Transcripts For CNBC Squawk Box 20170811

Day. You can see the hang seng was down by 2 the kospi in south korea, where the closest to these concerns is located, is down by 1. 7 in europe there are also concerns playing out there the dax down by 0. 4 all the other averages down by 1 or greater. Biggest declines in spain, the market there down by 1. 4 . If you check out crude oil prices, the iea releasing a new report saying that Global Oil Demand will grow more quickly than expected this year. Thats not helping prices which are still down by 37 cents. Here are the big stories were watching shares of snap are sliding after the social Media Company reported a bigger than expected loss snap lost 16 cents a share last quarter. Revenue coming in at a lighter than expected 1 181 million the company added fewer daily active users than anticipated. Ceo evan spiegel addressed concerns on the Conference Call. We have always been last to market, competing against giant companies, weve been able to grow our business in markets that are highly competitive because were focused on innovation that explains why were willing to take this wait and see approach in markets around the world that dont make sense for our business at this point but may make sense in the future. Highly competitive meaning Facebooks Instagram stories, which has made a big splash since launching last year. Spiegel said the cofounder wont sell snap shares this year well talk to a snap analyst later on in this hour. And googles ceo cancelled a companywise town hall meeting that was organized after one of googles employees was fired the employee was let go after a controversial memo on women was released some employees worried they would be outed in the media for asking questions some of the presubmitted questions were leaked along with the employees who submitted them and one of ubers earlier investors is suing Travis Kalanick benchmark claiming fraud, breach of duty and breach of contract benchmark wants to boot kalanick from the company totally when is the last time a board member sued another board member at the company this will get interesting. Kalanick owned 10 of the company, benchmark owns 13 . And 20 of voting shares. He does not own enough without the help of camp and others to prevent things he will also lose the right to have his Board Members in addition to his own board seat, the Board Members he was able to carve out through his separation agreement. I was able to read through chunks of the lawsuit. They were saying, y they voted for him to have these things, but he made all kinds of promises and conditions, and they say he didnt let them know about things that was happening at the time, especially with waymo. The allegation almost makes it seem that kalanick was almost orchestrating the theft of some of these items i know north korea is a big story, but lets not forget about Silicon Valley big story with goggle, snap. Snaps pain is a big stock story today. Others are on the move as well nvidia Second Quarter results easily beat demand with Strong Demand for gaming chips, but that wasnt enough the data center and automotive units fell short the stock down 8 . Nordstrom reported better than expected Second Quarter results. Samestore sales rose 1. 7 analysts were expecting a decline. The company said more people shopped at its Online Stores no nordstromrack. Com. News corp. s swinging to a loss in the Fourth Quarter thanks to a writedown in uk earnings the company did beat on the earnings forecast but the revenue missed on estimates, on continued weak demand for print ads. That stock is unchanged this morning. The big overwhelming issue weighing on stocks this week are the tensions rising between the United States and north korea. President trump responding to the escalating threat. Eamon javers joins us with more on that story. Good morning good morning. President trump took questions from reporters at bedminster, new jersey yesterday where hes on a twoweek working vacation he talked about the comment earlier in the week in which he said fire and fury would rain down on north korea if they advance too far in this brinksmanship weve been seeing over the past several days the president said if anything, that comment which was criticized for being too tough may not have been tough enough he also said he will wait and see what the leader of north korea does in terms of his threat to attack guam. Heres the president yesterday lets see what he does with guam he does something in guam, it will be an event the likes of which nobody has seen before, what will happen in north korea. When you say that, what do you mean youll see. Youll see, and hell see. Reporter the president said that was not a dare but a statement of facts another issue he addressed yesterday, he declined again to kr criticize Vladimir Putin the president did not criticize putin for expelling ambassadors, in fact he thanked them. I want to thank him because were trying to cut down on payroll. As far as im concerned, im thankful he let go of a large number of people now we have a smaller payroll. Theres no real reason for them to go back i greatly appreciate they have been able to cut our payroll for the United States. Well save a lot of money. Was a wideranging conversation there the president also talked about paul manafort, his former campaign chief whose house was raided by the fbi at the end of july the president called him a good man and said the fbi raid was tough stuff but also distanced himself from manafort saying he had only known him for a short period of time wow we get a lot out of these press briefings. Thank you. Lets get to the markets, joining us is ed campbell and j. J. Kinnahan. Welcome to you ed, is this the dip where you still buy . Does this feel different this time around . We see a 4 4 spike in volatility transports below the 200day moving average weve been looking for a tullback this summer that so far has eluded us. Weve been through an environment where you typically have if you look at the long history, you have 5 or more pullbacks from a peak every two to three months. We have gone a year without one in a low volatility environment. This could be the catalyst that sparks the meaningful pullback what is meaningful . Is it 5 is it greater . Yeah. I think its 5 , possibly a bit more i do think the underpinnings of the equity bull market that we experienced over the past several years are still in place. That is the long noninflationary business cycle, corporate Profit Growth i dont think the probability of a bare market is high. But we are concerned a bit and our position keople are positiod cautiously j. J. , is it north korea that is the biggest risk to viewers money or Something Else . I think north korea in the shortterm is, brian you know, we could sell ill say one thing, this is our first 1 move in 55 trading days i dont want people to overreact. Were coming off alltime highs. I think its natural we see selling pressure when its a geopolitical risk, when you have both sides sort of talking tough, that does put things in a bit different light. We seen in the vix over a 45 move so i think theres a bit more fear that being said, you know, i think many investors may want to pair back risk because i dont think its time to run and hide. You may want to let this play out a bit more before you go in guns ablazing to buy if youve been a buyer on dips the last five years, youve been a very happy person. Would you advise people selling a bit of stock when you look at this market, we see names like nvidia down nearly 8 . The nasdaq lost more than the dow. People seem to be selling what they made money in should they continue to do that or buy some protection on the market when youre at alltime highs t makes sense to take some risk off the table. You talk about nvidia, which has had an incredible move i think its wise to take off some risk to get back into cash and look for that opportunity to buy back in. As i said, in the past its been 1 youre looking to go. On this one, this may take longer to play out so you may want to, you know, go in very slowly if youre going to buy, or take some risk off the table. Bulls and bears make money, pigs get slaughtered. If you have all the your stocks on and you havent taken anything off, you have to look at your portfolio carefully and say what are we waiting for . I thought picks got rich, hogs got slaughtered any way, we get the point. J. J. Was right to put this move in context were still about 2 off from alltime highs in the s p 500. Its something we would have seen in the past, were just not used to seeing 1 moves. The spike in volatility seems to be troubling so many funds are built on low volatility and long equities volatility goes up, they have to sell equities. Thats the way the fund is constructed. At what point do you get concerned that a spike in volatility as weve seen royals the market because of the construction of some of these funds . Thats a concern thats out there. But, you know, as i mentioned, i do think that from a longer term perspective, in terms of fundamentals, the underpinnings of this equity bull market is sti still in place if we get a 5 or more pullback, i would be a buyerment. Right now, just sitting on your hands and waiting yeah. We started the year off bullish. Our forecast for s p 500 returns this year was 8 to 10 . We exceeded that so weve been pulling back as the markets have run up. Were positioned cautiously now. If we get a meaningful pullback, we would be buyers j. J. , should we be concerned about the spike in the vix given people were short the vix and that could be a squeeze . Are we year stating that move in the vix . I think thats a good point the other thing besides people being short fix is many people were not buying as much protection as they had they said ill take the risk that i may have to pay up on a 50 risk, at the end of the day its still below 20. Once it got to 15 yesterday, you saw more buying pressure on people coming in to buy protection they were willing to take that risk thats a great point again, i think 20 still remains the warning signal because were coming from such low levels. Those who say the fix was broken, volatility, the higher we go, the lower volatility is supposed to go but its only 15. I hear what youre saying about a 40 move, but when we have this 40 move at 15, it seems like the vix is broken or market fear is not high its higher but not that high overall. I agree the other part about it, we did see a gold move for the first time, twomonth highs yesterday. People did come for gold bonds were up yesterday, not even a full point on the 30year future to your point, yes, people are buying risk, heading into a weekend you may see them buy more until we get to the 20 level and people come for bonds and gold convincingly, this has to be a cautionary tale but not a panic tale well leave it there. Thanks to you. Thank you among other headlines. Amazon is reportedly in talks with major u. S. Venues to try to offer tickets to concerts and sporting events. The move could loosen ticket masters grip in this country. Ticket master is owned by live nation amazon said some success in business where it sold tickets to shows may have been behind this. China cyberregulators investigating the countrys top social media sites for breaching laws banning content thats violent or offensive to the communist party. Tencent, baidu and weibo are the points of the probe. The government has shut Live Streaming services and sites, tightened regulations on Internet Access and issued warnings about cleaning up web content. General electrics new ceo is betting big on his own company. John flannery bought nearly 2 27 million in ge stock. Thats according to a regulatory filing he added 104,000 shares to his 401 k account bringing his total holdings to 15 15. 5 milli. As of yesterdays closing price. So a sign of confidence among the new ge ceo on a stock thats fair to say needs a sign of confidence yes this has been not only the worst dow performer the past year and few years, but by far the worst dow performer. Not even close to the other decliners. We dont know if the kitchen sink is out. The next Earnings Conference Call is where we will get that kitchen sink quarter maybe its a bet in oil ge got big into oil. 16 of ges revenue is part of the oil and gas business they got into it as oil started to slide if oil can come back up, maybe well see ge stock recover maybe bet on themselves maybe wish i had that money. To bet on yourself i bet a dollar this show will be one of the top five squawk box this week new reports say that hbo may have been working on a ransom payment to hackers over leaked show scripts, but hbo wont call it a ransom, and it could be paid in bitcoin. That fascinating story straight ahead. [vo] progress is seizing the moment. Your summer moment awaits you now that the summer of audi sales event is here. Audi will cover your first months lease payment on select models during the summer of audi sales event. Hey youve gotta see this. Cno. N. Alright, see you down there. Mmm, fine. Okay, what do we got . Okay, watch this. Do the thing we talked about. What do we say . Its going to be great. Watch. Remember what we were just saying . Go irish see that . Yes im gonna just go back to doing what i was doing. Find your awesome with the xfinity x1 voice remote. Thats appropriate for this first story in science news a team of researchers say they are one step closer to transplanting organs from pigs to humans they have successfully used gene editing techniques to remove diseases that could be transmitted from pigs to humans. Its a potential solution to a huge problem theres currently more than 100,000 people in the u. S. Awaiting Organ Transplants only 20 to 30 will receive them can you imagine if you can harvest them from pigs, how many lives could be saved they didnt say how long it would take before they could do this thats a huge discovery. If it can be scaled up in any way, even for one particular organ, think of the leaps and bounds were already using pigs bladders to heal wounds. And pig valves. Fantastic news. [ pig squealing it is nearly a month until labor day. The countdown to christmas is already on were just 136 days away from christmas. Have you shopped yet no, no, no. Toys r us is getting ready for the holiday. The retailer announcing it will return to times square, but only temporarily beginning this month. The decision comes about two years after toys r us closed that massive 110,000 square Foot Flagship store is the popup going to have the ferris wheel they also had a life sized barbie doll house. Theres no word on how long the store will stay open it was heartbreaking, if you have kids, you want to bring them into times square, that was a fun place to go. Used to be an espn zone, then i dont remember before toys r us toy stores are almost becoming like book stores where you would bring children, they had never been to a bookstore and toystores mine think they actually just come from amazon fao schwarz shut down in the city they must have had the highest rent in the city if our viewers have been there, its right next to the old apple store. A new development in the hbo hacking saga the hacker who told Television Scripts and other data from the network leaked a new email showing a Company Executive offering 250 thoishgs as a bounty payment to the cyberthief this is according to multiple reports. The email said hbo was working to obtain 250,000 in bitcoin. The executive never described the payment as ransom. They called it a bug bounty payment. Thats a term that refers to a payment for those who help you find security vulnerabilities. They have been careful to say theyre not paying ransom, but thats what this is. So Many Companies say we never pay ransom this shows they sometimes do and this is what the ransom hackers are saying, you want your stuff back so badly, you have to pay the ransom theyre trying to friend theyre not paying ransom. Thats not what it is i was joking around with a friend of mine, he said it feels like were going back to the days of the mafia. So many email hacks, high level executives are lichi inin ininig email, after sony, dont put anything into email carrier pigeon is the way to go thats how reuters got its start. Coming up, tensions with north korea are rising markets are nervous but what is the feeling on the ground in south korea . A live update from seoul is next as we head to break, here are some of yesterdays s p 500 winners andize izlosers not a lot of winners yesterday, but a few, perrigo, blaker hughes, darden were back after a couple minutes. Experience advanced Safety Technology at the lexus golden opportunity sales event before it ends. 