Transcripts For CNBC Squawk On The Street 20130729

Coke ver cusus pepsi, one firm,e 35 billion deal webetween omnim and publicis. Far from the only deal. Saks is going to be bought and the battle over Pharmaceutical Company elan ends with a big bid from perrigo. The second half of earning season, hertz and wynn in focus. The hertz ceo will join us as well. Help wanted at amazon. The Company Announcing today it is adding more than 5,000 jobs across the United States. First up, deals involving highend retail and pharma in the fix today. The biggest deal u. S. Based omnicom and publicis group, a merger of equals. The new Company Worth 35 billion and will be the Worlds Largest advertising firm. However, the deal is expected to face intense regulatory scrutiny. Live with the ceos of omnicom and publicis later on squawk in the street. In addition, perrigo and elan and saks and hudson bay. Merger monday . Yes. Yes a merger monday. Got to go there. Thank you. Welcome. Dont believe it is that is it a sign of things to come. Certainly theres a peace of business each of these deals done for particular reasons. The big deal, of course, the advertising merger of equals, in part to try to stem the rise, not the rise, the dominance of google. Elan, of course, for sale in part because Royalty Pharma came after them, they fought that off successfully, decided to auction themselves. Hudson, an inquestion is it company that owns lord and taylor. Congratulations to elan. Right to do, it turns out that people want to own irish domicile companies because youre able to quickly change tax structure. Perry gos a company i have had on mad money multiple times. You see the store brand made by them, the Company Makes the the store makes money, perrigo makes money. Saks doesnt have growth and theyve got a lot of stores theyve been closing, closing, closing, not adding. The ad deal, i dont know. I mean, do you put two nongooglerelated companies together and hope that you can stop i mean nononline companies traditionally and hope you can stop dole . Have to give it a shot. Have to give it a shot. Only become more and more important. The automation of the purchase of advertising. Programmatic. Only growing. So you have to believe it. But we all know, in the history of mergers of equals. Ones that span the atlantic ocean, its not the easiest. Yeah. All of these deals, david, ones about tax structure, as jim said, right . Saks deal, real estate. Merger of equals, a weird cat. Not your classic types of mergers that would lead you to believe there is a newfound confidence among ceos. They are not. I would agree with that. And they are not necessarily of the type that will bring further consolidation. Perhaps the ad deal is a sign of something. Although these two of the big players. Right. What you see from here is a question. But i think youre right in that. Its not necessarily a sign of, hey, im feeling more ebeale yent about the business and the economy and im going for. Carl alludes at the top, when you merge the two advertising firms, so many clients are in conflict. So i mean, you just jump . Pepsi and coke, literally. A little weird. I dont think theyll be saying you take the west, ill take the eastern hemisphere. Well ask the gentlemen how theyre going to deal with that. Its a fair point. Talking about trying to close this thing by the Fourth Quarter of the year, some say that may be aggressive. Perhaps it falls to the First Quarter. They need 75 different approvals in terms of countries which gives you a size of the Global Nature of the deal itself. As a side note advertisers on the deal we think if m as coming back it will start to show itself boutiques, no big banks advertising on the big deal. Certainly notable. You put i just never understood exactly when theyll have the large one and then bingo, theyve got the large one. You know one of the things that i always hear, if you go in New York Times story, all of the companies are involve in advertising. The ceo raises the point many advertisers are saying, you know what . We dont need ad firms. We know to go to google. We know to go to sales force. This is the new world. We know how to reach younger people. You dont go through omnicom publicis. Is that true . May be go through the exchange or facebook as well. Do you necessarily need them to figure it out for you . I dont know, jim. Look, ive got to tell you, on the facebook call, its clear they are facebook people, speaking to the companies that im dont they have ad firms . Are they really going right to the company . Right, right. Seems like theres this ind intermediation and its a big deal. It may be a way to save the business. I dont know whether it does. We flow how it worked out for sterling cooper when they merged on mad men. Hasnt been a great plarj marri far. No, when you force out the great creative guy, you know what happens. We dont get that opportunity often. Lots of big deals to watch. Eyes are on those as we enter the Halfway Point of earnings. A big week of quarterly reports. Wynn resorts did miss. Hertz global matching estimates, revenues above consensus. Late in the program, exclusive interview with the ceo of hertz, mark fis sore ra. This week, 130 companies. We have to balance that with jobs on friday, bank of england ecb fed. Look, these are all of the things where we constantly worry what happened to that housing group. Interest rates went up. We had a go back over those Conference Calls from housing last week. Its like holy cow, this big move up in Interest Rates hurt. Another move up in Interest Rates youre going to have the stocks down 30 . Youll have them down 40 . Some companies are taking back the momentum. Caterpillar announcing gigantic buyback. No doubt if reaction to the very poor well, lets say maybe the worst reaction to any. Goldman has a note today putting earning season into s r perspective, misses on sales are punished more than usual. I think thats true. Now weve got to look back and say, three weeks from now, where we have the Fedex Express situation, which is the express right back to where it was. 3m the one that bucked the tide. Go back to 3m, you know what . He did manage to come up with quart that kept the stock up. Howard schultz, we spoke to him he came up with a quart that made you think. 9 comps. Beautiful. But thats not the rule for Corporate America. Nobodys talking about 9 comps or 9 rise in revenues at all. No. But you think about it. Facebook doing well. Yes. Very visible companies. Mcdonalds did not do well. What im saying its hit or miss. When you miss, its really tough. Home builders, i dont know, Home Builders are just they were growth stocks. Now theyre value stocks . You cant go that fast. You need a couple of quarters before you go growth to value. You were on twitter early, very early, and you gave a list of your favorite specs, speculative plays. Yes. Radian. Still working. One of the things that i find its amazing how it works. I get it, nature got it. Aquan. Its an easy way. Terrific. The airlines are bifurcated, southwest was not good. Us airways lost in the shuffle. Fabulous quarter. Genworth, they are like the Insurance Companies that keep coming back. I was with someone this weekend talking about cdos worth pennies on the dollar trading at 80 cents on the dollar. Insurance Companies Stuck with stuff, turns out its coming back, not to haunt them but to make them. Right. Is your list of surefire winners getting smaller . This downgrade of whole foods today . Boy, i dont know. Do you want to get in front of the cohort that says we will protect you from the food chain . We are not we know you younger people, this is why i like white wave, you younger people, you do not like to get the mcdonalds beef. You want our beef, organic beef. I dont know. I dont know if i want to get in front of the juggernaut of organic and natural foods, which is to me a generational thing. Not unlike publicis omnicom, a generational thing. Younger people view the world different, they do it differently. Note on whole foods titled not the time to be greedy, right. A valuation call, sticking to their guns on the valuation call. Isnt that sort of a crystallization of the Broader Market . People are talking double tops, people are talking low volume. Its just number of downgrades versus upgrades is so overwhelming, you come in this morning, you say, all right, okay, lets see. Weve got lazear downgrading expedia, thats a d disappointment. Whole foods downgrade. We have rbc downgrades t. Rowe, everybody it seems like is trying to get ahead of what they think is the next leg down. But the next leg down has eluded us so far. It has. Those kinds of downgrades are not often or not always, if in fact, often a predictor of whats future performance. A lot of defense downgrades and the stocks turn out incredible move. Raytheon, lockheed martin, much better than expected earnings. You get into the face of these companies that are doing well, with the ground grades, and then youve got to upgrade them after they move. Were seeing a lot of companies that are doing better than what the analysts expected. Right. This move in asia, though, disconcerting, is it not, in terms of worries about growth . Were always talking about china. But japan again japan, go to bed last night, japan is down two. You wake up, its down much more. Japan is a major destabilizer. I believe i believe in the i believe earnings are coming back. But people only care about the end. Right. If the end goes the wrong way they dont want to be there. What are people thinking about wynn . Its chinese gambling. People want to write off china every single day. Is there every Day Companies like, china can help us here . No. No. Its about water supply being polluted, air being unbreathable. Their rice paddies being completely tainted. Yes coming observe here, reaching into smithfield foods. Theyre not contentious. I want i sound like a senator. You sound like a member of the ad committee. Its not enough. As long as theyre not setting up a plant that has chromium as how about melon what they put into the milk. Melamine . Theyve got a bad rap now. People not looking. When Proctor Gamble reports you want china to be good. Pepsico, one of the reasons they had an upside surprise, was china. Theres a tension. Remember, always a tension between guys making hay in china and guys getting ripped apart by china. I think of my interview last week, china blinked. China seems to blink solar. They blink a lot, theyve got something in their eye. By the way, speaking of the hertz number if you have a question for the hertz ceo, tweet us your question with the askhertz. Well get the answer straight from the sort later in the hour. Amazon shares on a roll. A hiring spree at the online retail. Also ahead, the ceos of omni. Com and publicis, creating the advertising juggernaut coming up on squawk on the street. I look at futures. Chock full of action. Whats summer doldrums . This is september in july. More squawk on the street from post 9 back in a minute. [ male announcer ] come to the golden opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. With fidelitys options platform, weve completely integrated every step of the process, making it easier to try filters and strategies. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. 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This amazon is an amazing story because though theyre cryptic on the comp, they are developing warehouses in order to get away from, i think, paying u. P. S. A lot of money im mentioned this during a break last week santori. Sending product from the west to the east and i want it on amazon prime. They dont do as well with prime because they have to pay a big check to u. P. S. If you pull warehouses everywhere the Conference Call is hard to be critical of because amazon basically he says, have faith. Right. Everybody seems to. I think if they lost more money the stock might have been up more. Thats the old days but its worked. Netflix allowed to lose money. Teslas allowed to lose a fortune. You can lose anything you want in tesla and its better because you have to stop bmw. Have you seen the i3 today . I saw it. Only goes 100 miles. You can buy a range extender for more money. I wonder how tesla will act today. Bmw having done some work on them, work on this for a long time. Its a high priority. And they have global reach. They do. A lot of marketing muscle. Teslas only sold a couple cars in europe. I dont know. Tesla deutsche bank, upgraded last week. Tesla netflix, amazon, call it tan. The more money we lose, the more the stock goes up. Netflix didnt lose money, to be fair. Amazon unexpectedly amazon moving big into international is something people want. By the way, go back to the idea that theyre hiring. It just makes you love them more. Amazon theyre hiring. Its fabulous right . Best thing. The president s going there. Yes. The new american company. Bezos, the greatest the if theres anyone, heir to jobs. No doubt about that. Kram alreacramer will give us at to the trading week. More squawk on the streets. Weekdays are for rising to the challenge. Theyre the days to take care of business. When possibilities become reality. 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Fundamental. Start. Fundamental. Avon is doing well. Tupperware, stock didnt come in. The group is doing well. Theres a lot of cash generated by herbalife. 