Transcripts For CNBC Squawk Box 20170713

Ranges i agree and it occurred to me again why the market went up yesterday, we just dont know how to enjoy good things, good times. I mean, it really looks like we have maybe progrowth policies, Interest Rates that will probably still stay low. Inflation that probably wont be a problem. Everybody is worrying about Profit Margins hitting peak because wage gains will start hurting Profit Margins its bad for income inequality, but in the meantime Profit Margins stasy sustained. Everyone is saying its overvalued, but are we missing the point that there is like a perfect storm . Yeah, and yesterday you were talking about Profit Margins and once wages go up, Profit Margins by definition have to come down. But i think and im guilty of this all the time. We make this more difficult than it has to be to your point, maybe it is this simple now and i think the intelligence i cant, they try to figure out ways where ty the market will go lower. I cant, they try to figure out ways why the market will go lower. And lets check on equity futures. This of course after a record close on the Dow Jones Industrial average we are looking at another higher open with the s p looking at about 4. 5 points, dow up 31, nasdaq up 29 points at this hour overnight in asia, it was positive import export data that helped lift the indices. Hang seng up, nikkei basically flat european equities, we are seeing green arrows across the board with the biggest gains in spain right now. Ten year yield, we see that here again this morning ten year yield at 2. 331 . The two year note 1. 347 and it is just about a one month low. Mark grant a dooum dacouple g gee said we go lower before it heads back up. All the gary cohn stuff yesterday was interesting. Because depending on who you are, hes like a rorschach mark grant said that i think gary cohn will reverse the errant yellen policies to people who think that she has been behind the curve, that means that he would raise rates. But mark grant was talking about that these recent increases given the economic factor have been counterproductive, with the rest of the world still easy, that it was a misthat that yellen was raising so it was weird to watch some people think that gary cohn will be great because he would raise rates. Oh, he would be great because he would reverse the rides. So weird if you think donald trump was a wild card as president , gary cohn as a fed chair is even a wilder card. Because hes not an economist . Hes not a twrrained economit but he grew up in a trading environment. He was lole on the Commodities Exchange for years so a completely different skillset than the fed requires. But as somebody who always thought that the exit for easy money would be easy and fruit with challenges, maybe gary cohn is the perfect person. Who is better suited to get out of it. And maybe he would bring a trader mentality that you would love maybe fed funds could change intra day, go up, go down, just are depending on we went up a quarter, were going back with down get gary on the show, well have a conversation. One other point about the market 1999, we were at 10,000. I know we went to 666 on the lows, but just forget about that, hard do, but go from 10,000 to 21,000 in 18 years, and do the compound rate of return, what is that, 4 its not that this is not necessarily way out over not gang busters. Youre are right and to your original point, yet this is again we say it all the time most hated rally in the history of man kind. And im not sure why are and the iea is raises its forecast fdemand for global oil. You can see were back to 45 or so temperature several members did pass much more oil than allowed by their supply deal. Separately, new custom also data from china showed Rising Oil Demand in that country which imported 8. 5 million per day, a 14 increase from last year, makes china the biggest crude imt po importer passion the United States and weve talked about this, janet yellen heads back to capitol hill today yesterday she struck a dovish tone most of my colleagues or at least the median anticipated that one further increase in the federal funds rate would likely be appropriate this year but as i say, we constantly watch the economy and evolution of inflation in the labor market and will make decisions on the basis of our evaluation of that information. Today real hear from Charles Evans and fed governor Lael Brainard and look for weekly jobless claims, prior price index and federal budget and Delta Air Lines reports before the opening bell. Went home yesterday and sometimes i turn the tv on as background and i said yellen is on, ill watch a little what time did yop i tried to watch and even in i said you know what, ill read the summaries. Ill wait until its over and then read the salient points because i couldnt do it and i switched and it was a different hearing. It was chris wray on that hearing. So i watched that for a while. And you thought you would read the summaries the next day, right . That one i didnt watch that long either because it was not about chris wray out it gave them a chance opine and filibuster about russia and that surprised you why are . No, it didnt surprise me thats what they do. But it was one big russia you wonder why cnn only covers that. Thats all they do in anyway. And speaking of which, here we go well talk about trump here todays top political story is President Trump arriving in france he will meet with macron later this morning and i meamon javers joining us h more the president has landed in france hes staying at the ambassadors residence. Hes expected to discuss syria and terrorism with president macron of france were also expecting that he will give a News Conference later today and he will also visited too many of floriof flnn they are expecting some protesters against mr. Trump, so we will watch to see whether he gets similar reaction that he got last week in hamburg when he is in pairs are. But all that teed up for today meanwhile yesterday the president gave an interview to reuters where he laid out his defense of his son donald trump junir. Who scheduled the controversial meeting with the russian officials who suggested that they might be bringing some information on behalf of the russian government that was harmful to Hillary Clinton heres what the president said about that meeting that his son took he said i think many people would have held that meeting he also said on his meeting with Vladimir Putin last week in hamburg, i said did you do it, referring to election reference, and he said no, i did not. Absolutely not and i then asked him a second time in a totally different way. And he said absolutely not so the president saying that he pressed Vladimir Putin twice on the issue of election interference in 2016 and putin simply denying it. So expect that News Conference will be dominated by russia this afternoon depending on who the president calls on remember, those are two and two, so only two questions from the u. S. Side depending on the reporters he calls organizatin, expect a question about russia did we city that that was a meeting with russian officials fair pint point. A russian lawyer whose gobetween said she was conveying information from the russian government because i think that is probably true, about i dont think we know whether that is true but now it looks like it was very interesting, you saw a guy that we have had on a bunch of times, the Hedge Fund Guy that it all came from and that they are sanctioned so much that and this woman suosedly just seems like more than coincidence at that was so high on her list of things do. And it looks like some people were directly tying to what president putin really wants like a lobbyist for putin on that issue you not on the election, on that issue you. Right and lob be biists make entire careers off of issues like that. So you can see where that could be alucrative niche for somebody with a russian background and a line to the putin regime but the right is saying that she got in for some no good reason why she didnt need a rea to get here, that the Obama Justice department let heard in for some odd reason. I have not seen that. Lead story on drudge. You have to check it out youre stuck on the Huffington Post you can move over to drudge occasionally. I didnt read the Huffington Post either. I woesk up aboutwoesk up about a minute and a half before this. I work on all day. I know you do i wouldnt know how to act i will tell you that i talked to a former u. S. Intelligence official who is very experienced in counterintelligence who said that his view of that meeting was that it was a probe by russian intelligence they send forward people to see what the reaction would be and he said he thinks the russians were probably surprised that don jr. Took the meeting after that probe but once they got that receptiveness, then they could have moved on to other steps so on this former intelligence official says he thinks there is more to it, they would have kept going after getting that response there don jr. And now were going back to 2014 or 15, i think weve gone back to before trump had announced and they were eavesdropping on some russian types talking about some people that knew trump. Ooirts g its gotten to that point glp ye yeah, they hop toremonitor af people and they unmasked every person that could ever run for president i think glp so were they all just where fans of the apprentice or was there something more sinister going on you can only imagine the man hours listening to all those tapes in russian well, they can listen to those or watch janet yellen. Kind of the same no anyway, thanks you bet works all day he does by the way, so does melissa lee. Well, shes not here every morning. Shes here a lot. I knew this was going to happen you two together, youll be just oh, come on, joe. Some news just in from uber. It is combining its ride sharing business in russia and neighboring countries in to a joint venture. Uber isnt publicly traded, but yandex is. Its a producer of search mapping and Navigation Software. It is nine as the google of russia and you see they are up 10 . Lets talk markets following a record close for the dow join position us is karen cavanau cavanaugh, bruce kasnan, chief economist at jpmorgan. That is a big job. Yeah, a lot going on in the globe be Global Economy are there different divisions with other chief economists . We have regional heads. Im the chief economist for the bank and Investment Bank there is an Asset Management business which is separate hes the big swinging person i know what he is but its early these fast money guys, still in the boom boom room. Im talking about urt babout yog guy there. And in the past i kind of thought you were too negative on things and i think its thinking born about out because this is a real strange economy that were in it seems pretty good gleeb alob but then there are areas where are it is hard to get above 2 gdp. Well, our view has been over the last year that the Global Economy is doing quite well. But its not thinking driven centrally by the United States so its not a u. S. Centric story, but a very positive upbeat story on growth and recovery in pricing power. And i think as we were saying before, corporates are doing quite well in that environment i dont see anything that is breaking that. And i think the world as we go through the next six to 12 months will continue to deliver a good outcome how can it not be rip roaring with the nominal plimt numbers that were seeing now . Its threatening to get down to theoretically could get down near 4 i dont know if you want to say there is anything wrong with the u. S. U. S. Economy in the sense that were generate be jobs in the First Quarter, about 1. 5, well go about 3 , about 2. 25 in the first half and about 2 whole year. So trump wants 3 and youve been no, were not doing that. We dont have are fiscal stimulus built in and we havent had it since the election. We dont think congress has enough coherency to deliver are clear skrooutcomes deregulation is moving very slowly second of all not moving in the same direction in terms of its growth impact. So five years from now, i think the deregulation could become an important story. Karen, that would seem to indicate the market has moved up to reasons unknown the reason they moved up is because companies can make money in this low growth environment its not the best environment, but companies have shown time and time again they can get it done and they will continue to get it done and they did it in the First Quarter with Earnings Growth of almost 14 they will to it again in the Second Quarter and so that is why the market is moving up. The market and the economy arent always the same thing and it would be great to have a backdrop of a 3 or 4 growth economy, but we just dont see that and until we see the fiscal changes and deregulation, until we see tax cut, we wont see that but it sdntsd mean that the market cant continue to go up what about all the confidence numbers that you see with Small Business and consumers it was all meant to happen because of profits or have they actually started acting wheels have are started to turn and weve seen it in the confidence numbers and then well start to see more, but we really go nedo need the tax cutd regulations to change. But the confidence is there. So the wheels are starting in motion and that just will be a bigger boost for the market. I think if the chief economist of jpmorgan was more bullish, i think that would be part of the animal spirit. Youre Holding Things back single handedly. I wish i had that much you spoker, but we call it like we see it i think the other thing we want to keep this n. Mind would it kill you to get on board, would it kill you to be more the other thing to keep in mind, when you think about a 3 , 4 u. S. Economy, youre thinking when to 10, 15 years ago when demographics were moving and also a key core view we have is that productivity growth is not jen can rating the samd kind of gain so 2 economy in terms of what it delivers in job growth and more broadly in temps of the labor market is like what a 3 economy was 10, 15 years ago people do think that some of these things could juice that productivity, that that is work fbl. And maybe even you bring people out that arent in the participation rate, bring them back, in a that can help with im more skeptical on that point. But the confidence readings, what weve seen in the first half of the year is an economy glow growing 2. 25, but 10 investment growth what is holding it back is government and even stori invens and those are not things you worry too much about so on the u. S. Economy i think is doing okay. I dont think 2 is a bad number especially given what would happen if we have a 3 economy and potential is 1. 