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Futures indicating a bit of weakness the dow, s p and nasdaq futures are all not moving a whole lot the dow futures are down a bit but the implied open is higher thats where you get that fair value difference the nasdaq is the one to watch the nasdaq has been the bigger decliner its been the biggest gainer so far this year. Nasdaq futures indicated slightly lower but nowhere near the magnitude of the selloff we saw yesterday. On todays wall street agenda we get the latest nap shnapshot on inflation. The july Consumer Price index is out at 8 30 a. M. Eastern time. Both headline and core cpi are forecast to rise 0. 2 . Were going to hear from a pair of fed officials we have dallas fed president , rob kaplan and minneapolis fed president Neel Kashkari making comments and on the earnings front, look for news from jcpenney they report before the opening bell growing worry over military action by north korea is one big reason that stocks have sold this week. Its grabbing all the headlines here but what are they saying in south korea . Chery kang joins us live from seoul. Chery . Hi, chery, i dont think she hears us now i garnered that, when she said i dont hear them lets give her a minute chery kang has been doing some good reporting. I would love to see i would love to hold up some covers of the newspapers to see what theyre saying because we forget that in 2010 and 2013 there were conflicts between south and north korea and threats over guam and hawaii chery kang i believe youre with us now from seoul. Good evening to you. Hi guys, good morning to you guys there was muted reaction coming from the south korean government today. I dont know if you can hear me, hear the music in the background, but certainly they have a mini concert going on in downtown seoul its raining a bit, but looks like a normal day with many people just going about, doing their own business certainly this tension getting the attention of south korean media for sure i pulled up some morning papers for you this morning asia time this is one of the major conservative daily here. It is an interesting juxtapose between north korea protesting against the u. N. Security Council Sanctions that was veetd t vetoed in this past weekend and this is south korea protesting against the thaad deployment system and the top headline goes north korea and the United States going head to head against each other. And lets bring this up. This is a leftleaning paper leftleaning meaning more pro north korean and embracive of north korea. An interesting choice of photo it carries an image of american protesters standing outside the white house calling for diplomacy rather than war. Peace over harsh rhetoric as we saw this past week its about the opeds, too one editorial peace called for a contingency plan for the south korean government. On the other side there was one oped from a leftleaning paper calling on u. S. President donald trump to sort of stop ratcheting up the tension around the peninsula. Calling the comments coming out of him this week, calling the comments, the threats that he made careless and not so well thought out. Thats the sort of divide we see in the media reports certainly what was interesting, i talked about how this is just a normal day in south korea, but i did interview some people, just average citizens of south korea, and asked them if there was any difference this time around take a listen to this clip translator i think trump makes me nervous if he approaches the north like that, im worried whether they will corner north korea. Many former leaders have taken a gentle approach before translator as a south korean citizen, imbo worried a little bit, but i trust that south korean leaders and the president will coordinate well with the United States and solve the issue. I think this is part of our routine in south korea many of us think that what President Trump is saying is not sensibiliible either. I think they will stop this at some point over the many years covering north korean stories, ive been telling viewers that south koreans are calm about this. This time i felt like they this unfamiliar rhetoric coming from the u. S. President is certainly worrying some south koreans. Overall its about keeping calm here and going about their usual business in seoul. Back to you. Chery, thank you very much. Joining us for more on this is adam mount thank you for being here thank you glad to be here. Chery brings up an interesting perspective. South korea is in a different position than the United States is for the first time were facing this idea that they could potentially reach out to us with some sort of missile, potentially a Nuclear Armed one. That changes the dynamic probably explains some rhetoric heating up here. What do you think . Conventional wisdom would say President Trump should not be so bombast bombastic. But what weve seen to this point is trying to negotiate with these people has not worked what do you think the right answer is . Youre right. This is certainly a new challenge for the United States. The United States has never the continent of the United States has never been threatened by north korean icbms before thats a new development the president has clearly reacted to that. The difficulty is the administration has allowed internal infighting to come into the public sphere, which is paralyzing response to this icbm you see gyorko weighing in publicly, contradicting rex tillerson. Every time they contradict themselves, they make it more difficult to make progress just to lay this out, some people say this is a case where the administration has intentionally played good cop, bad cop scenario you dont think thats the case, you think its chaos i think Good Cop Bad Cop is a rational strategy. This is more improvised. You saw secretary mattis last night say that the president s rhetoric is up to him. This is my rhetoric. One of the last chances they had to achieve rationality in this process, and to make clear and coherent threats to north korea was form mattis, tillerson and mcmaster to go to the president and say you have to work from prepared language. This has to be vetted through the pentagon and state department, we need to be ready to engs cuxecute it. Mattis kind of acquiesced in this infighting, and they make it harder to make progress some people say the rhetoric trump was using was achled at north korea, others thin the compliance rate, by this was directed towards china. What do you think . The dialogue seems to be the threats have not resembled Credible Threats they spell out a way forward either both for china or for north korea. What you heard instead was vague elusions to the power of u. S. Military force that does not leave north korea a direct way forward. You have got to ask yourself, why is it worth dialing up tensions this far . They may hope to coerce north korea back to the negotiating table on favorable terms, but north korea has been clear thats not going to happen they see themselves as a regular Nuclear Power. They say they will not dismantle their program voluntarily. The only chance for negotiations to start is for the United States to make a direct approach and open talks on broader terms. In your analysis of the situation, you sort of leave china out of it. Im wondering if we should china count. Overnight in a staterun newspaper, the global times, there was a notion there that beijing should remain neutral should there be any conflict between north korea and the United States. The Peoples Congress is going to meet late their year president xi is focused on his second fiveyear term, being reele reelected to his office why should the chi nnese get involved and are we hearing telegraphed that the chinese want no part of this the chinese global statement which is not directly official central policy but related said that they would want to get involved if the United States struck first but not necessarily if north korea struck first. In pyongyang that will be read as permission. China has not implemented sanctions reliably they have proven unwilling to apply the level of pressure necessary to coerce north korea to denuclearize. This unrealistic reliance on chinas assistance has to end. Its held back progress as well. Adam, thank you coming up, Nuclear Threats rising well talk to former australian Prime Minister kevin rudd about the war of words between the u. S. And north korea and earnings alert jcpenney expected to report around 7 30 a. M. Eastern time. Later, author james patersterson will join us on set. Stay tuned, youre watching squawk box. 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. I think trouble may be on the way for snapchat investors it could be another difficult day for those folks. The stock is down 14 in the premarket after results disappointed on nearly every metric it had a larger than expected quarterly loss revenue missed the mark. And it also missed estimates on global daily active users, the most important metric of all joining us is eric sheridan. You cut your price target, correct . Yes but youre still 5 bucks above where snapchats stock price is right now why . We took our price target down to 12 down to 12. You had cut it to 19 previously. We took it from 24 to 19 a couple months ago. From 19 now down to 12 thats mostly been a function of consistent relatively poor advertising checks so its an elevator without a cable. What has changed between 24 bucks and you cut your price target in half over the last year or so what have you seen that is making you be that much more pessimistpessimistic . I think when we were talking to it advertisers in the february march time frame, they were talking about snapchat being a company that can could do well north of 1 billion of revenue this year, well north of 2 billion of revenue next year. Were closer to 9 900 million o revenue this year, and 1. 5 billion next year. So the price target is showing less momentum in the advertising business because of less of a reach to customers or its really two things. I think the user growth has come in slower than expected. This company went public early in its life cycle. This advertising business is almost early stage compared to where facebook and twitter went public in their life cycle you have user growth coming in worse than expected and competition being heightened from the likes of facebook and its division of instagram. When you look at instagram stories, do you also calibrate that on the same metric, that its a new business in and of i itself its 250 million users in april it was 200 million. It ramped quickly. Do you look at that and say thats a relatively new business, as well as snap. Look at the two versus each other. Its a great point, but instagramsed a vo ed advertisis got layered on top of facebook th most instagram users have logged in using their facebook identity would this have been more valuable had face bach bought it it was wrapped into the family brand . Scale is an important part of the advertising business if you were a part of a larger scale program, you could grow users faster facebook and instagram, in terms of logging in as a user and selling advertising has been a much more positive my only source of information is my nearly 14yearold and her friends. You ask do you ever see ads . No no does it work is there any proof that advertisements on a platform like this will ever make money because if it doesnt, the advertisers will go back to traditional media. What they do have, they have a younger demographic who is very, very engaged we are seeing them lay ner ed a v layer in advertising. This is a 10 billion valuation on less than a billion revenue and no profit and no profit at 10 billion valuation, you are going out a couple years to justify how to buy the stock here there was a bit of a snafu on the call yesterday they left the microphone open, t one analyst laughed at their response is that a big deal no, these technical snafus happen from time to time on earnings calls but to that point, the laughter erupted because evan spiegel did not answer a question directly. Were you getting a sense that on the conference came that snaps management were answering the questions in a direct fashion . Is it any different than what we hear from Corporate Executives what i heard from clients all through the night is frustration. Theres frustration that is went public theres been some noisy quarters now. The stock has not performed well that frustration continues to build. The only thing that can solve for that is execution. Do you have confidence in evan spiegel i think hes a good innovator on product their product is really interesting to its users you have to scale a business on tof of top of an interesting product. Thank you. They say money cant buy happiness but mathematics can quantify it. Oscar fernandez joins us next on the calculus of happiness. And later two of the biggest real estate coanmpies team up. Top speed fifty knots life on the caribbean seas its a champagne and models potpourri on my yacht made of cuban mahogany, gany, gany, gany, gany watch this dont get mad bell mnemonic get e trade and get invested this is not. This is pretty good as things go its a small world after all right now its time for todays executive edge our next