2,000 calls bought near the end of the day herb herbalife because they report today. Maybe someones going to get lucky. The question here, jim, continues to be, are they going to go out and borrow a good deal of money, as a result of what you say they have strong cash flow, ability to they can borrow relatively cheaply. Could they borrow 2 billion . What. Im saying, this is the story out there. Do the math. 2 billion. Dutch tender at, i dont know, somewhere up here. Right. And you buy 30 of the companys stock back. Karl you could squeeze. Say youre short 20 million shares. Short 20 million could be squeezed badly been. I mean, but that big presentation about how herbalife is not is a ponzi scheme, how does that play into the buyback . It could not sure. Its not able to stop it. Im not about fundamentals here. When we talk about the name, this is tur pupurely a marketd phenomenon. If they were able to borrow and do it. They dont have audited financials, not any fault of their own. Right. Caught up in the scandal. No fault. Michael johnson there are plenty of banks willing to loan them 2 billion if they wanted to do that. This is an international company, its a big employer of people worldwide. You could say everybody who works for them does poorly. Thats not the case. Michael johnson, used come on mad money constantly and lay out a story we generate a lot of cash and buy back stock, and that would be something you wouldnt want, if youre short, because no, especially if you come with a tender for a meaningful percentage at a price well above where it currently is. How much of this would again karl icahn, obviously, whispering in Michael Johnsons ear what to do. He can go up, by the way. Carls capped at 25. Hes at 17. Dont hold me at the numbers. Hes allowed to buy calls, not that big. Maybe hes coming around. Focus on the fundamentals. Fundamentals are pretty good. The battle between one large short seller and everybody else. Not able to destroy the business, hes the short sell rp not able to take it down. Hes not got the president the president s going to amazon. Hes not going to herbalife. All right. Weve got a lot more to talk about this morning. All of those mergers and earnings, busy week. Opening bell about to start for this week on a monday. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. [ indistinct shouting ] [ male announcer ] time and sales data. Splitsecond stats. [ indistinct shouting ] its so close to the options floor. [ indistinct shouting, bell dinging ]. Youll bust your brain box. All on thinkorswim from td ameritrade. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. Opening bell in a few seconds here ahead of a big week of earnings. Bps, mercks, pfizers, glow worm, allstate, metlife, exxon, you pensioned p g already. Insurers are reacting to travelers perhaps no more pricing increases. Theres a sense that maybe theres going to be a price war insurance. I dont know. I will tell you this, people are shooting first and asking questions later. If there is no price war, youll go back into these because theyve been remarkable performers. One of the best all year. Health care insurers. Incredible. They never quit. Never. Aca nothing but a help. Oh my. This is just one of those things that happened from washington that was supposed to be bad for these guys and its all net for wellpoint, united health. Humana the strongest stock i follow. A look at the opening bell. S p at the top of the screen at the big board, Semiconductor Company exar celebrating its transfer from the nasdaq to the nyse. Okay. Another win for these guys. At nasdaq, columbia banking system, washington state, celebrating its 20th anniversary. Theres going to be ipo action later in the week. Sprout, you mentioned whole foods, prosprout as ipo friday. Annies worked, fair way worked. A lot of bubble buzzing, skuz me, about a lousiine housing co that want to rent housing units. When to the hedge fund say we have 10 billion in houses and we have got to dump then, because the housing business turned sour. This is the theme for this quarter. A number of them that have come public or tried. Colonies failed, right . Blackstone, however, the largest at 29,000 units, still buying in certain markets. Its a yield play. Theyre renting them out. Right. And that way they youre getting a healthy return. They can do it so they at least can manage their portfolio with a cost that makes some sense for them. So its not clear to me theyre going to be selling anytime soon. No, but when you go through the horton Conference Call the exit is probably public exit and or sale to another entity as opposed to selling pieceme piecemeal. True. I like housing as a theme. Theres multiple bids going on, in the end a big downtick. A big dos down tick. People didnt lock in people paused. When getting a mortgage higher you really say, whoa, i may cancel. Cancellation spike for the Home Builders. They were there also confident when they come on tv, confidence to me misplaced. What does that say, then . What, because where are we on a 30year mortgage. Affordability . They love the affordability thing. People cant afford, thats it were not going to have a housing market. People say wait a second. Heres my monthly pay schedule. Ive got to rethink. Ive got to rethink what my monthly im not saying they stay away. The Fourth Quarter could be good again. Housings a seasonal business. One of the things that took my breath away, horton saying dont worry, the buyers come back around super bowl time. And im thinking, were still we just started training camp. Holy cow the dows dragged down here by boeing, the worst component. Now asking customers of its next generation 737, the 747, the 777, to inspect at least inspect, emergency transmitters that have been the source of concern for the dreamliner. Well, every time if you bought it, every time it went down on these, its been a remarkable trade. So im not running from boeing. I would run to boeing. I know precision cast parts didnt have a perfect quarter last week. People trying to sell parts of boeing. I think its a mistake. Ill take the other side. Talk about the deal stocks this morning. Looking at, as you imagine, saks is up, elan is up. No surprise. Omnicom is up more. Merger of equals there. If youre an omnicom shareholder. 813 of newco shares and a 2 special dividend. Theres a look at saks. Theres omnicom. A nice move up. You continue when they get involved with mergers they do well. They do. I see perry go down. I wonder whether perry go finishes down. They did manage to get a premium over royal tayepharma tg to do. Its not a done deal. But is it likely to pass muster with the Shareholder Base certainly would seem. Dont appear to be any other bids are. They held a process. You heard mark schaffer, the banker running it, saying positive things about where he was hoping it would end up, not sharing distinct information on it. Its tax rate. These irish deal, whether its i mean its just incorporate i was looking atshire. Shires not a company that i like. Why . Has a couple of products about to go off patent. But the stocks up big, betting someone can buy shire and change their tax rate. Incredible driver to get out of the u. S. Tax scheme. Yeah. Perigo shares. 6. 25 in cash. Elan, if you remember, royal toy stream, which they sold to boy, they get roleties, its crash, great tax rate. Thats what the company is. Absolutely right. Ite ive been mulling over housing. If home sales go down, people continue to rent. Real estate, hearing that at 2. 4 billion the hudson bay deal for saks, second largest ever canadian acquisition in u. S. Retail. Wow. If you want to did a baseball statistic equivalent. Its a good sized deal. It is. Theyll bring saks to canada, right . What . Thats part of the plan, i believe. Also take some of the lowerend malls which there is a saks and change to lord and taylor. Saks overexpanded, saks does have a terrific online business. Obviously the Flagship Store a huge generator. Going back and forth with david over the weekend. Davids not been to the floor of womens shoes. Whats your problem . I dont know. Youve got to get out more. Women shoe floor could change your life. Very well could. I have prided myself on my legs and i think theyd look pretty nice in a pair of pumps. Is that much of the zip code about toe cleavage. You dont want to get those things where your toe whats that called where you need surgery. Sixinch heels. Bunions, you dont want that. Whats popping on the screen, jcpenney, up, in a flattish tape, after einhorn discloses on friday the short position is closed. Look, jcpenney, again, i mike olman came in, calming people down. Jones, thats been up. Rumor that jones is for sale. Pvh, the stock roaring here. Under armor, a fabulous quarter. Apparel companies are doing well. How badly retail is doing if Apparel Companies are doing as well as they say. Well get Chain Store Sales this week. Another thing weve got to worry about. Lets get to bob pisani on the floor, see what else is moving. Good morning. Talking to john renn, maurice levy, omnicom publicis. Im amazed they have pulled off a deal this complicated. Impressive. Get more for you in a few minutes when they talk to david. Big week for macro this week. Expecting 1 . July nonfarm payroll. People are talking about this morning the dollar weakness, onemonth low against the dollar. I think thats a little bit of an issue here for the a lot of traders. Of course everyone believes bernankes going to continue the dovish tone on wednesday. Hes not go doing anything to rock the boat since theres no fed Conference Call going on reporters meeting going on. Japanese stocks are getting attention. Were down four days in a row. Abe supposed to push his reform programs including higher sales tax. The yen has been strengthening against the dollar. And thats one of the reasons the dollars so low. The dollar index so weak. Twoday drop in the japanese stocks very noticeable. Here in the United States, you know how disappointed everybody was when caterpillar lowered guidance. You see what happened a few minutes ago . Announced a huge buyback. Buying back 1 billion of caterpillar stock. Thats an interesting number. Thats about 2 of caterpillar shares outstanding. Calling an accelerated buyback. It wasnt expected. At least not right now. I think theyre trying to blunt the concerns. The market drooped wednesday when caterpillar it didnt recover the rest of the week when caterpillar made the announcement. Hertz came out with earnings. Ive rented three times this year and let me tell you the prices are higher. I know they say 2 higher. Seems higher than that to me. And thats one of the reasons the stock ups 80 this year. Its down today because guida e guidance, earnings were in line and they didnt raise guidance. People were thinking theyre making so much more. The company said they think pricing is going to be flat. Well see. All i can tell you is, as a consume of hertz for years prices are up notably from the same time last year. This lord and taylor deal fascinating me. I dont know how they get to 16 a share. Theyre going to make 46 cents this year, saks. Do the math on this. Talking 30 times forward earnings, doesnt make sense. Even if you give juice, and i know about bringing to canada, it doesnt make sense unless you include real estate parts. Talking about the possibility of separating real estate assets through sale leaseback. Fifth avenue alone, on a sale leaseback would generate 40 million a year. They only made 60 million in profits last year. So already just a sale leaseback in the one named store would generate twothirds of their overall earnings. Outside of doing Something Like that, the deal doesnt make a lot of sense. Back to you. Interesting. That is a high multiple, bob. Theyre not going to turn around and sell fifth avenue. No. No. Maybe a sale leaseback as bob said. Talk other deal news this morning as well. As you hear applause there. Dell, lets start there, because michael dell did give an interview at a couple of outlets via email. We cant get him on tv if hes going to do email interview. But what he said perhaps most importantly was this, that if the deal does not go through, i plan to stay and continue to do my best to make the company successful. I will not support the kind of recapitalization a sale of assets, some shareholders, that being carol icon and some are suggesting. I believe the challenges we have faced as a public company, including potential proxy fight would be significant. But im ready to fight and committed to doing what i believe is right for the company. In a way though, curious comments. It says im hanging around, ill let you know that right now. Yeah, its going to be in no mans land, weve talked about that if the deal is voted down. Its not clear whats going to happen, given the fight decided at an annual meeting date which is not yet set. Well see what the special committee decided to do with this push theyre making to change the voting standard. Very much unclear thats going to happen. Maybe you get a change in the record date but thats not going to deliver enough votes. They are still behind. Very bizarre extension strain to michael dell, what will he do . Ill stay but if icahn gets too involved ill go. Clearly southeasterns good, carl icahns eving. Like darth vader and the force is with michael dell. Is he really is it really does it come down to every day he wakes up and says, i dont know, i dont know, i dont know. I dont know either. Hes never been in a situation like this. Thats something to keep in mind. Never had to work for anybody. A nice good guy. Yeah. Quickly, hma. I dont i talked about it the or day but i want to add to reporting on Health Management associates. They may want to get the stock down but the fact is, Community Health and Health Management are in talks i can tell you that. It would be below market deal. They may announce something as soon as this week. Consideration from Community Health to hma holders would be in cash. Unaffected stock price, before we put in a poison pill and talk about glenn view buying more, its about 11 a share. If we deliver you some deal high that than, a nice premium to that it may be higher multiple than what tenet paid vor vand g, 70 of the shareholders have to vote in the affirmative. Glenn view earns 10 of Community Health. Theres a view they would view it positively. Im keeping an eye on this. Appears to me that hma and its current Board Management out of bullets. Trying to figure out what to do to fend off larry robins and glennview to line up consents to replace the board of directors. We may get a press release announcing the potential deal but its fascinating. Could they get more . What. For hma. The idea that glenview, the directors we have nominate ld take over, well improve management of this company and unday we will reapproach and see. For community if you get a deal, with a breakup fee, why not take it . Right. For hma, not clear. Well see. Ticking up. Ticking up instead of going down. Theyd love to see it go down. Strange situation. Lets shift to bonds and the dollar. Rick santelli, go ahead. Thanks, jim. As you look at 24hour tenyear note rate, right around 8 00 eastern, rates started to creep up a bit. We are starting and continuing