European equities. The ftse 100 is the only major average that is in positive territory. We did see a better than expected q2 gdp number for the Second Quarter. That was up. 6 from the last quarter. 2. 2 from the last year. Thats going into the brexit vote. Take a look where we are on crude. Brent still below 50 a barrel. Wti about 47 47. 18. We are getting job onning from opec numbers. Nothing is too certain. Couple big stories were watching this morning. Apple is issuing a security update from infecting your ipad or iphone. Devices can be affected by clicking a web link and hackers take over using the camera and microphone and tracking information on apps like facebook and gmail. Advising customers to update to the newest version as soon as possible. Inning im going to do that on the show. Mylan announcing yesterday its going to be reducing the outofpocket cost of the emergency epipen allergy injection for some of the patients after price hikes more than 400 . Senator Chuck Grassley appearing on closing bell last night saying the savings is not enough. Price hikes are cheating taxpayers. Competition will draw down the price and we want to know whether that process can be speeded up to get competition to market. Because i think one of the reasons mylan had the guts to move this price up so rapidly is because they do have a monopoly and about 40 of their client tel is medicaid. Well have more reaction. Couple data point on the docket today. Second estimate on q2. Growth forecast slightly lower. Also look out for july International Trade numbers in the final report on august Consumer Sentiment. You give me mixed signals. Youre going to download this thing. I am literally. You told me never do that when it first becomes available. Li you looked at me like i was a novice. I want to be clear. Dont ever download the software on the first day. Nobody ever does that. Distinction. Andrew it sorkin over here. If youre going from one ios a full letter or number grade you wait. If they have a immediate Security Patch where they say the world is about to end if you dont do it, do it. How does a layman know these things. How do you . Because i am a lay manman. I watch squawk box. You go right here to the settings. You hit general. It doesnt really have. You hit software update. Checksing for updates. Doing its thing. This will is not good tv because its taking too long. Let me go. Like a cooking show where all of a sudden the food is like ready, well have it ready later. That is going to be some scintillating television when it is ready right there. This isnt one that says a little one you have to find this one. Yes, yes. Let me go on, stocks to watch today. Game stop. Talk about Second Quarter results. Revenue missed forecast because the weak sales. Video citing a lack of new titles and the push by video game makers to get consumers to buy products directly on the consoles instead of in the stores. Seems like thats been happening for a while. Auto desk raising full year guidance. Company makes design jenging and entertainment software. Saw a surge in subscriptions. More customers shifting to higher priced deals. Ulta salon reporting seventh straight quarter. Beauty product retailer also raising full year outlook. Those projections are slightly short. A u. S. Judge has ordered the state department to release certain emails by september 13. Specifically the order includs s any emails from clinton and the white house of the week of the bangladesh attack. Meantime, on the campaign trail, Hillary Clinton is striking back one day after donald trump called her a bigot. Speaking at a rally in right knee neo, clinton cite sized trump for his divisive rhetoric. Now, trumps lack of knowledge or experience or solutions would be bad enough, but what hes doing here is more sinister. Trump is reinforcing harmful stereo types. And offering a dog whistle to his most hateful supporters. Its a disturbing preview of what kind of president heed be. Donald trump speaking in New Hampshire about an hour before clintons rally. He offered a prebuttal of clintons attack. Its the oldest play in the democratic play book. When democratic policies fail, they rely left with only this one tired argument. Youre racist, youre racist, youre racist. They keep say iing. Youre racist. There are now speeches scheduled today. We will be talking about the author of the book later on. Quiet markets for most of the week. That could change today when federal chair speaks at jackson hole. Joining us for more is ian micro economics and jason pride director of Investment Strategy at glen immediate. Guys talk all the time. Yellen herself, ill grant you that. Im going to go ahead and pretend that this could be really monumental because its august and its been quiet this week and weve been waiting for news other than political so im going to say, okay, this is a big deal. Am i just playing along with this or is it a big deal . I expect her to say what we expect her to say. This has been hyped up like nothing else. I cant remember a jackson hole event that had so much hype and excitement. I dont really think shes going to say anything really rev la toir. Shes going to stick to the line they need to normalize policy and data dependent. Shes not going to say September Fmc were going to raise rates or not raise rates. Shell leave the door open. Sheel be vague and well scratch our heads afterwards and think away was that about. Jays jason, i was reading an analyst that said it would be crazy for her to do that. One job support certainly sufficient to either do it or not do it. In a fed thats so good at predicting future Economic Growth and just has a good handle on everything, any given number of any given month could be enough to scuttle their action. Thats sad. Its sad and. Sure, i think theyre in a position, joe, where tlair hey a point they need to put in another rate hike. Theyre starting the wheels are in motion to try to get the market to that viewpoint. Whether it comes out today or not, i dont know. It will probably be wish wash like ian suggested, but theyre trying to nudge the consciousness to believe that there is another rate hike on the table. The reason for that is is their mandates basically met, employment is pretty full, job market is feeling tighter. Were actually starting to see wage growth. Inflation is starting to poke its head around. Its been almost a year since the last rate hike and lastly, reality is the markets could take a quarter point. This isnt that big of a number. They could probably take it. Trying to nudge the communication that way. We might see a hint of that. I dont know. If they do communicate that way, tell me how the market ends today. I dont think theyll communicate it in september. I would say another rate hike this year. My guess is december. I dont think theyll come out and communicate that. It will be a lot of economic or data dependent. That sort of stuff. Basically suggesting the economy has gotten stronger. Employment markets are a little tight. Should the market sell off on that or do you buy because you think things are better than we otherwise thought. I dont think so. I dont think the market would sell off dramatically on that. Basically expectations starting to see the market has priced in 50 50 chance of rate hike in december. Maybe move up a little bit there there. Its a quarter point. Ian, were in a tight are we in a tightening cycle because to draw a line, a point is not a cycle. Dont you need two hikes to be to draw a straight line, you need two points. Is that threat tongue people that in a tightening cycle you get more than a quarter point from zero or whatever we are. Well, we have to. Ultimately we have to do more than a quarter point a year because the inflation picture is beginning to change and unemployment is pretty full. Below 5 . Its going to take more than a couple of quarter point hikes a year apart to start putting some pressure on those on that inflation picture over the course of the next 18 months or so. Which i think they will need to do. The problem is one piece of data doesnt go their way, theyre like rabbits in the headlight. Completely frozen. Everyone is unsatisfied because people think they should be hiking faster are unhappener and people who dont think they should hike are unhappy. Theyve become four experts and every single move they make has to be viewed in how its going to affect currencies around the world and maybe the dollar gets a little stronger. Even though i always thought the feds main mandate was for stable currency, but when youve got both full employment and like this crazy inflation target, you actually might want a weaker dollar to get to your inflation target. Theyve got so many thing going on. So many things going on that cant do anything good. I actually dont think the path they put in place is all that bad. Youre a money manager. All you care about is stocks going up. Dont take the punch bowl away. Its sick to watch the way you sell yourself. Just so youre portfolios might getted marked up a little. We need this wait a second, joe. Were dealing with deleveraging. This economy is in tough shape. Eight years later we got emergency numbers because were dealing with the leveraging. We cant take a quarter point increase. Get rid of the punch bowl. Im saying we can take it. Im saying we should continue this path. Its going be a very slow one. Look at what happens with rates abroad what other Central Banks are doing. That puts pressure on the United States to some degree and lets face it, weve been dealing with 2 growth. 2 growth isnt rampant growth or rampant inflationary environment the fed has to fighten quickly. After all this easing and all this qe were still at 2 . Maybe that should tell you thats not the antidote though what ails us or the groeb. Why keep trying. The problem theres not a great antidote to access debt. You have to grow your way out of it and it takes time. Ian, they have some culpability in this, dont you think, Central Banksers around the world . Yes, they do. Theyve learned i think fairy recently the negative rate doesnt work. I think the zero rates in qe is questionable as well. It hasnt done what its supposed to do. You read the textbooks, the economy will go to the moon. That hasnt happened. The Central Bank Response has been do some more. The response should be maybe it doesnt work and maybe were scaring people every few weeks the economy stinks. Maybe if we raised rates and told people things are normalizing they might feel lisz scared and mend more money. We dont invest here at cnbc. We may have some mutual fund or comcast or ge left over. I havent done any. Im sitting here like a big mutual ju mooch not worried about anything. I see these commercials if there was ever a time where the entire globe has built up sort of too much excess from printing money, if its ever happened, this would be the mother of all busts. Im watching it going, probably not, but if it ever would, has it ever been like in in history where they built up so much excess where it could be manifest in all asset prices being overvalued . I might be sitting here holding a bag. Well look back on it and say, oh, that was really obvious. You watch the fed do that for so long. And it was obvious its coming. Here we are not selling anything. This makes he nervous. Its a very risky scenario when you have an enormous Central Bank Balance sheet not just in the u. S. , but other countries as well. We now have employment and inflation pressure. What if over the course of the next 18 months rates have to rise by 2 . Whats going to happen then to all those people who have been buying all assets. Seems more. What happens when the money isnt free anymore. Hindsight everybody knew housing was in a bubble. This is a huge thing built up. If after this is over you say that you saw this coming, im going so say no, you didnt. You never said anything about this. We had to be careful here a little bit. We look at equities. Equities are at about 18, 18. 5 times earnings. The whole financial system, yes, theres support built in by low rates and as rates go up, they should deflate a little bit, but 18, 18. 5 is not that expensive for the equity markets. Its not the sort of expensive that brings about negative returns. Unless earnings go down. Anyway. If you think earnings are going down. Just a point. Ian and jason, i dont know about you guys, but its building for me. Do you feel it . The excitement over jackson hole. I have to explain . Then its not building for you guys. I thought you were talking about the impending unraveling of the market. I cleared my calendar for the whole day. I plan to get the remote out. I dont even need the remote. Im going to sit there. I got my. Smoking jacket. Got your microwave popcorn ready to go. Got much better. Raisins. All sorts of candy ready to go. Watch this big event. Speaking of this big event, as we have been discussing, fed chair janet yellen speaking in jackson hole later this morning. On the opening day of the conference, protesters in the town turned up the pressure on the fed more than ever. Steve joins us from jackson hole with more, steve. Reporter hey, kayla, good morning. Protesters now in the third year. Reaching a new and pretty extraordinary level in year. Firm first of all, not only did the well funded group hold a rally outside the meeting. Later they met and chanted and rallied for the fed not to raise rates. Later met with 11 fed president skmts foempbs where they discussed Monetary Policy and its affect on labor and the poor. Want to be sacrifice against your enemy that isnt even here so my exact question to you is this, why not test the bonds of maximum employment. Reporter fed officials including vice chair along with several fed president s mostly expressed sympathy with protesters. They agreed to research the central question. Just when minority employment starts to make gains. What happens is eventually this economy will create imbalances or overheat and get into situations somehow that has to be we have to react to that. When we react to that, it leads to a recession or some other bad outcome. There was some push back from boston fed president. He noted that periods of too low unemployment were followed by painful recessions. The fed also committed to another demand from poerotester increasing diversity. Were going to be able to ask a bunch of fed folks about this today. We have at 7 30 coming up on squawk box. And then loretta. Then janet yellen. Shell speak at 10 00 a. M. Eastern time. We have stan fischer the vice chair at 11 30. Im wondering what the talk is at jackson hole that lays blame on the fed for this outpouring of populism and inequality in this country that weve seen. Reporter so it was out there sort of last night. I didnt get to talk to too many folks about it. They had seen it. Talked about it. They do agree they have a terrible communications probable. At least some of the folks i talked to. Mostly they think the policies they pursued have been the right ones so theres a bit of disagreement as to whether or not the policies are wrong between the story and what im hearing from fed folks, but they certainly agree theyve got a pretty bad job at communicating the reasons for their strategies. They didnt say, boy, did we screw up those policies, were autism. They said they thought the policies were good. Right joe, let me ask you, do you buy the idea, i dont know if theyre still here today. Is