guest wants to help mike math more accessible to your everyday life and make your life better too. The subject of his latest book called the calculus of happiness and it tries to use math to help you become happier, wealthier, and also find true love just some small goals along the way. Joining us is oscar fernandez, professor of math at wellesley college. Thank you so much for being here thank you very much for having me here i wish my calculus teacher had laid a little bit of this on me its good for you. It can bring you happiness and wealth explain that to us the most common question that you get in a math class is when am i ever going to use this stuff. Right whats interesting is that, you know, when you talk about math at this level, the math tigss are very aware of how this comes up the students want personal relevance. How does this relate to my life . This book is all about that. Health, wealth, and love give me a great example how i can use math to make myself happier. Lets talk about nutrition for one second common question we all have during the day, how many calories should i eat. Turns out theres an equation for this and there are a few components to the equation. One is total daily energy expenditure. It dependsen your weight, your height, your age how about love . How do you use calculus to find love i want to ask him this because hold on, hold on. Listen, like, millions of americans, i suffer from done laps disease, my belly has gone laps over my belt and getting rid of that spare tire is hard heres the thing i know what youre saying, but i dont have any idea how many calories i burn during the day sure, sure. We sit behind a desk. Figure that out. So theres a help so turns out if you put groups of people in a room, you study them, you measure the caloric intake, caloric expenditure. Theres a little equation, if you know your weight, your height, your age, you can estimate how many calories your body will burn at rest if youre a couch potato 24 hours, you dont eat anything thats called your resting Metabolic Rate you layer on exercise, anything as lifting a finger, thats exercise, believe it or not. You layer that on, you layer on reduced thermogenesis, if you eat more protein your body requires more calories to digest that this is one of the differences in science eat more protein you naturally start losing weight because you net fewer calories lets get back to love because thats more complicated. Thats where i dont understand how calculus can be applied. Right theres lots of interesting little bits here so take the following problem. Suppose youre going to commit to dating 100 people in your lifetime not at once not at once right question is, and we do this, you know, through our life, most of us every day, we date a few people, we get a sense of what the field is like, whats out there, what were into and we form whats called a leading contender in my head, the ten i dated this person is probably the best turns out theres a rule of thumb, 37 rule. Take however many people youre going to date, take 37 of that, you should date that many but absolutely reject them right . Form the leading contender in your head and settle down with the next person who is at least as good as that. Thats really interesting always thinking about the grass is always greener on the other side of the fence. Youve tried the other side of the fence. Youve tried it its already 37 of the scorched earth all right oscar, great stuff and makes math interesting the book again is called the calculus of happiness. Thank you for joining us today thank you for having me its been a pleasure up next, stocks coming off their worst days since may the s p and the nasdaq on pace for the worst week of the year we have got your full guide to your money in the trading day ahead. Plus former australian Prime Minister kevin rudd is here to talk about the war of words between trump and north korea. Theres a lot more to do dont you go anywhere. Squawk box will be right back. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. Tensions running high as President Trump issues a new warning to north korea the latest in this rapidly developing story straight ahead. Markets on alert as concern grows over north korea will today be another big down day for your money were going to set you up for a full trading day in just a couple of minutes. And the Great American eclipse. What you need to know to get ready for one of natures most aweinspiring moments. Another aweinspiring moment, 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 again, everybody. Welcome back to squawk box here on cnbc we are live from the Nasdaq Marketsite in times square im becky quick along with Brian Sullivan and melissa lee lets take a look at the futures this morning yesterday was the biggest down day for the markets since may 17th this morning, things have stabilized a bit dow futures are indicated up by about five points. S p futures down by about 3. Check out the nasdaq, it is indicated down by another 16 points so well watch this as we get closer to the opening bell in the meantime, heres whats making headlines the white house will reportedly release a brief document next month outlining a framework for tax reform reuters says that the three to five page document will not be accompanied by tax legislation as some have expected but it could provide a starting point, laying out areas where the Trump Administration and Congressional Republicans agree. Reports say it could also include some input from democrats. Shares of snap are sliding after the social Media Company reported a bigger than expected loss snap lost 16 cents a share last quarter. That was two cents below estimates. Revenue came in at a lighter than expected 181 million and the company added fewer users than had been anticipated and as a result the stock is down almost 14 this morning amazon is reportedly in talks with major u. S. Venues to try and offer tickets to concerts and sporting events that move could loosing ticketmasters grip in this country. Ticketmaster is owned by live nation and amazon, by the way, has had some success in britain. Thats where its been selling tickets to shows in londons west end thats been happening since 2015 stocks to watch, nvidia Second Quarter results easily Beat Estimates Strong Demand for gaming chips used in Bitcoin Mining but the companys data center and automotive unit fell short the shares had nearly tripled over the past year, you see the decline in premarket down more than 7 right now. News corp. Meantime, Fourth Quarter loss excluding items the companys he beat forecasts but revenue missed estimates on continued weak demand for print ads. Todays wall street agenda, we will be getting the latest picture on inflation with the july Consumer Price index. That comes at 8 30 eastern both the headline and core cpi are forecast to rise 0. 2 . The Inflation Numbers earlier this week and the ppi were lighter than expected. Well hear from a pair of fed officials today. Dallas fed president rob kaplan and minneapolis fed president Neel Kashkari. On the earnings front, jcpenney report less than 30 minutes from now. Well be having a look at the Retail Sector a little later in the hour, but before this, jcpenney down by 17 cents because of the low price of that stock. A companywide town hall meeting was consequenceled after one of googles employees was fired. The employee was let go after writing a controversial memo on women in technology and diversity issues at google some employees were worried they might be outed in the media for asking questions he said some of the presubmitted questions were leaked along with the snams of tnames of the emplo submitted them the dow dropping 200 points yesterday. The worst day since may. Lets talk more about the markets and your money gabriela santos, jpmorgan funds, and river front investment group. Gabriela we know that north korea is a scary situation, a serious situation, and a risky situation. But how do we quantify the risk of north korea into our stock market how do you figure that out well, its tough. I think stocks are having a hard time investors are having a hard time figuring that out. If we remember, what weve had yeartodate weve had some very, very strong Global Economic data some very strong global Earnings Data including the u. S so thats really been the backdrop for stocks. And now there is some attempt to figure out whether these are just escalating tensions, or whether there will really be a military confrontation here on the horizon. So far the best case for stocks is good economic backdrop will continue these are just tensions. We are not seeing military escalation its easy to forget, in 2010, north korea lobbed bombs on a south korean island. In 2013, north korea threatened to attack guam when we put the Missile Defense system in. And also attackhawaii. The markets have rallied obviously since then, for a lot of reasons is this another one of those things that is important and scary, but it will pass, in your opinion . It seems at the moment we do seem just like escalating verbal tensions sanctions, as well rather than an actual step into military confrontation that would be an entirely different ball game. But we have gotten very much used to geopolitical stress around the world not just north korea, south korea, right but weve also had several confrontations in the middle east weve had terrorist attacks. This has become, sad to say, a normal backdrop for the market but, michael, you are looking at the markets right now, what would be the thing that might cause you concern, that might make you think, maybe this time, this dip is not the one to buy anymore . You know, i think its really hard as gabrielle said, with the earnings backdrop so strong, with the economic backdrop so strong, and with this being kind of the wolf on the whatever that weve kind of become used to quite frankly since 9 11 i think this would be really a mistake for investors to overestimate the potential consequences of this potential crisis. I also think we should recognize that we came in to this environment with volatility at an alltime low. A lot of people have been making big bets against volatility. So the market might have been poised for any kind of destabilizing event to cause a little bit of an excessive reaction simply because no one was anticipating such a reaction, and everybody so youre saying the volatility surge that we saw yesterday, 45 or so, that was a squeeze that caused the downward pressure on equities in that one session . Absolutely. Absolutely and not only that, but remember, we are down about 1. 5 off the high this market has not seen a 5 correction in over a year. 5 corrections are normal part of any bull market and by not having had one in so long, were kind of due. But having said that, gabriela, weve been waiting for this pullback. Even if we were to pull back 5 that only gets us back to where we were on may 17th of this year if youve been waiting and waiting, youre buying in at higher levels, anyway. Well, we do still think the market is going to go higher over the next few years. So for investors who are still, perhaps, too concentrated in Something Like fixed income, it could still be an opportunity. And also, not just a pullback, but an opportunity, around the world, as well i guess my point is do you need a pullback before it looks like an attractive place to start putting your money we think that u. S. Stock market is still an attractive place to put our money and with the pullback it would be particularly attractive for investors who are underallocated to stocks. Weve seen, though, big moves, michael, in specific stocks i dont necessarily need you to speak specifically about stocks. Weve seen 11 drawdowns in netflix and amazon weve seen pretty big moves and pretty Big Cap Technology that used to be the leader. Does that cause you concern . Do you say those are the areas to buy or those are the areas that would see continued pressure should we enter the 5 correction from my perspective, i think pullbacks in some very, very richly valued stocks are a healthy sign that the markets recalibrating and getting a little less frothy i would not be chasing fully valued, you know, high multiple stocks in this environment simply because theres a lot of great value sitting in the marketplace, particularly theres been, in my opinion, an excessive move in some of the overseas markets, particularly in europe. Europe has had a fantastic earnings season. All the Economic Data continues to surprise to the upside. So from our perspective, you know, rather than chase some fairly pricey stocks higher, i think this is a good time to think about, are you fully allocated in International Space . Its been left out of the rally for a lot of the last seven years. And if history is any guide theres kind of a biblical pattern. Seven lean years and seven fat years you think europe is still a good deal, michael absolutely. The dow is up 11 , 10 this year, one of the worst performing major indexes over the past 12 months almost every major European Market has outperformed us but that doesnt scare you off and the euro is rising. And that. Doesnt scare us off for the simple reason that, while weve got one year of outperformance, ironically, a year of outperformance that began right after the brexit vote, weve got one year of outperformance after seven years of underperformance. The relative valuation gap between the u. S. And europe is still more than 30 . So theres a long way to go in catching up from the underperformance of recent years. Also, remember, the euro has been in a trading pattern for the last two years of 105 when were worried about the euro breaking up. 115 when we get great Economic Data like weve gotten recently. Weve broken out of the upper end of that band by a little bit. But with marrones election, and the potential for labor market reform in france the risk to the euro is dramatically lower than it was even a year ago i think an increase in the training band from 105 to 110 at the bottom, and maybe 120 to 125 at the top, thats not going to derail their recovery, and its fully validated by the lower risk weve got to go gabriela likes cyclicals in europe, as well. We do thank you both. Coming up Quarterly Results from jcpenney plus the war of words between President Trump and kim jongun making a lot of people nervous a crocer look at whats driving the rhetoric and what options the u. S. And its allies have after the break. Stay tuned youre watching squawk box on cnbc theres a denture adhesive that holds strong until evening. Fixodent plus adhesives. Just one application gives you superior hold even at the end of the day fixodent. Strong more like natural teeth. North korea appears to be a poor country, and yet it has managed to develop ever more sophisticated wep bes and generate Nuclear Power those are very costly. So where do they get the money Michelle Carusocabrera has more the short answer is they sell commodities to china well known