to see some corporate supply. Last week, daimler, am next. Today, ibm, remember the old da days, ibm, disney, associated with having great prowess when it came to rising rates and trying to get their supply in early . I dont know if thats true, but a lot of talk as to that style. How it affected the dollar index, look at 24hour chart, rates started to climb, the dollar did improve. The dollars having a tough time as the twomonth chart will show. A lot of talk about whats go october with abe and japan. Nikkeis had a couple of tough days, down over 3 two sessions in a row. If if you look at this from twomonth perspective, its losing ground. But it seems they cant get all of the stimulus market activity on the same page. Interest rates for the jgb has stopped going up and thats key. As you look at a chart of the jgb, its hovering under 80 basis points versus testing 1 . Of course, with the fed meeting this week, well have to acknowledge that the ongoing issues of stimulus and how global stimulus is fungible. Thank you. Rick santelli. Kelly evans joining us, talking about what shes watching ahead of 10 00 a. M. I have to draw peoples attention to the article in the journal, whats happened is that for the first time theyve gone through john hill, christina peterson, and help from other people, to look at 700 predicts that fed officials have made, 20091 20092012, trying to see whos been right, whose view of the world has been borne out. And the bottom line here, guys, is that what youre seeing, a point, plus one to forecasts that were relatively spot on, and minus one to forecasts that missed the mark. Who comes out on top . Janet yellen, none other than the one often presumed to be first or second in line in running at least we should say to succeed ben bernanke. Dudley is second. Two come out well in the tally. Who didnt come out well . Anyone who is hawkish inflation. We have clauser. We should say this isnt just about economists verisus Bank President s. Looking at how the economists did like kocherlakota, but his forecast didnt look great. Meanwhile, elizabeth duke, not an economist by training, hes leaving the board, but she did better. Whats the point . As we start to think about who markets want at the helm of the fed who they trust, someone like a yellen, whose view of the world has been out there and proven right, is going to have more credibility. What we dont know actually as much about Larry Summers. We dont flow right now quite as much as how he sees the world and what he might do as the fed chair. Why is the press this weekend so horrible for summers . Mar than vineyard, you he doesnt need internet connection. Why . What happened here . The long knives are after this guy. I dont think its long knives. Its his record. A guy that the journal is pointing out, and other places have pointed out, this is not ayour typical economist. Held controversial positions in the late 90s, work ford citi group, made i didnt think he worked for citi. Consulting, getting fees. But he was treasury secretary. Association been lie say, summers teflon. Stuff doesnt stick to him as it would for someone else. Well talk later on. Cramer putting snap snapchat on the radar. Can the bad guys snapchat buy at 3 45 and get away with it because you dont have the technology to stop it . I dont know what youre talking about. Should regulators be worried about snapchat . I dont know what youre talking about either. Well be right back. 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With everything thats going to happen this week, what do we get tonight. Two 8 yielders. One of the things weve seen yield hasnt protected you. Will 8 . A publishing company, you get front gate, back and forth with front gate, happened to love it, dennis gallagher, 8 . This is a return of capital situation canadian company. These are tougher. This is a company that we have to check the cash flow can cover the dividend. See you tonight. Thank you. 6 00 and 11 00. The ceos of the huge merge enwean omnicom and publicis. [ male announcer ] if you cant stand the heat, get off the test track. Get the mercedesbenz youve been burning for at the summer event, going on now at your authorized mercedesbenz dealer. But hurry, offers end july 31st. If then schwab is the placeing your trato trade. Higher level, tdd 18003452550 going on now at your authorized mercedesbenz dealer. Call 18882849410 or visit schwab. 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Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Welcome back to squawk on the street. Google versus microsoft. Thanks to 35 billion deal between omnicom and publicis, advertising accounts for the tech rivals will be at one firm. The ceos of both omnicom and publicis are here live at post nine to break down the deal. Bmw launching its First Electric car. Well take you on the first test drive and see if the company can create some buzz with the new model. 53 million of jewels stolen in cannes, france. Which legendary gang could be responsible. Find out how the kardashian clan coulding contributing to the countrys gdp. Nice. First up, breaking news. Pending homes slipped from a sixyear high. Just got figures from the National Association of realt realtors, down. 4 in june. However they are still up 11 from a year ago. And lawrence yune says higher home prices and Interest Rates beginning to impact affordability but a lack of inventory contributing to that slip. Pending home of course a measure of sales contracts signed but not yet closed. Michael fredericks at blackrock and john lonsky at moodys research group. Welcome. Good morning. Good morning. Michael, first to you, reaction to the pending home sales figures. We start off a week where we learn a lot about gdp. The fed meeting, what are you telling clients to do here . I think pending home sales may be better than expectations and Mortgage Rates are up about a percent off the troughs of roughly a month ago. Not a big surprise. We think that housings one of the bright spots in the economy. Part of the reason, were judicious with amount of risks were taking we do like stocks. We like these highquality, highdividend yielding stock that we also like cyclical stocks writing covered calls on top to generate nor income. How can you like cyclical stocks with a lot 0 tuned to the china struggle. Whats the story there . Weve seen stocks generally lagging here over the last several trading sessions. We take a bit of a longerterm view of the world. I think in you look at the sick cyclicals, the disparitys eye opening. If you think the s p will rally the second half of the year we do think that the cyclicals will be leading the way. I think on a namespecific basis, i think you can put financials this that category. Financials have been a bright spot. Those are some of the names they dont generate a lot of income, you if selective you can get paid a lot to sell away some of the upside. Those are stocks weve been overriding in the multiassets income fund. Earnings seasons boosted by their performance if you exclude them it wont be so rosy. Are we seeing the same pattern here play out . We are, especially with the nonfinancial companies, s p 500, the expectation is that their income from continuing operations will be down 1. 5 from a yearago. Thats worse than what we had the previous quarter. Compared to a year ago. This makes you wonder how well the economys going to do in the second half if nonfinancial corporations are struggling when it comes to growing revenues and profits. Sure. Thats been the trend now for several quarters. We havent seen much by the way of revenue growth. Yet the markets doing okay. We should point out the share count is declining. Companies are buying back their own stock, epf earnings look okay. What point does that matter . I also think whats at work is the market still expects that Interest Rates are going to remain relatively low. That the bar that earnings have to cross in order to keep stock prices from falling has been lowered by what are expected to remain exceptionally low Interest Rates. Look at index on pending home sales. Down a bit. But if we look at the index of Mortgage Applications for the purchase of a home, thats down 4. 5 from midjune to midjuly in terms of a moving forward week average. Thats not good news. We find that the phlx housing sector stock price index has collapsed by 15 from where it stood in midmay. Michael, you wanted to respond to that . I think the bottom line is that in a way not a lot has changed. Interest rates are going to be low for the foreseeable future. If youre an invest who are needs income, the usual sources, core bond market are not the place to be. Youve got to take a versatile tactical approach to income. The levels of s p its not a time to be pouring into the stock market. Overstretched at this point. There arent great alternative. I think equities will do better than core bonds and diversifying into preferred stock and highyield bonds, it all makes sense. Im starting to think jefferson should have written the pursuit of income in lieu of the pursuit of happiness. Hertz reporting secondquarter results, profits up 31 as the company logs doubledigit percentage revenue growth. Simon hobbs speaking with the hertz chairman and see late in the show. Has more on the earnings, good to see you. Letter reporting now what is eighth consecutive record quarter as expected with strength in car and equipment rental. Equipment rental pushing profits up 31 . The stock may have dipped slightly today. No, were up again. Up 4. 5 . The big picture, its more than doubled over the past 12 months. The stock up 124 as you can see. Hertz is a business getting stronger as the economy gets stronger not least the number of Major Car Rental Companies in the country is dropping from six to three. Hertz has closed its own 2. 3 billion acquisition of rival dollar thrifty. Hertzs share of the airport car rental market is rising from 26 to 37 . With that rising market power, hertz should be able to raise prices more quickly. The average spent per day by its Leisure Companies at airport is is up 4. 4 on last year. And every 1 gain in prices boosts profits by 6 . Now what makes hertz more interesting, its rolling out technology that will make hiring cars for short trips so easy, from say the parking lot of walgreens or lowes families in may ditch buying a second vehicle. Incidentally, also see hertz increasingly trying to sell you its used cars directly with a license to do so in your state because hertz has learned that it gets an average 1100 more by selling directly to you than at an auction. Now the ceo of hertz did not want to to any interviews until his acquisition of dollar thrifty closed and the regulators signed off on it. Now that its happened, Mark Frissora will be live with us exclusively on cnbc at 11 45 eastern. And you can get involved. Tweet any questions you may have to squawkstreet with askhertz. A big interview and successful business. Were glad to have him back on cnbc. Back to you. Simon, well look forward to that in 90 minutes time. Now bmw is making a large and some say risky bet on the new colleelectric vehicle. Will the bet pay off. Phil lebeau giving a look at bmw new model. Its behind you there . It is. Right now its an awkward appearance theyre doing a design briefing for journalists here at this venue in manhattan. Thats is the i3. The i3, bmws first mass market electric vehicle. It will go on sale in the Second Quarter of next year. The price 41,350 and thats before federal tax credits. Interesting to see what reception it gets in the marketplace. We had a chance to drive there is on friday here in new jersey. And the interesting thing about this car when youre driving it is when you take your foot off the accelerator it slows down to the point where you dont need to use your brake. The brake there in case you need. Its a unique feature, including no center stack, you can slide across after you paralleled park in the city, go out the passenger side. We had a chance to talk with bmw ceo Norbert Reithofer about his expectation for the market in north america. Hes fairly confident the i3 will do well. U. S. Market, in my opinion, an important one. If you see the First Quarter of 2013, i mean, the growth rate was 135 for battery electric vehicles. And that is a very promising figure for us. It is an interesting market talking about electric vehicles. Right now theres three primary competitors to the i3 when it comes out. The volt leading the pack yeartodate in terms of sales under 10,000, close behind is the nissan leaf and the tesla model s, 8931. Take a look at shares of bmw over the last year a lot of questions on twitter as wells email, how come bmw didnt build an electric car to the tesla . An urban vehicle sold around the world, we are not trying to make a direct competitor to the tesl. They take a look at i3 for the first time. Guys, back to you. Phil, thanks. I cant wait to see reviews, consumer reports. That will be interesting one. Thank you, sir. Phil lebeau in new york for us. Wall street is reportedly obsessed with snapchat. Why . The ceo says its not a good way to send inappropriate content. Snapchat is not a great way to send inappropriate content. Any photo can be saved by someone with quick fingers taking ashot or taking it with a camera. All of the talk its for sex texting. I wouldnt know. Its not true . Well we dont see the photos. So what are traders using it for . Well try to find out a little late snoor later. Some of the best known agencies under a single roof, the ceos of omnicom and publicis are here at post nine right after a break. Now to a big deal that could shake up the advertising world. Publicis and omnicom announcing a 35. 