5 it keeps the fed moving slowly that is a reason the market is doing well but the big story on the world right now is what a happening in europe, recovery that were seeing we have global backdrop which is very good for u. S. Corporate earnings its good in terms of the overall global backdrop we live in do you agree with all that . I agree with that and thats why i think investors need to go and spread their net wide. But youre not pulling your horns in absolutely not. The bias is to the up side so all this talk about yellen and raising rates, i think that rates will drift hire, but ighe not worried about it there are plenty of bears and skeptics that hate bullish talk. And i was kidding. You keep your opinion. But they watch and say that there was all this bubble i was just kidding if you want to stay dower like youve been for a while, that is your prerogative karen here who is very optimistic fair and balanced did you know that is available . Thats why i just said it oh, really, are you going to claim it i should. Weve lived it. The no spin zone. Yeah, dont even you went down the path. Yeah, but do you know all the names . That is your old buddy. Anyway, lets move on i didnt name the show. He has nothing do with it coming up coming up opecs output surged in june. But prices stabilized overnight on strong command numbers from dhoo china. We will talk crude realities the future isnt silver suits and houses on mars, its right now. Think about it. We can push buttons and make cars appear out of thin air. Find love anywhere. Hes cute. And buy things from, well, everywhere. How . Because our phones have evolved. So isnt it time our networks did too . Introducing americas largest, most reliable 4g lte combined with the most wifi hotspots. Its a new kind of network. Xfinity mobile. Celebrity entering the political arena could be kid rock he hinted on social media that he intends to run for u. S. Senate in 2018 hes 46, amichigan native. He promised a major announcement is coming soon hes been on the show. Love the guy anyway, i said do i call you mr. Rock senator rock. It would be senator rock, but we may have supposedly a president the rock and then senator rock hard for you. I saw some of my buddies that used to be at cnbc that lean a little bit left for saying oh, really, kid rock well, i guess he will run for senate now that the Supreme Court spot is filled and the fbi looks like its filled maybe he can run for senate. I go oh, yeah, he doesnt have the al franken how can kid rock he was not on saturday night live. How about schwarzenegger jesse . We could go on and on but we wont Opec Oil Output rose in june despite the group extending a deal to limit production joining us now from nasdaq corporate solutions, great to have you here. So what do you see in terms of the price of oil . Some people are saying that we will break 40, other people saying above 50. I think that we continue to stay range bound you made the poechint about lib and nigeria. Their output is up so that coupled with the uptick in u. S. Production has caused the market to have a negative confirmation bias. So welook for anything that is positive gets overlooked by the market and we focus in on these negative data points and the financial positioning is such that the shorts are elevated and a lot of the length has been taken out. So short term, were having the risks to the up side, but we stay in that range bound market for the next few months. S p at an all time high energy basically slide ways. Exxonmobil down 18 since january. Are the equities trying to tell you something . Its interesting because it kind of feels like deja vu of last year where energy underperformed for most of the year with and then in q4 rallied tremendously and we became the best performer in the year. So an interesting dynamic. We also have the decoupling of the credit market. And that is important because 20 to 25 of u. S. Production growth, u. S. Is linked to that high yield market, so that would be a very important corrective element if the credit market were to tighten in terms of reining in the growth. Do we have a sense of break even price for a barrel of oil here in the United States . Yesterday i was having a conversation with jeff occur ary and he was saying that there is so much private equity money pouring in. Curry and he was saying that there is so much private equity money pouring in the money keeps going this because there is so much money being poured into the private equity that it keeps getting deployed no matter what the irr is that is a great point and so the numbers are all over the man. Some are sub 20. And what is interesting we always think of saudi as being the lowest cost producer, but saudi actually needs a lot higher price than most u. S. Shale producers need but where the rig counts have been going up are in the rigs that are backed by the private equity money so it really shows thedy pergs some of the high yield companies is where you have seen stabilization. And in terms of a lift in price, how much in your view if at all does it have to do with the ipo . There is a thesis that aramco needs a Higher Oil Price to get their ipo done that will probably be towards the middle of 2018 in terms of when you might start to see that get priced in, but i think aramco has a lot of other levers in their tool box to juice their valuation in terms of tax policy, what they put in their ipo. Weve seen from this new crown prince that he has been very aggressive in terms of actions against the qataris and yemen and other situations so i think he is very much about market share rather than price because anything that benefits his nemesis, mainly iran, isnt good for him and hes taken that aggressive approach. And i dont think that the market is really realizing that. All right thank you. Stocks to watch today include Teva Pharmaceuticals getting a upon on reports that the company will poach astrazenecas ceo. Shares of astrazeneca moving lower. Mallinckrodt moving higher after special status for its muscular dystrophy drug and amicus trading lower after they announced a secondary offering of public stock Fda Advisory Panel recommending approval of novartis new leukemia treatment. The process i can treatment is last resort early tests have shown promising results. Novartis says the entire process takes 22 days and can cost up to half a Million Dollars last nights vote is a recommendation full vote is expected by the end of september about it would be the first ever approval of a gene altering treatment by the fda. Looking at do you remember gopher . From the love boat. He became a congressman from his home state of iowa but there are ten. Oh, ben jones from dukes of hazard remember him he was coote represer. Steve lar gent, played in the nfl. Sunonny bono. Yeah, ski accident. Clint, jesse the body. Clint eastwood was mayor of caramel. So on this is not senator kid ro rock fred thompson. Joe kernen from new jersey. Im not from its all the same mayor kernen, senator kernen . Congressman . I have trouble sitting through any meetings that is my problem you could be president then because of your Attention Span or other issues Attention Span be and bladder. Coming up, for that senatsenatoo release an updated health bill and lanhee chen will be joining us as we led to break, here is a look at yesterdays winners and losers shes nationally recognized for her compassion and care. He spent decades fighting to give families a second chance. But to help others, they first had to protect themselves. I have afib. Even for a nurse, its complicated. And it puts me at higher risk of stroke. That would be devastating. I had to learn all i could to help protect myself. Once i got the facts, my doctor and i chose xarelto®. Xarelto®. To help keep me protected. Oncedaily xarelto®, a latestgeneration blood thinner. Significantly lowers the risk of stroke in people with afib not caused by a heart valve problem. It has similar effectiveness to warfarin. Xarelto® works differently. Warfarin interferes with at least 6 bloodclotting factors. Xarelto® is selective, targeting just one critical factor interacting with less of your bodys natural bloodclotting function. For afib patients wellmanaged on warfarin, there is limited information on how xarelto® compares in reducing the risk of stroke. Dont stop taking xarelto® without talking to your doctor, as this may increase risk of stroke. While taking, you may bruise more easily, or take longer for bleeding to stop. It may increase your risk of bleeding if you take certain medicines. Xarelto® can cause serious, and in rare cases, fatal bleeding. Get help right away for unexpected bleeding, unusual bruising, or tingling. If youve had spinal anesthesia, watch for back pain or any nerve or musclerelated signs or symptoms. Do not take xarelto® if you have an artificial heart valve or abnormal bleeding. Tell your doctor before all planned medical or dental procedures. And before starting xarelto®about any conditions, such as kidney, liver, or bleeding problems. Its important to learn all you can. To help protect yourself from a stroke. Talk to your doctor about xarelto®. Theres more to know™. The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Good morning lets take a check on equity futures. We are looking at the dow extending its record close from yesterday looking to add about with 27 at the open. S p looking up about 4 and nasdaq looking higher by 26 points target just coming out with upbeat earnings news for Second Quarter saying its comp sales will be positive and earnings above the high end of the previous range of 95 to on 115 ceo saying traffic is improving and that the retailer is doing well in the face of a competitive environment. You see the spike in shares up 5 dismal year overall. And if you look at target, it was on the way back. It was trading over 54 1 2 and what happened . Amazon announced whole foods, stock goes down 10 . These are excellent numbers if you look and despite the fact its up 5 , i think you can build on this gain i think target valuization wise is a stock you might want to own. And well get the retail earning. Walmart shares are up by 0. 7 but it is worth watching to see if the good news sort of bleeds over permeates. Good word reagan. What does that have to do with anything . Oh, yeah, of course, ultimate example of an actor turned politician i thought you were talking about target i thought maybe he shopped there. Work with us here guy, come on i know its early. Time for bonz socho. Were going to talk about health care and possible tweaks include keeping some obamacare taxes, fighting the Opioid Crisis and stabilizing state Insurance Markets. Joining us now, Hoover Institution research fellow. Its good to see you i wonder what you would do if you were in this administration. What do we need to really get just one more gear into this domestic economy that seems to be lacking right now what is the most important thing . Well, it seems that not repealing this net Investment Income tax is a significant issue. Now, i understand the politics of it. I understand the optics of it. I know why Senate Republicans are hesitant to move ahead with that repeal, but if you are looking at all of the factors that drive Economic Growth, being certainly this is one of those factors that you have to pay careful attention to more broadly, i think obamacare has been a drag on Economic Growth so the question then becomes how do you repeal and replace it in a reasonable way the framework is fundamentally the same as the one the House Republicans have been work with. I think its fine, i think the question now becomes can they get the politics right to getting across the finish line and that is really what all the changes and modifications are about. Yeah, i hear exactly what youre saying about that tax because it seems like a lot of moderate republicans are guys that are up for reelection and they are worried about the criticism from Chuck Schumer or that they are hearing from town Hall Meetings and they think that tax would add to it but i dont think they understand no matter what they do, you will hear about someone losing coverage and you will hear the stories from democrats. Your heart strings will be pulled on from people that are affected by whatever we do and that would happen whenever you try to pull back on an entitlement, but they think that this tax thing is they are most scared of that because dems say you are giving tax cuts to the rich and taking away services from the poor with medicaid but in a perfect world, if they were really true to what they wanted to do, they would get rid of the taxes yeah, the tax piece and medica reform piece is also really important here. I think a lot of conservatives how so potically . Well, its tough politically because what you are looking at is the cbo estimate showed a reduction in spending relation difference to obamacare of about 700 billion on medicaid over the next ten years and that that is posted up against 500 billion or so of tax relief. So you have this weird tug of war. But the medicaid reform piece is also crucial from a fiscal sustainability point of view this program is not going to be able to continue unabated the way it is so you wonder if rep did just said damn the torpedos, get rid of the taxes, reining in medicaid, you wonder what would happen in 2018 and then you wonder if the moderates and conservatives of do nothing, you wonder about 2018 not a good situation its definitely not a good situation if they cant get something done underlying the reason why this is such you an important issue for republicans to tackle is the 2018 election cycle. And if republicans cannot deliver on something they have been saying that they will do for the last seven years, it creates significant electoral issues i think so they will have to do something here i think Mitch Mcconnell puts it up for a vote next week regardless of whether the votes are there or not because this is such a critical policy issue if they cant get this done, tax reform is no easier. Infrastructure apparently is no easier so they have to move on this ive seen it argued that the town Hall Meetings and that some of the rhetoric from the left isnt really necessarily as widespread and that if they did do something 2018 is not necessarily lost so from that point of view, youd say not doing something is probably even worse for republicans than if they do put through snag is criticized a lot by certain elements. But obamacare people that have if are not enamored of it. What are the polls. Polls for a long time were negative but were seeing obamacare in a little bit of a renaissance now because anytime you try to turn away as you said earlier, weve been under in obamacare regime if you will for the last seven years. Anytime you try to take something that has been in effect for seven years and put it in a different direction, its very challenging. I dont think weve ever seen in American History by the way Something Like what the republicans are trying to do so obamacare may be more popular now, but it hats tit has the sa problems it did last year, hire premiums, less competition and the need for fooreform is still very desperate all right thank you. Coming up, new data on jobs and linked oin workforce report. President trump is in france meeting with president macron. Well talk to p. J. Kro jp. J. Cro. [car tires screech] [bell rings] time for todays executive eventual and launch of another german grocery chain on u. S. Soil Courtney Reagan joining us reporter good morning. Thats right, so in about an hour or so from now, this store will open for the first time it is the 14th of 100 planned u. S. Leital Grocery Stores so far shoppers have been impressed. But competitors are watching and in some cases fighting back. Kroerg h kroger has filed a lawsuit alleges that the private label called prefer selection infringes on krogers private selection and is confusing to customers who may falsely associate the private label with the u. S. Competitor. Lidl of says it is proud of its pree preferred range. Last quarter, kroger set about 29 of its sales came from private labels collectively. But all other grocers should be paying attention because lidl brings significant competition in at momosphere and selectioni and price. This pineapple is 89 cents today. The stores are about a tenth the size of a regular Grocery Store and in some cases it may feel like there is no thrillfrills, t also has premium feel to it especially when it comes to the organic produce, meat and bakery areas. When it comes to pricing, lidl has promised that they would be about 50 lower than the competition, but a pricing study found that their prices were about 14. 