less well known they manufacture and sell weapons mostly to african countries. They also export north koreans as a form of slave labor to russia, china and africa and in the category of weird, they design and export huge brass statues. We know all of this because of this what ive got here this is an annual report from the u. N. Panel of experts, these are investigators who work for the u. N. , put out a report every year on north koreas progress toward nuclear weapons, and whether or not countries in the u. N. Are enforcing the sanctions imposed by the u. N so, like i said, the sale of coal and minerals to china we all know about that lets move on to arms sales. Just one of many examples in this report, investigators discovered north korea sold automatic pistols, assault rifles, antitank missiles, antipersonnel mines to the congo for the u. S. By the president ial guard and special units of the congolese police. Were going to show you a photo of 30,000 rocketpropelled grenades seized from a ship in the suez canal manufactured in north korea. They are underneath the tarp there, underneath that dirt. They do all this through front companies. Example, north korea has a Company Called glowcom they advertise on the internet moving on to labor, this is a letter from the report showing that a north Korean Construction Company built new military headquarters for namibia abusing north korean labor and they also build enormous socialist style statues. This one is in senegal the u. N. Sanctions were imposed on north korean statues in 2016, in theory this should have stopped. If we went out a little wider you would see very tiny flags at the bottom of this statue to give you a sense of just how enormous it is think the colossus of rhodes oh, youre kidding. Enormous. Crazy, crazy stuff using north korean slave labor . Right so they have a construction company, for example and they export their labor to that country and they bring them back and one government pace their government rather than paying the employees directly and also, isnt most of this done in cash, michelle by the way, it really is power lunch in the morning yes crazy thats why sanctions dont work because if youre paying everybody in black market cash, what does it matter if you sanction the banking we got these employees going back, 20,000 u. S. Each for them to travel for expenses they smuggle things all the time i think we have this photo of this bentley that they seized, can we bring that up that they found stuffed under like a bunch of grapes or gra grapefruits and things theyre always smuggling because its very difficult for them to use the International Banking system thats the letter joining us for more on north korea, former australian Prime Minister and president of the Asia Society Policy Institute Kevin rudd hes just out with a new piece on north korea in the Financial Times. Mr. Prime minister good to have you with us. This is a huge roblem. Michelle just outlined there is a whole other economy existing even if sanctions are imposed, they get their money from other sources. Very difficult to sort of shut them down. Exactly ive never been of the view that sanctions work with north korea. I think that it makes everyone feel good politically. You go off to the u. N. , the Security Council passes a resolution, we get tougher and tougher, but the bottom line is these guys are up 10, 20, 30 Years Experience of getting around them. And so i the key question is what other leverage can be deployed to get them to change their behavior you dont think china has power or influence, or do we have no, they do theyre unprepared to use it unprepared or unwilling unwilling but what im saying is that china asked this question. For a moment put ourselves in their position theyre thinking about country next door to them, strategically,s who forically a buffer state between themselves and the rest of the world. What then happens if they do what the United States wants, which is bring about a fundamental change in policy in pyongyang on nuclear weapons, which could lead to the removal of the supreme leader. Theyre question is what comes next, is the country next door then destabilized or worse, could end up becoming a state which is proamerican rather than prochinese on their borders. Thats the deep fundamental National Interest at play on the Chinese Market the big problem is, big problem is, i dont think the chinese believe that the United States is being real when it says that a unilateral military option is on the table of course, that causes china to be even more relaxed about the pressure that it brings to bear on the north koreans you dont think thats changed in the last couple of days with President Trump saying what he said i think President Trump or at least add a level of doubt that wasnt there before well ive just come back from beijing about two days ago and talking to friends in china about all of that, certainly the temperature is going up, the language coming out of pyongyang, language coming out of washington is ratcheting up, but the key question still, i think in chinas mind, is what happens the day after . If they were to do what the americans seek them to do. My own view is, as ive outlined in this piece in todays Financial Times is, look, china could come to the table on this, but they would need to be told by the United States, whats the grand bargain here . For the future of the Korean Peninsula so that we dont end up with american proxy state on our border theres a guy name bill perry, former secretary of defense under clinton. I know bill oh, you do, okay. And i was listening to an excellent interview done with him, i cant remember where, a couple of days ago where he was talking about the carrot and the stick back in the late 90s, and the Clinton Administration basically had sort of reached a deal with the kim family that were going to keep you in power. Just dont be a nuclear state. And everybodys going to be left alone. And it was going well, and then the Bush Administration came in, its not a political thing, but was more hardline and the kim family said whats the point of us giving up anything if were coming after us. Nobody likes the bully that is north korea, but at the same time, do we need a little more carrot and a little less stick here i think youre looking at questions like that, and bills analysis, by the way, i think is right. I mean, looking at this youve got to hop inside the mind of the north korean regime. Thats hard because were looking at kim jongun, and to us he seems to be irrational but whats the core interest there . To stay in power for 1,000 years. Thats it. And so the last thing he wants is war, because hell be definitely out if that happens so he says, i want to a nuke in order to be my ultimate deterrent, no one gives me strife is there another way of providing the regime with the guarantee of the security that they seek . And thats part of a grand bargain on the peninsula i think youre going to get to the grand bargain but it shouldnt be negotiated with north korea it should be negotiated with china. What do we have to give china for them to actually do something with north korea if it was me trying to put the ledger together, what do we want what we want is the end of the Nuclear Program in north korea, and elimination of the existing arsenal and the associated Ballistic Missile program. What would the chinese want . On their side of the ledger. One, a peace treaty between the United States and north korea. Because weve been in a state of war with north korea technically since 53. Two, diplomatic recognition by the United States and north korean regime. Three, possibly this, a tripartheid security guarantee for the regime for the future, bill perrys point and four this is the really tricky one, where real diplomacy could be applied, if we get all of that, would the United States be prepared to consider a staged withdrawal of its own forces from south korea in order to produce a genuinely neutral Korean Peninsula how would south korea feel about that depends which government is in power at the time the center right government, which lost power recently, would have to reach for the smelling salts. The government thats there now . The center left government, if it was part of a broader security arrangement for the peninsula, may think theres some merit in it but theres a difference between having troops on the peninsula by the u. S. , and retaining security treaty with south korea, which no one should and what we what we wont realize here, necessarily, is that south korea does not have an ambassador to the United States right now they dont have an ambassador to china. They dont have an ambassador to russia because they were also new in their administration. Is that a risk well the south korean government as you said is even newer than the Trump Administration thats right. Just been elected and frankly, theyre still working out where the washers are in the blue house thats what happens when administrations change overall what worries me about developments on the north korean question at present is that ive always been of the view that conflict or war on the Korean Peninsula is improbable. The problem with everything unfolding at present, is its now become possible. And calculate to the degree of possibility is ratcheting up leave it there. Kevin, thank you kevin rudd good to be with you michelle, thank you when we come back, Hackers Holding game of thrones script at ransom. The details right after the break. And the futures at this hour have stabilized a bit. Dow futures up by 13 s p futures downdy 1. 5 nasdaq down by 11. 5. Welcome back to squawk box. A new and Interesting Development in the hbo hacking saga the hacker has leaked an email now showing that an hbo executive offered 250,000 as a, quote, bounty payment, to the cyber thief. That is according to multiple reports. Email says that hbo is working to obtain 250,000 in bitcoin. Now the executive never described that payment as a ransom instead calling it a quote, bug bounty payment although that term typically refers to a payment to those who help a company find security vulnerabilities. This definitely has more twists and turns than a game of thrones episode by the way, you know whats going to happen saturday night im behind like two seasons so i dont want to hear any of it no. Coming up the president making some forceful comments about the Opioid Crisis. A closer look at what can be done to stop the abuse of highly addictive painkillers. Thats next. Plus we are expecting results from jcpenney any moment as we head to break take a look at u. S. Equity futures watching thenasdaq very closely. Down 11. 5 right 2340u. Prsu oth iexodto be a big esren atnd tay t 4. 95. 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. And at 4. 95, you can trade with a clear advantage. Looking for a hotel that fits. Whoooo. Your budget . Tripadvisor now searches over. 200 sites to find you the. Hotel you want at the lowest price. Grazi, gino find a price that fits. Tripadvisor. Fixodent plus adhesives. Theres a denture adhesive that holds strong until evening. Just one application gives you superior hold even at the end of the day fixodent. Strong more like natural teeth. All right. Good morning happy friday 7 30 here in the east. Welcome back to squawk box. Were live, of course, at the Nasdaq Marketsite in times square among the stories that are front and center for you this friday, ges new ceo is betting big on his company and maybe himself. John flannery bought nearly 2. 7 million in ge stock according to a regulatory filing. He added 1 04,000 shares to his 401 k account bringing his total ge holdings to 15. 5 million as of yesterdays closing price. Chinas cyber regulators investigating that countrys top social media site for a breach of laws that ban content that is violent or offensive to the communist part ten cent weibo and baidu are part of the probe. The government has shut Live Streaming services down, tightened regulations on Internet Access, and issued warnings about cleaning up web content. And we are watching oil once again. The iea releasing its latest monthly report this morning, and that agency says that Global Oil Demand should grow more quickly than expected later on this year it should help to ease a glut despite rising crude production. However that report not helping oil this morning crude oil down just about a half a percent to 48. 36 a barrel. The futures this morning had stabilized as people kind of looked at what happened yesterday. The futures down, or at this point dow futures up by two points this comes after the dow was down more than 200 points on all these concerns about rising tensions with north korea and the United States. We will see if this holds, because President Trump just tweeting about north korea once again. Saying military solutions are now fully in place, locked and loaded, should north korea act unwisely hopefully kim jongun will find another path and again weve been watching the futures this morning we will see if this continues to hold we saw a slight tick lower in the futures and were watching the bontd yield down to 2. 