there a direct flight from newark. How quickly can i get there . Reporter you want to protest for higher rates. Is that what they want . How quickly can we get you a barn jacket. Reporter i wanted to ask you a question though, do you think its a bit much to blame the whole break down in the political system on the Federal Reserve or does that make sense to you. I blame it i was just reading julian asan blames it totally on the politicalization of the meadia. A i blame pit it on that as much as anything. I cant stand the media. Youre part of the media. Steve, weave sll see you in little bit. Well see a lot of your from jackson hole. Im going to be sitting on the lazy boy today watching. Pretty much. When we come back on squawk box. The ceo of mylan making head looirns on this very show. Blaming the cost of epipen on a broken health care system. Reactions from the industry, next. Your Business Needs Better Technology to drive better performance. So you need it to be reliable and fast. Really fast. Introducing the comcast business Summer Savings event. Fast Internet Speed to drive performance, plus cutting edge wifi for your employees and customers, and voice mobility so your calls find you wherever you are. Get some of our most advanced products at a great price with over 500 in savings. Call today and ask how to get these savings plus a 250 prepaid card. Comcast business. Built for business. Welcome back to squax. My frustration is theres a list price of 608. There is a system. I laid out there are four or five hands that the product touches and companies that it goes through before it ever gets to that patient at the counter. No one everybody should be frustrated. I am hoping that this is an Inflection Point for this country. Our health care is in a crisis. Its no different than the Mortgage Financial crisis back in 2007. Meg terel joins us now. What the mmylan ceo did yest was bring a fight. It usually takes place behind closed doors. This really affected the stocks of the rest of the supply chain yesterday. The pharmaceutical Care Management association t trade group for pharmacy benefits managers came out with a statement responding yesterday afternoon loop lg mylan and saying that mylan is simply the latest drug maker trying to reframe the pricing problem into a coverage problem. Blaming payers for the massive price increases is a red herring and doesnt pass the lab test. We also talked with a chief million dr. Dr. Who issued a channel to mylan. We would love to see lower drug prices. We pass the savings we take from the marketplace back to our plans. I challenge her, she can lower the price today and well make sure our patients get lower copays and our plans pay lower prices. Because of course Heather Bresch was making the argument that the system incentivizes higher prices on branded drugs. Is that true. You think ant the margin of all the other players. The graphic. The five different hand if you will that touch this. Thats effectively 50 of the price of this drug if not more. More. How do you fix that component of it. She should be reducing the price too. Your question assumes that this is accurate. The entry is now pushing back on this. We have a note out this morning who covers the distributors and the pbms and hes saying this is an oversimplification. What he say is the supply chain is not earning more than half of the mic profits here. Not even close. Theres an argument that this wasnt correct. As the price goes up and she takes margin. Are they taking margin too . Is that whats happening . We dont know know, but the assumption is yes. The pbms are pushing back on that. The argument of the drug industry is that the pbms make money by negotiating bigger discounts on drugs. This is all an absurd discussion because both types of companies should trying to maximize profits. What should be stopping is competition. So when the p bm points and says no, no, youre the one trying to maximize profits. And heather says no, no, its them. Both of them should be trying to make more money. Theres a lot more competition im just trying to understand. Otherwise your left with trying to decide whats a fair margin. Yes, theyre trying to boost margins. I was going to go to a separate question. One of the things she talked about is the fact she gives away epipens to schools for free. This was part of the questikwqu about the lobbying thats going on. I assume theyre not giving it away from free. How many of these things we think they really are giving away for free . If you are somehow this altruistic fapharmaceutical Company Giving this away free. And subs diedsing the rest of the world. How much is really given away from free. I think they put out a number giving 750,000 epipens away from free. I saw that. Ill doublecheck and make sure that was right. The argument of the payers is that that obfuscates the patient system program. The copay obfuscates the issue of the drug prices. Joe makes a valid point. Mylan isnt unique in raising the price of a drug in this way. A lot of companies do it. Its some company suddenly gets this kind of attention paid to it and theyre evil and greedy. What the drug industry is concerned about this is going to start spreading to the rest of the industry. Now, of course the middle when who we dont talk about as much. We dont look at their role as much. Theyre starting to get attention to. We need to look at the p bms. Thats one component. Do the retailers themselves. Do the other middle men have a responsibility to step and you happen give us transparency too in this. Thats a good question. The pharmacy managers are presented as the folks who save people money. They negotiate the discounts. Cr crew said on behalf of lower drug prices. They were also down. Their stocks fell yesterday too. As there is concern that a pressure on drug prices may make it more difficult for investors to value the entire supply change. Whats frustrating and ann annoying is people love a kneejerk reaction in a poster child for corporate greed. They dont need to look at any of the surrounding issues. Everybody wants more competition. You would even agree that you would want the government to be able to negotiate prices, right . Sure. Thats the other piece of it. I know thats the other part. Y heres the thing. We have a system here. We could change it and go to everything you match expenses and what you bring in so that its exactly zero. And that everybody benefits and i think theres another system for that called we can nationalize everything. Everything could be not for profit and try to do it that way. Anything you make over and above expenses, you have to give back. Thats one way of doing things. See what works. See if you have invasion. That would be the argument of the drulg industry. If you dont have that insen tiff to make money, investors wont give you money to invest. Its what we have. Yes, we have a patent system. When it is set up to generic to me. You maximize competition in a fair way. This is the story we should be focusing on why theres no more competition. We want a person like marten strek and have him and put his picture there and throw darts at it. Both instances were talking about drugs that existed for a very long time. This is not the problem is this is not the invasion story. If you gave me a drug that was came out of nowhere that saved people from cancer that was marked up to some crazy price, then you would have a big debate. This is a different story. You. I felt that. I like the epipen. Thank god for the epipen. Are you coming back . We have guys from the p bm coming to come in and say its the nasty greedy cldrug compani. Be careful what you say. Up next, a report card on the hedge fund. The best performers and recognizable names that are trailing the broader markets this year. As we head to break, heres a look at s p 500 winners and losers. Ay, soou launcyour ba. Now what . How willou keep up with the nedemands of todays digit economy . The fa i some bieve ty wont need a Traditional Bank down the roa so at cognizant, were helpg banking anfinaial Services Companies think digital, bentrational, and reine what the bank our clients n w lerage cuer intelligence be. To predict their fancialds and pride more contextualized products and services. Wee creati new platforms efrtlessly iest,rsan borrow, transasawhereverwhenever theyhoose. And were digitizingnghe way bas run, driving efficiencies and for thr cuomers in return. Digiganfinancservices. G letsalout how digi works r your biness. Theres a lot places yoyover want to se 7. 95. [ beep ] t yoll be glad to seet here. Fidelity where ter investors will always be. If only th. Fidelis acte trad pro can d smarter entrand exit points and can te pottial pro deli ere smarter vestorwilllwbe. It is time for the executive edge. Delivering alpha conference kicking off on september 13. Kate kelly joins us with a bit of a look at the biggest hedge funds and how they performed so far this year. Its been a difficult year for hedge funds. The summer stock rally not creating much upside for this krout. Take a look at major brand name funds and how theyre fairing at the moment. Square down 16 . Bridge water pure alpha down 11 . Glenview capital and passport both down 7 pkts. Maverick capital down 5 . Against that backdrop, other Asset Classes are iping the s p up 6 . The Investment Grade Corporate Bond index up 9 . Even the gsci up about 4 versus an average hedge fund thats up just shy of 3 . Investors have been grausing for a while about this now theyre really taking note of it. Pension funds from chicago to new york in albuquerque is dialing back their hedge funds. In some cases abandoning them all together. The fee model doesnt justify the performance, some of them are arguing, especially when a balanced index fund would do just all well, if not better. Thats the view of mark levine. His pension fund bailed out more than 60 hedge funds earlier this year. All the pension fund now had 3 of assets in 15 hedge funds and expects those to be fantastic. If theyre going to be in his portfolio, they have to be f fantast fantastic. And so far theyre down 7 . Can i put you on a separate topic. Front page of the wall street journal in morning. What is exactly happening here and why is bill ago man want to buy. I saw that and i dont make with you. Hes short so what other reason to buy than to cover the short. He has been consistent he thinks this is a short target. He said so. Why would he buy herbalife then . Thats why im baffled. Its a baffling story about the hedge fund community. His current stance in the last month or so is he wants to wait and see if earnings erode as a result of the ftc settlement and continue the play it out. I honestly dont know. Why do we have to go why dont we have a word for that. We need one. Whats the u. S. Equivalent. I dont know. Thats the only thing i feel. The pension fund story. No, about the hedge funds. The s p has 6 . Maes masters of the universe. Cant match the s p. I love that. The problem here is the argument in favor of hedge funds is theyre an alternative. Theyre a hedge. Its a way to guard against other market investment. Guard against profits. The problem is theyre not doing well. Theyre not doing as well in the really good times and still doing negatively in the bad times and people are frustrated. What do you think for the end of the year. I think its going to be sizable. The rate of outflees slowed a bit. Is it an outflow from the entire industry. Were meaning money will be reallocated to some of the Big Hedge Funds. Yes. I dont know if thats possible. So many of the brand names that are doing well are closed to investors. That was one point mark made to me. Think of it ask as you only want to invest in hedge fund that wouldnt have you because theyre closed because their returns are so great. Journalist envy. For me. They make so much money. This could be the second act. I already did that not for a hedge fund. I would pay you 2 . I dont get the 20. I know. You dont get 20 unless youre in the black. We should tell you shut it down and renew it. Weve got a block buster lineup of folks speaking at the alpha conference. Produced by cnbc. An institutional investor. These guys often make them money. This group. Weve seen has decedent profits. Amazing list of people. They do. Well be talking to them. And explain why hedge funds arent delivering alpha. Get your Tickets Available on the website currently. Coming up, cheating has come a long way since the advent of internet. Now with school underway, well talk about how kids are scamming their teachers. As we had to break, quick check at the european markets. They are mixed. Well be right back. This car is aveling over 200 miles hour. To win, every millisecond matter both othack and thsands milway. Thhe helof at t, red bull raci can share critical information about every inch of the car from virtuall bres a getng warm. Confirmed, daniel you need to ol your brakes. Givinghem thagility to have speed precisn. Becausno onows like at. The first stock index muplays crtedt ov 100 yea ago as a benchmark r average. T many people ill ild portfolios th straties just track the benchmarks. But inveing isn abouachieving average. Its about achieving gls. And Invesco O Liev doing that today requireshert and expertise highcontranslation . G. Welcome back to squawk box in morning. Sit back to school season, but this is an unbelievable story. Growing number of students are using tactics to cheat. Hiring hackers on whats called the dark net to change their grades, delay tests and actually alter attendance records joining us to talk about all this is karl. Hes the head of security at rad ware, a Cyber Security company that protects School Districts and colleges across the globe. I was astonished this is even happening. Its one thing there were kids looking over shoulders and, you know, getting people to help them with their homework. This is a totally. Fast times. Digital high. Different world we live in. How successful are they at it. Its incredible ses. The truth is right now cyber crime and cyber hacking pays. Thats the truth. Not a lot of people want to talk about it. Going on p online and finding hackers to do this. You can hack schools for as little at 5 on the dark net. You can hire the equivalent of a person to go do things for you. Like a consultant. Essentially to go get it done. You dont need to know almost anything about how to get this done. You just need to have either some sort of money or expertise how to get to it. I feel like were giving the kids at home some ideas here, but the schools are also trying to combat in. The truth is that there used to be the echo systems of pap larty. Theyre still there. Jocks, scientists so forth in school. Now you have efeign. The folks have have figured out how to do things or gain access to these things skpchlt they provide the conduits to get things done. Who is hiring you . You would think this is just a u. S. Based problem or just a big city problem, the fact is this is a epidemic not only in the u. S. , but across the board. Why . Its ef its everything from espionage to Great Research all the way to i want the get a ph. D. Or mda from a High Class School and do it without going there and not paying to go there all the way to essentially i dont want to take a test. I dont want to do work. Is this happening at the College Level . Are we talking about the College Level . Are was talking about lower. You would thi the