6 below kroger, 10 respe10 below walmart and on par with aldi this is just the beginning, but certainly a name that competitors are watching particularly those that are familiar with its presence overseas sooits interestiits interee timing comes when target is raising its estimates for Second Quarter and they are willing to give up on price in order to compete. Lidl is lowering the bar in terms of price absolutely. The grocery wars are really just heating up when we think about amazons purchase of whole foods and there are so muare so many questioning surrounding that aldi is already stepping up its game adding about 400 stores this year. Those prices are quite low about on par with lidl so i think everyone will have to up their game. If target really does want to compete at least in this area of grocery. So six aisles ill bet you every store you know the aisles have the same thing and that speaks to me. Because if i go somewhere else, im totally lost that is true. And in a way its sort of trending back towards simplification in retail where for so long it was we need to offer consumers every product of every type and every kind shape and size and now folks are saying do you really need 16 kinds of kevin ketchup. I was in dairy and now i need a seg wway to get back to thy are too big. And that is for folks that actually still want to use their own shopping a lot of people use that fresh direct or i do a combination. I go to the Grocery Store myself you dont send your people . Thanks, court coming up, ceo of lloyds talks about the cyber threat to global business. Rays always been different. Last year, he said he was going to dig a hole to china. At t is working with farmers to improve irrigation techniques. Remote moisture sensors use a Reliable Network to tell them when and where to water. So that farmers like ray can compete in big ways. China. Oh. He got there. Thats the power of and. Were counting down to the big reveal of cnbcs stop state for business. North carolina repealed its controversial bathroom bill, so businesses that boycotted the state have begun to return. Texas is still adding jobs at among the fastest rates in the nation minnesotas best category, education. Georgia finishes near the top for workforce and infrastructure. And the winner is, washington state. Thanks for this honor it really is an honor. Washington, americas top state for business, 2017 mounting cyber and geopolitical concerns are slowly shifting the global insuranc industry landscape joining us now, inga beall thanks for joining us. Thank you. The deadline is approaching for the eu and uk to reach a free trade deal. A lot of businesses are thinking about how do we access the eu in the future what are you doing being an Insurance Market we are in the risk business so weve been planning this for a long time, even before the vote last year. We thought weve got to have some contingency plans and as soon as we knew the outcome, we put in place our contingency plan looking at the various countries lloyds could set up in to continue to offer insurance for the eu customers weve chosen brussels and that was after many months of discussions with various regulators we will have that up and running, our plan is, by the middle of next year so we can actually test it before the uk actually exits the eu. We need the licensing to be able to continue. Its about 5 of lloyds global revenues, so quite a considerable and important market for us. We were talking in the break about your Cyber Insurance industry or business, i should say, and, you know, its stunning because i feel like only recently have companies and just the general public really been made aware of the threat of cyber hacks and attacks and so on, and yet youve been offering this for 20 years . Yeah, yeah. So what are you seeing these days in terms of business acceptance, of spending the money on cyber for a long time they didnt want to spend on because it wasnt something they could point to shareholders and say, look, we spent this money and it was worth it because nothing happened. And of course what really happened was it started here in the u. S. And thats because of regulation, coming in, kicking in and saying, come on, firms, youve got to start getting your act together we want to know what breaches youve had, particularly because we want to protect the customers. That saw a massive rise in the demand for Cyber Insurance in the u. S. Lloyds probably writes 30 Global Market share of this. The u. S. Used to provide 90 of that but now weve got regulation coming in in places like australia, weve got it coming in in europe next year and thats going to drive businesses to actually start thinking about buying more because theyre going to have to report breaches, and particularly in europe theyre going to be introducing fines. And its all about protecting the customers data. So weve seen a dramatic increase what were still trying to do, though, is understand how to add it up, how to had atadd the exp up because this is a risk that knows for geographic boundaries. It cuts across the whole world were very much used to dealing with physical risks, earthquake risks, hurricanes, weve been modeling it for decades. This is a brand new risk were trying to get our arms around. Were trying to understand what the impact is and particularly how it impacts businesses. I would think even if you had one incident happen to a corporation that you dont even know if that is the end of that incident, so, for instance, a worm could get in and mutate in some way and cause more damage so from your perspective, it seems like there could be a lot of risks potentially in this new age of cyber attacks. Some of these have been within firms infrastructures for a long, long time, could even be years. We also know that a lot of it is about not maliciously necessarily, but employees, right, just accidentally doing something that lets something come into the system so a lot of the time we spend with our clients who buy Cyber Insurance is helping them build more resilience into their businesses one of those aspects is how can they make sure their employees, all of their people know what they should and shouldnt do because its so easy just to make that one click and there it is, its in there. How much do you thinkyoure going to in terms of business, is this your Fastest Growing line of insurance . For sure, absolutely. Weve got premiums now about 800 million, so its quite sizeable and there are some other risks, though, because with this unrest in the world, the geopolitical uncertainty, people are buying much more insurance to protect their trade credits. When theyre trading with businesses in other countries. Weve also seen a rise in demand for terrorism insurance, particularly for those countries and markets where theres no National Pool or government involvement, so we are seeing a rise in demand for other types of insurance when you look at whats happening in the whole world. Fascinating, inga, thank you for joining us guy. Joe where did you grow up . Whats your hometown, quick . Its not a trick question. Just answer quick. If you dont know cincinnati, ohio. You do know. The mayor of cincinnati, iojeoh, rry springer. But he was a mayor first. He was a mayor first i was wondering if an electric toothbrush really cleans. Better than a manual, and my hygienist says it does. But. Theyre not all the same. Turns out, theyre really. Different. Who knew . I had no idea. So, she said look for. One thats shaped like a dental tool with a round. Brush head. Go pro with oralb. Oralbs rounded brush head surrounds each tooth to. Gently remove more plaque and. Oralb crossaction is clinically proven to. Remove more plaque than sonicare diamondclean. My mouth feels so clean. Ill only use an oralb the 1 brand used by dentists worldwide. Oralb. Brush like a pro. Stocks rally as fed chair yellen signals that rate hikes will be gradual. Your trading day setup is straight ahead. Health care front and center mitcconnell gets ready to reveal new details at a midmorning meeting. Plus a new Linkedin Workforce report find out if hiring has been hot, hot, hot this summer as the second hour of squawk box begins right now live from the beating heart of business, new york city, this is squawk box. Good morning and welcome back to squawk box here on cnbc were live at the Nasdaq Markets in times square. Im melissa lee along with joe kern an and wilfred frost. It does look like well have a positive open. The dow extending its recordhigh close. Looking at 22 points at the open the nasdaq on the longest winning streak since may, looking at about 22, s p up 3. 5 this morning shares of target are higher. The company says Second Quarter earnings will come in at the higher end of its Prior Guidance and Comp Store Sales will be positive customers are responding positively to changes that target has implemented those shares are up by about 4. 3 another premarket winner yandex. It will be combining its Ridesharing Services with those of uber in russia and surrounding countries. It also specializes in mapping, search and Navigation Technology those shares popping 15 . Investors will look at two key economic reports weekly initial jobless claims as well as june Producer Price index. Claims are expected to be down slight slee while the ppi is expected to be unchanged for the month. Delta airlines releasing Quarterly Results and this must be important because, wow, hes here, phil lebeau. Phil lebeau. Phil lebeau. Thats for sure. We are all benefiting from this. Im good. Let me give you the numbers from delta. A slight miss for the 2q earnings coming in at 1. 64 relative to the earnings estimate of 1. 67 a share. Revenue in line with expectations at 10. 8 billion. The qq margins, and we already had some guidance from them to expect it to be 18. 5 . Came in at 18. 4 that compares to 17. 4 last year couple of key metrics to keep in mind passenger revenue per available seat now, thats the big metric in the industry, up 2. 5 thats at the higher end of their previous guidance. But the cost her available seat mile will get some attention when you normalize it for the new pilot contract up 5. 5 , so thats a hefty increase. The guidance for the Third Quarter, well get more details on the Conference Call at 10 00. Margins between 18 and 20 this is what they have been talking about for some time, increasing those margins passenger revenue up 2. 5 to 4. 5 for the Third Quarter and capacity up 2. 5 with the biggest growth in the domestic market again, well get more details about that Capacity Growth coming up on the call at 10 00. Phil, how did american beat yesterday and delta not do so, what was the difference . American, you didnt have a beat yesterday, you have the guidance raised by american. Americans earnings dont come out for a couple more weeks so their guidance was increased remember, delta raised its guidance in terms of those internal metrics about a week ago, so what youre seeing with all of the airlines is an increase when it comes to passenger revenue per available seat mile and theyre moving those margins higher and the expectation is that we should see that increase in the Third Quarter as well. Great stuff. Phil, thank you. You bet. Janet yellen heads back to capitol hill today she will testify before the Senate Banking committee at 10 00 a. M. Eastern time. She appeared before a house panel yesterday striking a dovish tone about rate hikes. Most of my colleagues, or at least the median anticipated that one further increase in the federal funds rate would likely be appropriate this year, but as i say, we constantly watch the economy, the evolution of inflation in the labor market, and well make decisions on the basis of our evaluation of that information. Huge. Also on the agenda today, well hear from chicago fed president Charles Evans and Lael Brainard. Shares of tether pharmaceuticals they will poach Astra Zenecas ceo snap has a price target of 22 a share. Competition appears to be stable and they may be looking to lock up shares. Snap bouncing back 3 but below the ipo price which was 17. The markets will get another dose of fed chair yellen as we mentioned. Lets bring in the chief investment strategist, david bianca and lou bryan also joins us can she get any more dovish than she was yesterday . Well, you framed that well. Certainly the chair has acknowledged lower than expected inflation, talking about the neutral fed funds rate being less than 2 we think the fed will hike in december and probably two or three times next year. What the fed is doing is acknowledging the concerns of disinflation and thats helping to keep longer term yields from falling the way they were doing a couple of months ago maybe theyre managing the yield curve. Lou, is this sort of a green light to investors out there in terms of higher equity prices, higher bond prices, lower dollar is the path of least resistance for most of the equity for the Asset Classes higher except for the dollar it was yesterday, thats for sure and i think it was because of somewhat of a slightly more downbeat assessment of the economy than we might have thought because of her view of inflation rather than scoffing it off saying were really paying attention to it also the idea as david brought up the neutral rate. The last measure i have of the neutral 8 is 0. 05. When youve got the pec core at 1. 4, the neutral rate waiting for adjustments is right now at 1. 45 so the fed wants to be accommodative but if they raise the rate one more time then theyre no longer accommodative, theyre straddling neutral i think that made the market back away even more from the possibility of a december rate hike, which they had not completely bought into prior to yesterday. David, is it astonishing to you at all that the markets are so skeptical about december and yet economists are so convinced about december well, we are still convinced there will be a december hike. We think were getting close to neutral. We said neutral is probably close to 2 when that was a controversial statement but we still believe the short end of the cousin will go up and were still sticking with big banks in the United States. But one of the things were also talking about, if the fed is getting close to neutral and the ecb is still negative, maybe its time to really start looking at european banks and adding allocations to europe, not just european industrials but moving more aggressively into european banks as well. Lou, on that point, what about the u. S. Dollar, particularly against the likes of the euro given, of course, that weve got a slightly more hawkish tone expected from mario draghi and a more dovish tone from janet yellen. Is the dollar headed south from here were right up at the higher edge of the range for the last couple of years. If you were to get over 115 and sustain that for a while you could have a run on the dollar versus the euro and that could be because of this shift in sentiment from the Central Banks. But the ec the shift in sent mea sentiment, the ecb is not going anywhere as far as this policy goes. They may taper back at a pace faster than the market assumed, but at the end of the day the fed is leaning towards raising rates. They still think theyre going up in december, whether the market believes that or not. The fed is leaning towards hiring rates and the ecb is still involved in their stimulus and very accommodative program. We saw the most strength in yesterdays market in reaction to fed chair yellen is in Technology Sort of the old thesis, kick back in, rates will remain low, where are you going for growth, youre going to technology do you still buy that . All year long weve been recommending Growth Stocks we havent been believers in reacceleration we still like tech, we like big banks, but were increasingly adding to europe the european economy has been encouraging, its been strong. The euro has shown some strength here, but we dont think the euro gets too much stronger that would weigh on the European Market and we think the ecb will wait for the fed to put through some hikes before doing anything significant. Given what we learned from janet yellen yesterday, whats the key question outstanding in your mind that youd like to hear answered . Actually i think theyre very transparent in their thinking and acknowledging that there is tons of uncertainty as to what inflation is going to be were debating things like the phillips curve and its a lot flatter than history, maybe its completely flat. Taylor rules dont seem to apply to this cycle. They dont have the answer that im looking for, were all debating this together whats the normal interest rate. Lou, longer term, in terms of the changing makeup of the fed, whats your take on how thats changing weve got randy quarrls appointment. Are you hopeful for a change in leadership or would you like it to remain the same i dont think yellen has