1 billion merger over the weekend. And if approved it could bring rival accounts like coke and pepsi under one first. John wren president and ceo of omnicom and maurice levy chairman and ceo of publicis. Welcome. Congratulations. Good to have you. Thank you. Joking about how you kept this quiet. Its written this started as a joke, true. As a joke . Yes, it did it started as a joke. On the terrace of the publicis building and john said, its a priceless view. I said you can get it. Over time and other social occasions we went, are you really kidding . And escalated and we started having more private serious conversations. And it turned out that it was actually possible to accomplish. And we have. What are the like strategic circumstances that led you to even think of this . Youve been doing this for a quarter century, right . Did you ever see that was nice. Hes been doing it longer. Im in the industry 40 years. Im leading publicis in a quarter century and weve done a lot of deal but this has a lot of reason to exist. The most important one is that its an excellent combination for our clients. We have to think first about the clients. What the new world is creating as issues for our client and we believe that this combination is something which will have them coping with all of the changes which are happening in this world and particularly with the internet giants. So this is something which has a lot of good reason. For our people its exactly the same. Precisely the same. The marketplace has moved and its changing it changes every day now whereas in truth, up until ten years ago it didnt change very rapidly. You had time to absorb the changes, intellectualize them, reeducate your people. Now changes are instantaneous. And this gives us the combined resources plus an array of assets that we can Service Every client need and were terribly nimble at the same time in being able to shift in the give us specifics how this is going to position you to compete effectively with google in the new world youre describing where things change quickly. When we think of your queepz think of good Old Fashioned advertising on television, magazines, analog media, so to speak. Well, our businesses are much more robust than that today, tlz no question. We have trading desks that trade Digital Media that look like youre sitting here versus sitting in a building with a room full of buyers. The way data gets used in terms of accumulated theres always been data around but with the ability we have to gather that instantaneously, sort it use it come up with meaningful data that can be used analytically to create insights or target markets is is a fundamental. Maurices company was doing it, doing it successfully. We were doing it doing it successfully. The combination of putting resources together allows us have a different level type conversation with the facebooks of the world, googles of the world and allows us to stay on the cutting edge, principally for the benefit of the clients. Whats interesting some analysts saying not so fast, for people to assume its a done deal. We know eu regulators especially the french can be nationalistic when it comes to antitrust concerns with 80 of the market potentially owned by the big four if your merger goes through. How do you answer that and guarantee it not only gets done but done in a speedy way . There there is certainly a path to go through. And we have to deal with all of the issues. We do not anticipate any major hurdle. Regarding the friend. Reaction, they have received numerous congratulations coming from the political side of france, so this is something that is quite interesting. Im not saying the world is changing. Im saying that the french government has received the information as something being very good step for our industry, for our companies, and for the french market. I would like to come back to your question regarding google and the like. We dont want to compete against them. We are already collaborating. Sure. If we are doing this, its to avoid competition. We dont believe that it should be good to have google and the like having a position which is such will minimize the role of the othadvertising agencies. We are helping our client to deal on an equal footing with these big players. Its not something that is against anyone. It is something that is done for the benefit of our clients. And we do believe that by putting our resources together, our intellectual capabilities, all our people and our investment capabilities we will help our client much better than what we do currently individually. The deal is structures, the true merger of equals. Right. Ive done interviews like there is for many years across from well intentioned executives like yourself who structure deals like that because they have to do executing is difficult. History is littered with failed mergers of equals. What gives you confidence you guys can pull this off. First of all, weve known each other quite a while. The other thing is nature of our business, all of the agencies that are being accumulated are used to periods where they are so collaborate and the rest of the time they dont have to collaborate, they can compete. Thats true if in the three advertising brands within omnicom. Fit a new piece of business, its great, theyll compete against the siblings. Fit a common piece of business theyve learn theyd have to cooperate. That transition wont be difficult. Thats most of our folks. Obviously were not polianish. There are hard choices to be made. We have committed ourselves. As i said were both veterans. Well take the decisions, make the hard choices and move on. But have you heard comparisons to mad men and the story line in mad men that involves a merger . Yes, we have. We have heard of this. I wasnt of mad men but i came in the end of it. I sat in the merger which created omnicom in 87, 86. And a lot of things that could have been improved when we got started have that as a learning and we grew from 700 million back then to 14 billion, almost 15 billion now. So, yes, theres going to be challenges but including losing key clients, though. No, i dont think so. Thats possible, and we have provided for that. But obviously 23 billion, most clients are pretty comfortable and long ago have they gotten past the conflict issue because as an industry, every one of us, including our competitors, has learned to build fire walls, you know, so solve some of the issues. There will be some, of course, but not much. We dont anticipate a lot of difficulties. We think there will be some discussion, there will be some question, which are absolutely fair and normal for coming from advertisers that would like how we guarantee the fibers will be working and the competition will be alive. This is something that we are used to doing. As john said, competition is doing this already. Its enough, its something that isnt totally new. Clearly some emotional aspect for clients which competition is more fiercer in some areas than other areas. We have to deal with there is in a nice way and to explain the situation. And to work with them in order to find the right ways of dealing with these issues. Clearly, its not yet a big hurdle to jump over but i believe that working together with our clients, we have great relationship with them. Sure. I called many of them, john did the same. The reaction is overwhelming. And extremely positive because, that is the most important thing, they see the benefit for them. Gentlemen, congratulations. After a crazy weekend, get some rest. John and maurice, thanks for coming by. Thank you. A good chance if you have kids they are using snapchat. What about traders and Investment Bankers . What wall street could be using snapchat for. Later, how the kardashians will be influencing gdp in a few moments. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. Golden opportunity sales event and choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. Back in june an article claimed wall street was obsessed with snapchat. Is it true . Good morning, kayla. Good morning, carl. Wall street is enormalered with snapchat with the rest of the generation of people who live in fear of what lives on social media and what the repercussions of that could be down the line. Enter the message that selfdestructions, socalled snaps surged in popularity past instagram, 200 million snaps isnt a day. That number doubles in two months this spring. Its a way for young wall streaters to document excesses or lack thereof. Late night cubical shots or hampton weekend ragers. Snapchats ceo even spiegel warned what you send may not be as private as you think. As soon as theyre viewed theyre delighted from the servers. Doesnt prevent anyone from taking a photo with another pho photo. Its a subpoena, snapchat serves are provided evidence in Divorce Court to prove cheating. To the extent people can figure out ways to communicate, by im or snapchat or some other method, Law Enforcement needs to think about that. And think about it, he is. He didnt know what snapchat was at delivering alpha in a nunny exchange between him and jim cramer, jim said my daughter and i sent it all the time. Could someone buy leap wireless 3 00 p. M. Friday and his face was blank. Its not something youre able to get away and if you think you could. Knowing kayla, i lot of people saying, wait a minute, what is snapchat . If anything, a boon for the company. But we shall see. Kayla toushy, thanks very much. You might roll your eyes at keeping up with the kardashians. More on that. With fidelitys options platform, weve completely integrated every step of the process, making it easier to try filters and strategies. To get a list of equity options. Evaluate them with our p l calculator. And execute faster with our more intuitive trade ticket. Im greg stevens, and i helped create fidelitys options platform. Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. [ male announcer ] you wait all year for summer. This summer was definitely worth the wait. Summers best event from cadillac. Let summer try and pass you by. Lease this cadillac srx for around 369 per month or purchase for 0 apr for 60 months. Come in now for the best offers of the model year. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. An Interesting Development in the top ranks of apple. Bob mansfield is stepping down as technology chief to work on special projects. Jon fortt is live in san jose with more on that. Whats odd about this, Bob Mansfield announced his retirement a year and one month ago june 28th, at the time running hard ware engineering. In that case apple put out a press release, saying the expert would take severalins to transition out of the job, five months later back in the senior role of Vice President of the technologies after the shakeup. This time, his name just disappeared off of apples website yesterday. People noticed putting an inquiry to apple. A spokesman sent mie this explanation. Bobs no longer on apples executive team but will remain at apple working on special projects reporting to tim. Overseeing chips and wireless and who would get his direct reports, one former apple executive, whose brain i picked, thinks this means mansfields transitioning out of apple after a year. Apple isnt saying that. A few things that are clear, mansfield has a lot of fans inside apple. Hes had a hand in some of the companys most important advances including custom chips, Battery Technology and antenna design. One of steve jobs most trusted lieutenants. One of two fielding questions, he doesnt have to work anymore but apple needs to fine similar talents to his if its going to tackle challenges like tv and wearable technology. Something i thought id never say in the same breath, kardashian and u. S. Gdp. A report saying entertainments spending on shows like keeping up with kardashian will be factored into gdp. Joinings now from jpmorgans trading floor. Good morning. How are you doing . Great. So, look, there are a couple of things here, first to tell people that this gdp revision is coming. The second is to explain what, if anything, it means. And i guess, to start with first piece of that this might tell us about the level of gdp than its growth. Well got a revision to gdp, it will add new categories. So its going to take a comprehensive look at our spending on intangible capital which the big clunk is r d spending by corporations. But also theres a category of entertainment, literary, other artistic originals. So some long lived television shows, movie, that will get counted in gdp. Sorry we are juxtaposing you with shots or scenes from keeping up with the kardashians its an important way to how we are accounting this stuff. Companies are valued from intangibles with regard to r d. Other parts of the world are doing this as well. Right. When we change statistics there are people who think its a government conspiracy or something. But this is an International Movement to take a comprehensive look at intangible capital which is increasingly important more so than tangible capital. And so other countries are taking that lead. U. S. Is now falling into line. And like i said, as you pointed out, you know we already value pharma, tech companies, not based on physical capital but intangible capital. This is making it more consistent with the way we think about things in the market. Interesting, michael. More broadly, i wonder whats your expectation for wednesday for advanced q2 gapd. And the elment of core cap x, is the table set in your view for companies to spend more in the back half of the year . Right. So for wednesday, were looking a. Anemic 0. 