most egregious work is at the Primary School level. Its been a surprise to us. It came out of nowhere. The fact is that the School Systems dont have access to these expertise in general, security expertise. How much do you charge . If i call you up and say i need your help. We like to think its a nice wage for if risk factor, the risk factor is tremendous. If we can dilute the trustworthiness of whether or not somebody has credentials. Its a pretty massive day. You think about also there are students actually acquiring income based on these attacks. So theyre able to ransom for example their school, if they get angry. When you say ransom, what does that mean. Theyll have a Digital Asset thats very important to them. They want to take tests and make the test unavailable for a price. Theyll make it back available again. Theres a great story on the dark net of a college kid that earned over six figures for a ransom of their own university. I dont understand. Theres a test that has to be taken on a tuesday morning. Think of common core its. If it needs to be taken, its scheduled at a very specific time. If i make it unavailable through a cyber attack. D dos. If i make it unavailable during that period of time, i may not be able to reschedule it, frankly, through the logistics of things. People are willing to spend a lot of money to make sure those tests are taken. The school would hopefully be able to find out who this is and hold them accountable for it. This is the forensics trail. Thats not always so easy. Most of it is attributable to other countries. Last question, are people trying to do this to their sat scores. Of course. Sat and act. This is a major. A lot of reward to those. I would think so. Have hacked that . Theres been some hackers that have suggested that they did. In fact, theres been no known infiltration, although theres been some situations like that. Thank you for coming in. Thats eye opening. Terrifying. Fascinating. Did you really graduate from m. I. T. . Yeah, Michigan Institute of truckers. I thought you told me you know how to program . I think anybody who can hack in to change their grades should get an a anyway. Very entrepreneurial. They should get the m. B. A. From harvard. Exactly. As a reward. Coming up, the Trucking Industry is gathering i just said, Michigan Institute of truckers. Gathering in dallas and one big topic of conversation, amazon. The ecommerce giant is changing the game for shippers. Morgan brennan joins us next with that story. Wait here your ck. Oh youyou got it. Yoknow, sinci got rid of myar, i real joy walking ok got it . No, im od. Anuncer etting pulled over for buzzed driving could cost youaround 10,000 oh, youre me eay. U live th yo mom . Anunc thl set your game k few year. Buzzed, bustand oke because buzzed ivg ruk driving. New biarent sellings. What . How about p moreinto promotio . At if we hire more saleseps . At if we nah. What else . At iwe e the whe supp chain . So people can customize thr bike before th buy it. Thorked better thanxpted. Illial it back. Yeah,justittle. K. Li busines powed by p. When yunive, you rumple. The price goes from 50 bucks ten years ago to 500 or 600 a year and youre making 18 million a year. I understand better than anyone that facts are inconvenient to headlines. Is mylan a Greedy Company . Youve been labeled greedy. The leaders, the senator, ive called all of them. I want to have a face to face whens the meeting . They havent set it. Ecommerce giant amazon is transforming a transportation, making it a hot topic at the annual Great American trucking show in dallas. Thats where we find, of course, cn cnbcs morgan brennan. Reporter hey, good morning, joe. Its been a rough ride for trucking. Weve seen tonnage falling in the first half of the year, amid an oversupply glut, and also slow Economic Growth. But there has been one bright spot. Thats ecommerce. And amazon, of course, dominates that space with a billion packages shipped last year, and more expected to move this year. And of course, move as quickly to your doorstep as possible. For the companies that can cater to that, thats been a boon. Take covenant transportation group. Covenant specializes in exdiz this freight. I asked him if he was worried about the tech giant building out its own transportation network, leasing trucks, buying drones, and buying truck trailers. He said its actually a relief. No one carrier can handle all of amazons freight. They need every one of our trucks and more so. And thats what youve seen them in the last few you know, the last year or so getting into airplanes and actually getting into some of the trucks and some of their trailers and those kind of things. But we welcome it. We welcome it. We need them. So, basically, covenant, like weve seen with other transportation companies, is growing as fast as they can to meet amazons demands, and there are still more to be had. Just to put these numbers in perspective for you, with covenant transportation, ecommerce is a third of their total sales now. And david says thats growing 50 per year. Back over to you. Okay. Thank you, morgan. Coming up, when we return, fed heads gathering in jackson hole. Markets are waiting for janet yellins speech. Well talk to st. Louis fed president James Bullard first on cnbc. That is 30 minutes away. Squawk returns in just a moment. Eres a lot ofces you ver wa to se 7. 95. [ ep ] but youll bgl to see it here fidety where smter investwill always. Ifnly signwere as obvioushen you e. Fidelis active trad pron hed fidety where arr inveors willlway. Your Business Needs Better Technology to drive better performance. So you need it to be reliable and fast. Really fast. Introducing the comcast business Summer Savings event. Fast Internet Speed to drive performance, plus cutting edge wifi for your employees and customers, and voice mobility so your calls find you wherever you are. Get some of our most advanced products at a great price with over 500 in savings. Call today and ask how to get these savings plus a 250 prepaid card. Comcast business. Built for business. Wall street eyeing jackson hole. The futures treading water ahead of janet yellins big speech. In this hour, st. Louis fed president , jim bullard in a firstoncnbc interview. Well see if hes sticking to his oneanddone rate forecast for the year. Mylan under fire for the 600 price tag of its epipen. Cnn Heather Bresch saying the middle men are the problem. Well hear from the ceo of the Pharmaceutical Company about her comments and whether or not Pharma Companies are driving up the prices. And apple releasing an unexpected update to fix a hack attack that would allow hackers to use your camera and even your microphone. The details and the fix straight ahead, as the second hour of squawk box begins right thousand. Announcer live from the beating heart of business, new york city. This is squawk box. Welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernan along with Andrew Ross Sorkin and Kayla Tausche. The futures have been a little bit higher this morning. Its been listless all week, and actually its up just 15 points right now. The nasdaq hauled the up 385 and the s p, 263. That apple hacking is an old story, because andrew and i both have protection now. Weve updated. Weve both brought protection today. If you were planning on hacking us you cant do it. Find somebody else. Youre going to try and its going to say, no can do. Because their and it took me no time. No time. Got on wifi did it. It was ios 9. 5. And dont do the big, whole number upgrades until but on this one, we did it immediately, right . So youre really high five. 9. 35. You really believe that . I learned the hard way about you and your high fives. Lets get you caught up on some of the headlines making news this hour. Janet yellin could command the bulk of the markets attention today, but a couple other items of note on the agenda leading up to that main event. Were going to get Second Quarter estimates of gdp at 8 30 p. M. Eastern time. And look out for july International Numbers and the final reports on august Consumer Sentiment coming up this morning. Also a big headline, tesla has u. S. Trust approval to buy solar city. The u. S. Trade the Commission Says it was quickly approved, because the companies have few if no overlaps. Tesla says in july after it made its first offer, the two companies would form a one stop shop for clean energy, offering consumers solar powers, home battery storage, and electric cars under a single brand. Im trying to think, ron barron, by the way, thinks its okay. With a sunroof . Thats great with 40 oil. I have a one stop shop for paying four or five times what you need to pay for energy. A great idea. And a couple more headlines for you real quick. An update on the problems att r theranos. The centers of medicine and Medicaid Services revoked a key certificate for the companys newark, california, lab and terminated the facilitys approval to receive medicare and medicaid payments for all services. And senators are turning up the heat on mylan. Drug Company Announcing yesterday they would reduce the outofpocket cost for its epipen after price hikes of more than 400 of over the years. Senator Chuck Grassley appeared on closing bell last night and said the savings card that mylan is offering is not enough and he wants to tie it somehow into ethanol, would be a good way to do it. Price hikes are cheating taxpayers, he says. Competition will draw down the price and we want to know whether that process can be speeded up to get competition to market. Because i think one of the reasons mylan had the guts to move this price up so rapidly is because they do have a monopoly. And about 40 of their clientele is medicaid, so they can cheat the taxpayers, as much as theyre cheating individual families. And mark merritt is the president and ceo of the pharmaceutical Management Care Association and hes going to join us in just a few minutes to discuss all this. And i have no idea whether thats actually him, but maybe it is, maybe its not. I dont think anyone in the world would know do you think . Except people that know him. Well find out. But thats the picture that we have. If that guy shows up, i assume that that will be right, andrew . A nice smile, doesnt he . Very attractive. Handsome man. Lets take a look at the markets, too. Were joined by our guest host for the hour, jason trenert, a chief Investment Strategy that is him. We know that for a fact. He is here in the flesh. And john riding, chief economist and Founding Partner at rdq economics. Mr. Riding, the speech from janet yellin today is called the Federal Reserves Monetary Policy tool kit. Is there anything we dont know already about this tool kit . No. There isnt. There is no secret so we can all go home . Weapon. We know that if they had to cut rates, theyve got oneandahalf rate cuts in the bag. The fed is not going to go to negative rates, not consider that at any time. We know they can hike rates, increase the Balance Sheet and buy treasuries and mortgages. They cant pull a bank of japan, they cant buy equities. Theres nothing in the tool kit that we dont know about and they havent used. So what were waiting for is some acknowledgement that maybe they need to use fewer of the tools that theyve been using and start the process or restart the process of renormalizing interstate rates. And as joseph was talking about earlier, the jobs number, micromanaging the economy, she doesnt know what that jobs number is going to be next friday and shes going to be very reluctant to give guidance that shes willing to go in september. But i think the feeling is growing within the fed, they have to get at least one rate hike in this year. Jason, your thoughts . I couldnt agree more. I think the greatest thing about thats not fun. Can you disagree . No, listen, i think the greatest thing about what japan has done in terms of going to negative Interest Rates, its shown how absurdly ineffective were getting in terms of monetary policies have gone from being ineffectual in my opinion to actually being harmful. And i think, i also agree with john, were not guy to buy equities. The big transition, i think, for investors over the next couple of years, and youre already starting to feel this. In japan, theyre doing it through this thing called helicopter money, theres going to be a transition from Monetary Policy to physical policy, in my opinion, over the next couple of years, because youve reached the limits of what you can expect. But there seems to be so much handwringing over what the fed can do and what it should do. And yesterday, greg ip writes that the fed needs to become relevant. And kevin wosht is writing that their models are irrelevant. Were coming off a decade where the fed has been a lifeline for the economy, where janet yellin has been one of the 100 most important people. The fed has had celebrity status. Cant we let it recede into the background . The fed hasnt been one of the forces driving the economy into that financial crisis in 2007, by keeping Interest Rates too low, too long, in 2004 to 2006. And so, theyve been kept even lower for even longer. Because, unfortunately, managing policies are the only game in time. But the problems the economy faces, low productivity growth being one of the main problems, are not treatable by monetary policies. So it would be nice for the fed to step back and leave the problems for others, but this fed doesnt have the dna to step back. And say, if were the only game and there are still problems, well keep on doing something. And unfortunately, jasons right. The feds probably at a point where its doing harm. Because low Interest Rates dont necessarily help borrowers, at this point, as people have serially refinanced their mortgages, but they do hurt savers and were now actually raising a generation of people who dont see the point in saving, because theres no return to saving. Jason, can i ask you a stock market question . Ive been asking this all week. How do you play this . Assume less about what they should do and more about how you play what you think theyre doing. I think, how you play it is frankly, you just assume that the status quo is going to remain. That the fed is going to remain extraordinarily accommodative, which will drive up asset prices. So this is an academic exercise. I also think, you know, largely, central bankers are gripped by this arrogance that they can theyre almost al chemists, that they can move beaker a into beaker b and it creates some sort of magical sorkin, your questions imply these shortterm yes, because i think there are people who wait there arent there are people who wake up in the morning and theyre trying to figure out what to do. There arent many people. And this whole week has been sort of this slow grind down. I dont think so. And they want to know but, very important issue, its being held up by fed accommodation. Because going back to the issue of productivity, the drivers of the profits are drying up. And so the market stays up now, either because people are willing to take more risk, or because the stock market looks like a betteryielding bond than the bond market. And you know, the question is, how do you get Profit Growth back. A time horizon of friday at 4 00 p. M. Theres a lot of people very few people. It happens every day. The viewers, thats what theyre doing. Theyre easily holding for i hope theyre holding. But we have a number of people who arent always