done a bad job. I think as far as the makeup of the board, thats always interesting and adds to the debate, but the fed is the chairmans committee, so it depends who they put in as the chairman and the rest of it is interesting, but not vital gary cohn is nominated and becomes fed chair, does the market go up and by how much do you think . How much is that worth to a market to have a trader heading the fed . Yeah, i think that thmarket will go up because of his background i dont know if its just a oneday thing or not and i dont know exactly if its justified its simply that gary cohn worked at goldman, so that must be good for us as david said, theres a lot of interesting dynamics going on here, and the fed could be sort of in a trick box by the end of the year, because if the inflation rate does continue to trend lower from here, as it has the last few months, and the fed does go up with rates, i think that thats very friendly to the long end and you might have a very narrow spread between the 10year and the fed funds when the new chairman comes in and that is sort of a tricky situation. Coming back to european banks, is that a shortterm trade based on valuations changed sentiment or have they sorted things out . Its a longterm trade. We are tactically cautious for the summer, for things that are for more policy concerns in the United States and the whole world feels that if the u. S. Dips a little bit, but for the next few years, next three or four years, i think europe delivers returns, price returns twice that of the u. S. Equity market led by european financials. David and lou, thanks. Thank you some news in the drug market an Fda Advisory Panel unanimously recommending approval of novartis new leukemia treatment it genetically alters a patients cells to fight cancer. Early tests have shown promising results in very sick patients. The entire process takes 22 days and can cost up to a half Million Dollars. Last nights vote, though, as you know, just a recommendation. A full fda vote is expected by the end of september it would be the first ever approval of a genealtering treatment by the fda still to come, Senate Majority leader Mitch Mcconnell set to unveil a new Health Care Bill at a midmorning meeting. A preview of what we can expect coming up. At 7 30 eastern, the latest workforce report from linkedin find out how hiring is going over the summer months. Later, street reaction to deltas earnings and a look at the sector squawk box back in a couple minutes. The power of innovative thinking. The power of 100 of the worlds top companies. The power of an etf. The power of qqq. The thinking we put in, clients get out. Power your clients portfolio at powershares. Com qqq. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Welcome back Senate Majority leader Mitch Mcconnell is expected to share with republican senators the details of the new version of its Health Care Bill at a midmorning meeting. Kayla tausche has more on what we can expect. Good morning. Good morning. The details of the bill will be shared and leadership will take the temperature of republican senators who have been divided over how to amend this bill since its First Release nearly a month ago. Some expected changes include preserving the Investment Income and payroll taxes from the Affordable Care act, adding more money to fight opioid addiction and a new Stabilization Fund and creating a high deductible plan option Vice President mike pence was in kentucky stumping for the bill and will likely need to cast a tiebreaking vote. No more than two republicans can vote no for the bill to pass aides have suggested two guaranteed nos to be Susan Collins of maine and senator rand paul of kentucky. Yesterday after seeing an outline of the new bill, paul called it an insurance bailout superfund and said hed still vote no. When we looked at the bill a week ago and i said or two weeks ago and i said i couldnt support the bill as it was they have now taken the bill and made it worse. They have taken any pretense that this is a repeal bill and they have made it a bill that basically is a spending bill many other republicans, especially those from states that expanded medicaid, are choosing to wait until the 11th hour to say how theyll vote one other determining factor may be whether an amendment allowing insurers to offer nonexchange plans makes it in. As recently as yesterday an aide for one of the bills authors, senator mike lee of utah, didnt know whether it would be in there. House aides have said theyll put off their recess if the senate produces a bill for them to take up, but well have to wait and see how that goes and how, joe, the reception of this bill is and whether its any different from the first time around. Right well talk more about it now, kayla, stay tuned. Joining us, former new york Lieutenant Governor betsy mccoy and former Vice President of bidens Economic Advisor and a cnbc contributor, jared bernstein. There he is, jared how are you doing . Im good, thank you. Right off the bat, i want to ask you a philosophical question, jared. Sure. Is it what we should intend to do in terms of medicaid taking on such a big role in the health care of so many americans, is that a viable way to approach health care . Because a lot of aca, a lot of obamacare, a lot of the additions are into that program and it really has exploded in the past seven years from what was a small relatively small program. Its now providing a lot of health care. Some states one out of four people are on medicaid yeah, i think should we allow it to just grow or is it something we should try to do to not have it be the health care of so as the answer should we just go to single payer in your view, jared . Why mess around with medicaid . I think single payer has some attractive characteristics and its very common in European Countries that spend half to twothirds of what we do and manage to cover everyone with better results that said, thats a way heavier political lift than anything were talking about. I like the way you teed up the question the important point, though, is something you touched on which is medicaid is just a vitally Important Program in the lives of literally 70 million americans. So the kinds of changes that were talking about, im happy to get fiphilosophical, but at h end of the day this is a political decision thats going to make health care for those many millions of people far less affordable if you go with either the senate or the house plan and i include the tweaked senate plan half of all births are now covered by medicaid. Twothirds of people in Nursing Homes are covered by medicaid. Now, if you want to dial that back, you have to figure out another way to support those folks with equally Affordable Care and eventually what youre going to do is reinvent medicaid so its actually a much more Successful Program than it often gets credit for. The single payer, just the description of how you described that in other countries, you talked about coverage and with Better Outcomes. You have coverage, but a lot of places you dont have any access, jared. And the reason that medicaid is so cheap is because they dont pay doctors and youre running out of doctors that are even going to i could make it cheap too if i paid 60 or 70 of what medicare pays. I disagree with you because i focused on outcome its for a particular reason. You cant have positive outcomes without access. You know that theres a lot of Different Reasons why you can do single payer with 9 Million People try it with 300 Million People, some need it well, its just i dont know. We have different betsy mccoy is here. Lets talk to betsy lets see what she has to say. Shes loaded for bear with this medicaid stuff. First, id like to address the misconceptions, the demagogue reout there. We hear again every day on the news that millions of people who are currently on medicaid are going to lose it that is not true because both the house bill and the senate bill grandfather in those who are currently on medicaid. They will not lose it. So thats number one but number two, we do have to rein in the rapidity of the growth of medicaid right now 74 million americans are on medicaid. Thats 20 million more than on medicare, the universal program for the elderly. Medicaid is crowding out aid to schools, roads, other things that we need its the single largest item in many state budgets, so there has to be a way to control the growth of this program, which as you pointed out, joe, was supposed to be a safety net program. But urngd tnder the obamacare r turned into a rapidly growing program with the intent of turning it into single payer it was almost a trojan horse. You know, i dont mind if you just tell us you were doing that, jared, it would have been a little better than well, i dont think that was a secret and in fact the Medicaid Expansion wait a minute gruber said there are a lot of secrets in there. The Medicaid Expansion was a well understood part of the program. In fact the Supreme Court tried to dial it back. Its not like republicans could have stopped it. Id like to point out why its so important to pass this repeal bill. Number one betsy, lets talk about the numbers for a second. Just a me, jared. There are 12 million americans who are currently paying penalties because they have chosen not to buy these plans. Theyre unaffordable and they offer benefits that these people dont want number two, there are hundreds of thousands of people who have been demoted from fulltime work to parttime work because of the employer mandate and many, Many Employers across the country who are being discouraged from hiring because of the obamacare employer mandate. Both of those things, the individual mandate penalties and the employer mandate will be repealed in addition, hundreds of billions of dollars in taxes will be repealed and we need that in order to clear the runway for tax reform. What this nation is waiting for is tax reform. All right, let me argue with you about some of your number, some of which are correct. We cant get there until we pass this repeal bill. I dont know why hes talking over me. He has plenty of time to talk. On medicaid, it is a factual error to say that millions of people wont lose coverage. You are wrong the cbo the cbo the cbo looked at the numbers and theyre projecting how many people 10 to 15 million would lose medicaid. Thats what they did. 10 to 14 Million People according to cbo. How many people will be enrolled in the future. So were now into the alternative news segment of the discussion jared, youre saying people who are currently on medicaid will not lose it. It is in the bill. Youre saying 10 to 14 people that are on . Not on now. Theyre not going to lose it theyre guaranteed its grandfathered in. According to the congressional budget office, because of the reforms proposed, the medicaid cuts proposed in both the house and senate bill. Theyre not cuts. 10 to 14 million fewer people would be covered by medicaid in 2026. But those are not currently on medication. Theyre slowing the growth in future enrollment. Thats not the same as losing coverage. So the other factoid that betsy has wrong is this business about parttime work in fact theres been a sharp decline in involuntary parttime work theres been some increase in voluntary parttimers. Thats something we want i dont think betsy is saying people who want to work parttime shouldnt be able to i can give you a list. That number has come down sharply. I can give you a list published in investors business daily of hundreds of employers across the country, not Just Companies but municipalities, junior colleges, senior colleges, county governments that have reduced fulltime employment and demoted people to parttime status to avoid the employer mandate it is a jobkilling part of obamacare. Thats not what the bureau of labor statistics numbers show and thats what you want to go on here. No. Look, this is not that complicated. Look, the employer mandate joe, help me here. Okay. Moderate. It adds too much to the cost i dont want to talk over you, i just dont want to let you filibuster. Okay, go ahead. Youve got like a minute. Thank you look, the cbo scored this and they found that over 20 Million People would lose coverage over the next ten years. Wrong lose is the wrong word. Hold on seven million would choose not to buy private plans. Thats not a controversial claim and its a lie it is a controversial claim because youve used the wrong word theyre not losing coverage. This is what they do on fox news this is not what we do on cnbc on cnbc we actually try to have discussions. Its a lie. You just told a lie. Theyre not losing coverage. All right this is just not the way to have this discussion. Read the cbo report. Jared, youre saying the word lose when its a fact fewer peep will be added down the road. You know youre doing it. 20 million fewer people are not have coverage. Its a loaded point to say theyre losing it, that youre yanking it, thats different than saying fewer people will be on it. No, its not. Its saying if you didnt repeal the bill if you didnt repeal the bill, over 20 million will not have coverage. Theyre playing music, but to me these two voices at the same time is music for cable. Jared hes distorting it. Id love to come back and have a rational conversation about this with someone whos a much more factbased discussion. We dont need any insults if you had the facts on your side you wouldnt be insulting me. Weve got to go thank you both and maybe we will do it again because it was something anyway. Coming up, Summer Hiring season has been hot, hot, hot, this according to linkedin the latest data up after the break. First look at u. S. Equity futures. We are looking at a higher open. S p up by 2, nasdaq up by 20 stay tuned, youre watching squawk box. What if we pull Customer Insights from the data in real time . Wait, our data center and our clouds cant connect . Michael, can we get this data to. . Look at me. Look at me. Look at me. You used to be the yes guy. What happened to that guy . Legacy technology can handcuff any company. But yes is here. So, youre saying we can cut delivery time . Yeah. With help from hpe, we can finally work the way we want to. With the right mix of hybrid it, everything computes. Good morning, welcome back to squawk box here on cnbc were live at the nasdaq in times square the chicago suntimes newspaper has been sold to a group of investors that includes a former Chicago City Council member. Tronk had also been seeking to buy the sun times. The Justice Department opened an antitrust investigation into that possibility but closed that probe after this deal was announced. The state of illinois has dodged an unwanted distinction the triple minus Credit Rating is the lowest rating still considered investment grade. Illinois could have become the first state ever to be downgraded to junk which s p said they might do if they didnt reach a budget deal. Opec compliance with production cuts fell to its lowest in six months during june compliance dropped to 78 from 95 in may among the biggest offenders, algeria, ecuador, iraq and venezuela. Federal reserve chair janet yellen will appear before the Senate Banking committee today thats after giving the markets a nice boost yesterday on signals about the pace of rate hikes and Steve Liesman joins us i started watching when i went home and said, you know what, im going to talk to liesman and youre going to have to summarize it for me. But i dont want you to skew it. You have a good skew antenna. That sounds strange, but go ahead. Its so great to come in every morning at 7 30 and do my report here. Go ahead. The big news from fed chair Janet Yellens testimony yesterday, the idea that the feds end point that this cycle could be closer than some in the market may believe that is there isnt really very far for the fed to go from here. Because the neutral rate is currently quite low by historical standards, the federal funds rate would not have to rise all that much further to get to a neutral policy stance. Okay. Now take a look at the feds forecast for how far they think they have to go. They have 2. 