5 growth in the Second Quarter. Whoa. Capital equipment spending running 4 annualized in the Second Quarter similar to the First Quarter. Its a step down. We do think things could get bet in the second half of the year. Some of the orders data for capital goods has picked up. Survey pihas decent spending. I expect better cap growth in the second half. If we go back and have benchmark revision that raises the size of the economy because of the intangibles, its not like thats going to change the jobs picture, for example. Does it in some ways make it worse than the magnitude of job loss as weve seen since the recession if the economys bigger than we originally thought . Well, not necessarily. We dont know how these revisions are going to be spread out, how 2008 and 9 are going to look different. I dont think necessarily it will make the economy look worse. Obviously we have to rethink a lot of level variables like output for worker and so on. How thats spread out over times is yet to be seen. If we get. 5, mike, thats going to throw some trader into a tizzy. Can that be made up for by a good number friday . Is that in the offing, too. I think so. I think some of the factors that may be holding back Second Quarter are going to be transitory like federal Government Spending should be down quite a bit. So i think it will be more important to see what private final sales, requewhich might n look as bad as the. 05 number. The labor market has looked steady though gdp growth has been weak. We expect to see that friday which should calm some fear but was keep the fed tapering on the table for september. Thats an important part of the discussion as well. Helping to explain the relevance of the kardashians. Thank you, mike. Up next forget to ask who his favorite is. Come on. A thief stole 53 million of jewels in cannes, france. Could the infamous pink panther gang be involved . Find out when we come back. announcer at scottrade, our clients trade and invest exactly how they want. With scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Awarded fivestars from smartmoney magazine. Where would you like to go tonight . [ male announcer ] its a golden opportunity to see how lexus effortlessly connects you to where youre going. Come to the golden opportunity sales event and experience the connectivity of lexus enform, available on all lexus models, including the es and rx. This is the pursuit of perfection. A talking car. But ill tell you what impresses me. A talking train. This ge locomotive can tell you exactly where it is, what its carrying, while using less fuel. Delivering whatever the world needs, when it needs it. After all, whats the point of talking if you dont have something important to say . If you dont have something important to say . First day of my life by bright eyes youre not just looking for a house. Youre looking for a place for your life to happen. Like carpools. Polly wants to know if we can pick her up. Yeah, we can make room. Yeah. [ male announcer ]. Office space. Yes, were loving this communal seating. Its great. [ male announcer ] the best thing to share . A data plan. At t mobile share for business. One bucket of data for everyone on the plan, unlimited talk and text on smart phones. Now, everyones in the spirit of sharing. Hey, can i borrow your boat this weekend . No. [ male announcer ] share more. Save more. At t mobile share for business. Welcome back to squawk on the street. Out to the cme group. Rick santelli with the san teleexchange. Good morning. Wake up out there. And at any tiisnt a lazy monda. Not too many mondays from now well have a new fed chairman. I call it the fed chairman squeep staked. It really is different. Granted, you know, what weve had turnover in the past, maybe outside of ben bernanke, whether it was mr. Greenspaner mr. Volcker, it just seemed it was a different world, especially with transparency. Although transparency, to me, how many people have said the fed needed to be more transparent . Imagine a window here, transparency allows somebody to see through the glass to see whats on the other side. In this case, decisions about exit strategy taper, the problem with transparency, it isnt whether the glass is clear or opaque, its what there is to see on the other side. And i guess thats what theyre missing. The other thing theyre missing, from im from chicago, if i poll all of the players and see which predicted we would win the world series, whoever guessed that right if i make them the manager, does that guarantee me that next year im going to win the world series . No. Ive seen an article in the journal trying to handicap decisions by nonchairman types within the dozen members of the fomc committee. Down here theres a boatload of various ways to practice trading. Phony trading. Not real, artificial. Practice, see if you have what it takes. I have yet to see one person who on faux trading doesnt make a boatload of money. When its real money, when youre in the hot seat. Above and beyond that does it mat who are guessed right or wrong on inflation . You know, the models that predicted that if we have programs, fed programs, that it would result in a creation of money that would flow through the economy and result in new hiring. But the transmissions line were screwed up. We need a big bottle of drano, the moneys cramped in a pipe. The issue is not when that started to flow through, because when velocity picks up there is a jump in inflation, we can argue about that definition, commodity prices. One decision, and the only decision, that matters is proof in the gdp this week. Its about growth. There are verifiable issues within the fed programs that result in Sustainable Growth . The answer is no. All of the rest of is it just a silly discussion. Back to you. All right. Rick santelli for fed chairman, well talk to you soon. Zynga may be struggling in the gaming world but one startup taking gaming to another level. How fruit ninja are succeeding where others failed. The chairman and ceo of hertz will join us live. A lot more. Hes with simon hobbs, in a few minutes. [ male announcer] surprise youre having triplets. [ babies crying ] surprise your house was built on an ancient burial ground. [ ghosts moaning ] surprise your car needs a new transmission. [ coyote howls ] how about no more surprises . Now you can get all the online Trading Tools you need without any surprise fees. Its not rocket science. Its just common sense. From td ameritrade. Its just common sense. Could save you fifteen percent or more on car insurance. Yep, Everybody Knows that. Well, did you know some owls arent that wise . Dont forget im having brunch with meghan tomorrow. Who . Meghan, my coworker. Who . Seriously . Youve met her like three times. Who . sighs geico. Fifteen minutes could save you. Well, you know. Welcome back to squawk on the street. Im josh lipton. Watching Sinclair Broadcast Group sb grchichlt, it will bia sets including news channel 8, a 24hour Cable Network covering washington, d. C. , from the all britain family for 985 million. The Company Anticipates transaction will close in the for the quarter. That stock has rocketed higher this year, up some 140 . This morning, up about 2 . Carl, back to you. Josh, thank you very much for that. Friend. Prosecutors are saying diamonds and other jewels stolen from a luxury hotel in San Francisco worth 136 million, author man double the original estimate of 53 million. The Carlton Intercontinental Hotel in cannes hosting a temporary jewelry exhibit from the diamond house. Reports could not confirm it was a single gunman who stuffed the suitcase with jewels before making a quick exit. It was not clear how many pieces were stolen. Gems were supposed to be on public display until the end of the august. Its one robberies in recent years. One expert noted it foltz recent jail escapes by members of the notorious were notmaking this up, the pink panther jewelry thief gang. This is a lot of money. It is getting bigger and bigger. This started back during the cannes festival earlier this year there was a couple jewelry heists a big deal and that was only a couple million each and now 136 million. 136 million and we heard about high profile art fests and i dont know how people get into that line of work or where you learn your craft. You watch oceans eleven. Thats a lot of jewels. It almost seems like something out of a movie script except in this case what amazes me is just the security. In some of these instances they were talking about dozens and dozens of people there and yet you are able to see one guy or a small group coming out and just brazingly taking these. You have to imagine part of it may involve some inside cooperation. Right. Who knows . We know nothing other than the amount of money we think the jewels are worth. A lot of people googling pink panther. Straight ahead, the start up giving angry birds a run for the money and well talk to the ceo that for the Company Responsible for fruit ninja and fish out of water. S event to experience the precision handling of the lexus performance vehicles, including the gs and allnew is. This is the pursuit of perfection. Theyre the days to take care of business. When possibilities become reality. With centurylink as your trusted partner, our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. Every day of the week. Centurylink® your link to whats next. A quarter million tweeters musicare tweeting. Eamed. 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They see what others are trading like the days top 10 options trades by volume and get ideas yea i have an idea how about trading that in for a salad . [ male announcer ] so come trade at the place thats all about options and futures. Optionsxpress. Open an account today and get a 150 amazon. Com gift card when you call 18882800154 now. Optionsxpress by charles schwab. And experience the connectivity of the available lexus enform, including the es and rx. This is the pursuit of perfection. Gaming is not dead, especially if you like slicing and dicing virtual fruit. Fruit ninja users have have been doing it since 2010 and the game has been downloaded more than 500 million times. The Company Behind the game and 19 others is australian based half brick and joining us is the ceo of half brick. Good to have you on the program. Good morning. Good morning. Thank you. Half wait, 500 million. Thats half a billion. I am still trying to get the number straight in my head. For those that think that gaming is a fad and were losing interest in the space in general, how do you push back on that . Well, i guess the numbers sort of point to a different answer, but gaming just seems to keep getting bigger and bigger. Look at our numbers, 500 million, thats taken us three years but keeps on accelerating. We had zynga we mentioned at the top and their daily active user, a totally different entity was down 50 year on year. How do you keep that from happening . And to what degree are you having to pour even more money into development and trying to make each game a hit. We definitely are seeing our budgets increase, but the key part to our strength is that we like to continue to innovate on our games. Were not just known for one particular game. We keep on coming up with new games all the time, but we also support our games to keep things fresh and keep the users coming back for more. Are you going to stick to gaming and trying to develop that next great one or are you going to go into other lines of business that might be more steady like merchandising, real estate, that sort of thing . All of that is part of our plan but our core focus is games and we want to stick to our strength and i work with various partners to take our ip to other platforms, whether it is merchandise or tv or movies or whatever. People want to try to figure out target markets when it comes to gaming. I keep hearing things about mothers, moms, as a key demographic for people who actual will i are big consumers of this type of product. Is that true . Yeah. Definitely is. It is different for each of our games. If you look at fruit ninja, that spans from anywhere from 2 to 102, male and female and some of our other gamsz jet pack are targeted towards male gamers. We like a diverse range of games and the moms are a big audience for us. How much do you spend as a proportion of your income or whatever on research and development and do you do anything differently you think pointed to your success relative to some of your competitors . Yeah. Thats a great question. For us i would say almost 20 into research and development and the way we go about it is to do a whole lot of game gems throughout the year, so were about 80 people strong and we like to let all of our guys contribute, not just a handful of designers. So with these regular game jams we come up with a continue stream of new ideas we can commercialize. You are probably the perfect person to ask about distribution. We have fights here all the time about ios versus android, who is going to be the future pipe to carry content like yours. Who do you favor right now and who do you see having the momentum going into the next few years . Thats a tough question. I am going to make someone unhappy with that answer. For me it is still ios. Thats definitely where a lot of our revenue comes from, but if you look at the sheer size of the market, android definitely is growing at a rapid rate. People sometimes say, look, itunes is just getting so big over half a million apps and just it is tough to find one that just on word of mouth. How big of a concern is that for you, the cureation part of it. I think it is and if you go back a couple years it was a level playing field. If you had a great game you could cut through the noise and now it is about User Acquisition and paying big dollars to get the players that you want for your games. For a company like halfbrick we rely on the virility of our games and recommendations so it is continuing to do well for us and i think well have to look at User Acquisition in the future. You guys are in a cut throat space, no doubt about that. Thank you so much for your time. Good to talk to you. Thank you very much. Can you imagine . I was going to ask if the cut throat pun was intended. No, but thats a good one. Hadnt thought about that. I dont know if we have seen a more narrow trading range in the past few days, down 30 points and basically stuck down. It is the case for all of july and for the first part of the month or the first twothirds of the month it was while you were sleeping the market was steadily gaining and having one of its best months and that turn reasonable doubt a little lately and we have seen a trij and now it is lower than higher. Despite the nikkei every night, are we coming with moderate action . If you are just joining us here is what you missed. Welcome to squawk on the street. Sheer whats happened so far. If they are able to do it, then you might have a freer, more open, more capitalist i can economy better able to grow once you go through those changes. Will bmw be number one at the end of the year for the luxury market in the United States . Yes. Emphatically, no question there. We will fight for t we will go for it. Merger monday . Yes. Yes. It is a merger monday. Got to go there. Thank you. Youre welcome. Figure we get it today but dont necessarily believe that it is a sign of things to come. Chinas point, china seems to blink solar. They are blinking a lot. This he have something in their eye. Yeah. A look at the opening bell. From our perspective given the levels on the s p, it is not a time to be pouring into the stock market. It feels maybe a little over stretched at this