holding. Theres a few. Were going to get some talk to a few more fed officials throughout the morning, Steve Liesman will. For now, john ryding, appreciate it. Jason, youre staying with us. Its been a big week, because we had National Waffle day. Most of these national days, i dont i dont think theyre just looking for them. But one that we do need to talk about, because, you just cant say i cant say enough about the dog, as a thing. Because, i finally figured out why all dogs go to heaven, why thats true, because dogs could never do anything intentionally this is pink floyd, dogs, they could never do it you dont have one . I dont. You dont have one . I dont. Cats. I have a son thats allergic. I would have one, otherwise. All right, the holiday celebrates all dog breeds, both pure and mixed, and encourages the awareness of the number of dogs that need to be rescued each year we know that guy. Yeah, you know that guy . Thats zarah, my female shepherd. Thats pongo, who runs the roost. Pon pongo, from dalmatians. Hopefully we have one of zarahs little brother. She has a little brother named gunther. Theres pongo. Hes so sweet. He doesnt look like a dalmatian. He doesnt. But he is black and white. Weve got to get gunter in later. Theres gunter, hes the new hes only 6 months and thats how his big sister feels half sister. Are they watch this morning . They are watching . Thats why we had to do this. But i will, honestly, i was thinking that there was a German Shepherd that the latest thing is to drive these poor dogs behind cars. Thats what some people do, these horrible, horrible people. And you see this German Shepherd afterwards, its barely you know, theyre nursing it back to help. The minute it gets adopted by a family, suddenly its happy, its just these animals, they do need you need to go in, hopefully, if youre looking for an animal, go in and adopt a dog. People who say, who dont have a kid, theyre not quite a kid, but better than anybody thats not in the family, as far as better than all strangers. I need to find a rescue dog thats a doodle of some sort. We have a hypoallergenic situation. Is there a doodle version of a German Shepherd a hypoallergenic. I dont think you want to mess you have the perfect breed. Theres no reason to put another breed in with it. I dont think. Weve got to run. When we come back, mylan ceo, Heather Bresch, blaming in part the middle man for the rising price of its epipen here on squawk box. After the break, the ceo of pharmaceutical Care Management will join us to talk about the growing problem of drug pricing and a possible solution. And st. Louis fed James Bullard will join us from jackson hole ahead of todays big speech from janet yellin. Squawk box returns in just a moment. s me, a from theative gax mea box. Woulyohe me make art . H one our jourys kee us young y, i have an id well never geter. Ar go be ami amazing nouncer give your cardboanother life ar go be ami milan ceo on squawk box yesterday saying its the middle man, in part, that are responsible for the high drug prices. My frustration is theres a list price of 608. There is a system, there are i laid out that there are four or five hands that the project touches and companies that it goes through before it ever gets to that patient at the counter. No one everybody should be frustrated. I am hoping that this is an Inflection Point for this country. Our health care is in a crisis. Its no different than the Mortgage Financial crisis back in 2007. Express scripts chief medical officer firing back on closing bell, saying in his words, its just not the case. That cant be further from the truth. We would love to see lower drug prices. We pass the savings that we take from the marketplace back to our plans. So i challenge her, she can lower the price today and well make sure our patients get lower prices. And joining us with more on this is mark merritt, the president and ceo of we had a picture of you, mark, and you are the guy. The pharmaceutical Care Management. Pharmaceutical Care Management association. Yeah. Just rolls off the tongue. They represent americas pharmacy benefit managerers. Our meg terrell is here. Meg probably knows more about the specifics. Ill let you make your case. Mark, the only point ill make is, when, you know, youve got two opposing private sector corporations that are both in the business of trying to maximize profits for shareholders. I dont think you need to be fingerpointing and saying, youre trying to maximize profits more than we are, or you are more than thats what private corporations do, and competition and innovation is what holds back things from going up. But the thing we can all be utilities, if you want, and we can pay out every dime that we make and just cover expenses, but thats not what private corporations do. So before both sides start pointing fingers at, oh, youre just greedy profit mongers, that is the system. Thats what we do. We just need competition to clean it up, right . I totally agree. And thats why i was surprised that mylan blamed pharmacy management producers, and for all these convoluted things about why they raise the price of their drug. Just raise the price of the drug if you want to, but dont blame others for it. Its a simple thing Drug Companies do t a the end of a cycle when theyre going to face competition, often they raise the price of the product, its nothing new. But just own it and dont blame others that have nothing to do with it. And what pharmacy benefit managers do, we were created 25 years ago to help make benefits more affordable and accessible to the people that they serve. Hundreds of millions of people. We bring down the cost of drugs. We negotiate with the Drug Companies, and in a sense, if you want to call us a middle man, we are between the employers unions and Government Programs and the Drug Companies to keep those costs as low as possible. And a good example, the most noted example that people might understand, pbms administrator, the seniors Prescription Drug program, which is the most popular program, Health Program in the country, has come in under budget every single year, exactly for the reason you mentioned, joe. Theres competition, we force Competition Among competing drug makers. Theres Competition Among competing pbms. Ultimately, seniors get to choose the plans that they want. And theyre not going to choose one thats overpriced. Thats something that pharmacy benefit managers do. So we werent saying yesterday, were mad because the price rose, we dont like that, but we can deal with it. But were concerned when a drug Company Raises the price of their product and doesnt take responsibility for it and tries to blame others, specifically us. Mark, its meg terrell. Can you explain a little bit about how pharmacy benefit managers make their money . Sure. What pharmacy benefit managers do is we negotiate with all of our with Drug Companies on behalf of all of our clients, the unions Government Programs, employers and so forth. And we get Drug Companies when they have drugs in the same class, the same category, to compete against each other. And the one that offers the best price concessions usually gets the best place in the formula. Or there might be a 10 copay instead of a 50 copay. Employers, unions, and others are willing to pay us for that. These are fortune 500 companies, typically. So these are tough competitors, tough health purchasers. Theyre willing to pay us fees to get that. There are all different kind of ways that they do that. There is no pbm contract thats a universal, onesizefitsall thing. Its the clients that determine a kind of contract they want. A union may want one contract, medicare may want another, an employer may want another, and an insurer may want another. I guess the question is, do they pay you a set fee or a fee based on the size of the discount. The argument of the drug industry is that you can get a bigger discount by raising the list price of a drug, therefore you would get paid a higher amount of that as a percentage. Thats a total fallacy. Thats not true at all. We want lower prices. Our clients want lower prices. Our clients are very smart. Insurers are very smart. Fortune 500 companies are very smart. None of them have to hire a pbm, by the way. They all choose to, to save money. And they would never let that kind of deal come through. Thats why they encourage us to promote generics and other lower cost drugs wherever possible. What kind of margin do you get on the epipen . I wouldnt know that. Thats a companybycompany thing. But i wouldnt imagine very much but as the price of that particular product or any product goes up, does the margin increase . No, were not buying the drug. All we do is reimburse the drugstores for how much they pay for it. So were working with the employers and the drugstores and the Drug Companies. But we dont buy the drug and then resell it. Are the drugstores taking a bigger margin as the price goes up . Drugstores have a good margin. Of course, the Drug Companies have a good margin. And again, you have to look at this not as some complicated thing. Every business is complicated. Amazon is complicated. Detroit is complicated with general motors. Facebooks complicated. There are always lots of different players involved. So its a heresy not a heresy, its a foolish thing to say that because theres a lot of different people involved in the process, thats who driving the price up. The person who sets the price is driving the price up. Fine. But take responsibility for that and dont blame others for that. Mark, we appreciate it. Well be talking more. Dont you know, keep your phone line open. We may need you again to talk about this, because its not over. But we appreciate it. Thanks. You got it, thanks. All right. Happy friday. Thanks, meg. Thank you. Coming up, gamestop hitting yet another glitch as more and more gamers turn to digital downlo downloads. Details after the break. And a first on msnbc interview with st. Louis fed president James Bullard. Squawk box will be right back. Gamestops Second Quarter revenue missed forecasts on weak sales of video games. The retailer citing a lack of new titles and the push by gamemakers to buy products directly from their consoles instead of in stores. That stock down 7 in premarket trading, down 34 in the last year. A little other video game news this morning. Activision blizzards destiny has grown a huge Online Community and now the game and its players have done something no other Online Gaming community have has done. Organizers of the destiny conference happening in tampa this weekend ran a 24hour, 7day Charity Stream on twitch, raising 500,000 for st. Judes childrens research hospital. The results are the single largest donation st. Judes has ever gotten from gaming based charity event. The funds will be presented to st. Judes this weekend at that conference. When squawk box returns, weve got a lot more. St. Louis fed James Bullard will join us live from jackson hole this morning. Well find out if hes sticking with his view that a single move in september is all thats needed for a long time to come. As we head to a break, take a look at u. S. Equity futures, ahead of miss yellins mustwatch speech. Looks like dow would open up a little bit higher want 18 points higher. Were back in a moment. [annncer it forcnature . Or aales event . [annncer it forcnature . The summ of audi sales event he. Ge t 5,000onus onselect audi de. Mthe lubrants thatat make . Improvedueec ev thnogy make engines more eicient. Wehelping yo mon e e inon te th toand reduce emiio you thought we jue thgas. Energy lives h welcome back to squawk box on this friday morning. Jason trennert from strategist is still here with us. Were awaiting some fed commentary from Steve Liesman before we get to janet yellin. The vix, i dont want to say is up sharply i mean, its up about 10 this week, to, you know, 13 or so. 13 and change, right. One of the things we put out yesterday, ill just mention is we are getting a little bit worried on a tactical basis on the on bonds and bond proxies. There is a series of theres been a spate that hasnt been universal of stronger than expected economic news. Weve had industrial production, new home sales. One of the things that people arent paying attention to that i think is important is that money growth is actually up about 8 over the past three months. So were saying, theres been a lot of people crowding into these trades. And yesterday we put out a note to our clients, Institutional Investors that you might want to be careful as you go into this fall. Because there could be a strong patch and discussion of higher Interest Rates, higher longterm Interest Rates. Theres this idea that you cant really trust the Corporate Bond market anymore, because of all of the qe thats out there, now the ecb, the bank of england trying to buy Corporate Bonds, but the cds market actually reflects that maybe its not so healthy, despite the fact that yields are only going lower. Well, thats i think theres been a lot of issuance. The companies have been doing exactly what theyre incentivized to do. The cost of capital between equities and bonds is so great that companies are doing precisely what theyre incent e incentivized to do. If you look at a chart of corporate share issuance and bond buybacks, its almost the same chart. It almost looks like a magic trick. The same scale, the same pitch, the whole thing. And i think thats fair. I think the Corporate Bond market isnt quite as robust as it might have been. Perhaps thats what Central Banks had in mind all along. Perhaps. Today is the super bowl for central bank. And fed chair janet yellin expected to give her speech at the fed summit in jackson hole, but before that, Steve Liesman joins us from the mountains of wyoming with a very special guest with him. Steve . Reporter hey, good morning, andrew. Im here with st. Louis fed president jim bullard, as the lead up we have here to the janet yellin speech in a couple of hours. Thanks for joining with us, jim. Sure. Happy to be here. Chilly. Yeah, it is. You have this big idea, that the fed should do it im calling it ronco, set it and forget it, on Interest Rates, for two years. But one of the things thats part of your plan is a single Interest Rate rise to 0. 63 . And i want to get the sort of shortterm out of the way here before we get to the longterm. When would you do that single Interest Rate rise . Something you would do in september . Our firm does call for a rate rise, but im agnostic on exactly when we do that. I do like to move on good news about the economy, so if we got a meeting and we felt like things were looking stronger, that might be a good time to do that. Have we had enough good news in the economy of late . We had a couple of good jobs reports here, but year over year, gdp growth rate is very low, below trend, really, and the thing about that is, you cant blame that on seasonal adjustment. If you do it year over year. Right. So, were looking at your forecast here, and it calls for 2 growth. Thats over the forecast rise which is 2 1 2 years. Yeah. But can we do 2 this year . Because if we do, you have to do 3 in the back end. Some of the tracking forecasts are up a little bit, up around 3. If you have a 3 second half, maybe you can get to 2 growth for the year. But that kind of says something. One more shortterm question. Is that rate hike something you could do this year . We could. But like i say, were kind of agnostic about it. The important point about it is not that theres a rate hike, the important point in our framework is theres a rate hike, but not on the cusp of this 200 basis points story. Which is the story. Which is the story. We dont have anywhere near that kind of certainty about where the longrange outcome is for the u. S. So whats happening is, people are putting in their tailor rules and then theyre saying, well, gaps are about zero, rates have to go back to normal levels, which is some sort of average of the past. This regime idea says, well, were not exactly sure where the economys heading. So what were going to do is make the right policy for todays regime, which is very low real Interest Rates on government paper, and very low productivity. A slow growth, low inflation economy. And well make policy right for that. So youre at odds with everybody on the fed right now. Not everybody, but theyre going to come around. Well, inside the meeting. Nobody would talk to you. Nobody sat you last night at the dinner. Im joking. But, no, you have this 0. 