8 by 2019, but 3 is the long run rate. Maybe yellen is saying, you know what, we may get to 2 and coast there for a little while the market kind of has that dialed in already but its different from what the fed has been saying in its own forecast. Heres a quick summary of everything yellen said that matters, i think Balance Sheet will happen relatively soon. Could be a july event, more likely september event the next rate hike, its likely this year but its going to be inflation dependent and the inflation dependency of that was kind of added. It was a little more circumspect that the next rate hike would come by december the terminal rate, lower than you think as we just discussed jpmorgan saying you had bruce cashman on there appears to be an emerging view at the fed that the precondition for Balance Sheet normalization relates to Economic Growth whereas the precondition for another rate hike is better inflation data. So right now the rate hike running just 41 its traded well above 50 well see if yellen feels the need to bring back any of the dovish comments she made, but i suspect shes just fine with what she said yesterday and how the market took her words. The neutral point, as you said at the top, the most important thing. Does that mean that the peak of the fed funds rate in this cycle, however good the economy is, could be just a couple of couple of quarter point rises from here . Yeah, maybe three i think two is a number to start to think about weve been talking about three the whole time so heres the problem. One, the neutral rate is a moving target. Right now its thought to be at or near zero as the economy keeps going and growth increases and inflation comes up, the neutral rate is going to rise somewhat, but nobody really knows. Thats what i think what do you think i think that nobody really knows. Well, thats for sure. But we dont know that inflation stays quiet forever. And i dont think she knows whether this is absolutely a different terminal rate than we got in previous cycles i dont think she knows. I liked hearing it but i dont think she knows. They talk a lot about this r star, which is the neutral rate. I did a report not too long ago, the fault is in r star. No. You dont remember . No. Melissa is shaking her head. Well, she went to harvard. Steve, we didnt get any changes to longterm inflation targets which there was some talk of beforehand. No, but theyre a little more uncertain about the inflation and inflation dynamics she still says factors depressing deflation are temporary factors. Theyre going to roll off. The decline in Telecom Prices but there was a little more up certainty about that 5050 is probably a pretty good shot for this year but by september or maybe this month theyll announce that Balance Sheet rolloff. Steve, thank you very much. It was my pleasure. Our pleasure. I really enjoyed it. So did i. He said i had a skewed antenna. You cant get over that, can you . No. How did you interpret that . I kid melissa about Harvard Harvard was a glimmer in someones eyes when his school was like 800 years old or something, right john harvard went to cambridge. You went to all of them, didnt you cambridge, oxford . Just oxford. Just oxford it was fun. Best years of my life. Thats sad. Really these arent the best years of your life. Until he met you, joe. Until our first joust. And youre not married yet. You havent had children actually youre not married yet. These should be the best years. November 2015 our first joust, joseph. Linkedin out with its monthly workforce report hiring this summer is red hot, up 12 year over year. May and june were the strongest months for hiring since the summer of 2015 with the biggest increases in oil, energy, manufacturing an transportation. Lets bring in daniel roth, linkedin editor in chief to bring in the highlights. Surprisingly strong is it the main takeaway. This is the strongest weve seen since 2015 and its happening in industries that are doing incredibly well. So manufacturing, oil and gas, auto, engineering, aerospace, youre seeing places that are about using your hands, about building things, those are the places that are doing well Financial Services is doing well a lot of this looks like it is industries that were under the Previous Administration thinking we are not going to start hiring, were not going to do things under trump theyre starting to open up the doors and bring people in. Its unclear whether thats exactly whats going on but there is a feeling among employers that they can hire, theyre building toward the future, theres less regulation, now is the time to bring people in. Youre saying may and june is the strongest summer since 2015, but if those are true trumprelated effect, has it been that strong since he took office we saw it in january and its happening everymonth since then. Particularly the oil and Energy Sector that you said was one of the best performers, thats up to what date and does that factor in the recent Oil Price Decline or you think this is strength in the industry regardless thats a great point. Weve seen strength in that industry almost every month, but a lot of it probably has to do with the rise in oil prices. When you see Oil Prices Going up, there is the Oil Companies need to hire and this is all energy solar installers, big hiring solar installers, there is a desire to get people in who can do these energyrelated jobs. What about the retail sector. Lots of people with amazons purchase of whole foods. Are we seeing already or do you expect it to come as that acquisition rolls out lots of retail jobs disappearing as automation takes hold . This is fascinating we started looking into the question of this whole retail apocalypse this has been covered really well, everyone is calling it, theres huge closings, so we wanted to know whether the data backed it up what were seeing is its not happening. There is hiring going on, theres strong hiring, there is demand for people who have retail experience. But its happening in certain pockets. So San Francisco, washington, new york, denver, places that are doing well, cities that are doing well need retail workers and you still have a situation where 90 of all retail purchases are happening in stores. But a city like San Francisco, the issue at this point is the cost of living is so high, how are you going to have that cashier living in the bay area. Its not just cashiers, Health Care Workers. If you look at the skills gap in places like San Francisco, seattle, portland, austin, really hot cities, there is a massive demand for skills in places that dont pay well but where people who are doing well actually need people to fill those jobs, so health care, education, retail, food and beverage employers cant find people to fill those jobs because its so expensive. What happens historically do wages go higher wages go higher people leave so you can watch the flow of professionals around the country leaving San Francisco. Now, San Francisco used to be a net gain in hiring every month, one of the top hottest places to attract workers. Youre seeing it starting to drop seattle, portland, austin, denver, charlotte, those are the cities that are now attracting workers, a little bit cheaper. Thats on a regional basis. Where are the skills shortages on a sectorial basis health care is probably the biggest one. There is demand across the country for Health Care Workers who can do Health Care Administration who know how to run the big systems, to be able to run entire health care operations. And you see it in tech, theres a lot of Software Demand thats largely because everyone has become a tech company. No matter what youre in, you need people who have certain tech skills. Those types of jobs, traditionally theyre filled through immigration or through training here, and does that make a big swing factor on terms of companies weve been looking whether the h1b slowdown, whether the government clamping down on h1bs has had an impact on hiring. We havent seen it in our numbers but are continuing to look for it. Immigration definitely plays a role in filling these jobs right now the jobs, though, theyre being filled by everyone there is just such demand that people employers need workers no matter where theyre coming from. Dan, thank you very much. Dan roth of linkedin. I have to say whenever theres the visa debate, im glad no one ever mentions the 01b. Thats the one im on. Whenever they talk about clamp down, its always h1. If h1 is the high tech, what is 01 . H1, those are the people we really wanting. Maybe the 01s are expendable. I think its crucial that they keep them as long as its anyone theres a reason why its 01. Youre not really cut out for h1. I dont care. As long as 01 sticks. Why dont you take the plunge and just do it you mean become a u. S. Citizen . It takes time i think its eight years. Have you started the application process . I have eight years. To even apply. Have you looked listen, im 18 months in. I think well see. But, no, im pretty sure its eight years to start getting a green card. Lets talk about it in a few years. Im not sure lets talk about it if the 01s well, lets see lets talk about it. Coming up, stocks on the move ahead of the open on wall street futures at this hour pointing to a higher open. The dow looking higher by 4 points, nasdaq by 17 take a look at the yield on the 10year note and it was janet yellen that sent yields lower across the board yesterday 2. 323 is where the 10year is at well look at the price of oil after yesterdays gains on wti, were looking at a down picture, down 0. 8 on brent as well as wti. Squawk box will be right back. Ddos campaigns, ransomware, malware attacks. Actually, we just handled all the priority threats. You did that . We did that. Really. We analyzed millions of articles and reports. We can identify threats 50 faster. You can do that . We can do that. Then do that. Can we do that . We can do that. upbeat dance music bell ringing the power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Or a little internet machine . Read it carefully. [ phone ringing ] hi mom. It makes you wonder. Shouldnt we get our phones and internet from the same company . Thats why Xfinity Mobile comes with your internet. You get up to 5 lines of talk and text at no extra cost. [ laughing ] so all you pay for is data. See how much you can save. Choose by the gig or unlimited. Call or go to xfinitymobile. Com introducing Xfinity Mobile. A new kind of network designed to save you money. Were back im getting some details on this 01b thing. The 01 visa is for individuals or for an individual who possesses extraordinary ability in the sciences, arts, education, business or athletics. Then it ends with or in the tv industry it does. It does. Or in the tv industry. Youve got to be really talented in something useful or if youre in tv, you get one too. Well, thats lucky that was added at the end or else i wouldnt be here, thats for sure. I was reading wow, this describes you exactly. Extraordinary ability, 65 i dont think you get one for height alone, sadly. Looks to die for, hair. Everything everything youre flawless, youve got no flaws. Lets take a look at some stocks to watch this morning. Hes blushing you know what, because he believes me. No, thats not when you blush. You blush when its embarrassing. Because its so true. Seagate technology was downgraded and barclays cut the price target they said they have already cut much of the cost out of its operation, as much as it can, and several other factors are shifting Market Sentiment in favor of rival, western digital. Vantiv was upgraded they expect vantiv to benefit significantly from a transaction. A drug maker is rising in premarket trading. They granted orphan drug status for a muscular dystrophy drug. You need a little protection to make up for all the r d that you spend on something where youll never have a huge Patient Population target is out with upbeat earnings news and issued upgraded guidance saying comparable sales will be positive and earnings above the high end of its previous guidance previous guidance calling for earnings per share of 95 to 1. 15 per share. The current cup census estimate is 1. 06 per share the retailer is doing well in the face of a competitive environment. Shares of walmart and kohls are up 1 premarket as well. Coming up, the military are relying more and more on drones to help capture the bad guys up next, meet a former special ops Army Intelligence officer who was responsible for hunting the top two isis leaders using drones. Oscar health signing a deal with humana. They are looking to pa yond individual health care. They will join us, well be right back your Insurance Company wont replace the full value of your totaled new car. The guy says you picked the wrong insurance plan. No, i picked the wrong Insurance Company. With Liberty Mutual new car replacement™, you wont have to worry about replacing your car because youll get the full value back including depreciation. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™. Liberty mutual insurance. Executives gathered at the white house recently meeting with President Trump on the state of their industry. For more on the drone business lets bring in brett velakovic, a former u. S. Army special ops Intelligence Officer i dont want to screw up your name, brett, and now founder and ceo of Drone Service company, expert drones. He is author of drone warrior. Brett, its controversial, thanks for joining us. But what weve accomplished using drones, as president obama and the president was criticized for it, but incredibly probably beneficial to society that it was used in those circumstances. Would you not agree with that at this point, get that out of the way . Absolutely. Weve been fighting wars for centuries and never before have we had this ability to know so much about our enemy this isnt just a little gray helmet in a trench 100 yards away now we have Drone Technology just like businesses use data to drive their decisionmaking processes, we use data and intelligence information from drones to help us hunt the enemy and help us basically save lives. So every single war Going Forward will be utilizing the benefits of Drone Technology from here on out because of how beneficial it is to the war fighter. But the future of drones is not warfare, its that will always be important, but really the future of drones is the private sector and enabling businesses and employees to do their jobs more efficiently. I mean i looking at the uses that youve identified with your business, some of them i even feel like after talking about what drones have done for us in warfare, i feel like its almost i feel kind of strange talking about some of the mundane uses for it, but its very interesting did you see delivering alcoholic drinks and actually shaking the alcoholic drinks to people that have ordered them, brett see why im having trouble switching from warfare to Something Like that . But is it really possible . There it is. Weve done it look, the truth is military drones Drone Technology is evolving beyond its military origin to becoming powerful Business Tools there really isnt an industry right now i tell leaders of industry all the time, that if youre not thinking of ways that Drone Technology can help make your company more efficient, youre already behind because the amazons and facebooks of the world, they get it one of the examples youre talking about is we had a client, pepsi, come to us and they said, hey, how can we give drones a voice within the beverage industry. So we said, hey, why dont we build a drone cocktail bar where we modify drones, have them shake drinks, mix drinks, deliver them to peoples tables. While its not necessarily any faster than a bartender shaking a drink, its entertaining, and so people are using them for marketing. We have Industries Like the construction industry, agriculture, Insurance Companies. We are in the midst right now of a drone revolution and people and business owners, they need to get with it because were going to see a lot more use cases of this Going Forward. Brett, i read in your notes that with your business, you now make a lot more money servicing drones, ie repairing them when there are crashes than the outright sales oerriginally. How far away are we from having serious human injuries or accidents from drones that could set the industry back a long way and prevent it from seeing amazon using it to make widespread deliveries. Thats a good point the truth is a lot of these manufacturers right now are working on sense and avoid technology and basically obstacle avoidance were seeing some of the newest drones on the market being able to maneuver around buildings and starting to get to this point where they could be crashproof, which is obviously bad for business because right now people are buying drones and crashing them and theres a big industry for people than how to repair these things. When you think about just in 2014 there were 450,000 drones that were sold in the u. S. And just last year we were close to 2. 