point. There arent any great alternatives. I think equities will do better than core bonds. This gives us the combined resources and an array of assets that we can Service Every client need and well be nimble at the same time and being able to shift to changes in the marketplace. Good morning. Were live on a monday morning. A check on the markets as we were just saying the dow in a stubborn narrow range, down about 32 and s p off four at 1687 and nasdaq hanging in relatively flat at 3608. Shares of wynn rallying this morning, the hotel and casino operator reporting earnings essentially in line with wall street estimates. They reported a 3 increase in Second Quarter profit and net income up about 7 million year on year. Big sell off for barnes and noble today, the company says all of its Financial Statements for the past four quarters and prior fiscal year contained errors due to initial and they plan to restate financials and in the meantime says the statements should no longer be relied upon. Quite a statement to make. A huge day for mergers and acquisitions. Well break down everything you need to know about them. How would you like to skip the line the next time you pick up a rental car . Rental Company Hertz will make it a reality. The ceo will be here to tell us how new technology could get you into a car faster. Fwroe the economy from the middle out. That was president obamas message from an interview over the weekend. Well take a look at the best ways s ts to grow the economy Paul Mitchells ceo. And brian has breaking news. Thank you very much. This is indeed an extraordinary circumstance for ben bernanke because the fed chairman may be going to court. Just minutes ago the United States federal court came down with a ruling saying that ben bernanke should be permitted to be deposed in the case of Hank Greenberg, formerly of aig and his lawsuit against the u. S. Government. Now, absent what they call extraordinary circumstances, generally companies and individuals cannot compel high ranking Government Officials to be deposed. However, the court said because of Ben Bernankes involvement in the decision to bail out aig back in 2008 that indeed is an extraordinary circumstance that should allow ben bernanke to be deposed by Hank Greenbergs attorneys in the bailout of aig. Of course the government taking about an 80 stake in aig. Hank greenberg has sued the u. S. Government and the ruling just came down, guys, and ben bernanke may be headed to court. Hopefully with a cnbc camera in tow. We certainly hope so. Greenbergs issue for those that have not followed that is that the government rescued aig inappropriately in his words setting terms that he believes damaged shareholders, right. Yeah. Indeed, here is the key thing. Ben bernanke basically has acknowledged he had what they call personal knowledge of the bankruptcy, so when the judge here basically a fourpage ruling that i scanned over to meet the extraordinary circumstance requirements you have to be deeply personally involved in the Decision Making and indeed the court in this ruling found that ben bernanke did have personal knowledge into the inner workings of that decision to bail out aig and basically forcibly buying out Hank Greenbergs stake, so ben bernanke may be getting deposed, guys. Sure it will be completely private but this is a big step and a big you do not see high ranking Government Officials, in fact, i challenge anybody to find a case where a sitting fed chairman has been deposed in any case. We have to go back through the history books on that one. I doubt there is one. The deposition as you say would probably be private, but is it the First Step Towards something that could ultimately be more public in nature . Listen, when the ruling comes down, kelly, you will have a ruling in this case either way. When the ruling comes down, you hopefully will have the briefs filed right there that and the ruling and there might be key details being released when and if this ruling comes down. Listen, it is a long way to go. This is one step in a major lawsuit against the u. S. Government by aig really through the Star Investment vehicle which is Hank Greenbergs private investment fund, so we could get key details into that bailout because a lot of people despite great books like too big to fail written by a guy that hosts a morning show here, there is still a lot of key questions outstanding about how the decisions were made in that critical time in u. S. History. Yeah, and he will would be getting transcripts from those 08 fed meetings not too long from now. I expect you to read them all. Every word. Brian, thank you. This is a real merger monday according to faber, three major billion dollar deals going down this morning. David is back to break it down. You have been hesitant to declare days like this. We have tended to go with that merger monday when really the evidence is not supported. This morning i think we can safely say that it is a merger monday. Led of course by the very large transatlantic deal linking omni comand publiclyist, a huge advertising colossal created by a merger of equals between the two. It is structured as a true merger of equals. They are talking about run rate savings of about 500 million a year. The ceo will be coceos for 30 months and the deal could close they say as soon as the end of this year. Well see. That may be aggressive. If our omni comshareholder, here you go. I just went through all of that. You can so he it there and read it again if you missed what i was just saying. Lets move onto the breakdown on the deal itself. 813 years, a special dividend of 2 and publicist share equals one and special dividend of the euro. Earlier we spoke to the two men behind the deal coceos for 30 months after the deal closes. Here is what they had to say about the thinking and the competition landscape that will exist once the deal is done. The reason were doing this is to avoid competition. We dont believe it should be good to have google and the like having a position which is such that we minimize the role of the advertising agencies and by strengthening our position we are helping our client to deal on an equal footing with this big players. Maurice, chairman and ceo and publicist that will be coceo of the combination. We have other deals today. A very well known Department Store named sacs bought by hudson bay and perhaps a name you are not that familiar with, the owner of gordon taylor. 16 a share in cash. Valued at at about 2. 9 billion that. Does include debt. There is a 40day go shop in case anyone else has thoughts of trying to buy sacs. They expect to slows by year end. The stock has moved up on takeover speculation. You can see it there. A lot of this is potentially real estate and opportunity to replace saks in low end malls and move the brand to canada and as pointed out earlier today it is quite a high multiple for a deal of this type. Finally, a company that i followed with some closeness, remember, there was a fail deal in trying to buy the company. They lost the shareholder votes they needed essentially or went against them. Well, they put themselves up for sale and ended up with a buyer in perrigo. It is a 10 premium to fridays close and premium to the Royalty Pharma bid made up of cash and stock. The pelligo will end up owning about 71 of the combined company. This is about a royalties dream and the cash on hand at elan and irish tax rate which has become something of a rage it would seem in the world of pharmaceuticals over the last year. This can add a lot of value, simply lowering the tax rate. The key so so many of the deals and often overlooked when people are talking about the business. An important one nevertheless. David with the latest there. This is probably not the best pr move one day off the indictment of sac capital founder steve cohen decided it was time to party. He apparently ordered 2,000 worth of tuna at a party for dozens of people at his ten bedroom home over the weekend in the hamptons. Robert frank is back with more on this story. He has a right to party, but pr experts say he should be keeping the noise down. He is holding a party in his beach house on saturday just two days after his firm was chargedes with insider trading. Reuters reporting and we confirmed it wasnt a big party at least by billionaire standards, just a few dozen people and included some fellow donors to the Ovarian Cancer Research Fund. This was not a fundraiser. The Ovarian Cancer Research Fund saying the party was not connected in any way to any of their events they held saturday or fundraising efforts. Were told it was held at his current beach house, not the new one that he just purchased for 60 million, and this event was previously scheduled and he wants to reassure his friends, family and workers this lawsuit has not affected him and everything is normal. But as says this morning he should really be keeping a low profile. If he can beat the charges, then he should throw a party. Not before. This follows his purchase in november of that 150 million picasso and that new beach house which he bought in march for 60 million. Many wondering whether coens partying and purchases may be antagonizing to prosecutors and it certainly wont help them with a judge or jurors if there is a criminal trial. Back to you. Interesting. Not a big party by billionaire standards. Only 2,000 worth of tuna. It is like a couple platters in the hamptons. Thanks a lot. President obama talking about Economic Growth in an interview this weekend and says we need to focus on the middle class to be successful. Paul mitchell, cofounder and ceo John Paul Dejoria is here to tell us the best way to focus on the middle class growth and later the ceo of hertz will join us and were taking your questions. Tweet us and well use your questions later on this hour. First, Rick Santelli, the myth busting hat today, you wear it every day, rick. We try. I think so do you. Thats what we do at cnbc. Well talk about several issues. First of all, are the last couple recessions going to disappear with the mega revisions on gdp . Well talk about earnings expectations and how did they match up and finally, is the optimism in housing out running the fundamentals . Tune in bottom of the hour. In todays markets, a lot can happen in a second. With fidelitys guaranteed onesecond trade execution, we route your order to up to 75 Market Centers to look for the best possible price maybe even better than you expected. Its all part of our goal to execute your trade in one second. Im derrick chan of fidelity investments. Our onesecond trade execution is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. For over 60,000 california foster children, having Necessary School supplies can mean the difference between success and failure. The day i start, im already behind. I never know what im gonna need. New school, new classes, new kids. Its hard starting over. To help, sleep train is collecting School Supplies for local foster children. Bring your gift to any sleep train, and help a foster child start the school year right. Not everyone can be a foster parent, but anyone can help a foster child. President obama sat down with the New York Times this weekend if you havent seen the interview already. Saying i want to make sure everybody in washington is obsessed with how we are growing the economy, how we are increasing middle class incomes and middle class wages and middle class security. If were not talking about that, then we are talking about the wrong thing. Billionaire John Paul Dejoria, the ceo of Paul Mitchell. You can talk about basically anything. I sure can. We know this already. What do you make of this . Theyre calling it another pivot to things like the middle class and jobs. Is it the right thing to Pay Attention to right now . They should have been paying attention to it five and six and seven years ago when all of t economic unrest happened at Paul Mitchell and petrone we made sure our own people were okay, never missed a bonus, never missed a Profit Sharing and made sure they had a good life and then we, the private sector, helped others out. I will give you a quick example. Appalachia, 150,000 families unemployed and on food starps. We immediately went in and got it back into farming to feed themselves and then the following year having extra produce to sell at farmers markets and Grocery Stores so they could get right back into the middle class from being on unemployment and from being on food stamps. We started that already so it is my feeling it is something they should have addressed all along. This is president obamas point which is that the reason is may not sound different is it is what he has been saying all along. I am not sure it is news so much as a reiteration of what he has been trying to do or at least get people to focus on and you can question whether he is effective. I think where you will see the big difference is what you have seen already, even though we had massive unemployment and coming out of it, it is Corporate America getting sound again. I will give you a quick example. We have never laid anyone off at petrone or Paul Mitchell. Our people do more than one thing. Fewer moving parts. If more people in business or government had their people do three or four things which theyre very capable of doing and paying them a little bit more, have you a middle class, you dont have to get people out of work. They keep working and hello out there, we love you. There are a lot of people going wait a minute, we went through this crazy recession and as the Business Cycle goes up and down surely our Company Takes a hit. How are you able in this case to not have to lay people off and isnt that a competitive disadvantage for you . We started that way because again each person at john Paul Mitchell, each one does several jobs, not just one job. There is no need to lay anything off. Were a link machine. Another example, one of my companies should have 3,000 employees. We have 258. Theyre paid incredibly well. Thats not necessarily a great sign for the economy either if 250 can do the work of 3,000. They never lose their jobs. It gives me the opportunity to start other jobs and hire more people. Petrone, for example, we put in 1,500 people in petrone because of our expansion. So it is when you add people on, you add them