63, and everybody else goes off like this into higher rates in the future. But the trend is those rates are going down, have been adjusted, the longrange levels go down. Thats kind of an imperfect adjustment. I think i have a better framework for how to think about it. Just think about the next two years. What are the parameter that are governing the next two years. And make policy right for that. And dont say too much about the long run. What if youre wrong about this . The concern is twofold. We hear from other beneficials. One is that you have these bubbles in asset values and prices. Thats one. Totally fair. Theres nothing about asset bubbles. So that has to be handled judgmentally. Thats outside the forecast for us. Outside the forecast, but it could be your rate thats fostering it. People said the whole financial crisis was caused by rates being too low for too long. The model i described doesnt have anything about asset price bubbles. So youve got to most models dont have actually anything about i get that. But the typical forecaster doesnt have anything about that zp. But thats one of the reasons why we hear people likesther george say rates should go up. Thats fair. Youre ignoring that . Im not ignoring it. Im writing a forecast and ill have to make a judgment. What is your judgment on that . I think were fairly valued or in the high side of fairly valued and i could see the process getting away from us. Maybe tech stocks, maybe others. I dont know. What what about bonds . Being overvalued . The idea that theres a huge bubble in bond prices. Right. So our framework does have that, because we think the real Interest Rate on government paper is extremely low. And why is it so low . Were kind of agnostic about it. We say its because theres a big liquidity premium globally, and that is pushing the oneyear expost real rate of return on u. S. Treasury, minus 135 basis points over the last three years. It really hasnt moved over the last three years. So what were saying, for forecasting purposes, do you think thats going to turn around anytime soon . No. When i talk to people in markets, no. So you should just take that as a parameter. And then you should go ahead and make the right call. Is there damage being done by the fed in terms of forecasting these higher rates, these 200 basis points of tightening in its forecast . Yeah, i think thats hurting our credibility. Were two years, about a year and a half, by the end of this year, well be two years into the process since qe ended. Maybe have moved twice we that point. You keep getting it wrong. So i think thats affecting global pricing. Youve got this policy divergence story, which has been in fx markets for a long time here. And so, yeah, i think it affects the pricing. We want to line that up better with what is more realistic assessment of whats going to happen. And speaking of realistic statements, we had up early, our fed funds survey our survey forecast for the fed funds rate. The fed keeps coming down to where the market is. The market is giving a more realistic view of where rates are headed than the fed has gone. But the market agrees with me. The market does agree with you in a much stronger way. One other risk thats out there thats talked about by a lot of folks is the risk of inflation. Why wouldnt this low rate forever, or not forever, for the next, over the forecast horizon of 2 1 2 years, foment inflation in the system . So, one of the things that we put in this is that there is upside risk, i think, to our forecast. So there is some possibility we dont really believe in the phillips curve. The empirical evidence is pretty weak. Weve got a pretty strong labor market over the next two years. But were saying thats not going to generate much inflation. It could be that the phillips curve reasserts itself and comes in with a lot of firepower and that drives inflation higher. If that happens, well have to react. Speaking of labor markets and then sort of also the political system. The washington journal had a story yesterday, saying its been fed policy over the last several years thats helped forest some of the political divisions in this country and some of the Political Landscape we have right now. How do you respond to that . Tv fed has been in the middle of the response to the big crisis, but i think were at the end of the era for that. Employment is down below 5 . Inflations a bit low but its not that far from our target. So i think Monetary Policy on the whole has ended up doing pretty well. And were going to need a medium term growth agenda for the u. S. Economy, which focuses on productivity, focuses on gdp growth, and there are many things that need to be done, better investment, for instance, but many ore things that need to be done, to get gdp growth higher in the medium term. But those are on the fiscal side . Theres got to be a fiveyear kind of idea. It cant be stimulus. Ive sometimes talking about banning the word stimulus, because it gets everybody thinking about whats going to happen in the next quarter, whats going to happen in the next six months. Youve got to take a longer term perspective and think about, what kinds of policies can we adopt as a nation that will get the growth rate up . Speaking of policies, there have been some protesters here and theyve been actually urging the fed not to raise Interest Rates. And one of the charges is that fed policy has helped support inequality in this country. Is that fair enough . Yeah. I found out recently, this was funded by Dustin Muskovitz, from facebook. Its facebook money. So, i dont know. I think its kind of a funny thing for them to fund, because they want low Interest Rates in an era where were awash in low Interest Rates. Its kind of crazy, isnt it . That theyre out there saying, keep rates low when rates are already low . Rates are low. Its kind of a different era. To give you their point of view, they dont want this next thing thats being talking about, this next one quarter point Interest Rate hike. Yeah, youve got if it were just zero Interest Rates forever, how about support some legislation that just says zero Interest Rates forever. So youre saying they should bring their issues to congress . Well, first of all, i think Dustin Muskovitz should be here. Maybe you can helicopter in from sun valley or something. Why is he sending all these people . If he wants low Interest Rates, why doesnt he just come and argue about it. Joe kernan wants to come and protest for higher rates. Now, they do have a good point on diversity inclusion, which is very important and the fed is not good at this and weve got to get for the. Thats good. So i think, on that, you do have the german labor market reforms, which, you know, they cut youth unemployment in half and brought their unemployment down from 10 to below 5 . So, theyve been really successful. So i think you should talk to the labor secretary about some of the things you can do, to do that. I think monetary policies are doing all it can on that zp. Thanks for joining us. Coming up, we have loretta after the gdp numbers. And at 11 30, well talk to vice chair, stan fisher. Hes been told that maybe muskovitz can borrow bernankes helicopter. Thats a great point. Did you hear that, jim . What . Joe says maybe muskovitz can borrow bernankes helicopter. I dont think ben has a helicopter. He doesnt anymore. He left it that was property of the fed. He left it for yellin whos been using the helicopter maybe the helicopter we used to drop the cash out, maybe he can use that one. You guys. It is funny, the political divisions, though. Isnt it weird that the krugmans, the left, they all want zero Interest Rates, and then theres me and other people that that seems to be how are Interest Rates somehow a political, you know, litmus test . Because they are. So many things are a litmus test. I dont know who to blame all this division on. I dont know. I really dont, the media. The divider in chief that we have in i dont know. Anyway. Still to come, tennis goes hightech. The u. S. Open will be featuring smart courts for players. A closer look at the technology is straight ahead. Check out the futures at this hour. speaking japanese oh watson, youjase isery good. Thk you. speing japane exactl i can dersnd nua ntext d idiom sen lanagesapane Top Companies all over the world with erying from retail solutions, tbankg, Top Companies Cyber Security. Ld saking japanese tennis is going hightech. As you walk the grounds of the Billie Jean King National Tennis center at this years u. S. Open starts monday, you may notice two smart courts. These courts are rigged with multiple cameras to capture and help analyze a players oncourt game. This is courtesy of the tech company, play site. And for more on this technology, lets bring in paul anacon, a former pro player and later coached pete sampras. And also, Roger Federer is now the cohead of coaching and Player Development for playsight. Yobar yosef is playsights cofounder. Thanks for being with us. Thanks for having us. I watch their games. I need the someone to analyze. I dont need it analyze d than t is, but theyre so good. They hit it so hard. I see shots i know im not going to get. So why should i even try . And this is my wife thats hitting them. How do they move across the court like that and what can i leper from the smart court . I think the big difference that were bringing in is that whereby tracking what the players are doing, we can help you figure out not only what youre doing, but what kind of mistakes youre making and what needs to be done to fix them. So were helping players of all different groups and ages, recreational, as well as professionals, to analyze their game on the court and after the court. And just become a better player faster and on the way, have some fun and excitement. Does it help to be on the balls of your feet, paul, instead of i just sort of sit on my haunches, on my heels. That might be the problem. I see people moving around quickly. You immediate to anticipate where the shots going. Absolutely. Got to be on the balls of your feet to keep moving and be ready to react and get a good position. A lot of work. One of the things thats been amazing for playsight, the education, the technology stuff was the ability to help so many Different Levels of play. You can have really simplistic themes to help beginners. More advanced themes that i would use coach prague players. And in the middle, you have good club players. So what does this device cost and what does it cost as a consumer of it, if i want to have a lesson with it, if you will . Thats a good question. When we started off, the model was not to go only to the top 100 players. The idea was to go to the club market and really to the mass market. The price so get the system into your facility is 10,000 per court and running charges around 5,000 per year. If you break it down, its about 13 a day. Thats what you need to make to really have an roi on it. So if i owned a court, which i dont, but if i did you dont own a yard. My question is how much are people charged is it an upcharge or attraction to take a lesson at a particular court . Weve seen all different types of Creative Solutions from charging up a lesson, from just adding it to the whole membership. Some clubs decide to it as an addon like everything else. But with everyone holding one of these in hair hands, how much more sophisticated can the average players game get by watching something that comes from playsight rather than just having someone record what theyre doing. Its great that you have that, because we have an app that can go right on the phone there. Since its a cloudbased Informational Technology unit, you can go back and stream what youve done, you can punch it up on your phone, on your smart phone, or on your tablet and go through stuff after the fact. What i love from a teaching and coaching technology, it gives you the ability to put kind of the whys behind a number. For me to say one thing is really good, but to back it up with some numbers and video there are a couple rackets now, they put chips in the rackets. Is any of that integrated with that . Theres a huge wave of technology coming in with censors, wearables, wristbands. Were sharing that wave. Do you need a coach to help you be careful now, dont get me out of hi profession. Do you need a coach help you interpret what youre learning from playsight or can you do it on your own . The system is very friendly and its really used by players by themselves, but also with coaches. So i guess the answer is that it would help a recreational player, but if you have a coach around, it would definitely High Pressure you understand the numbers better and break it down better. I notice it helps to step into the ball, like leaning forward. Why am i always going backwards as im trying to get to the ball . Stepping in is thats an old philosophy. I thought you dont have to step in anymore . It actually wont step in for you, but it will help you when i get to the ball, im running for the ball going that way and im weakly trying to hit it back over the net. Am i doing something am i not fast enough . Its about reaction and repetition. Thats why, again, for me to sit here as a coach and say, do this, do that, its one thing to hear it, but to be able to go back and go through a recording of what youve just done, you can see your reaction time and see whats its not good. We can improve that. Help you get in better core position. Okay. I dont even know why i play. Thank you, paul. Thank you, yuval. Thank you and looking forward to monday. When we return, how to play the markets. Whats going to happen by 4 00. Later today from jackson hole, you dont want to miss it. Were celebrating national dog day. Keep sending us your pictures, people. Squawk box returns in just a moment. Your Business Needs Better Technology to drive better performance. So you need it to be reliable and fast. Really fast. Introducing the comcast business Summer Savings event. Fast Internet Speed to drive performance, plus cutting edge wifi for your employees and customers, and voice mobility so your calls find you wherever you are. Get some of our most advanced products at a great price with over 500 in savings. Call today and ask how to get these savings plus a 250 prepaid card. Comcast business. Built for business. Lets turn now to our guesthost, jason