5 million. This year were talking about over 3 million so just think about the amount of drones that are going to be in the airspace. You know, so now theres this whole ecosystem in Silicon Valley where people are making apps specifically geared towards how could we help the construction industry, how could we help real estate developers, agriculture, farmers, and theres all these industries now that can benefit from it and really its about making it safer, increasing their endurance, making sure theyre not invading peoples privacy, because thats obviously a big concern, but in the end it really is about how we can kind of use drones to create this positive impact on humanity and change the world. Just coming back to the use in warfare, you said well never go to war again without having huge amounts more information on our opponents, our enemies than they do, but also i read that china actually makes more drones than the u. S. Does so whos got the best technology and how confident are you that the u. S. Will always be ahead of others if a war does come up quite frankly, thats the thing that makes me nervous because i see both sides of that ive seen the sensitive government top secrettype technology and then i see the stuff trickling into the private sector right now we have hands down air superiority when it comes to military drone tech, like hands down were the best at that. But a lot of that stuff has been restricted to this kind of government side of things and hunting terrorists and counterterrorism now, the problem is, and we are looking at this data just last night for consumer drones and the chinese actually own close to 80 of the consumer drone market, which is insane, and weve really missed this gap and i worry that we have to be careful and make sure that were focusing on that as well. Brett, love that, very interesting, thanks. Thanks for being with us this morning. Squawk box back in a couple minutes your brain is an amazing thing. But as you get older, it naturally begins to change, causing a lack of sharpness, or even trouble with recall. Thankfully, the breakthrough in prevagen helps your brain and actually improves memory. The secret is an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. When a fire destroyedwith us everything in our living room. We replaced it all without touching our savings. Yeah, our insurance wont do that. No. You can leave worry behind when liberty stands with you™. Liberty mutual insurance. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. Antthats why at comcast,te wto be connected 24 7. Were always working to make our services more reliable. With technology that can update itself. And advanced Fiber Network infrastructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Earnings season takes off. Delta under pressure after reporting results. Reaction from the street is straight ahead. Yellen round two stocks look to extend gains as the fed chair returns to the hill for her second appearance before congress. Plus President Trump back in europe the commander in chief arrives in france for a meeting with the countrys president. Well tell you whats on the agenda as the final hour of squawk box begins right now. Live from the most powerful city in the world, new york. This is squawk box. Good morning. Welcome back to squawk box here on cnbc live from the nasdaq when Morgan Brennan is on, you combine good morning with you combine it. You can combine it. You love i love europe, i do. Especially france. I think it would be a better place if everything you know, just a few if you could start a business, a brewery in greece, maybe we wouldnt be constantly worrying if theyre going belly up. Youwouldnt buy greek beer, though, would you . What are you saying buy their olive oil and other things like that. Okay. You love the sports in europe as well, dont you soccer you know what i think they need to do. You do like tennis. Were starting to adopt a lot of things. Football goes over there and you like it. Real football. You mean american football. Along with wilfred frost, melissa lee, andrew and becky are off today. The nasdaq is still pretty strong on a relative basis s p is up 1. 5. A little over a point. Dow jones up just under 6 and the nasdaq up 16 treasury yields were moderating yesterday. Today 2. 32 on the 10year. Oil prices have been in a range with 45 as the midpoint. Were right about there today, 45. 07. Among todays top stories, uber is combining its services in russia with yandex. Yandex is a producer of search, mapping and Navigation Software in addition to providing ridesharing serves. You can see its up 22 today. Janet yellen heads back to capitol hill today she will testify before the Senate Banking committee in just a few hours. Yellen appeared yesterday before the house panel striking a dovish tone about future rate hikes. Amazon is reportedly planning to release another echo later this year. The end gadget blog says the new echo will have a smaller Smart Speaker and have round edges and also have a new clothlike exterior similar to that of google home and apples upcoming home pod. Delta out in earnings. The airline reported an adjusted quarterly profit of 1. 64 a share. That was three cents below estimates. Revenue was essentially in line. Revenue per available seat mile was higher by 2. 5 joining us on the squawk news line, joe denardi. Are there winners and losers in this quarter with the major carriers, joe . Why the threecent shortfall and others have been above expectations, right . Yeah, i think results in the quarter were largely in line they missed our estimate by a couple of cents just because we were slight sleely ahead of the guidance the outlook for the Third Quarter is a little better on the revenue side and a little worse on the cost side so i think that may be why the stock is indicating down a little bit. What issues are specific to delta at this point . We know about united and still dealing with some legacy issues and merger type issues what is delta trying to what are managers there trying to do . Yeah, i think what differentiates delta over united and american is the margin premium they have over those two carriers and i think whats important to delta bulls at this point is proving to the market that they can maintain that margin advantage. I think the bulls on united and american like the idea that they can catch up on margins and the earnings power associated with that, so i think delta needs to prove their margin advantage is sustainable longer term. Is there are we right at where were going to stay in terms of the number of seats that we see occupied on the carriers they finally Warren Buffett finally went back in, or at least his company did. That would have never happened if these guys continued to do the things that have hurt them in the past. So they really know how to manage their businesses now in terms of keeping planes full yeah, i think thats certainly a part of it, but i think what a lot of people miss is that whats truly different about this industry is where they make their money. And 10 or 15 years ago, you didnt have bag fees, you didnt have change fees, and the amount of money that these Airlines Make from selling miles to Credit Card Companies is just tremendously underappreciated. And thats what makes these businesses better and more sustainable longer term. Thats why ultimately theyll get much hire multiples than they get right now delta trades at nine times earnings right now if they can prove to the market that its Better Business over a full cycle, that multiple will go up. Joe, i think that is a very underestimated by investors in terms of basically when chase, for instance, has a card that offers points, chase is paying the airlines, correct do you think investors are appreciating that story . We see every day all these credit cards out there offering all sorts of airline points, these joint sort of credit cards, whether it be a united mileage plus or a delta card are investors factoring that in . Absolutely not. And i think thats really the truly underappreciated part of this story when you spend on your cobrand credit card, you earn miles, the bank needs to buy those miles from the airline and theyre paying the airline much more per mile than it costs the airline when those miles get redeemed because the airline is delivering to them a very profitable and sticky customer and that business has exploded in value over the past several years. Because of consolidation, airlines have been able to negotiate much more favorable terms from the credit card terms and its resulted in a massive shift on who makes money on these cards from the issuers to the airlines its not appreciated because of the disclosures that airlines provide around that business are inadequate. Joe, where are we delta in the battle against the middle Eastern Airlines some interesting news yesterday out of american and their battle with the middle eastern carriers yesterday. Yeah, i think i think delta, united, american, are all on the same page in terms of wanting to exert as much political influence as they can, you know, in their hopes of leveling the Playing Field it remains to be seen how effective theyre going to be because really on the other side of that, you have boeing to some extent and the countrys largest exporter they dont want to see any constraints put on those airlines ability to grow. So were not particularly hopeful that anything of substance gets done. But well see. Thats amazing. Youre right, joe, people dont think about that but ive seen all these offers andrew is very smart about which credit cards you get these unbelievable deals. But everything we spend goes so we get one pass miles like united roughly 50 to 60 of deltas earnings or American Airlines earnings comes from selling miles to Credit Card Companies. 50 of earnings yes not of revenue. Of earnings but thats still thats a staggering number. I dont even get that mad at my wife when she spends money because im getting the miles. I mean its not perfect, its not a great trade. You give me a credit card, ill get you miles too its easy. I dont know, that might not go over well with penelope, im not sure thank you, joe, i appreciate it. I learned some things there. Thank you other talks to watch, check out shares of target they are up in premarket the company says Second Quarter earnings will come in at the higher end of its guidance and Comparable Store sales will be positive customers are responding positively to changes target has implemented. Those shares up 5. 5 other retailers, walmart as well as kohls, dollar tree, macys, theyre all higher today. Snap was upgraded from a buy to a hold. The analyst acknowledges the recent selloff but says nearterm risks to revenue may be overstated. Shares of Teva Pharmaceuticals getting a pop on reports they will poach rival Astra Zenecas ceo. Astrazenecas shares are down lower on that news. President trump arriving in France Joining french president Emmanuel Macron for a News Conference later today joining us is p. J. Crowley, former assistant secretary of state in the Obama Administration and author of red line, American Foreign policy in a time of fractured politics and failing states. Good morning to you. Good morning. Thanks for joining us i guess the first question is, is how popular or unpopular is President Trump in france at the moment hes very deeply unpopular in france and this presents an interesting conundrum for president macron on the one hand the politics would suggest that he should push and prod President Trump on climate and other issues when theyre together in public later in the day on the other hand, he has the opportunity to become kind of the trump whisperer in europe. Under george w. Bush you had a great relationship with tony blair. With barack obama, it was Angela Merkel so whos going to step up and kind of be the connective tissue for the Trump Administration from europe. Macron has that opportunity. But that would be a remarkable turnaround, if that was the conclusion of today meeting compared to those meetings, the handshake, infamous handshake at the nato conference around about a month or so ago. Well, it is but it is a surprise that macron made the invitation, you know, to President Trump to come and its been a surprise that trump accepted on the one hand, you know, from Donald Trumps standpoint this is an opportunity to be president ial this is what president s do, you know, confer with foreign leaders on key subjects. The key subjects today being Vladimir Putin, counterterrorism cooperation and syria. And obviously president s also revel in the opportunity to commemorate important historical events so this is a plus for trump. Whats unusual, obviously, is the context of this trip this is President Trumps first public appearance since the g20. Its the first public appearance since the revelations of the emails from Donald Trump Jr so hell be pushed in this press Conference Today on that and on whether he accepts Vladimir Putins rejection that russia interfered in the 2016 campaign. Talk a bit more about the position in france, not just macrons position, but towards russia because it was often not focused on key topic at the french elections where you had Marine Le Pen and others pro russia it was really only macron that was antiputin so can trump find some ground there with the rest of france, even if its not with mr. Macron obviously and trump himself kind of weighed in in the election he seemed to favor le pen. But this is an important relationship france is one of the most capable of americas allies. It does spend significantly on its defense so that passes that kind of trump bar. It would be a very highly unusual relationship, but the fact that both that the invitation was made, the invitation was accepted, theres an opportunity here. And i think for president macron, hes had his own meeting with president putin since hes come to office they have a chance to compare on that and i think one of the questions here will be to what extent does trump move on this putin question you know, he did say yesterday in an entinterview with reuters that he did push putin for 20, 25 minutes, but does he accept putins denial or is he going to say that he needs to see more from putin actually that would be something that i think macron would respond to as well because, obviously, france itself had its own contest with russian interference late in the campaign obviously resisted that. P. J. , thank you very much for joining us this morning, much appreciated. And that trump macron conference scheduled for about lunchtime today eastern time. Oscar says it wants to humanize the industry. One of the first steps, a partnership with hugh mania. Plus media veteran Ben Silverman helped green lit shows. Later, why anything you say cant necessarily be used against you in a job interview, at least if the eu gets its way. Stay tuned, youre watching squawk box on cnbc youre gonna have dizziness, nausea, and sweaty eyelids. And in certain cases chronic flatulence. No sooooo gassy girl. So gassy. If youre boyz ii men, you make anything sound good. Its what you do. If you want to save 15 percent or more on car insurance, you switch to geico. Its