195 right now. Jcpenneys out with earnings. They just crossed the tape adjusted loss per share nine cents. Theyre saying that the broader retail environment remains challenged they are reaffirming their eps guidance for the year. Wider than expected loss. For a loss of five cents instead of nine cents . Adjusted loss of nine cents a share. Its interesting that theyre reaffirming their eps guidance for the year the commentary matches what weve heard from a lot of the other retailers, though, that the broader retail environment remains challenged we even heard that from nordstrom yesterday. That was a better than expected result better than expected compstore sales and they said the same thing about the challenged retail environment well see how this plays out in the rest of the sector today President Trump making a forceful stachlt on the nations Opioid Crisis during his vacation in new jersey the Opioid Crisis is an emergency and im saying officially right now it is an emergency, its a National Emergency. Were going to spend a lot of time, a lot of effort, and a lot of money on the Opioid Crisis. That is a very different characterization than the one that was used earlier this week by u. S. Health secretary tom price who said that the official declaration of a National Emergency was not necessary at this point joining us right now is someone on the front lines of this nationwide fight against opioid abuse. Tim feeney is the commissioner of the Suffolk County, new york, police department. Thanks so much for being with us thank you for having me this has been a big problem, not only on long island but in places around the country. Why dont you just describe for us what youre dealing with right now. Absolutely. This country is losing approximately 150 people each and every day to the Opioid Epidemic the Opioid Epidemic is ravaging communities throughout the nation it does not discriminate on the basis of gender, income, race, community, in Suffolk County, where im from, its affecting all of our communities rich, poor, middle income. This is an epidemic that started in the 90s. So this is a long time coming. It started from the overprescription of pain medication, and the misuse of pain medication, and now, the countrys in a fullblown heroin epidemic, and many places are now in a fentanyl epidemic describe how we get from prescribed opioids to heroin and then to fentanyl for people who dont even know what fentanyl is absolutely. So people were overprescribed pain medications and some folks even when prescribed appropriately misused those pain medications because they are so addictive. They developed opioid dependency and government acted, albeit slowly, through programs that prevented doctor shopping, laws that cut down on the prescription of strong pain medication, education among doctors and pharmacists. But folks still had the dependency, but the demand im sorry but the supply of those drugs decreased. So what happens . Supply and demand. Price goes through the roof. At one point a bill for oxycontin on the black market went for 80 so people gravitated towards heroin, which is much cheaper. In some states, including new york state, you can get a dose of heroin for 5 the excellent book dreamland outlines how medicaid really helped push the Opioid Epidemic, because you could use a 30 copay card and buy huge quantities, sell half to your neighbors. This is a legal heroin is not, but the rest of it is a legal crisis and we always hear, how do doctors do it . Well many doctors are compromised themselves, huge debt they just need the money of the prescriptions. But they also are just overwhelmed. How do we solve the problem on the doctor and dentist side . How do we stop the distribution . Because those are, hate to use the term, those are the dealers. Absolutely. A combination of education, and law that restrict the prescription of pain medication. So in new york state, i do have to commend the state legislature and the government for passing some aggressive legislation that limits the amount of prescription pain medication that can be prescribed at once to seven days. And there are some exceptions for the chronically ill, which is appropriate and we need to raise awareness but even in my own state, were not addressing dentists, for example. Many dentists are prescribing large amounts of pain medications for root canals. And then what happens is that the unused medication is either abused, by someone else, still the number one source of drugs in this country is the medicine cabinet. How come dentists arent held to the staple standard as doctors . I can only suspect that that was the result of lobbying efforts. 150 deaths per day due to overdoses is a tremendous number i would imagine that there are also a number of crimes per day related to opioid use. Right tell us whats going on sure. In terms of deaths there are more people now dying of opioid related overdoses than firearm violence and Motor Vehicle crashes combined it is now the leading cause of death for those under 50 years of age this is a historic epidemic that this country has never seen. And of course theres associated crime. Many folks steal to fuel their diction. They typically start off by stealing from loved ones and friends and people in their social network and as they destroy those social networks they then start to victimize strangers. Whats amazing to me is at least in Suffolk County weve been able to keep crime at a record low despite the epidemic as a result of very aggressive policing, Community Based policing, but i would say that close to definitely more than half of our crime is related in some way to the Opioid Epidemic. Youve said yourself we cant arrest our way out of this program. You talk about trying to make sure that people get help with this issue what would you like to see the federal government step in and do now that weve heard President Trump say that he thinks it is an emergency . We need to be investing significantly on all fronts. Prevention, treatment, recovery and law enforcement. I think the best way out of this epidemic is prevention theres no question we need to increase access to treatment and invest in medically assisted treatment models but prevention is the key. Opioid dependency is extremely powerful its extremely hard to kick. So if we can prevent someone from ever going down that path how do you do that, though . Listen the nation has we also have an obesity epidemic and an obesity crisis. I bring that up, because as youve read a number of books where the doctors, if youre 350 pounds, your knees are going to hurt, your lower back is going to hurt, youre going to keep going to the doctor, im in pain, im in pain, but theres no solution because its your weight thats causing this because the doctor who is tired of seeing you every week saying oh, here you go, this is new from purdue farm suitals back in the late 1990s, just take this, youll feel better by the way, now youre addicted. How do we solve that we need to remove certain financial incentives that doctors have prescribing certain medications. Thats number one. Number two we need to raise awareness about the issue. If i were president i would provide funding for a probust evidence based Drug Prevention program in all of our schools k through 12 you have to start early. Commissioner, its a terrifying problem one that is not going to go away quickly. We hope youll come back thank you very much thank you coming up, a roundup of big retailers including jcpenney those shares are down sharply. A worse than expected earnings wow, look how much its gone down since we last checked now wnbo 1 pmaet dad kinda walked into my swing. Huh . Dont you mean dad kind of ruined our hawaii fund . I thud go to the thothpital. There goes the airfair. I dont think Health Insurance will cover all. Of that. Buth my fathe without that cash from aflac we might have to choose between hawaii or your face. Hawaii what . Haha. Hawaii you might have less coverage than you think. Visit aflac. Com and keep your lifestyle healthy. Aflac jcpenney results out a short time ago the stock is getting crushed premarket. Courtney regan joins us with more on what to expect from other retailers. So this is the last of the Department Stores, jcpenney coming up with a loss of nine cents. That was almost double the loss analysts had been looking for. And jcpenney says it was in part because of liquidation of invent other from 1 27 of its stores. That also is why Gross Margins took a pretty big leg down in the quarter. Revenue did beat for jcpenney. The comps coming in down about in line with what analysts had expected down 1. 3 last year in this quarter they actually had posted a comp increase they did reaffirm their fullyear guidance again in part because they said some of that earnings hit was because of the liquidation of inventory from the 127 stores that will not be a repeat next year thats not currently in the plans. Shares are under pressure, just like all of the Department Stores were yesterday. Even though we saw macys, kohls, beat expectations almost basically across the board. Shares were still under pressure because the fundamentals are still an issue with the Department Stores. Theyre aggregators. They are boxes they sell a bunch of brands. And in this ecommerce world you dont need necessarily to go to a macys to get some of those brands and thats part of the reason for the pressure we have a lot of retail earnings to come next week. Tuesday is actually a pretty big day and were going to get reports from a number of different types of retailers were getting coach, home depot, dicks sporting goods, Urban Outfitters and target and thursday we get walmart and gap. Target did raise their guidance last month but they had a choppy history. They have had moments in the recent past where they have raised guidance and then failed to meet that so well see what happens there and we want to see that samestore sales continue to increase for Walmart Walmarts an interesting one, also, because its very close to 50week high its been on a tear this week. It has. A lot of people look at this and say walmart and amazon are the two to watch if someone can compete with amazon it is more than likely walmart. Before amazon came around walmart had the most sophisticated logistics system perhaps in the world for retail. Can we throw up a 10year chart of jcpenney and im sorry to do this on the fly. Looking at looking at the premarket price based on the decline melissa just told you i think this will be an alltime low for jcpenney its not an alltime low its longer than my charts go back to a 20year low for jcpenney. This was a 68 stock almost ten years ago today. You know, and like yesterday on power lunch they did log about 3 billion in revenue. Its not like theyre not selling anything they said that all categories actually improved. Or nearly all categories improved but this is just a sector that has been thats what i dont get we showed this on power lunch yesterday, i pointed out that macys, their sales were down 5 year over year 5 thats not a little but its not a lot. Stocks down 37 dillards, sales are down 6 or 7 , stock down 47 why are these stocks falling so much faster than their we act like the sales are just drying up theyre still selling billions of dollars in goods. Yeah. I mean theyre just not making any money. I dont know. When we had the kohls ceo just a couple weeks ago he really tried to make his case, not all retail is created the same look, were different. Were offmall were having some pressure, but its not the same kind of pressure were not cutting stores they have 450 more stores than macys so its a very complicated story. And certainly not over yet reaffirmation of the guidance of jcpenney that still doesnt make any sense i understand the hit because of the lidge widation, but this implies they have to make up four cents in the coming two quarters yeah, it definitely is. They have to make all their profit in the Fourth Quarter like trust me, ill make it up to you later on we dont buy that anymore. The Conference Call hasnt started yet. I think thats going to be the gigantic question thats going to be asked. He said really strong and backtoschool was still in still happening in many parts of the country. But holidays obviously the most important quarter. Can they make it all up . Its going to be a big beat. Court, thank you. All right, who was it sang total eclipse of the heart was that kim carnes . A total Solar Eclipse is coming. This is expected to be one of the most photographed videoed, streamed, shared, whatever, events in history. Its going to be amazing august 21st the author of apollo 13 and apollo 8 Jeffrey Kruger joins us after the break to tell us what to expect. Futures coming off yesterdays big declines the markets have been weakening a bit as we head into the open ing so to watch. Squawk box back righafr ist te looking for balance in your digestive system . Try align probiotic. For a nonstop, sweet treat goodness, hold on to your tiara kind of day. Get 24 7 digestive support, with align. The 1 doctor recommended probiotic brand. Now in kids chewables. Yogigspeed internet. Me . You know whats not awesome . When only certain people can get it. Lets fix that. Lets give this guy gig really . And these kids. And these guys. Him. Ah. Oh hello that lady. These houses yes, yes and yes. And dont forget about them. Uh huh. Sure. Still yes you can get it too. Welcome to the party. Introducing gigspeed internet from xfinity. Finally, gig for your neighborhood too. Welcome back, everybody. Krispy kreme will be going dark for the Solar Eclipse. Check this out for the first time ever, Krispy Kremes original glazed doughnuts will be eclipsed by chocolate glaze the chocolate glazed doughnuts will be available monday, august 21st thats the day of the eclipse at participating locations. That total some ar eclipse will be on august 21st and it is projected to be the most photographed, most shared event in history for a preview lets bring in Jeffrey Kruger offer of apollo 13, more recently apollo 8 hes a Time Magazine editor at large. The apollo 8 book all about that photograph, which is one of the most famous photographs arguably of all time, giving us the viewpoint of earth basically from outer space the moons point of view, this august 21st eclipse, supposed to be spectacular dont just tweet it. Actually look at it, enjoy it. Right america . But not with your bare eyes. Use the glasses. What can you tell us about this upcoming eclipse well, this eclipse will be it will eclipse other eclipses in lots of ways it will you can watch it and it is sort of worlds within worlds all the eclipses come together this one is crossing the United States specifically and exclusively. So, look, were a very vain people we could be forgive be our egotism and think this is a gift from the cosmos for us it is random, of course, but its a little bit like woodstock in that it comes in the summer of our profound miscontent and this cosmic phenomenon, crossing the nation, knowing no particular region, is just the kind of uplift were going to need this summer its a Unifying Force for the country . It is well, yes, because it elevates us look at this wonderful thing thats happening in the sky show just for us, but it also humbles us we are small people on a small planet, being shown this grand cosmic spectacle i have my parents and all kinds of relatives who are driving to South Carolina to North Carolina to see this im not. Im going to try and watch it from here. Am i crazy well, you will not get anything like the full effect. I have seen one cosmic eclipse, one Solar Eclipse, rather, it was a transformative experience, and it really reminds us, no matter how proud we are of our 21st century brains, i had kind of a 12th century fear as i was watching it, because its the cosmos behaving like theyre not supposed to. Its really extraordinary. There will, however, be a lot of livestreaming 3d experiences of it and we will have one on time. Com so if you have the right equipment where will you be i will be in casper, wyoming. We had originally planned to be in hop kinville, tennessee, which will have the longest period of totality, but our trail boss, and the man at time who coordinates, a guy name jonathan wood, did all of the preliminary research and realized casper, wyoming, and all the main cities in the pass of the eclipse has the lowest seasonal likelihood of cloud cover. Right so were going high what happens if it is cloudy . What will we see youll see a great deal of weeping among millions of people you can still, depending on what how dense the cloud cover is, youll still see certain measures youll see the odd color of the sky turns. Youll see a sort of filtered sun behind it. But it does pay to be, people who are watching it on water are very smart, because