trennert, whos been with us for the hour. You heard bullard say he wants a fiveyear plan, medium term, needs to focus on growth. I was really very attracted to what bullard was saying, because i think it would at least just get the fed out of the way. You have a onetime increase and you kind of set it as Steve Liesman said, you set it and forget it, like ronco, you would stop a lot of this gnashing your teeth about what the fed is going to do at every meeting. And then you can focus more. My own opinion, the Central Banks are not good at producing growth. You can either accelerate growth, bring it forward, or delay it. Its not particularly a good tool to create growth. You can rely on other in my opinion, thats not their job, but it seems to me theyre trying to micromanage the economy. There are other tools, fiscal, regulatory, trade, that are far better in my opinion to stoke growth. Get the fed out of the way and have it not being, as you were saying, superstars and all this other stuff. I just think thats not they should be in the shadows. They should not be outfront. Jim grant says they cant actually make things better. They can make things look better, but cant actually make things better. The feds Balance Sheet has quintupled since the Global Financial conference. The velocity of money has continued to go down. So the great irony, in my opinion, is the fed has made a lot of these discussions about income and equality, made it worse. Hasnt made it better. Its actually helped, for all due respect, with our viewers, the wrong people. Jason, have a great weekend. Thank you. Good to see you. Thank you. Coming up, the coauthors of a new book about donald trump stirring up a bit of controversy with the president ial candidate. Coauthors of trump revealed join us after the break. Take a look at the futures as we head to the break. Were back in a moment with the dow looking like it will open up about 17 points higher. Hawks, doves, and moose. Janet yellin set to weigh in on rates and the economy, but first, cleveland fed president Loretta Nester will join us live from jackson hole. Donald trump revealed. The new book has an inside look at the gop candidate, but hes calling it a hit job. Were going to talk to the authors, straight ahead. Rafa serves it up. Tennis star rafael nadal talks competition on the courts, yachts, and brexit. The final hour of squawk box starts right now. Announcer live from the most powerful city in the world, new york. This is squawk box. Welcome back to squawk box here on cnbc, first in business worldwide. Im joe kernan along with Kayla Tausche and Andrew Ross Sorkin. Becky quick is off today. Were less than 90 minutes away from the opening bell on wall street. Less than two hours now, you can feel it, from janet yellins big speech in jackson hole. I dont andrew, do you think do you think that just having round numbers for the seconds really gives us enough info . Do you think i think we should go down to milli i think we need hundredths. But it is 1 59 look, its changing, its 1 hour and 58 minutes away. The futures right now, and you can see theyre just going all over the place. Theyre up 17. That looks like any day this week, basically. Sort of, not much, amplitude has been getting smaller and smaller through the week. Is it really because were waiting for this. We call it the super bowl. Its not the super bowl ive got the popcorn okay. Jelly beans. Raisinettes. Gubers. Twizzlers. Thats good stuff. Thats made out of horse hooves, isnt it . That gelatin is made out of horse hooves. I was thinking bone marrow. Well discuss bone marrow. Weve got some top stories to get to. Markets will be watching janet yellins speech closely this morning. St. Louis fed president jim bullard just joined us in the last hour. He weighed in on Interest Rates. Our firm does call for a rate rise, but im agnostic on exactly when we do that. I do like to move on good news about the economy, so if we got to a meeting and we felt like things were looking stronger, that might be a good time to do that. Cleveland fed president Loretta Mester will join us in about 30 minutes. I was thinking of keith myseeis, a hedge fund guy. And kelleys here with a Big Hedge Fund story coming up you could call her the mester meister. Keith meister just nominated ten of his own employees to the board as part of a novel contest strategy. A story we broke on monday. Love it. Are you going to fix it now . Am i going to fix it . What do you mean . You broke it. A story earlier, carl icahn selling his herbalife stake to a new dealer. I just hung up with bill ackman and i believe hell speak with us directly, but just to sum it up, ackman is confirming the basic gist of the wall street story. He says, yes, he was contacted by jeffries, apparently because carl icahn wanted to sell his 17 plus million share position in in herbalife, hes the top holder on record at the moment. And ackman said initially, no, but later considered to being part of a consortium of buyers if one were to be put together, but only to the tune of a few million shares. And he said he would have sold them the very next day, because he still has a very short bias on this stock and thinks its going way down. Lets bring bill on to talk in his own words. Bill, whats the story behind all of this . Did i sum it up correctly . I think thats a pretty good summary. I mean, we were i was contacted by jeffries, i think, late the week of the 4th or 5th. Of august. Of august. And, you know, they were trying to put together a block trade to put carl out. I do that, obviously, very favorably, that hes, you know, obviously a seller now. Which i think is terrific. And this is a confidence game. Confidence games, i would say, carl is the leader of what creates the confidence in the company. And if carl sells, i think it can accelerate the demise of the company, because once i mean, we thought this was a great ftc settlement in terms of the findings and all the requirements, but the requirements doesnt really take effect until may, and sort of a slower bleed, unless the top distributors leave. And with carl there, may may have a better chance of keeping top distributors. With carl exiting, i think its over and its over quickly. So the sooner he sells, the better. And if you look at you know, you guys covered this pretty well over several years, but dan, fidelity, a huge shareholder and some still appear in the top holders list, although i know those are dated. So fidelity, i guess by the time the next filing comes out, theyre gone. I would guess bill stirrup is gone. But they dont have to file until november 15th. So its kind of carls last man standing. And if hes gone, i think the whole confidence thing just blows up. So let me ask you a question. And let me say, i reached out to carl this morning. I havent connected with him yet, but im curious, why do you think he would want to sell now . Firstly, hes made a bunch of money. His average cost is Something Like 32. And if he can sell this thing at 60 bucks and almost double his money and you know, great for carl. He doesnt have to worry about what happens to the company when theyre required to completely change their business model. Look, i think he knows that this thing is toast. And i think he also you know, a company under the terms of the ftc settlement, the companys only now allowed to compensate distributors very verified, documented, profitable retail sales to people who are not part of the system. And the ftc also found that there were minimal, if any, profitable retail sales outside the system. Bill so two questions the bottom line, one, i think carls selling because he thinks the stocks going down and i think thats a smart trade and im very happy for carl to make a profit, particularly if he gets out soon. Just to finish the narrative, bill, before we talk more broadly about herbalife, you officially say, no, you would not participate in a purchase of icans shares. You later rethought that and told jeffries you were willing to take a minority position in that that black trade, something you would hold for just a day. Can you go through your thinking there . Sure, they came to me and said, do you have any interest in covering your position . I said, absolutely not. We almost sort of laughed about it. And then they said, well, youll obviously you know, we can get carl out, that will help you . I said, you know, thats true. And so what i said to them was, i said, look, go find buyers for this thing. If you can find buyers for it, thats great. If youve got 14 million shares sold and 3 million left, thats a difference between you doing the trade and not, would i buy those shares, i might. And thats what i told them. So they went shopping for they went looking for potential buyers. And my thinking was, you know, one, i have no obligation, obviously, to hold those shares. So the second you know, the trade would be done at 4 15 on, you know, wednesday, and then thursday morning, i can sell my entire stake, the new position. And even with those 3 million shares, i would still have a very large net shore position. So i viewed it as, ill lose a little bit of money on the trade. I have 3 million shares at 55 and sold them at 45, ill lose 30 million, but we have more than 1 billion short position. And getting carl out would help i would spend 30 million to get carl out. I would probably spend more. Phil, youve talked about this being a slow bleed and i just sort of want to understand your thinking now about the timing, given what you talked about coming up in may. And how youve been in investments like this, whether its like this or not, but mba, that took the extent of seven years, and thun ravels, whats the timing look like now in your mind . The fact that carl is now a known seller, i think that accelerates the time frame of the demise of the company. Because, i think, again, this is a confidence game. And hes got five directors on the board. You know, its going to be a pretty interesting board conversation when the company now knows that carls a seller. I think thats interesting. And the other people knows that carls a seller pyramid schemes are driven by the top 50, 60 people in the system. And they have very little incentive to stay around. And, you know, this company is under enormous scrutiny. Its being required to change its entire business. If the distributor is still making cash yeah, look, the top distributors, what they need to do, they need to convince hundreds of thousands of people underneath them to keep buying product. And thats a big hurdle, now that the company is you know, everyone now knows that theyre you know, the people who read the documents, understand that the entire compensation system has to change. Skpo maybe they can milk it between now and may, the top distributors, that they can keep convincing their down lines to buy product, but once may comes, its going to be a lot more difficult to theres no the ftc eliminated qualification purchases. You know, people get paid for buying products from herbalife, not from sell products. Its a real confidence game. You have to keep convincing them each month to buy several the people on your down line to buy thousands of dollars worth of product they cant sell. Thats a tough thing to do, particularly if, you know, the main, you know, carls really been the main spokesperson for the company, hes a credible guy. What i would say is, carls a great investor. You know, you were right to buy with carl at 32 a share when he bought the stock and youre right to sell with carl when he sells the stock. Hes pretty savvy about it. He doesnt normally tell you in advance when hes out. Very bullish on apple until one day he found he sold the whole position. Bill, speaking of being a great investor, i was onair earlier talking about hedge Fund Underperformance this year. Persian square down 15. 5 through the last period, which i think is august 23rd, which you reported, year to date. Icahn, was down 18 in the first half of the year, in their privately held hedge fund as per the Holding Company filings. Can you speak to the environment that youre operating in, and what thats all about. And what is your current mentality about the markets and your own performance . Sure. So, look, our performance, this is the worst period of performance in my history as an investor. I would say beginning around august, you know, in last year, you know, to now. Last 12 months have been difficult. I guess, you know, fortunately, weve bounced off the bottom. Things were actually worse, you know, midmarch, end of march. Really, its almost entirely been driven by, you know, valiant. And ive never owned the stock down 90 and world was saying valeant was going bankrupt, and the stock was 18. I joined the board in midmarch with steve afrafrayden, and the companys made a lot of progress and thats obviously helping our performance. The rest of our companies are doing well. Herbalife has also cost us money, but i think that stocks going down. You know, so, well see. Well see where the year ends, but im still planning to have a good year. Okay. But its not an environment thing. Its really very specific. We made one very big mistake, taking a passive position in valeant. We paid a full price for the assets of the company and betting on managements ability to create value by buying other assets going forward. And that was we can spend an hour or two talking about the mistakes we made there. Whats interesting is today, valeant, we stepped in and joined the board is now a more traditional Pershing Square investment. We normally invest when the shareholders have lost confidence in management. And thats what happened here. But it wasnt just management. The Financial Statements were delayed, there was a potential fault. It was very similar to when i joined the board of general grove when they filed for chapter 11. I didnt think valeant would have to file for chapter 11, but it was the same experience. If you look at what happened, steve and i joined the board, we brought if joe papa, the board recruited joe papa. We have an almost entirely new board. Last week, joe brought in john harradean, they commitmented to delever the business, identified assets theyre reviewing for sale and and i think its a very interesting i would say its a classic Pershing Square investment today. And it wasnt, and that was my mistake, you know, when we brought it in february of 2015. What youre telling us now that the kind of thing you would say to an investor of yours, who was concerned or considering redeeming i mean, Pension Funds have been redeeming from Pershing Square and other places, and obviously you need to make a counterargument, right . Look, weve been very fortunate and have had relatively very modest redemptions from our investors, but, ive handled many, many meetings with investors. Talk about what went wrong. And, you know, how this why this wont happen in the future. And i think whats interesting here is valeant was a unique investment in a lot of ways. And we never, you know, get to meet the management of a company before making an investment. We never invest in really complicated companies, that you cant entirely figure out from just reading the 10k. And we broke those rules here, because we worked for a year with the valeant management team, you know, on the allergan transaction and that gave us a lot more confidence in what is a very complicated business. And, weve really if you look back at the kinds