what you do. Next next welcome back to squawk box. American airlines is ending a shared agreement with qatar and ethiad airlines. Thats where they share the same flight, each marketing under its own brand and flight number. American said the decision is due to what it called illegal subsidies that these carriers receive from their governments qatar says it will buy up to 10 of american despite that decision. Health Care Industry giant hu humana is partnering with oscar health joining us now is oscar health ceo and the cfo. Gentlemen, great to have you with us. This is oscar for business specifically so youre going after the Business Market with Humana Humana is providing the network of doctors, and what do you bring to the table what we spent the last five years building is a different kind of Insurance Company. The Health Care System is frighteningly complex and overly costly we said we want to start an Insurance Company where the insurer helps you simplify that experience, connects it up more, connects the dots for you in navigating this complex Health Care System. What we do uniquely well, i think, and what other partners see in us like humana is we are able to engage individuals and Members Around the health care much earlier on and in a much more deep kind of way. We have a very Personalized Service for people, watching over your shoulder as to whats happening with you as you navigate the Health Care System. With the click of a button, you can summon a doctor and about 70 of all oscar members get treated over the phone thats a beautiful combination with what they experienced for businesses in the national area. People enrolled with oscar, they have a much greater percentage use of telemedicine for instance, thats what youre talking about. In terms of the business perspective, though, does it cost businesses less because theyre managing the Health Care Costs earlier on in the process . The big thing it does do is attack costs, which i think is probably missing from the debate and what we think were in a unique position to do with Great Technology and great Member Experience is that we can work with partners like Cleveland Clinic and humana in order to get integration to drive Better Outcomes and lower costs. Does it preclude you does this deal preclude you from working with other hmos on other deals . We have a big landscape where week do partnerships we look forward to doing more of these things for a very long time. Youve had to pull out of markets because of aca, it got too costly to operate in certain markets. When you take a look at whats going on on capitol hill, were expecting the latest version of the republican plan today, what are you looking for in terms of the impacts on your business and how you do business. A couple of thoughts on this. I just still dont think that people will be crazy enough and suicidal enough to throw 25 Million People off their Health Insurance. So you dont believe in repeal, that they will repeal . I believe that there will at the end of the day and without calling the playbyplay be a plan that continues to cover tens of millions of people who have found coverage since the days of the aca. Im very optimistic about that i do think that what none of the bills that ive seen so far address really is the fact that the u. S. Health care system is too costly by a mile we spend about twice as much per gdp as any other rich country in the world. A bypass surgery costs 78 in the u. S. And 34,000 in switzerland, for example and i want to see some things in that bill that start addressing that problem there isnt enough competition in the value chain of health care i do think if you consumerize this market more more transparency. More transparency, xactly, more choice for consumers, you can attack some of the underlying issues. If you, for example, were to give employees the choice of buying a plan, you could free up to 150 billion per year in more income to americans choosing to buy different kinds of plans. Wow in thamerms of oscar, youre a startup essentially and looking to expand. When you take a look at what is being proposed, what could hurt you the most, what could help you the most regardless of where the debate ends, we think were well positioned because people are going to need Health Insurance and we think with our technology platform, focus on consumers, we think were going to be in a position to grow a very big business over a very long period of time. As long as were stable, i think well be fine. I think that as we focus on investing innovation, its with partners like humana and partners like the Cleveland Clinic that make us super optimistic. Thats a very diplomatic answer at the same time, with this debate going on and the uncertainty with health care, are you at all pulling in your reins . Are there any markets youre saying, you know what, maybe we wont enter that market because things are a little uncertain right now. Theres got to be something. So we are about doubling our footprint for next year so we are optimistic about even the individual market. In nashville, were rolling out oscar for business with humana and we plan on going into the individual market. We think its a market that you can make work. If you look at the texas marketplace, a market where you didnt have Medicaid Expansion, the average risk from 2015 to 16 came down. The population insured was healthier than the year before but there are some markets where that stability hasnt really necessarily occurred and more work needs to be done to stabilize the markets. I do think if you go ten years out, u. S. Health insurance, u. S. Health care will look much more like we and others envision it there will be deep integrations in the way we have built them with the Cleveland Clinic between Insurance Companies and between Hospital Systems there would be more risk sharing, more individualization, more choice, more convenience with televisits and so on. Thats what were positioned well for i want to say let us do the work, because once we are in the markets, we will get that growth, about 35 of members to oscar come because friends and family tell them about oscar the First Companies in new york that bought oscar for business bought them because they used to be oscar member and now run a business so as long as we can do our work, i think it will push the system forward. Got it. Thank you, mario and brian. Whos oscar oscar is joshs great grandfather. But why go back generations to get a name why joshs great grandfather . He immigrated through ellis island and the immigration official couldnt spell his actual name, gave him the name oscar. Josh, later on was in the e. R. And was confused about how this all works. He said this is almost like ellis island back in the days. Mario saying mario carts, mario. So mario health, people would say no, no, no oscar health is pretty good. Thank you. All right, thank you. Well see you again, im sure. This is three guys at Harvard Business school. These guys are going to be this is going to work, you know what i mean . These guys are on to something i do, i think so. We want to sell insurance to you as well. Really . Next time we come. We can talk i like insurance im from ohio. Facebook stalking potential employees. They do this and they may no longer be able to do this over in wilfs neck woods. Although brexit, i guess you arent eu. We still are at the moment. Just cling to that. Anyway, look at this, regulators say that employers must have a legal basis for even looking at social media profiles. Any Data Collected must be relevant to the job in question. Now, the guidelines published by the eu Data Protection agency, theyre not binding, but theyre considered highly influential and theyre expected to guide how authorities interpret next years tougher eu Data Protection laws. Its not a terrible idea, though. What . You dont think that if youre interviewing somebody for a job, you wouldnt want to check out their social media to see if theyre racist or violence. Theres too much access to private information in general. Well, dont put it out there. Thats a fair point as well. Its not private anymore. If you think anything is private, i dont know if you need to change some of your he seems worried maybe you just need to change maybe we should check out his social media. Thats fine ive got a very clean social media account. Maybe you need to change some of your social media habits. Hes worried about his 01 visa. Theres two big reports about to hit the tape. Plus janet yellen back on the hill today weve got that going for us. Just a few hours until the fed chair testifies before the senate well talk to an economist stay tuned, squawk box will be right back hey dad, come meet the new guy. The new guy . What new guy . I hired some help. He really knows his wine. This is the new guy . Hello, my name is watson. You know wine, huh . I know that you should check vineyard block 12. Block 12 . My analysis of satellite imagery shows it would benefit from decreased irrigation. I was wondering about that. Easy boy. Nice doggy. What do you think . Not bad. What do you think . The power of a low volatility investing approach. The power of smart beta. Power your clients portfolio with powershares. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Call 8009830903 for the prospectus containing this information. Read it carefully. Distributed by invesco distributors inc. Good morning and welcome back to squawk box here on cnbc live from the Nasdaq Market site in times square mostly cloudy t among the stories front and center the latest automaker to face accusations of possible illegal emissions, daimler they have summoned daimler to address allegations that it sold cars with excess emissions in both europe and the u. S. Thats pretty interesting, daimler, huh and President Trump is in france with a busy schedule already under way. Hell meet with french president will you do it for me, wilf emmanuel. Its not a tough one. The way you do it, you roll your r, you show off. I dont think i do. You do. I only did it because you forced me to. Its easy for you to go back and forth so we know you speak french you can fake it. All right, weve got to get to the data later hell hold a joint News Conference. And verizon has issued an apology to customers after using information from customers that was exposed. I think we do have a hard number to hit here. So lets hit it. Rick all right lets start out with jobless claims, shall we last week 248 moved up to 250, now its down three, 247,000 continuing claims. They have been below 2 million for a little while 1. 945. The meat of the matter june, ppi up onetenth, a little hotter than the unchanged we expected strip out everything we need to eat and drive, food and energy, its still up 0. 1. Up 0. 2 on trade month over month and thats core rate as well final demand year over year, lots of stuff here, right . 2 , 1. 9. And on the trade year over year 2. 0. If we look at all of those inflationary year over year numbers, theyre all a little bit cooler, but then of course this is ppi. Response of the market, 233 tens up up 11 dow futures before, up 13. Dollar index still under the gun a little bit of course look to overseas weird things happen. Yesterday there was a very small document, they changed the document so yields are popping a little bit, flirting with 60 basis points we want to keep that in mind theyre hovering at the highest yields since october why is that important . Because the spread between us and bund seems to be narrowing a bit. We want to watch the leadership, watch the correlations and of course we want to Pay Attention to janet yellen today on the senate floor it certainly seems as though when you look at her face to face, she might be coming towards more Balance Sheet or tightening, but i really think shes kind of walking backwards a little bit, maybe a little Michael Jackson move there i do think she is walking it back a bit in the ending bob brannon wrote a piece. Maybe the yield curve is Something Like japan something to Pay Attention to with Balance Sheet reduction than necessarily raising rates, kind of the message from yesterday. Joe, its all yours. Okay, rick, thank you Steve Liesman is here again. You were whining last time you were on about coming on in the morning like you have some hard like its difficult. Did i i didnt give you any grief today. What were you you get to be on squawk box almost every day. What were you complaining about . No, its the introduction, joe. Like this one no, no, no. When i have like a prepared hit and incredible wisdom in the prompter that i feel is essential that youve worked on. That ive done work on. Okay. And then its a bit like lucy sticking out the leg and Charlie Brown tripping over and with the football and the whole thing. You dont have that now, though. No, but weve just done it almost as if i did i was going to Say Something about are you going to do constants . Do you want to say anything about what rick said. You had a 006 pop in food, it looked a little bit up the chain of pipeline pressure, finished goods up 0. 2 and intermediate down 0. 2 the thing i wanted to say is we were looking for possibly a pop because you have the layoffs in the Auto Industry and that can sometimes mess with the seasonals. You didnt get it. Still speaks to me of a strong jobs market. Okay. Im just going to ask constance one question really and then you can because you watched the whole thing yesterday so you can from there on you can do it, all right. Constance, chief economist at kpmg my question, constance, i referenced it earlier with steve, its nice when janet yellen says we may have a lower terminal rate than previous cycles, but my point was does anyone really know whether inflation stays like this forever . Can you say for a fact that things are different right now and the fed, when its finished, will be lower than it was in previous peaks or do we not know i think theres a really good set of evidence that says it will be lower. Geographically . Theres potential gdp, which is the sum of the growth rate of the working age population plus the working age productivity productivity is about 0. 8. The thing about inflation that i think is really important, is it good disinflation or bad disinflation were having disinflation. Prices are increasing but at a slightly slower rate when you look at things like the atlanta feds sticky price index, which looks at the prices of things that dont move around a lot. Fruits and vegetables. Apple prices have gone up, maybe ill buy a pear. So thats a flexible price a sticky price is Something Like rent, right. That price moves very, very slowly so if you look at the sticky price index year over year, its been going down for the last three months if you look at another measure thats the trimmed mean cpi that the cleveland Federal Reserve puts out, thats also been going down and whendisingaggregatedisaggre. The Central Banks are looking and saying is this good disinflation, is it technology driven, is it productivity enhancing disinflation in which case we can sort of look through that but they are constrained because look at the spread theyre not going to annihilate the banks by continuing to raise the fed funds. If you look at the euro dollar futures, its projecting a terminal rate of 2. 