you can then duck out under the cloud cover but you know, clouds are simply a nonnegotiable risk when youre watching an eclipse. Even if you get the full view for the longest period of time its only like two minutes 2 minutes 40 seconds, maximum totality but im telling you they can be 2 minutes and 40 seconds of transformative experience. Its just its transcendent weve heard all the news reports about the National Guard getting called out already in some of these areas. These are small towns, it could be besieged by 150,000 people. Is that a real concern it is one of the places in oregon we talked about, and the story we have in the magazine this week, has a nominal population of 6500 they will have a population of 150,000 for a couple of days but im glad, very briefly, that you brought up apollo 8 because ill tell you something, that famous picture, this was a hinge point for humanity that this was the first time we saw the earth, not just as a horizon beneath us, which is even orbiting astronauts only see it that way, but the first time we saw the earth as a full, fragile, krus mass ball hanging in space and it gave us a sense of how fragile it is photographing the eclipse, while not exactly the same, will give us that sense of this sort of what are you going to use as your glasses i keep seeing weve got to order glasses, buy glasses there is a particular kind of glasses that you have to use until the moment of totality, and then when it is total you can take it off and watch it with the naked eye but put it back on. And be careful because there are, this always happens, counterfeit glasses flooding the market the american astro on cal society and nasa both have guides online about what brands are reputable and what outlets are reputable to buy already thank you very much thank you and good luck in casper thank you so much ive never been there. It takes a lot of spirit to be there. Oh, i like you. I like you youre coming back, baby latest book apollo 8 is out now. Coming up Barry Sternlicht joins us after the break politics, markets and much more. And James Patterson joins us to discuss his new book called the store and it ts shihelves on monday squawk will be right back. Top speed fifty knots life on the caribbean seas its a champagne and models potpourri on my yacht made of cuban mahogany, gany, gany, gany, gany watch this dont get mad bell mnemonic get e trade and get invested you myour joints. Thing for your heart. Or your digestion. 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Plus, americas new landlord blackstone and Starwood Team up for a rental home mega deal. Real estate mogul Barry Sternlicht joins us first on cnbc 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, everybody. Welcome back to squawk box here on cnbc we are live from the Nasdaq Marketsite in times square im becky quick along with Brian Sullivan and melissa lee joe and andrew are out today lets get a quick check on the markets. The futures had stabilized yeah, theyre still there. Took a little bit of a tumble after the latest comments from the president ial tweet on north korea saying we have a plan in place, as well but things have come back. The dow futures up by about four points nasdaq still indicated down by about 16 points. The s p futures down by 3. Among todays top stories, is a developing story that weve been following President Trump tweeting about the rising tension with north korea. Quote, military solutions are now fully in place, locked and loaded should north korea act unwisely. Hopefully kim jongun will find another path this comes, of course, after the president issued yet another strong warning to north korea saying that his, quote, fire and fury threat, may not have been harsh enough meantime, shares of jcpenney are getting absolutely smoked this morning. The Department Store reporting a wider than expected loss revenue did come in a little bit above expectations samestore sales down 1. 3 slightly more than estimated company says the broader Retail Sector remains very challenged that stock is now under 4 a share. Saudi arabia, meantime, reportedly favors the New York Stock Exchange for its main listing in the big saudi aramco ipo. That according to reuters. But financial and Legal Advisers have recommended london as a rather less problematic and risky option for aramco. The final decision on where to stage what could be the worlds biggest ever Public Offering will ultimately be made by saudi principal bin salman who overseas the economic and Energy Policies time shares under pressure after the company missed wall street expectations on basically every important metric that investors were looking at. Julia boorstin joins us with the details on the report. Thats right, melissa snap disappointed wall street expectations on every metric, earnings and revenues, as well as its user numbers. The company added 7 million daily active users in the quarter for a total of 1 73 million. Thats 2 million less than analysts projected the average revenue per user coming in at 1. 05 thats two cents less than expected now snap ceo tried to reassure investors ahead of the big lockup expiration of Employee Shares coming on monday. Given the amount of speculation around the lockup expiration i feel it is important to note that bobby and i will not sell any of our shares this year the company will withhold the shares needed to satisfy tax with holding obligations we believe in the longterm success of snap. Spiegel and chief Strategy Officer stress the value they see in their new selfserve add class and spiegel weighed in on the competition. Weve always been tloost market competing against giant companies and weve historically been able to grow our business in, maates that are highly competitive and saturated by our competitors because were so focused on innovation. So i think that explains why were willing to take this wait and see approach in markets like the rest of the world that dont make Financial Sense for our business at this point but may make sense in the future analysts pushed spiegel and asked him whether snap is growth packing by sending users push notifications and based on the open mike moment that followed not everyone was satisfied with his answer i think the most important thing for us is that when were telling you about content on the service that its really highly relevant to you and from your very close friends, and i think, you know, people as they become more reliant on push notifications have sort of relaxed the standards there, and i think its important for our business thank you the next question is from i didnt even understand his response some analysts were more impressed with spiegel laura martin praised spiegel for being more engaging with wall street and having a clearer message, about snaps unique advertising appeal what was that clearer message, julia obviously theres a disconnect between what investors thought of the Conference Call, and what evan spiegel sees of the quarter. What was so clear about the message from advertising the fact is, daily active users arent growing as quickly. Instagram story users, those are growing very quickly well, so she did have the underperform rating on the stock. I have to take that in focus but she called out the fact that there was less conversation about snap being a Camera Company. They werent talking about that anymore. They were talking about the amazing amount of engagement that snap has with users the amount of time that like that hot dog like the hot dog. 1. 5 billion times this hot dog was opened in the app. And that is the future of snap evan spiegel basically said on the Conference Call, the hot dog. Can you explain what were talking about . Users under the age of 25 sent more than 40 minutes a day on app thats up from the numbers reported last quarter. And then again, the numbers that were reported in f1 i hope we have video of the dancing hot dog. This is one of their augmented reality filters and one of the reasons why their users come and they return and spend so much time per day on the app. They say that their daily active users create over 20 snaps per day on average one of the things theyre doing is using augmented reality filters like the dancing hot dog. Im so sorry we dont have it now. Its part of a world future released in the quarter and so, you know, basically saying this would be the 1. 5 billion times already, and so this is a little okay but heres the thing we just talked about the eclipse. The eclipse is going to be viewed what 1. 5 billion times in real life. Advertisers arent making any money after that, either well heres the thing, brian just because something is viewed 1. 75 billion times, is anyone going to make any money from that . You have to remember that they offer sponsored lenses. So if you are Oscar Mayer Wiener and you want to pay for that lens you can pay for it and you can have your logo on it, and whats remarkable about an advertising perspective, there arent many Advertising Products where you can get consumers to interact with them, put their put your logo on their face, and then send that photo of you with their logo to their friends. So when those augmented reality filters work, like they did, there was a famous taco bell one, a number of very popular ones some for game of thrones, all of these different brands, if you can get an augmented reality filter to work its a remarkable product for the advertiser but the question is really, whats the longterm potential of this company. And i think that i think that whats interesting is what laura martin pointed to is that the conversation has shifted away from being a Camera Company to being an Advertising Company and so, that was something that she valued in that conversation. Julia, thank you. Ive driven the wiener mobile no you havent. Yes, i have anybody can drive the wiener mobile in the cnbc parking lot i was in the wiener mobile and i posted a picture like a selfie of me with this window looking out. And people were like oh, private jet travel im like its the wiener mobile. Because it kind of looked like a big chair. Thats the future . A dancing hot dog . What do you know . When we return, the biggest rental Home Companies teaming up for a real estate mega deal. Starwoods Barry Sternlicht is at the center of it. He will join us 234ex. Plus President Trump says fire and fury may not have been tough enough for north korea well talk to a former special ops Intelligence Analyst about how to contain the threat. And former White House Press secretary sounding off about the Daily Press Briefings being televised. Mike mccurry who served under president bill clinton and James Patterson will join us here on set. Hes out with yet another book about an online superstore that wants your money and your soul sound familiar u wchg quk xn un yoreatinsawbo o cnbc whoooo. Going somewhere . Heres some advice. Tripadvisor now searches more. Than 200 booking sites to find the hotel you want and save you up to 30 . Trust this birds words. Tripadvisor. Theextreme risk of burstd a pipes and water damage. Y. Soon, Insurance Companies wont pay for damages. That is, not if they can help prevent damages from happening in the first place. At cognizant, were turning the industry known for processing claims into one focused on prevention with predictive analytics, helping them proactively protect the things that matter most. Get ready, because were helping leading companies see it and see it throughwith digital. Lets see what he does with guam he does something in guam, it will be an event the likes of which nobodys seen before, what will happen in north korea what do you mean by that . Youll see. Youll see and hell see. That was President Trumps new warning to north korea those comments came after the president met with his National Security team yesterday at a new Jersey Golf Club the president declined to talk about potential preemptive strikes against north korea, saying he does not telegraph his mel tear actions the president also tweeting again this morning on the topic, quote, military solutions are now fully in place, locked and loaded, should north korea act unwisely hopefully kim jongun will find another path the latest on tensions between north korea and the u. S. , and possible next steps, lets bring in the former special ops Intelligence Analyst, author of drone war, also founder and ceo cofounder of commission Drone Company expert drones. Brett, good to see you nice to see you, brian. So doing special ops for years. Doing good work for the American People thank you for that what can you tell us about north korea . Whats the real threat of north korea . Right now it seems like quite a bit of rhetoric in my opinion they can barely feed their own people exactly youve got really a kick stater that is starving his own people so he can play with rockets in the mountains and its very, very dangerous for someone like him to have access to the capabilities that he does. Especially within the last 24 hours where china came out and essentially said hey listen, were going to remain neutral in this case, unless the u. S. Government conducts a preemptive strike and they just essentially gave them a hall pass to continue going down this path of presenting this, you know, option of essentially trying to strike u. S. Assets but really in my opinion, its a lot of talk, not a lot of action, and our military is ready if there is ever a situation where you need to go after them if you were still in the military, and you heard the president say Something Like, if north korea does this, or if they do that, everythings conditional. Right would you expect action, or do you take that as sort of, heres the language, but its really now in north koreas corner its important language look the militarys always preparing for operations, constantly i remember being in south korea, and jumping out of planes with the south Korean Special forces guys to train in the event that we ever had to go in to north korea. So weve been planning to go after, you know, for a war with them for decades okay and so really in the end were waiting for north korea to do something here and i think its important that the president and the administration do step up the rhetoric because it looks like at this point, north koreas essentially winning that war in that space, as well. But we have all the necessary personnel, the capabilities, our capabilities far exist out of our adversaries. We ever have to go in north korea we would absolutely crush them in north korea launched a missile, could we intercept it could we even prevent it from landing on guam . So we have a layered Missile Defense system and a lot of people have been talking about the fact that as of late, in case they needed to intercept a Ballistic Missile. That system alone is not enough. And thats why you really need a tiered Missile Defense capability the problem is the one that was recently deployed to south korea is not enough to have this umbrella coverage that is really needed