on with the idea in mind they can do so much. You dont have to lay them off when times are slow. Theyre doing so much and paid more for doing this and this is how america really works. Were not a socialist society. I dont think we will. Let the entrepreneurs get out and there and do it. Be prepared to do two or three things. Not one thing. Let people do stuff. If people do stuff, you dont have unemployment. Middle class stays there. It doesnt fluctuate with the economy. Some say if the president is really going to complain about a wealth gap he should have a conversation with his fed chief who made rates low and companies have bought back stock and issued debt and the stock market has gone up and it hasnt reached the kinds of people are you talking about. That is correct. What they need, no disrespect to government, is they need we the Business People, we started with nothing and made something advising the government and helping the government. Well do it for nothing because they, no disrespect, i dont know if the president even rab a Lemonade Stand but he is a good man and means well. No disrespect to him. Understand that. You need Business People that have come from something to nothing and built organizations where people have good jobs are paid really well and influence to do more. I am a serial entrepreneur. I have ten companies. It makes me happy to give people jobs forever. Thats what i like to do. Please come back. Always. Thank you so much. Pleasure. Thank you very much. Things are getting tense in egypt after dozens of protesters were killed during clashes with Security Forces over the weekend. We will go live on the ground in cairo with the latest when squawk on the street conditions. Come to the lexusouncer ] golden opportunity sales event and choose from one of five lexus hybrids thats right for you, including the lexus es and ct hybrids. This is the pursuit of perfection. [ male announcer ] its time. Time to have new experiences with a familiar keyboard. To update our status without opening an app. To have all our messages in one place. To browse. And share. Faster than ever. Its time to do everything better than before. The new blackberry q10. Its time. The new blackberry q10. The world is changing faster than ever, creating new opportunities for those who stand ready to seize them. In a time when the biggest risk is playing it safe, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, our flexible, collaborative approach helps forwardlooking companies not only run better, but run different. To give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because now more than ever, the future belongs to those who challenge the present. Things are getting heated in egypt. Clashes with Security Forces left at least 74 people dead. Joining us live with the latest from cairo, good morning, youssef. That toll has risen to 80 with hundreds injured. Confrontations between supporters of ousted president Mohamed Morsi and as we understand it Security Force plain clothes civilians. The brotherhood is not backing down and theyre saying that Mohamed Morsi should be reinstated as president and theyre calling for demonstrations and planning to march with coffins in various parts of the city and tomorrow in million man march whether they will be successful well have to see. Also on the other side the military and the government are clearly losing their patience. The minister of interior making it clear they would not tolerate the sitins for much longer and it raises the scope for further violence and the political divide, karl, up as to be widening more and more and as you can see the death toll is increasing as well. Perhaps because the stakes are so high, the Foreign Policy chief in egypt today to talk with the various political parties. She made it clear that the Muslim Brotherhood has to be part of a future political road map and also pause for a minute and take a look at the eegyptian stock exchange. It is interesting despite the violence and the marginal softening showing that investors have considerable confidence in the interim government despite the setbacks of the last few days and again a technocrat and quite economically qualified if you will set up that they have and also the 12 million that has trickled in or is beginning to trickle in, that will help avert a payment crisis and help with the currency and in the longterm help restart the economy. At the end of the day economists make it clear to me National Reconciliation is a must if you really want to capitalize on this economys longterm potential. Thank you so much for that. Fascinating narrative out of cairo and as well you have israeli and palestinian talks starting again for the first time in years and juxtaposition between that and whats happening in egypt is amazing. And to Rick Santelli in chicago with a look at gdp earnings and housing. It is a mouth full, rick. It is. Even before we get to that we wanted to jump in on your discussion, kelly. Do you think the president has pivoted in terms of putting the middle class in jobs first . No, i dont think he pivoted. I think this whole thing of quantitative easing and the whole idea of quantitative easing is to make the rich so rich they trickle down some of their wealth to the middle class. This has been trickled down on steroids and the president could pivot but the Federal Reserve is doing exactly the opposite. I dont think the economy is in his wheelhouse to be quite honest with you. Never seems to totally interest him, and it is mostly talk and speeches. And the last speech wasnt different than a lot of speeches. Real quickly, we have other things to cover, i continue to say the reason the president doesnt bring up the stark moves in stocks is because his base is benefitted very little from it. I would agree. The whole idea of the wealth effect supposed to benefit a small minority of people. And one of the ways we can measure it is gdp. I will get weird on this one. I think that this is being changed to promote a larger level of growth. A, do you think thats a myth and, b, a recession disappear . They will revise the numbers back to 1929 and using a lot of measures like royalty rights and stuff and already the 2001 recession is essentially disappeared over previous revisions and no negative gdp and some of members said there wasnt a recession and the 1990 recession could be at risk and we could be looking at a period before the Great Recession we had 27 years without really a recession. It is normal they tweet numbers and make adjustments. This isnt a tweet. Where we are changing a couple light bulbs. This is a major renovation. They change every five years but it is usually tweaks and this is a major deal. Theyre adding new categories that they already said should increase the number by 3 . Were looking at 3 more gdp than we thought. Cynical myth number two. If you look at what estimates earnings would be for various companies in january and february, you would be really disappointed even though the lower guidance may have been beat. Is that a myth or not . Should it be busted . It should be totally through. Some of the Companies Like alcoa or southwest airlines, they actually Beat Estimates on wall street that were set two days where they released and kept bringing the numbers down to a couple of days before they released and beat and everybody says they beat. Youre right. You go back and look at where the estimates were one, two, three months before, a lot of these companies missed horribly. Housing, seems to me that the confidence of housing is outpacing the reality of housing. Yes. I think what it is is what the Home Builders said. Lets Pay Attention to that. They said rising rates caused cancelations and people to stop. Economists told us everybody will speed up activity because of rising rates and what are the Home Builders telling us . Exactly the opposite is happening. Jim, thank you for taking the time. Karl, kelly, back to you. Rick santelli in chicago this morning. Thank you. Huge numbers on housing, jobs and the fed expected to drive market action. Well take a closer look and tell what you to watch for. Plus, bells about to sound across europe. Well get you details on the close as soon as we come back. Peace of mind is important when youre running a successful business. So we provide it services you can rely on. 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Those policymakers in the u. S. Will kick off their own twoday meeting tomorrow. Take a look across the major european markets now. Mixed picture as you can see on your screen and also mixed when we look at the fste adding literally a couple points this morning. France down by a few, germany up by a few. The big mover appears to be italy, down by 0. 9 of 1 and smaller moves elsewhere. Britain a wpp will be taking over by the Omnicom Group assuming that is approved as the Worlds Largest ad company. Shares adding 1 and wpp up about half a percent. Elan trading higher in their home country of ireland after they agreed to be acquired by perrigo. They have been talking details all morning. Those shares up 3. 8 . Bring in bob and see whats moving to the downside in this case, bob. Started at 11 00. This is a little bit of a immediately i got top lines of people saying judge say lawyers for Hank Greenberg should be allowed to depose bernanke, happening at this moment here and well show you whats going on. Move down 11 00 as the announcement came out and some people saying is that why the dow moved down . I dont think so. Although one is a little bit suspicious that people might want to lighten up on that news, some of the uncertainty. I tell you where some other plausible ideas. We see weakness in financial stocks throughout the morning and just prior to 11 00. Weakness in the european financials and the u. S. Ones and barclays, for example, barclays is reportedly ready to give some more details about a Capital Raise that they might have as talks about a new rights issue out there and you saw barclays move down as this happened, so take a look at some of the european and u. S. Banks. This might be a little more plausible about what happened here, so deutsche bank, credit suisse, royal bank of scotland and here in the u. S. Bank of america and citigroup both down, almost 2 . I think it may be more plausible and not blaming it all on mr. Bernanke. Elsewhere a lot of uncertainty whats going on in asia. We saw japan and mini crash in the last few days. Take a look at this. Japan is down about 8 in the last four days. Some concerns about abeonomics working over there. We have chinese slowing down. Here are the big emerging market etfs all on the weak side. Kelly mentioned omnicom. The big question , interpublic s number three now and if anything this is just a whole play. Whats interesting on corporate ad budgets, might be recovering. Thats what it really is. Hopefully thats what a lot of people are betting on here. I wouldnt be surprised to see people worry if they have to do some kind of deal now. It is the only way to torpedo it. Two Big Companies in the world, i dont think regulators allow that under any circumstance. It is an important question and one we shouldnt assume it is a done deal yet. I am talking about wpp and ipg. That, too. As a way to torpedo the other. Always exciting. They know they have regulatory hurdles to get over. No question about that. Bob, thank you, sir. Pleasure. Back to the breaking news we brought you at the top of the hour. A judge ruling that former aig ceo Hank Greenberg should be permitted to depose fed chairman ben bernanke. Joining us now on the phone is the honorable richard holwell. It is great to have you back. Thank you for calling in this morning. Good morning. Your initial thoughts and reaction to this decision which again is pretty unprecedented at least with record to a sitting fed official. It is a little unusual, thats for sure. The courts are generally quite protective of sitting members of the executive branch and then i think on the other hand you cant read too much into it. It is hard to believe that mr. Bernanke has said anything in his books and speeches on aig that would simply be repeated in a deposition. I dont expect any surprises. In fact, reading through the order, thats part of the plaintiffs argument. He has given speeches. He has testified before congress at least five times. A lecture Series Available on the fed website addressing the bailout, has written a book in part about the bailout, and do you could you expect him to say anything new in a deposition . Absolutely not. What the greenbergs lawyers willme want to do here is get testimony in a sworn way, under oath, and can be used in court. Sometimes it is difficult to use a newspaper report or a book in a court of law, so what theyll probably do is attempt just to button it down here. How likely do you think is it that this case goes to trial . Well, thats really too soon to tell at this point. He is going to have to get a little further into the case and see what they get out of the deposition. Sure. In this case as well just looking through the decision here, the court says it cannot fathom having to decide this multi billion dollar claim without the testimony of such a key government decision maker. So, again, saying that while this might seem unusual, that they simply have to get bernankes view on this because this information cant be provided by anyone else who was involved. That seemed like a big of over statement to me. It is hard to believe that there arent a lot of other more senior officials who participated in all of these meetings to provide just about the same testimony that the chairman did. And cannot fathom part is strong language, judge. Finally, they do cite other anecdotal case where is a Government Official has given testimony, general powell when he was chairman of the joint chiefs, former director of the cia, sykes, former fcc director austin, so not completely without precedent, right. No, there have been president s deposed while they have been in office as well. It is not without precedence. Judge, with your thoughts on this breaking news, thank you very much, sir. We should tell people that august 16th appears to be the date roughly around which this deposition could happen, and then what happens after that is completely up in the air. Our thanks to the judge. In the meantime the next time you rent a car, how would you like to skip the line, pick up the keys, walk right in . Now hertz is making that possible. The ceo is here to explain and will talk to simon in a few minutes. Still the one for you you know it even after all these years. 