of things weve owned historically, theyre very simple, predictable, Free Cash Flow generative companies and were buying them at deep discounts with the underlying asset, the underlying business. And here we went off the reservation and we bought a business at a very full price for the existing assets, betting on Value Creation by acquiring additional assets and we thought we could help, as we attempted to do in the allergan transaction, by creating other potential merger opportunities. And that was a big mistake. Okay. Bill, thank you so much for coming onair and talking with us. Really appreciate it. Coming up on squawk box, a new book takes an inside look into Donald Trumps past. But the gop candidate has called it a hit job. The authors will join us right after the break. Nnouncer theyll tt you. Try toreak your will. But holo the ssets. Ure thever. E e in col. [cli and move only when you hear tlick that says theyre buckled in for the dri. Never gi utill they cklp welcome back to squawk box this morning. To the campaign trail we go, and a new book out this week about donald trump. Its called trump revealed an American Journey of ego, money, and power. These 20 reporters, editors and Fact Checkers and 20 hours of sitdown interviews over four months went into making this book. And mark fischer and Michael Kranish are the coauthors of the book. Fischer is an investigator with the Washington Post. And this was candidate trumps response to your book, gentleman. The Washington Post quickly put together a hit job book on me, comprised of copies of some of their inaccurate stories. Dont buy, boring have you heard from him directly . Just that one tweet and were more than grateful for that. We asked our publisher to send him the most huge fruit basket possible. Tell us how this book came about. Because interestingly enough, he has not been that cooperative with the Washington Post. And yet, behind the scenes, what we didnt know until recently, is that he had been you. Yeah, theres a huge difference between what he does for public consumption, because bashing the media is a great applause line at rallies. And what he actually did with us in private, which was to be gracious and generous with his time. He gave us, as you said, more than 20 hours of interviews. Cooperated with the book, in almost every regard. There were some people he didnt want us to talk to, like his siblings, but for the most part, he was very cooperative. And he wanted what we wanted, which was to tell a full, comprehensive story of his life, from his ancestry, we sent reporters to germany and scotland, where his family came from. All the way up to the convention. And the idea was to examine this guy, who is the First Major Party president ial candidate since dwight eisenhower, half a century ago. Who has not previously served in elected office. And therefore, has not been vetted the way most americans would want president ial candidates to, you know, to understand who this guy is. How he makes decisions. What his character came from. There are a number of interesting revelations and i want to get to them in just a minute. But just from your perspective, the Biggest Surprise . Well, there are a number of surprises to us. I spent a lot of time working with reporters on his business dealings. And we know that hes had business failures, but the deathdefying roller coaster nature of his business experience really was deeper than we had thought. He had six corporate bankruptcies. Not a personal bankruptcy, as he points out, but he really took bankers to the edge, time and time again. Shareholders, bond holders, stock holders. He traded a Public Company to raise capital for himself when he needed it. And the share price was 35 at one point and went to 17 cents. It gives you a sense of just how deep the despair was. And there were numerous times where he clearly, he said to us, he took his eye off the ball at various times. And he barely survived. But in the end, his view is that, i made a great deal for me. I survived. And he came to this point where he is today. Can you speak about his disposition . Because i think thats, perhaps, the largest i mean, there are policy questions and all sorts of things, but people talk about the unpredictability of donald trump. And sort of, given the amount of time you spent with him, how you felt about that. You know, its interesting. Hes theres a caricature of him as this simplistic guy, because he uses these short sentences, very declarative, sometimes coarse or vulgar language, but hes actually, i found, a much more complex character than a lot of people know. And on the other hand, its hard to have a real linear conversation with him. You know, i think if you were born 30, 40 years later, someone might have said, this is a guy who has some attention issues. Hes not much of a reader. He told us that we asked him about, how do you make decisions . How do you work as an executive . And he said, he really doesnt like to do extensive reading. He doesnt like it when people bring him reports or briefings to read. He wants people to come in and tell him orally in a matter of seconds the merits of an issue. And he says he likes to rule by his gut. He makes decisions by instinct. He has deep confidence in his own instincts. Obviously, we know he has a great knack for reading a crowd. He believes he has the same knack for coming to the right decision about an issue. But hes unusual for president s or candidates in that he is really not much of a reader. Did he give any sense that his personality or his outlook or his disposition had changed at all over the course of the campaign, with what started out as almost an experiment, to see where the gop was, and how the base felt, to now what is obviously, the nominee for president , for the gop. Thats a great its a great question, because he has been with different parties over his career. For example, he changed Party Affiliations seven times. He was a democrat, republican, independent, then a republican, and also changed positions on a number of issues. He called mitt romneys selfdeportation of immigrants crazy and maniacal, and then he proposed forced deportations, and now hes going back something closer to perhaps what mitt romney talked about. He has been a man who has his philosophy has been one of reading the moment. Hes not an ideologue. Its more of a pragmatic approach. But some people would ask, what is your core belief. We asked him that question. What do you really believe, if youve changed your party and position so many times. His response was, look, im a business person, i look at the moment, i want these people to be friends with me. Its very different than any other president ial candidate, which if you asked, whats your core beliefs, they would likely pound the table and say, these are my core beliefs and heres what they are and i havent changed. But we know about politicians, dont we . It would be nice if the world was really like that, you know what i mean . I think about the vetting, too, i still dont think i know a lot about the current president. I know he was a senator for a little while, but, i would like to know more. I would like to know more about all these guys. But weve got peter squhooitser on monday. Tell your friends at the Washington Post. Okay, gentleman, the book trump revealed, check it out. We appreciate it. When we come back, we have some numbers, breaking news, gdp numbers right on the wait. Squawk returns in a moment. Coming up, were just minutes away from breaking economic news. Were going to get a second read on q2 gdp. Well bring you those numbers, and cleveland g tp president horror retrot mester will join us. [announcer] is it a force or a sales event . The summer of au sales eventer. T up to a 5,000 bonus selectudi mols. For decades, investors have us a 60 40tock d bo model, with little alternatives. Yealternativ can thatraditial assets cant. And even though eyre called alternatives, eyre actu designed help meet very tradiogoals. Thats w ies believes people should an aernatives a lcore part their portfolios. Translation . Gobye 60 40, heo 50 30 20 welcome back to squawk box. A litany of data coming out, our july read on trade balance. And of course, its a deficit, 59. 3 billion. Thats about 4 billion lower than we were expecting last month, and increases the deficit from 63. 3 to 64. 5. So sequentially and based on expectations, pretty good number. Lets look at gdp, shall we . Our second walk around the block. And it is 1. 1. So we shaved a tenth, but pretty much expected by all. If you look at now the last four quarters, we have the 1. 1, 0. 8, last two quarters last year, 0. 9 and 2 . Lets finally get to july. Wholesale inventories read unchanged. Unchanged on inventories. We are expecting a number close to that. Keep in mind, last month, it was up 0. 3. Remember, this inventory deal, it surges, it recedes, surges and recedes. It plays havocs with a bunch of numbers, but it seems to be fairly consistent. Corporate profits, by the way, mine is 2. 4 versus 8. 1. Thats preliminary q2. Put all of that together. After all of that, we walked in the door, and the tenyear note, surprise, were trading 156. Every day in august, its been in the 150s. Where are they now . Drumroll, 156. Janet yellin, of course, and the f1c committee and all the policy makers around the globe will be in jackson hole and well so if anything moves the markets as the day progresses. Squawk box gang, kayla, joe, becky, back to you. All right. Thanks so much, rick. And we are seeing some of the air come out of the futures. They have been up. Dow would have opened as much as 31 points, now its about 5 points. But well see how the market continues to digest that data. Meanwhile, fed chair janet yellin set to deliver a speech in less than 90 minutes. Lets get back to Steve Liesman in jackson hole, who is joined by another special guest. Steve . Reporter kayla, thanks very much. Im here with cleveland fed president , horrLoretta Mester. Thanks for joining us. Thanks for having me. Another weak gdp number, 0. 1 . The second half was kind of weak. Do you have or the first half was kind of weak, do you think the second half will show a rebound . I think well have some strengthening in the second half. I think the economys on a good track. I think the employment numbers show that. I think the Inflation Numbers are coming up with, slowly. Theyre below our target still, but moving in the right direction. What do you have dialed in for the full year . We talked to somebody yesterday who thought, well, they had a 2 forecast for the year. They would have to do 3 in the back half. I think thats reasonable. Its going to be hard to perhaps get to 2, even 3. But i think thats not an unreasonable forecast. To do 3 in the second half of the year . I think we can do that. You say that so nonchalantly. Thats a big number . Well, the first half of week, we have some momentum and some underlying strength. Some of the inventory adjustment will come back in the second half of the year. So if youre doing 3 , walk me through your rate forecast for the rest of the year. So, i really believe that the economy is still on track for a pickup in growth in the second half of the year, inflation moving gradually back to 2 over time. And the Unemployment Rate going down a little bit from where it is now. So, given that forecast, consistent with that, i see a gradual, you know, upward pace in Interest Rates as being appropriate. Now, that doesnt mean, you know, were behind the curve now. But i do think that, you know, it makes sense to be starting to move interests up on that gradual path. Should we be on the edge of our seats for september . Is september a time you would like to raise Interest Rates . I think every meeting is a live meeting, as many people have said. I go into the meetings with an open mind. I like to hear what my colleagues say. I like hearing diverse views about the economy. And of course, we all have our own forecasts and our own ways of and frameworks for doing policy. And i know thats one of the things were going to talk about at jackson hole. But it sounds like in that context, you would certainly like to see an Interest Rate hike by the end of the year . Well, timing isnt the real thing. The real thing is the path. If youre in the Market Holding a piece of paper that has a term on it, which is a bond, timing is a lot, right . Well, it is. But the way i do my framework for doing policy is i look at a medium run forecast. I look at the data and look at a lot of different data, not just one data report. I look at the trends and the data and i infer and try to predict what the medium run forecast is. And then i back out what would be the appropriate path of policy. In my appropriate path, its a gradual increase. Thats why timing isnt really the right way to look at it. Lets talk about the framework. Because we did our fed survey, and 60 of our 39 respondents say the fed doesnt have a framework. And a plurality. More people than not also think, you know what, the feds not making thats one thing were looking at right there. And the next chart says, you know what, more people think youre making policy based on the latest Economic Data rather than based on the medium term outlook. Are they wrong about that . Is there a framework . There is definitely a framework. I can tell you my framework. I find that a disappointing result, but i think thats a really, more of a reflection of perhaps were not communicating as well as we should. What should you be communicating . Heres a form to talk to all of wall street. Again, my framework is, we want to look at the median run forecast. We dont set policy data point by data point. We look at the data, feed the data through models and through our forecasts. If youre on the way to doing a rate hike and all of a sudden you get a lousy job report. All of a sudden the rate hikes off. So it sure seems like youre going data point to data point. I dont think thats the right interpretation of what happened over time. I mean, i think people are always assessing the information thats coming in. And different policy makers around that table might have different forecast. And so, youre always saying, as the data comes in, is the consistent with my underlying forecast or not . So you continually do that kind of evaluation. So one of the things that the guys with the pieces of paper out there with the term premiums want to know is, you know, whats the path of rates . We were talking about to jim bullard this morning, he was saying, you have about 200 basis points of tightening built in over the next couple of years. Is that a realistic number . Is that what you have . I think what you have to do is look at the forecast that the fed policy people put out four times a year. I think thats our best assessment at the moment of where we think rates are going. But also, you have to realize that there are error bands around that forecast. And theyre not forecasts in terms of what like the market is forecasting. When we write down our policy, we think of that what we think is appropriate policy given what we expect to happen in the economy. But, specifically for your outlook i think a medium run, over the medium run, i believe that policy rates have to come up from where they are now and it would be appropriate to do. 200 basis points . Im not going to give you an exact number, because there are error bands around it. And as soon as you