effectively to shoot down a Ballistic Missile thats there. But theres a number of different capabilities that exist out there. In this case, and really, the fact that it was designed to intercept medium sized missiles. It was never designed to hit a missile early in flight. It was there to strike it as it was coming down. So potentially north korea could overwhelm that if they had to. We have a number of different defense capabilities that are already in place that are essentially ready to go if something were to happen like what well if we dont have to keep the ability to intercept, then its a bit of a reactionary side of it that youre talking about in terms of our capabilities . Right so, we have to be prepared, and be proactive to react to that, obviously. Look, we have Missile Defense systems. We also have bombers that are stationed in guam. We have Cyber Capabilities that are out there in case we need to do something we have a number of capabilities that are there that exist to defend ourselves but at the same time, we need to increase our support for japan, we need to increase our support for south korea and really provide them with the tools to help out their organizations, their countries for fighting these guys Cyber Solutions would be using some sort of way of knocking these missiles out before their launched . Right so, essentially some of the same things that weve done against other countries that have looked at using a missile system, or their nuclear capabilities, and we do have, without basically revealing a playbook, we have capabilities that are out there that could hurt the systems before they were able to actually launch. So, as long as we continue to allow our war fighter to go out there and prepare for that type of scenario, well have the capability thats necessary. Weve talked to a lot of former generals who have said that there is no good solution militarily when it comes to north korea. What youre saying makes me feel a little more comfortable with things but should we base the assumptions on the idea that were ready on the idea that there will be thousands, if not tens of thousands of lives essentially in danger . Well its like general mattis said a war with north korea would be catastrophic especially for the south Korean People we would never want to in my opinion go to war with them. At the same time we have to breep ourselves as a nation. We have to be ready for any event whether its north korea i mean history has shown that wealthy dictators who like to impress their own people, their only goal is to stay in power. Thats it. I would imagine kim jonguns only goal is to remain a dictator for as long as he can is that the greatest deterrent of all his own need why would he do anything when that would automatically basically make him gone . You know, he knows what hes doing primarily because he has china backing him. And thats the biggest problem here this whole thing about increasing sanctions against north korea. Thats never going to work, because they already have ways to get around that a lot of the money that they make to design these programs in the first place are through the elicit drug trade, arms dealing, and now theyve got china essentially backing them and allowing them to be a wild card out there in the region to affect the u. S. Militarys influence in the pacific yes it is about power. Its about what were doing right now. Where were talking about this guy, and were bolstering his persona around the world and thats the danger there in this case. Thank you thanks, brett good luck with the book thank you coming up Barry Sternlicht will join us check out shares in jcpenney the companys on track to open at lows not seen since 1972. Mpto sesany missing on etf and cosreal welcome back, everybody. Blackstone and Starwood Capital merging their Single Family rental business to form an 11 billion rental company its the largest Single Family landlord in the United States. The parties have agreed to merge in a 100 stock for stock transaction. Joining us is barely sternlicht himself. Hes the chairman and ceo of Starwood Capital group barry, its great to hear from you today. Thanks for calling in. Hi, becky how are you . Great we are glad to hear from you this morning i want to talk through this deal this is something thats been so interesting to kind of watch, because after the financial crisis, you saw home prices come down so sharply. Some investors making comments about what a great place it was. I remember Warren Buffett saying it was a great place to buy. You actually put your money to work and started buying up these homes. How does it been because some people thought that would be a shortlived trade yeah, i mean, we thought it was compelling to buy a house back then, lessen the cost of building and we and a couple of our peers bought as many houses as we could, in lumping, and in the beginning we thought of this more as a trade, that was a downside, and a lot of upsides now after we created waypoint and merged it with Blackstone Holdings weve all determined not only the business but margins as good as a mull toy Family Business which were a major owner of so, you know, 65 different growth margins is pretty compelling i myself was surprising with the hes in which we manage these homes which obviously are not as concentrated as homes, apartments in a building but the credit quality of the tenant is pretty good. Better than its usually a family, and they stay for longer than an apartment person stays so it seems to be a gis that is thriving i mean, its Something Like 16 million Single Family rental homes over the 110 million homes that are in the United States. So even though we have 82,00 houses, were kind of relevant in the scheme of things. I would guess that the bigger you are, though, the easier it is to manage the properties because you can consolidate more of them, and do your margins go up when you get bigger yeah, well achieve north of 60 million in synergy putting the companies together partly from just beginning the houses in the area, its easier. Theres a lot of technology being deployed in this space we dont even have to go to the house to let the tenant in we just put the keys in the lock box. And they send all their repairs electronically we can schedule maintenance people to go out and do the trip so, its become quite a fascinating business, and its interesting, the interventions, and all the interesting things you can do when you have 82,000 people we have 1 14,000 multifamily properties so this is over a couple hundred thousand units now. A pretty good view of the business and both the apartment business, and the Single Family home rental business are both very healthy. Even higher occupancies, and they helped moving forward with home price appreciation. So this business we thought we could get very good cash yields which we have done, and you see them for the shareholders, and then we have additional value from appreciation in the homes and, i think you know that weve been talking to residential sector for a long time its very healthy. You cant sleep in your computer so its somewhat insulated from Technology Innovations i kind of relish the fact that i have this business i understand and we can innovate and improve the service. Which both companies are super focused on one thing weve seen, barry is weve not seen buyers return to the home market as quickly as a lot of people had anticipated after the 2008 crash how much have you benefited from that and do you see that changing just in terms of Home Ownership, new buyers coming into the market any time soon i know supply has been one of the issues Holding People back but also the ability to get loans. Yeah, you know, i dont think its as big as i credit issue as its been just as a buyer issue, to buy houses, the weakest part of the market is the firsttime buyer. Hes the guy missing also, the regulations around home construction, you have to do its hard for developers to build entry level housing now in areas that people want to buy. So you have some companies that are in the boonedocks building entry housing and theyre doing pretty well. But most of the Home Builders are trying to build to the middle of the market and the Home Ownership rates as you know have fallen to 50year lows i think 62 . They just ticked up last quarter for the first time i think in 16 or 18 or even longer quarters. And so maybe youve reached the point where the millennials are saying hey, i want to buy a house. Obviously as home prices appreciate it gets a little cheaper to buy a house, than or its more important to buy a house so you can get in on it. And also compares favorably. On the other hand if you think rents are going to go up, which or home prices are going to go up, Interest Rates are going to go up, its going to be harder to buy a house and afford to buy a house. You could get stuck in an apartment. And you get stuck in your Single Family home. Its kind offing ainteresting thing. Its better for us i think the biggest single reason people move out of apartments and im sure a lot of rental homes, is to buy a house. Something like 15 or 20 of the people leave to buy a house. Even today you know, barry because its more expensive sorry, barry, when a lot of these big players like starwood, blackstone, were buying up homes, you know, people thought whenever they exit that could really mark the top of rent, its a better time to actually sell the homes in this sort of environment, it sounds like youre saying that high home prices are actually helping your rental business are you making a bet that the rental business is going to be stronger in the future because otherwise this could be a great time to sell some of those homes with home prices being so high because of lack of supply well, i would say that, you know, were in this for the longterm. We think this is a reals set class. I love the fact that american shareholders or consumers can buy a share of the company and it represents the u. S. Housing market and the double play of income and appreciation of the home if you want to bet the Housing Market, what a great way to play it i also compare it to all the other Asset Classes in real estate whether its hotels or malls or retail or industrial i mean, this is very strong credit diversified company ive got 82,000 homeowners its going to be very hard, as you pointed out, there are a lot of Single Family homes being built and thats also because labor is so scarce you really cant find construction workers to build more homes and we dont exactly know where they were we created a home builder, called tripoint, and in some of their markets they had a lot of trouble. Even they couldnt liquidate and as i mentioned, some make it very expensive to lose those homes profitably so we im a holder of this company, and the combined entities, and you know, we really think both relative value, and even as a defensive stock, i think we can be offensive and defensive. All right, barry its exciting if you can just stand by here, weve got some Economic Data that we want to get to. July cpi out in just a few seconds time. We want to get to Rick Santelli at the cme with all the numbers. Rick perfect timing. And heres the numbers up 0. 1 head line up 0. 1 core. Thats where you strip out food and energy lets take a year over year look 1. 7 on straight. And if you look at just core year over year, thats also 1. 7. Now, yesterday ppi was cool. This is cool, but not nearly as low temperature as yesterdays ppi. The two top head line numbers at 0. 1, about half of the 0. 2 we were expecting here. About, you know, pretty much right in line, matter of fact sequentially on head line year over year, 0. 1 hotter than last look, 0. 1 cooler than some were expecting. When it comes to year ear year, 1. 7 core, 1. 7s across the board. Maybe lets stick with that. Because we all recall, those big runs, if you look at november 15, all the way up to the first couple of months of this year, we had a 17 month run with a 2 or higher handle and obviously now we have one, two, three, four that are below 2 maybe that summarizes things best this is the last number to make the short look for higher rates going into the weekend weve already lost several basis points in tens you want to Pay Attention today. Equities are down, rates are down, inflation is soft. 2. 13 is the low close for the year were trading about five basis points higher than that now. Back to you. Excellent, rick, thank you very much. Have a wonderful weekend by the way, folks, lets bring Barry Sternlicht back in very quickly. You mentioned how this whole play is going where you really get a dual benefit, as rent prices rise, and as homes appreciate thats a double benefit. If things were to turn down it sounds like it would be a double whammy, if rents go down and home prices come down. How do you protect yourself from that the funny thing that led up to the craziness of the housing crisis was the supply of homes got out of whack, 2. 