25, which is much lower than the feds projections. To me its a Novel Concept to even speak of bad disinflation i grew up in the volcker days. The stock market went up like eight times in value or something. I cant believe it can be bad. It was bad right after the crisis. Deflation can be bad but how is slowly increasing prices bad . Well, theyre increasing at a progressively slower rate so you could continue to go on a trajectory to deflation. So its a second derivative. But also as a mark or highlight of lower aggregate demand. Exactly. That would be bad inflation disinflation. Do you think theres such a thing . If its telling me that consumers are taking a side light that retailers and producers are having trouble selling their stuff and prices are declining for one reason, thats one reason. But if you have improvements in technology and things are more efficient and prices going down because of that or greater competition, thats good disinflation. We look at the Services Component of ppi and that has started to decline and thats interesting because services is the biggest part of our economy, but also the place thats most labor intensive where weve had trouble getting productivity gains. So it could be a precursor to an improvement in productivity. I want to do something we like to do here on squawk box which is consider that the market has it totally wrong. Okay. Lets talk about yellen yesterday. Everybody took this dovish idea. Theres a couple pieces i read, tom porcelli wrote one of them they only read one part of the statement. On one hand she said we may not go so far. On the other hand she said right now the neutral rate is here but i see that neutral rate going up over time. So the other part of the statement says, you know what, were going where we thought you were going where the first part is dovish. The market only listened to half of yellen yesterday. Yeah, because over time may not ever happen, right so, yes, the market is a discounting mechanism, right, but we dont have visibility on that over time that shes talking about. We have visibility on whats happening in the near future, and that visibility suggests that we have very moderate price pressure we have very moderate wage pressure and it would behoove the fed to go slow slly like they said they were going to do. And the other thing joe said, which is smarter than he knows it is, the fed doesnt know what the neutral rate is. I didnt realize the insight that i was expressing. What im about to tell you is that there was a famous paper in 2002 cited by many, many people, updated in 2007 which came to the conclusion that the fed doesnt know where the neutral rate is and thats a big part, a big part of Monetary Policy theory right now. Who orphinetes, the central banker for cyprus. Who took 84 pages to say what you said in 30 seconds. The golf course or the island the country okay. My point is that you took 30 seconds to say what they took 84 pages to do. Constance, they have to try to forecast it you just said basically out of the mouths of babes. Im trying to give you a compliment it was very smart. Okay. Its insightful i didnt realize it was smart. Its a little back haenhanded its a little backhanded compliment. Im trying to associate his remarks with highfalootin academics. We cant know what productivity is. Its really nearly impossible to forecast. But you have to do it is the point if youre a policy maker administrat constance, thank you. The first couple pages are really instructive and interesting about the challenges of making policy. When we come back, first apple, now facebook reportedly getting into the content game. So which tech company will be the next to go Hollywood Well talk to ben lvma rit r e break. Stay tuned, youre watching squawk box on cnbc you always pay your insurance on time. Tap one little bumper, and up go your rates. What good is having insurance if you get punished for using it . News flash nobodys perfect. For drivers with accident forgiveness, Liberty Mutual wont raise your rates due to your first accident. Switch and you could save 782 on home and auto insurance. Call for a free quote today. Liberty stands with you™ Liberty Mutual insurance. Anyway, its day two of the annual allen and Company Conference in sun valley where politics is playing a particularly big role this year. Julia boorstin is there. Bigger than normal, huh, julia bigger than normal. It does seem bigger than normal. We heard quite a lot of talk about Jared Kushner and ivanka trump before they arrived here last night we caught them as they were walking into their lodge to check in here last night and the crowd here is politically mixed. On a panel yesterday about the economy were protrump investors stanley drek miller and seth carman and the ceos are similarly mixed. We did hear quite a bit of support from some ceos about President Trumps policies, including from sir martin sorro. If President Trump could implement his agenda of infrastructure spending, of less regulation and lower tax, if he can, thats a boost to the u. S. Economy at a time probably that it needs it. On the other end of the political spectrum, mark penkis and mark hoffman are here. They cofounded a new initiative to win the future to crowd source ideas and support for the Democratic Party i dont want to sound geeky, but what weve spent our careers doing is designing these social systems that enable millions of people to interact with each other and coalesce and drive outcomes and so we said why shouldnt we try to bring that innovation into politics. Im sure well continue to hear much more about politics in the next couple of days. Now, coming up in the next hour of squawk on the street well have an exclusive ceo, less moonves. Back to you. Thank you im surprised this guy isnt out there, aztec titans unite in sun valley were joined by one of medias top executives leading the charge joining us awardwinning producer and show creator Ben Silverman. An old colleague, previously cochairman of nbc entertainment where he green lit shows like the office and won awards for that hes now chairman and coceo of independent studio Propagate Content and is the producer of apples music debut tv series, planet of the apps. Theres life after nbc look at you, youre tan, you look healthy, you look good. Life after nbc is great, isnt it fantastic. It wouldnt be good for me. But its good for you. Is there something you want to tell us no, no, no. I can never leave. Anyway, was it a chance when you left i dont think it was for you you knew this is the Third Company ive built in having traveled around the world and worked on entrepreneurial activities and building businesses and trying to push the transformation that were living through in media. I felt a little bit like, you know, i was being held back inside the corporate world because you have to protect legacy you have to look backwards if you have a giant 50yearold institution built on a syndicated platform of local affiliates and traditional broadcast partnership, its going to be hard to take it to the next century i think that whats been incredible for broadcast television in general is this new addition and newfound money in the way they have been able to work out subscription fees with the Cable Operators on their live product, on their sports product and on their big Primetime Entertainment product so that was almost like a hail mary pass we were working on while i was there. But other than that, youve got to protect the back. You cant look to the future as much as you want to. When i think digital, for some reason i think of different distribution i dont think that the content needs to be molded to the digital age, but it did, and youve done it somehow. No, but thats such an interesting point because the genres arent changing that much the genres are not changing that much you look at netflix and amazons content, its still dramas, comedies, kid shows, animated shows. The formats arent even moving from 30 minutes and an hour to 37 minutes. Why do you need to note that there would be a difference . But, but, alongside it bubbling up are tremendous amount of content initiatives that are totally different the way in which content is created and produced on youtube, the way that its produced socially the way that a platform like twitch gets born out of people playing video games. You start to see there are a lot of different opportunities that digital will enable, but whats interesting in this kind of initial transformation period, its more the distribution machine is changing and new players are coming in to distribute it differently than the actual content itself. And were not yet at this place where Story Tellers and code writers, i talk about this a lot, are converging, but its starting to happen and youre seeing new forms youre seeing generational shifts. How big a player will apple be in its own content creation in five years time, as big as netflix . Well, obviously ive had a great privilege to work with them and theyre an extraordinary company. And i think they recognize that content is something that they have been associated with from the itunes platform and otherwise. I think anything they want to do, they will and can do you know, im not inside how theyre making their longterm decisions in any way, but ive got to think that they will be a major player i also know just from my own experience with them the design heritage and creative heritage that exists inside apple has many ways to be expressed. Its not just in their product offering, but also could be in their content offerings. It seems like everybody wants to get into the content business facebook now wants to invest in original content snap will probably go down that route. Are there companies out there that say, you know what, that really doesnt make any sense or that makes tremendous sense . Well, i thought right away, even when i was at nbc, that publishing, which is what were talking about, this is video premium video publishing, was a way for you to differentiate your product if there was 100 different ways to get your email and a hundred different ways to talk to your family and 100 different ways to get your news and information feeds coming through, then what was the differentiatorbetween me choosing facebook, the apple product, snap product or twitter product. Video seems to be the way in which these companies are defining themselves differently. What choices they make, whether they do live, whether they do highend drama, whether they do things related to technology what it is that they cando and how theyre bundling that around specific audiences and what the digital platforms have an what e digital platforms have an advantage in today is that they really know their audience so from the sales side, what they can deliver back to the advertiser, if they do it correctly, can be pretty profound could that also be helpful for you as a content developer, potentially, for these outlets can they hand you a lot of data and say, this is our audience. Create something for us. And thats one of the things that i look at the at t, time warner, direct tv potential merger and see, wow, theyre going to have a lot of information to play with, as well, connected to creativity. I dont think data can inform, me, you know, and the playwrights i work with and the people that are literally coming out of the theater they dont want to hear about that but knowing your audience helps a lot. Not enough time yeah. Youre in l. A. Now, right im in thats where the okay, well, but next time youre back here grace us again, please love to be here im still surprised you arent in sun valley you head there had you know what, i havent done enough business with the alan and company if i hire them my banker, maybe all right anyway, our gain is their loss here are the futures at this hour after a decent gain yesterday, after a percent for the nasdaq the s p and nasdaq are higher again. Back in a few minutes. For your heart. Your joints. Or your digestion. So why wouldnt you take something for the most important part of you. Your brain. With an ingredient originally found in jellyfish, prevagen is now the number one selling brain Health Supplement in drug stores nationwide. Prevagen. The name to remember. Tame now for your kensho stat of the day. After the job reports beats by a similar magnitude as it did on friday, the topperforming sectors are tech, staples and health care. If you find the policy, do something more rigorous. Mainly buying the stocks and companies that have gone down in spite of terrific quarters youll be in a much better position when the market turns when the sellers, of course, come to their senses welcome back to squawk box. Lets get down to the New York Stock Exchange jim cramer joins us now. Jim, sum up the news weve had from the airlines the last 24 hours. Whats your top pick of the moment geez, what a bummer southwest was pretty good. We have some good numbers from United Continental coming in with a real head of steam with american. And then give us this one. And you kind of just say, like, get with the program that said, they do have growth, they are they have a lot of cash do i sell the stocks only just to be able to buy one thats a little bit better if youre a hedge fund manager. Because this ones fine. The group is fine. Its fine. Its just that theyve had a nice run jim, the retailer is having a rare positive bump this morning because of target upgrade guidance yeah, well, this is the empire striking back theyre all going to wait youre going to see a lot of these, because they are not destroyed by amazon prime, theyre going to try to tell you they have a pulse. Target was not as bad as the analysts thought were still dealing with a lot of companies that are going to have a down 2018 over 2017 take it in mind theyre going to try to rally, just like they tried to rally with costco you could get something going provided the targets not the only one we need another retailer to come out and say the same, macys, choll kohls, somebody, anybody, any retailer so jim, we get a 5 jump in the s p physical gary cohns fed chair. Whats the Market Reaction if it was joe kernan as fed chair . Oh, a nosedive. Oh, did i stay that . Ive got to mull about that, ive got to check social media to find out more joe would be good joes got an upbeat attitude about the market i stay at zero for eight years. Why the hell do i have to think . I dont have to do anything. I thought that you would start giving money away to everybody. Because theyve got like 2 trillion why dont you start giving money away we can do that . What is that, a universal basic income it income ubi . I got confused. Wilf is hard to understand earlier, he said, when will apple be ready i thought he wanted to go to applebees aisle happy to take him to applebees, a real good special tonight. An early bird. I would like to go to applebees okay, applebees, make it a date okay, done. Ill take a date to applebees then, not malibu up next, monkey heads to court. The details when we come back. [car tires screech] [bell rings] without pg es assistance, without their training our collaboration with pg e is centered around public safety. We could not do our mission to keep our Community Safe. Anytime we are responding to a structure fire, one of the first calls you make is for pg e for gas and electric safety. Its my job to make sure that they have the training that they need to make the scene safe for themselves and for the public. Its handson training actually turning valves, turning systems off, looking at different wire systems all that training is crucial to keeping our Community Safe and our firefighters safe. Together, were building a better california. A federal Appeals Court in San Francisco is deciding whether or not a monkey owns the rights to a selfie the animal technically took at a Wildlife Reserve in indonesia this is ridiculous petta sued a british nature photographer and his publishing companyfor Copyright Infringement they sought a court order in a way that would benefit the naruto, the monkey that guy is smart the monkey . The monkey is smart. Did you see that expression on his face . Im putting one over on the entire human race. If that ever comes true, planet of the apes, this guy might be in charge. I wonder whose app did he took it on whose phone did he take it on does naruto have a phone its been real and its been fun. Hope everyone will be with us tomorrow as for right now, squawk on the street is next. Im Carl Quintanilla with jim cramer and david faber at the New York Stock Exchange. Futures pretty steady, as we await yellen on the hill, day two. Well get a cbo budget score, a new senate Health Care Bill, president s in paris, lots to watch. Europes mostly green. Yields ticking up a bit. Ppi up 2 year on year, just above expectations the fed chair sparking a strong rally on wall street, the second day of her testimony begins this hour on what is shaping up to be a busy day in washington pl