put a number on it, people focus on the number. The real thing is, is it appropriate to gradually move Interest Rates back up. And definitely move them up. Not moving them up every time, but assessing, moving them up, assessing the conditions, assessing the outlook. Lets talk about some of the risks around the rate structure right now. How concerned are you that there are potential bubbles in asset values now that are fostered by low Interest Rates . I think you have to take on board that were in an environment where we have very, very low Interest Rates. And there is a potential for instability because of that. We saw that, you know, in the past, and we kind of want to have a framework, where we dont go back there again. So i think you have to take that seriously. Do i see them imminently . No. But i think you have to be taking that onboard, as being a concern that going forward, if we leave rates low, too long are there excesses right now . I think there are some people point to the commercial Real Estate Market and certain parts of the country as being probably a little bit frothy. But, again, i dont think thats an imminent problem. But i do think its something you have to take into account. How about stocks . The stock market reflects a lot of different things. Im not going to say theres a bubble in the stock market. I dont think i would be able to say that. I think investors, you know, assess conditions just the way we do. Okay. Loretta, thanks for joining us this morning. Thanks a lot, steve. Okay, thats Loretta Mester, the cleveland fed president. Coming up at 11 30, we have Stanley Fischer. The ettetons showed up. Are there actual mountains back there . There are. Oh, look at that look at that we knew they were there. Ive done this once every 13 or 14 years, joe. I can see youre correct. They didnt go anywhere. I knew they were there. You were correct about that, joe. The mountains are still there. And so many other things. At least that one. We appreciate it. Weve got to get to a quick story weve been following all morning. Billionaire investor carl icahn mulling selling his herbalife stake to a group that included bill ackman and ackman joined us earlier this hour to talk about it. Hes made a bunch of money. I think this has average cost is Something Like 32. And if he can sell this thing at 60 bucks and almost double his money, you know, great for carl and he dun have to worry about what happens to the company when theyre required to change completely change their business model. Look, i think he knows that this thing is toast. And a quick reminder, we have a blockbuster lineup for the sixth annual delivery alpha conference. The preeminent investor simultaneous and you can get more details and tickets delivering alpha. Com. Coming up on squawk box, snapchat is hitting the football field. The photo app getting big bucks for its sponsored filters. Details, up next. Plus, aspect ventures. Theresia guow will join us with her ideas for the next big thing. Well be right back. Ts a as a vestednvestoin v, invest with trade, where investors castated invest. This is retirement. Reting rir tes and i neveget tired of it. Plan you. Real is tohi a r. And i neveget tired of it. Amin minli one. Plan you. Alking n fends. Amis getng ts cle. Al is an animareue. Amazing over twentyseven thsand othem. Theres lyne pla where real andmazi live. Welcome back to squawk box. Snapchat isnt just sending disappearing messages, its augmented reality lenses that users can superimpose on their faces have turned into a very big business. Cnbcs Julia Boorstin joins us now with more julia . Today snapchat is partnering with nfl for a sponsored lens. Building on a partnership snapchat has covering nfl games with live stories and nfls the First Sports League with a discover channel. First snapchat sponsored lenses are big business. Take a look at this one. The company has run over 100 of them since halloween and sources tell us that brands pay between 350,000 and 650,000 or even more per lens, per day. And thats just to reach snapchaters here in the u. S. Now, snapchaters says it definitely pays off. Its users playing with sponsored lenses for an average of 20 seconds before sending out whats effectively a commercial for friends, for the most popular, is this one for taco bell. It was viewed more than 224 million times. That was just on cinco de mayo. The most engaged, the one for gatorade with 30 secondsover average play time and an 8point increase in purchase intent. Amc paid for one for fear the walking dead over the weekend and they treated out some of the freakiest videos. Pretty creepy. Between these lenses and sponsored filters that go over photos, as well as video ads, snapchatss reportedly on track for over 300 million in revenue this year. Though snapchat is private, and of course, it will not comment on those revenue numbers. Kayla . Instagrams hot on their heels so well see how fast they can keep innovating. Julia, thank you. Now were asking who could be the next snapchater. Next guest is an early stage tech investor, who championed many successful companies, like trulia. The fact that snapchat has been able to make that into such a big business, does it have a mote around it. Is it completely indefensible. I think its great theyve been able to make ate business, but i think there are other what it really speaks to is this generation really wants to have messaging apps as their main mode of communication. Whether its snapchat, facebook messenger, whether its whatsapp, theres much more usage in terms of time spent on that any of the other kind of interfaces. So coming up with creative ways to monetize those apps is interesting. Just a quick question, because i was showing it to kc y kayla earlier, do you know about masquerade . No. Its basically the identical thing that snapchat has, facebook now owns. I dont know if they bough it or made it themselves. And i imagine it will ultimately get integrated into instagram. So how defensible are any of these products . I think the defensibility is less around the product innovation, the features. The defensibility is in the platform, right . So they like the platform and who are the people that are spending time on it . So its about the actual content that the users are creating and contributing on there. Thats why youll spend more time on one than another. Because if all of your friends are spending more time on instagram or more time on snapchat, thats where youll be spending more time. But frankly, they mostly use all of them, from what i can tell you. Which is fascinating, because at some point, you get app fatigue and you only have so many hours in a day and so many minutes of those hours you actually want to spend on social media. So at what point, do you think were fully saturated on these devices . Well, so its interesting, i think that its because you use the word social media, which, obviously, they are social media, but i think its really about sort of the messaging platform. So, on those devices, whether theyre people are fatigued with apps. You know, most people open the average taapp they downloads opened 1. 1 times. But when you think about messaging, whether its imessage, but thats the way you interact, whether its on snapchat or messenger or its on whatsapp, thats the way people like to interact today, much more so than sort of email or through a web page. So i think thats the way most new apps are going be skinned in the front. Are you going to hang out on masquerade all weekend now . All weekend. I think i would only do that once. Oh, look at that, i look silly. You should see what people the kids these days. They do it and then they do it with their other friends. And do it again and make a new face. They wait for new masks or new lenses every day. To put on your face. I have you know, i have you know, im a 6yearold kid, so every morning they want to see whatever the new mask is. So they can play with it. But then, there are people who are reusing masks. Its constant. Different environments. She put your face on snapchat. Why am i so ugly as you. Why am i so ugly as you. You look better as me than i do as you. For theresia, for investors who want to play any of these secular trends, how would they do it if theyre not in your seat . I think in the early stage side, theres a ton of noegs going on around this new ui platform. So its not just about sending funny pictures. Im not talking about that part of it, but the fact that people like to have these short text and graphicical messages back and forth. If you think about at work now, sort of the rise of like slack, as the way a lot of people who have pcs will interact with each other, as opposed to email. I think its just about that quick, really fast communication. And so theres a bunch of really interesting innovation going on around that to enable. So you can obviously, you can better on which platform is going to win. By the way, we havent talked about, but you know, google and microsoft are also trying to invest in these conversational messaging front end platforms and what theyre building behind them are bots, right . Theres a lot of talk about Artificial Intelligence and bots. Were involved in a very interesting one thats based on photo and video bots. Thats an interesting place to invest. And on the public side, we didnt talk about this, but the other side of the whatsapp app, the data sharing we have a lot to talk about. Thats another place to play is in the cybersecurity area. And slack, too. Well we visit slack next time youre here. And just for our viewers who may not know exactly how it works. Have you slacked . I slack every day. You slack here. But youve actually played on slack . Yes, i do. Its different than email . It is different than email. It may eliminate email. At least, thats the goal. Lets go to break. Well let you slack a little. When we return, were days away from the start of the u. S. Open. And robert frank sat down with tennis robert frank sat down with rafael nadal and got served. Re we will bring you that interview next. Where we explo. The oceans. Otecting bdiveity. Erywhere we work. Defeatlaa. Improvenergy efficiency. Lopmy job at xoobil turning gae into biofus. Ducingnergy verty imangargo fther wiess. Fuelinthe global econo. And tht weust ma the g. Fuelinthe global econo. En les here. reing in iortion. Ere, in l of ts, ttuff tha . Hovehis . Finances,your fute. You don you rtnewiwi a fm atvis rnmenn pson, onhat tterto yrgan snley. Welcome back to squawk. The u. S. Open about to get under way in new york. Robert frank had a chance to cook dinner with a tennis great. He cooked us dinner which is a great thing. Rafael nadal ranked five in the world joined chef marcus at the taste of tennis event and talked about why his favorite meal is one that he catches himself. I love being in the boat so normally i go for fishing with lin lines, so i love the seabass. Its great when you are in the boat, you catch a seabass and then come back to the boat and you can cook it and have dinner with it is something. Amazing experience. With a spear gun. Thats scary. We asked him if the lack of an american player in the top ten has hurt tennis popularity in the u. S. . I think we are in a great moment, we have been a period of time that the sport grows a lot, we have a lot of sponsors, the tournaments are bigger so thats when you have more people working in the same sport and more people taking jobs from the sport is great and thats happening in tennis. And for joe, i asked him especially after brexit whether the spanish and spain should join other countries and go their separate ways from europe. Heres what he said. I have an opinion. I feel that europe is bigger and stronger if we are together, so for sure i would like to see spain in the euro. Do you think it will stay . I dont have any doubt. The good news is rafahs risk the up and down injury of the year, seems better. He was holding the frying pan strongly and confidently. Hopefully well have a fit and healthy rafah. How did it taste . Amazing. Marcus samuelson the top chef of the world right now, it was great. It was great fish. Thats nice. I think the southern countries probably want to stay. They get all the money. Why would they want to leave. Exactly. Thank you. Thank you, guys. Fun times. Coming up todays top stories as we head to break quick programming note, Steve Liesman has an exclusive with Stanley Fischer 11 30 a. M. Eastern time. Well be right back. Hello friday no o sface. Outhere onepeed. Thmeedz cclf ivinonea and evet n coueem all ve driving mod letou custizthsteering ift points, ansuspension fit d e oue on. Ren. The 2016 cclass. Fitase e or 36ren. A month at yr lol tmercesendeerass. Fitase e or 36ren. A month at yr lol liveto youor f totosthan 9 al. Ecs,grients, isust goterestinin why use toake a pill . Or scialisor daily use . Aroved to tre th eree sfunion anurary mptof h, likeeenggo frequentlyday oright. Tell your or a aut l your medal cdisand dine andr heart isea enoh fose not takalis if yoke trates for che teordeas for pmout l en,r medal cdisand dine andr heart isea enoh fose as imacause afdropn ood prsure. Do not d aohol in exce. Side effts m incluadache, set s, delad backache or che. Voidong injurt cal right awy for an erection laing re tn four hou if y he any enecreasor lin hngr, or any sptoms an aerc actin st tcialis and dil he rightway. Welcome back to squawk box. Apple issuing a security update to prevent spyware from infecting your iphone or ipad, they can be infected clicking a an app and they can track information like facebook and g mail, advising customers to update to the newest version of the operating system as soon as possible and our own techs here at the table, joe concern nan did it himself while we were on the air. I might be the idiot savan might be i am not commenting. All right. Also in sports, and the ongoing ryan lochte saga Brazilian Police charged the swimmer with filing a false robbery support from the incident at the gas station in rio. Lochte will be able to decide whether to introduce a defense in brazil. Police are sending the indictment to the International Olympic committees Ethics Commission but not all bad news, he has picked up a new sponsor, four others dropped him, his previous only four sponsors, but Pine Brothers throat drops says lochte should be forgiven and appear in ads that say the companys cough drops are forgiving for your throat. Thats pretty good. Here we are talking about it. No one heard of prin brothins and now they have. Only once a year is it national dog day. Cherish your dogs, cherish them. Theyre the reason all dogs go to heaven because they could never they could never deliberately commit a sin. I know this for a fact. Theyre amazing. Celebrate the day celebrates all breeds whether poor or mixed that encourages awareness of the number of dogs that need to be rescued each year. Hopefully fewer and fewer dont get rescued because theyre mans best friend, someone once said. Joins us your best friend. I have three of them that are my best friend. Make sure you join us on monday. Squawk on the street is coming up next. Good friday morning. Welcome to squawk on the street. Im Carl Quintanilla with sara eisen and mike santoli at the new york stock exchange. We have made it to friday and most importantly, yellens speech in about an hour whether youre fan or of the fed or critic, widely anticipated Futures Holding their cards close to the vest in