5 million homes are being built. Before that we have 50 years of straight home price appreciation i think youre going to see general increases, weve seen home price appreciation. So not that worried about home prices falling and i think the tasteness of the market to the lack of housing built across all sectors, multifamily and Single Family bode well for future rent growth and current income size. Its pretty interesting. One of the innovations that the companies have done, and we did this, and i think blackstone also did it, built to rent so we go in to a new community where a home builder is building, we buy the whole block. We agree to buy it up front and have the construction nine months, twelve months, to actually rent it, and then we can sort of exactly, you know, the brand there, and the capital costs. And obviously pretty efficient to barry so this has evolved that doesnt work in every market but it does work in some markets the builder has equity from us up front that he can use as his equity to build up communities Brian Sullivan, good morning. Listen, i know obviously making a huge bet here but you invest in everything. Can we pivot just a bit, is this a sign that you view the stock market as not a good place to invest right now i dont know how you could come to that conclusion. You know weve done three or four mergers now, started out literally with two guys in my shop in greenwich who helped put together this portfolio i guess one of the reasons i would say that is there are publicly traded Home Builders out there as well. Have you ever thought about that side of the market going to the equity side rather than the physical side yeah, the Home Building is a tough business, and you know concernses with Home Builders. There are things you may have seen a Company Called four star [ indiscernible probably better off being on target and we look today at the differential and theyre pretty much on top of each other right now. I dont think the markets every time we down. You know you talk about the reality of the etfs, they buy on Interest Rates, they sell the reits when they fall, they buy the reits and etf exacerbated those moves so we continue to look at where there might be opportunities to buy Public Companies that are trading below their mid asset values but at the moment i dont think there are many you have to take premiums. And we still worry about rates rising some day it should help 50 to 100 basis points my guess is that something will get done in the Trump Administration particularly on taxes. And so i think the whole Housing Market would play ar part reflects fairly defensive nature of the position that were taking today we want to be a little more careful. And the other things we do, we buy in europe. Barry, want to thank you so much for calling in today. Appreciate your time, and appreciate your willingness to talk on such a wide variety of topics we hope to see you in studio soon a pleasure. Take care. Have a good weekend. You, too. This is Barry Sternlicht calling in on the news that blackstone and Starwood Capital are merging their Single Family rental business to form an 11 billion rental company that is the largest Single Family land owner in the United States when we come back this morning, the White House Press secretary who turned the cameras on now says the press briefings should not be televised. Mike mccurry will join us. Squawk box will be rhtacig bk. E kids to get a repair estimate. I just snapped a photo and got an estimate in 24 hours. My Insurance Company definitely doesnt have that. You can leave worry behind when liberty stands with you™ Liberty Mutual insurance. Happy friday welcome back to squawk box. All right, u. S. Equity futures indicating perhaps a well look they flipped around there was a slight drop indicated but now, dow futures indicating maybe a slight move up for the markets remember were coming off yesterday of it 240 drop in the dow. That has to be because of the Inflation Numbers. Right . Theres no way were going to get to that in just one second. Im going to read there you go were going to get it right. Steve liesmans giving me the old like hurry up go to the camera. Because this in television, folks. This is whats interesting. This is the universal sign for hurry up Steve Liesman looks at me and goes like this, it means hurry up or youre a hamster on a wheel, sullivan Steve Liesman, give us the information. Maybe the latter. No youre right this is a cool number. Its the second cool number weve had. This week when it comes to inflation and the ppi coming in lower than expected. When i look at the individual components i see mixed but a bunch of negatives there ill give you some of the negatives that were in there weve got to talk to phil about this new and used car prices calling 0. 4 that is a specific interest to Brian Sullivan, who is always in the market for a car immediatelyal foeing the moments that he bought a car as well as my brother. Medical care up folks weve had these two things that have depressed the cpi. Telecommunications and Physician Services physicianselveses picked up a little bit which one is that . Thats the year over year falling at a 10 rate. Its so important that even janet yellen mentioned Telecom Prices and melissa you know about this. Because was it sprint or one of the ones that started its wireless offering, free sprint and tmobile are at war to the bottom. Race to the bottom this service is the year over year that one picked up a little bit on month on month. Heres the bottom line 1. 7 year over year on the core, and i think its 1. 7 on the headlines. At least from the fed standpoint its not getting worse take a look at the probabilities. And i did get some email yesterday our probabilities are different from the cme we use the reuters numbers they have one that we can track minute by minute 36 , 30 on december 36 on january so not going anywhere any time fast according to the market as brian pointed out you can see down in the 2. 18 18 firmly now this is really this was 28 like a few days ago. North korea made it step down and then the inflation data i think has led to another stepdown if you are a home buyer, Mortgage Rates could hit a new yearly low on this data. Its not just the bond market. Its the Mortgage Market i think thats very significant. You could have a little bit of help there and its going the other way as far as where the fed wants it to go but one of the ideas, we talk about this another day, maybe the fed is too tight here. Steve, thank you. Mike mccurry was the first press secretary to allow the networks to televise full press briefings. He now believes its a mistake to make these briefings an oncamera event mike mccurry joins us right now, the former White House Press secretary for president clinton and the former director of communications for the dnc he provides counsel for public strategy washington and thanks for being here today glad to be with you this morning. Youre the guy who said we should turn the cameras on why do you think we should now turn them off . Well, i actually think they should be left on. I made a mistake, though i think the problem is that its a live news event. And you know, a White House Briefing is really supposed to be a briefing for the reporters who are there. They get information from the white house, that they then need to go out and check that information against other sources. And then prepare a report so people get a complete report and get, you know, multiple sources talking about whatever the white house wants to put out on a given day. So its not so much that the cameras and that the broadcast media are there, its just the fact that its turned into this spectacle of kind of fear of the absurd every day when we watch people do this combat back and forth. And thats not what this briefing is designed to do its supposed to be an exchange of information reporters holding the white house accountable. The white house providing information it wants to provide on the president s initiative, and his policies i think if we just lowered the temperature a little bit and turned it back into what it was supposed to be, which is a briefing, i think that would be in the best interests of the american public. Mike, i have to say, just making a delay on this it still has everybody recording, making it be delayed, i dont know that that in itself is going to change anything because each outlet is going to run out and try to be the first to get that out there their network, or to their blogosphere or whatever that may be. But why because because theres the pressure to constantly be first on this stuff. And thats not simply the White House Press briefing thats changed that thats not the right model for journalism the right model for journalism is substance, depth, getting the best information that people can act on, rather than helter skelter just so would you ban twitter not only from the president s use but from everybodys use because that has shortened the news cycle yeah, but twitter is like, you know, its cotton candy for news junkies its not the substance and the depth that we need if were really look, youve been talking about the Financial Markets, and where theyre going, what the overall economy is doing people need solid information that they can use to act upon. They dont need just to momentary things that come up in the briefings. I think we need to even it out a little bit and provide a little more substance and depth on behalf of the american pub lipg. Mike, listen, i dont want to go after anybody in my own industry i have Great Respect for everybody, people i know and dont know its a very difficult job. However do you feel like sometimes balls it is live viewed that many of the questions seem to be more to benefit the news reporters, news organizations, than the actual giving out of information . Some of the questions sometimes often seem so narrowly focused, that im not sure what purpose theyre serving to the general population okay. Thats exactly part of my complaint. What i notice, you know, things went along well when i was at the white house for three years of, you know, broadcast journalists being able to have access to the briefing but then we had a certain zesty matter that developed involving a young intern, as some of you will recall, and then it changed, and people were posturing on both sides of the camera id have to say probably i rose to high dungeon myself sometimes on camera. But it was for the benefit of a momentary Television Show in the afternoon to supplant soap operas and thats not what the American People need. They need to know really, what is going on in their government . Whats the president doing whats the government, you know, what are the policies that are being shaped, and you know, thats thats my argument is that we should not make this a Television Show. We ought to make it something that is for the benefit of the reporters who cover the white house, and obviously for the benefit of the white house to get out information about the program the president s trying to produce okay. I think thats where we need to go. Mike it was good discussion thank you very much for joining us on squawk box. Nice to be with you all right this is very cool. Up next, New York Times bestselling author James Patterson is in the house check this out his new book is about an online superstore on the brink of global domination. Sound familiar jame h keep waving and come on out. Well see you in a few minutes with at t you can get your entertainment right here. Right now, when you get the incredible iphone 7 from at t you can get unlimited data and live tv. The channels you love. Your favorite shows and movies. Making your iphone into more of a. Oh my tv is ringing. Hey. Im in the middle of a. A second iphone from at t . Okay right now when you buy a new iphone 7 from at t youll get a second iphone 7 on us. And power both with unlimited data and live tv. music stops bell rings the price tag that comes with this convenience though is steep. Thats the story told by New York Times best selling author James Patterson. His new book the store is out on monday theres one of two covers i have seen for it. Thank you for being here. Its funny its witty, its scary. Does everything have to be politicize now blue and red yeah, sure. Make a choice. Excellent. Two faces in the store instead of one but its a cool story it is scary. Stepford wives. Theres a very stepford wives feel to the whole thing. It is the store is taking over everything. I guess i dont think its really about amazon but amazon fits so if youre into business youre going to feel it. In an overt the top way but if you think about okay heres amazon, they take over books which i dont like that much. Youve been outspoken about that. They take over, you know, supermarkets, next is going to be the news. They got the Washington Post and the next thing this will be the amazon squawk box. Jeff besos owns the Washington Post but not amazon per say. Good point. But the extrapolation is there. Jeff besos is amazon. Is this a scenario that you think is realistic i think it is this is the era of meglomaniacs and the strange era where theyre techy billionaires running the world now and my only thing was realistically with amazon i would like them to do a better job. Jeff would say if i didnt do it somebody else would do it and i think he said that my only thing is okay youre doing it, maybe you can do it even better. Maybe that company can be a little better than the competitors and not beat up the publishing world and we need publishing right now. Although he would say loo were trying to give our customer what is they want and disrupt markets. Thats okay but they did beat up publishers. Walmart used to do it before they were there. Walmart owned all of their suppliers. Are they giving customer what is they want or telling customers what we need like amazon dictates our behavior im not out here to necessarily beat up amazon as much as deal with this whole area of monopolies. Isnt there something deeper. Of course its deeper i wrote it. Well, clearly but its almost like the role of Artificial Intelligence is a much bigger, really the root of this. Thats bigger, yes. Thats another thing that makes the book and what happens here scarier. Where is it going to end is it going to end with us it doesnt happen in the book where machines are running our lives but thats another one of our fears. This is just one of many projects that you are always working on youre probably the most prolific author. This one comes out monday but they can order it right now. On amazon. On amazon, sure. Barnes noble. Com. Terrific. Any bookstore ifs there are any left. The strand in new york city absolutely. Youre working on a lot of Different Things though and it just got my attention about the project that youre working on with president clinton right now. Yes its a novel. I think it will hopefully be the best novel about a president ever because we have a president who is writing and collaborating and forcing me to absolutely get it right we were in hollywood last week and we had like 11 Companies Bidding for the film rights or whatever with which was a lot of fun to be there with president clinton and i said, hi been with president clinton a number of times now but it was one of our sessions that goes four or five hours and all of a sudden it washed over me im sitting here talking to bill clinton, you know for four hours and the realism and the authenticity in this novel right off the bat im interested how did that happen. Thats another one that they can order on amazon or barnes noble. Com. When will this one be out this will be next summer. James, thank you so much. We love checking in with you to see what else is in the docket. Stay close because im moving fast. Always are. Thank you James Patterson. Thank you when we come back details about the hottest new single on itesun and why you might not be able to hear it. Squawk box will be right back. All the as make the song jump to the top of your play list that way when you turn on your music silence will play rather than the first song in your play list thats crazy. Its not a song. Its nothing. Its the sound of silence which is also a song. Exactly hey guys, real quickly its the last day of our hard working intern summer with us today. Here she is. She has been getting up very, very early all summer long thank you. We appreciate it thank you for your help this summer. Thank you. Good luck back at school. Shes going back to welsley. Lets take a quick look at the markets as we head into the weekend. The futures this morning have rebounded pretty sharply on the lower than expected inflation. Dow future is up by 40 points. Brian, melissa thank you for being here have a great weekend everybody right now its time for squawk on the street. Good friday morning welcome to squawk on the street. Futures have been battling it out to see if stocks fall for a 4th consecutive session. North Korea Tensions remaining earnings for jcpenney snap and