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Its one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Judgment week for the rally. How you should be trading with the fed and the jobs report looming and why tonights earnings mean everything and coach is left in the dust by the rally. Why is one of our traders still bullish . Well answer the question at the top of the hour in 15 or 20 minutes. Thank you so much. Shares of hertz are lower despite better than expected earnings. Lets send it to simon at hq with the ceo. Good morning to you. We waited a long time to have mark back on the program. He was not doing interviewsing in the acquisition closed. Congratulations on the results. It is an eighth consecutive record quarter i think is how you paint it. Were very encouraged by results and the eighth consecutive quarter is a pretax earnings record. Soft on volume, though . Some people slightly disappointed on guidance. On the volume side we hit the analyst median, but some people get ahead had of you as you know. Your success becomes your worst enemy sometimes. We feel like there is tremendous upside in the Company Going forward. And you have been wonderfully successful in terms of the share price. If you just look at that, more than doubling over the last year and a gain of about 130 . Barrons quoted another 60 higher. Where do you think the stock should be . We sernl think it is 60 and then some going through 2015. We have a solid set of strategies that will drive our growth, four big growth areas. Without going through the list, how does the multiple calculate for you . Where should it be in your view . You were saying before we came on youre trading at a multiple you should not be at. We should be 8, 8. 5 multiple on ebitda and we believe that the company certainly deserves that based on performance and its position in the industry. Where would that stay the stock to . Taking it into the future two years, it would be at 50 roughly. Okay. The big picture here is the number of Major Car Rental Companies is dropping. Over the last decade it dropped from six to three and youre betting down the 150 acquisition which takes share to 37 . Are you able to raise prices as a result of that . I see the average spend for travelers at airports is up 4. 4 year on year. Are you pushing Prices Higher . The more typical way the prices go up is typically when fleet costs go up, and thats when you see pricing go up with certainly the industry consolidation is going to help and we know that will help. I dont know if thats the real driver of the increase in pricing right now. It is really driven around residuals dropping a little bit and a lot of our fellow competitors have increased fleet costs. We dont this year. The good news is we dont have increased fleet costs. Having said that, et cetera that the driver more than anything else. We said you wouldnt do interviews during the dollar thrifty acquisition. Did you fear that the regulators may block it . No. That wasnt why we didnt want to do the interviews. Did you fear . Absolutely. Any given moment over the last three years of this we had worries that there may be something that would pop up for some reason. For most of the process, though, the ftc was able to communicate with us in a way that was positive, so we felt more than likely that it would be approved, but there was always a fear there. Last week on friday expedia lost a quarter of its value because its hot wire platform is doing so badly, and the argument that was made at the time by some was that after super storm sandy you guys didnt build back capacity, you kept capacity tight deliberately in order to push rates higher. Is that fair comments . No, it is not. In fact, fleets have been loose in the Second Quarter and even in the Third Quarter now as we get in, so fleets are not tight. We did not constrain capacity. So thats just not true. Your big push beyond airports is the other 30 , the ledger travel and the technology. This idea you can book online and access a car remotely 24 7. Where does that take you . Clearly youre head on with zip car which has been bought by avis. Right. We like to think of ourselves as different from zip car because were actually trying to blend car sharing technology in with the normal rental experience. So truly revolutionary type of model that allows anyone to access 24 7 our technology in the car, so you have each car essentially becomes the counter and the counters are inside the car, so is Customer Service, and with 24 7 we think we have something that is revolutionary. These video booms, going in the parking lots of walgreens and lowes, do people have to talk to your Call Center Staff by them or is that about selling up . Actually, the 24 7 video kiosk work where you have a lot of volume and the 24 7 itself, the technology in the car does not require you to actually have a video kiosk by it. You can access the car by just doing a click, swipe and go. Go online, we activate your key fob. You go to the car. The door locks open and you drive away. The competitor, the big arrival enterprise has mast rat bmw and bentley. You have Ashton Martin and tesla. Are the electric cars cutting it. We like to offer the most advanced technology and be on the sustainability edge. He were doing everything we can. 74 of the pleat is epa certified or better. We offer tesla as well because it is exciting and one that hits the electric target right away. Were almost out of time. Here are the questions our viewers tweeted. Doug tweets what do you see as the ceiling for growth at hertz . Well, we think that doubledigit growth the next three years at a minimum. Peter asks rental car sky rocketing at airports due to fees and taxes. Bad for customers. How does it impact your business . Rental car costs are not sky rocketing. I guess were still commercial volume right now and commercial pricing right now is up 1. 8 . Thats not sky rocketing. One more. Here is another. When there is an issue more often that be not it is about not having enough reps at the counter. Yes. Why is that . During the Summer Season there is a peak. Obviously we have parttime workers that try to cover the peak for us. Rental car lines always increase because you have four waves at the airport where the demand gets so huge during a twohour period it is almost really difficult to do that. Were trying to eliminate all lines. At hertz with the video kiosk, as well as with bypass the counter, a program that we have, you should really never wait in line for a hertz vehicle. We at hertz today we move at the speed of hertz, the whole idea is when you sign up for gold, you would never wait. You see that in the advertising. I know were out of time. One last question. We have the ceos on the program earlier on and you will be aware they have done a deal. How do you feel about the idea your rivals may now be operating advertising agencies within the same business. Does that make you nervous . As long as they can separate the state of affairs and if the competitors, you know, i dont have an issue with that. I think they should be able to do that reasonably. Good to see you. Thank you very much for coming in. The chairman and ceo of hertz. Well get you in three months time. Thank you, simon. Back to you guys. Simon hobbs with that interview. Thank you very much, simon. President obama says he will name the next head of the Federal Reserve sometime this fall. So who has the edge . Is it Larry Summers or is it janet yellin . Art will be here with an interesting take next. [ male announcer ] you wait all year for summer. This summer was definitely worth the wait. Summers best event from cadillac. Let summer try and pass you by. Lease this allnew cadillac ats for around 299 per month or purchase for 0 apr for 60 months. Come in now for the best offers of the model year. announcer at scottrade, our cexactly how they want. T with scottrades online banking, i get one view of my bank and brokerage accounts with one login. To easily move my money when i need to. Plus, when i call my local scottrade office, i can talk to someone who knows how i trade. Because i dont trade like everybody. I trade like me. Im with scottrade. announcer scottrade. Awarded fivestars from smartmoney magazine. Janet yellin and Larry Summers considered to be the among the favorites to be the next chairman of the fed. Ubs says the odds that is not yellin or summers is on the rise. Here with more is our director of floor operations at ubs financial services. Good morning to you. Part of the note today. You put this in quotes. What is your argument . I think there is a feeling among a few of us cynics and wall street that this may be a little bit of a stalking horse, may be a bit of a ruse. Will you recall about three weeks ago mr. Summers candidacy if you would was pretty much dead and buried and suddenly like the phoenix it sprang up from the ashes full blown and flying and the feeling here is that maybe some of the strategists with the administration looked at what happened after bernanke hinted at tapering and saw the very sharp reaction of the stock market and of the bond market, et cetera, and said, wow, the markets are very, very sensitive to change. We have to be careful of that. One way to take care of that is to insulate them to change, to kind of accommodate them, so all of a sudden if Larry Summers pops up, against the logical favorite which is janet yellin, it gives you a chance to vet yellin. Look at how the markets do. How is it going . There is kind of a feeling that he is there. With all due respect, i mean, no one doubts that Larry Summers is absolutely brilliant, but one thing he is not is a consensus builder, and if youre going to run the fomc, which is like herding cats, you need to be a consensus builder. Back and forth and numerous studies and informal polls on who the fed chairman will be and who it should be. Is the view among traders theyre skeptical summers would be nominated or do they not want him to . Again, everybody recognizes his brilliance, but there comes a time when you want what the fomc to get somebody over to your side or to say to them, okay, if you must dissent can we phrase this calmly and can you go along with this thing . Thats not Larry Summers style as far as i know it. A brilliant man, but there are different roles for different people, and you might want to be yellen ruptedly very good at not trying to talk you out of your position but in a soe cratic method begin asking you why do you feel that way and what makes you think about that . In that manner kind of talking you back into her camp. Thats something that is pretty good with the fed chief. Meanwhile, off the fed, markets having another one of those days, as did japan, you make the note every day. Were adding into a month where volume may be low and people are drawing double top charts in the Home Builders. How much, i dont know, uncertainty are we going into the new month with . I do think august can be a very tricky month, so you want to be very careful of that. As i said here with you two last week, i thought i saw the check engine light going on. There are some suspicions here. Interestingly, if you recall, friday morning the sudden drop in japan and the spike in the end caused everybody to fear maybe a hedge fund was going to liquidate or cut back. As the day wore on it became evident thats want the case, so now the markets condition and this morning tokyo down, the equivalent of 450 points again, and they say i saw this movie. Nobody dies. It will be all right. And so were not there. I do think that the idea that bernanke will be forced to testify caused a little bit of an ache in the markets, more scaring bids away than bringing out sellers. It made people remember what a turbulent time that was when they stepped into take over aig. And yet another thing to consider with the chairman in the months ahead. Great to see you this morning. It is time to send in your guesses for this months nail the number, and we have a special prize that will put you in the same camp as carl icahn and well tell you what it is when we come back. Mine was earned in djibouti, africa. 2004. Vietnam in 1972. [ all ] fort benning, georgia in 1999. [ male announcer ] usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection and because usaas commitment to serve military members, veterans, and their families is without equal. Begin your legacy, get an Auto Insurance quote. Usaa. We know what it means to serve. Peace of mind is important when so we provide it services you bucan rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. A few day as way from the jobs number and that means another chance to nail the number and a good prize this month, tweet us your predictions for the july nonfarm payroll and use our handle at squawk street and if you win the prices well put you in the same camp as carl icahn, john paulson, nelson peltz. It is a duffle bag given to all speaker this is year and autographed by everyone on squawk on the street and even if you couldnt get to delivering alpha this year, act like it did, well have until one minute before the release at 8 30 a. M. To submit your predictions. I have seen a couple come in around 200 k. You never know if the real surge is friday morning. Fair guess. Remember f you get your guess in sooner, that bumps you up in the case of a tie. What about auto shutdowns, not as bad as some think. And you get to call into the show and that way youre like the other icons as well. With the market down 65, lets get back to headquarters and scott wapner and the halftime. Four hours to go until the close right there on the wall is where we stand on the street today. A bit of a defensive day. Here is what were following on the half. The battle for herbal life with earnings looming and the stock surging why todays results mean everything. Debate it. It is link versus baker in a halftime street fight and our top story after a great run for stocks this year, it all comes town to this. What were calling judgment week for the rally, the fed, ecb,