Transcripts For CNBC Squawk On The Street 20170802

Adp is a slight miss ahead of the jobs number on friday. Apple set to open at an all time high after the solid earnings. Company sells 40 million iphones in the quarter well hear what tim cook had to say about the future. We might see an open above 22,000 for the first time but how long can this rally continue Major Corporate news out this morning. A r Irene Rosenfeld to leave mondelez. Am up implieg tlying the lau the end of the september quarter. It wasnt only about ipad and iphone sales. Services revenue hit an all time quarterly record of 7. 3 billion representing 22 growth over last year. We continue to see great performance all around the world with double digit growth in each segment. Over the last 12 months our Services Business has become the size of a fortune 100 company, a milestone we have reached even sooner than we had expected. Go back to something that looks like a company where you can give it a higher multiple. Particularly the Services Revenue which is extraordinary added 20 million more people this quarter to the Services Revenue. The reason i point out on that is recurring revenue is what wall street historically liked they love a business where you get money in every single month and that was really the takeaway for the quarter for me more important than the iphone. You took the words out of my mouth. Their hope is to get the higher multiple they believe 30 of revenues, you are golden that they will deserve and be rewarded a higher multiple akined aki akined companies that have a higher revenue stream. Its so true. Lets talk about 22 growth and service. Its double digit now. Its 11 but its on the trajectory that you just mentioned so therefore the idea that you keep this low multiple on apple would indicate that youre out of step with whats occurring. First we thought they backed into services. Theyre talking about adding, remember they added the breaking bad people so look for this service revenue. I know were going to speak to a Great American but remember at the time warner merger with at t the cfo says this is about watching on your cell phone. That 22 growth its some larger component of revenues. Its got to be a fortune 50 company and the other thing i would point out is that the good thing here is that last year was aided by pokemon go and it turned out when i spoke to apple it wasnt, this is so much more consistent and they mention things like icloud back up and they mention things like music and these all add up 180 Million People paying this youre starting to talk about these streams that we love we love netflix. We love prime. We now have to add apple services. But thats another reason why with 261 billion in cash, 94 of it or so overseas, you do get this pressure from some that say you should buy Something Else that will add to that recurring revenue stream whatever it might be. Right i know that thats some serious disappointing july but no. I put all of these on directv. Spotify you know they gave me the heisman on that. Similarly they gave me the heisman on directv i got a lot of heismans. Netflix at 25 billion, no stop sign but how about this, its now faang because facebook obviously youre talk about 2 billion people look at their facebook amazon, this is the resolution we need to be able to order the best stuff on amazon close their virtual reality. Netflix its the ipad sales were so miracle and alphabet, youtube a billion hours a day. Its craziness. Ipad is the first rise in 14 quarters. Another great takeaway. Do you think thats people wanting to watch netflix in bed, on the couch thats the preferred way you do it at home. This is all internet tv. This is Reid Hastings and it is for real its going to be am productions, amazon, and i just think that that was a very important number do not forget they talked enterprise too theyre really doing finally the enterprise higher multiple obviously. Sonnet fl netflix is not just driving huge changes in the distribution of programming from the traditional model but also adoption of devices. Techtonic comes to mind that was a good market. It was about time you spoke to tim cook not too long ago about their advanced manufacturing efforts in the u. S. The president was asked about whether or not apple promised to build three plants in the United States and then last night tim cook talked about that as well, take a listen. We have created 2 million jobs in the u. S. And were proud of that. We do view that we have a responsibility in the u. S. So increase Economic Activity including increasing jobs because am could have only been carey yatd here. The first is app developers. I have spoken with apple about this because we broke the news on mad money. It was never necessarily, it could be ten factors it could be a limiting principle to say three factors. Factors that they actually make only products for apple or advance them. So investments in factories. You would have more than three factories. I think the three factories number, it was never meant to be three. It was meant to be four more. When hes saying 2 million jobs we need to make it clear. Hes not talking about apple employees. Hes talking about the jobs created because of the existence of the iphone. Mostly american but the app store, you have to keep focussing on the app store, the app store, thats where the jobs are being created but remember the construction site was the largest. Yes it was. You have to get us in there. Ill get you in there. Not just you. Can we all go. Not a problem not a problem. Dont go down this path again. I want to check that place out. Dont you want to see that headquaters carl ill get my pass and well get in. Then we can take off because im sure its a spaceship. He never stops. Ill get you in ill make a call ill make a call during the break. Im not a member of that family. Apple will help us get above 22 k for the First Time Ever after the break. Irene rosenfeld stepping down. Another look at the premarket, 36 points from 22k, the dow riding five Straight Record closes were back in a minute when this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. Are you ok . What happened . Dad kinda walked into my swing. Huh . Dont you mean dad kind of ruined our hawaii fund . I thud go to the thothpital. There goes the airfair. I dont think Health Insurance will cover all. Of that. Buth my fathe without that cash from aflac we might have to choose between hawaii or your face. Hawaii what . Haha. Hawaii you might have less coverage than you think. Visit aflac. Com and keep your lifestyle healthy. Aflac for years, centurylink has been promising fast internet to small businesses. But for many businesses, its out of reach. Why promise something you cant deliver . Comcast business is different. We deliver superfast internet with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. We do business where you do business. Chief executive officer will be stepping down in november. She will be proceeded by va van de put she will continue as chairman of the board until next march 31st. She joins us from illinois always nice to have you. Thank you for being with us. Good morning, david. Why was now the time for you to step down and why is an outcider the right person to take your job . You know this is a conversation have been having for a couple of years and it was critical as we launch our Succession Process we looked at a wide variety of candidates but it was important to find the right person thats why, why now. I feel very good about the progress that the company has made over the last decade and i think its in good shape as we look ahead he is a senior ceo he has a very strong and proven track record at a variety of Different Companies of growing both top and bottom line even in challenging circumstances and i think he comes with a tremendous set of skills that will be very relevant as we start to write the next chapter of the mondelez story. You know i would imagine many of your 90,000 employees this morning when they heard the news said dirk who. In part because hes not an insider. Its so typical of a company of your size. We often see somebody who has been groomed for the role. What is it that the board and you decided was needed at mondelez that wasnt going to be fulfilled by somebody who your employees perhaps were a lot more familiar with we didnt say we wanted an outcider or insider. We identified the Key Attributes we thought were critical to take this company to the next level and he was the candidate we felt best really fulfilled those criteria so it was, i think, hes had an opportunity to speak with our employees, starting with our Leadership Team this morning and i think as they get to know him theyll understand what it was that the board saw in him and he brings a set of experiences that are relevant as well as a fabulous leadership style. What are those experiences i guess mrs. Rosenfeld that you feel would be beneficial to your shareholders and your employees . Well, if you think about some of the challenges of the french fry category one would say thats not necessarily as on trend as other categories might be he has grown the top line with his team by over 50 over the course of his tenure 75 of that, three quarters of it is is organic growth and at the same time he has been able to grow double digit each and every one of those years so hes what i call a leader that understands the power of the top line and bottom line and if you think about proposition thats our ability to grow top and bottom line. And its certainly some of the companies that and mars and cocacola. So those experiences i think will be extremely relevant as he brings a fresh set of eyes to the challenge of helping to realize our Growth Potential here at Mondelez International good to see you i want to talk about what you brought. You brought a return much better than the s p dramatically better. You just finished a tremendous margin improvement and 5 year plan and i thought this was the chance to be able to perhaps buy the nestle products be able to expand you got the work force correctly. I was looking for you to be able to take the stock higher now that everything is done so i am confused by the timing of the move im very proud over the course of the last decade. Its been a challenging environment on every front macro conditions, the consumer changes and consumer taste changes in customer configuration and we made terrific progress and created great value. Were now at a point where it is a good time to hand the reigns over to take this to the next level. Im a sizable shareholder so ill be cheering very loudly from the sidelines. On the release, theres still some fall out from the cyberattack, just try to get a sense about how bad these cyber crimes are, that this could really hurt the quarter of a Major American Company well it was a profound impact it cost us about 140 million on our top line or 2. 4 points of growth so it is a big deal. For a couple of days and keep running even though the challenge was that our shipping and billing operations were shutdown that was a big impact. It really hurt us. Some of those sales will be lost to us. Cost control has been an important component during your tenure and that continues. Analysts saying the unanticipated volume loss we were talking about, that cost control is it your anticipation to see it beyond what you were targeting . Were pleased with the fact that even though our top line was profoundly impacted we still delivered a very strong bottom line our adjusted margins expanded nicely about 90 basis points. And that will be important it does make the task of delivering our outlook that much more challenging theres some commentary that youre benefitting from kelloggs moving away from a dsd model your plans are now beginning to play as we expected as our competitor began to transition out of the system. Is that something that youre s seeing. We believe theres enormous power in a selling organization and we have reved up our organization to capitalize as they exit and were starting to he see some of the early science and its one of the things that gives me great confidence that we will see a trajectory change on our north American Business as we come into the second half. Everyone is scared of amazon in brick and mortar. Here they buy whole foods. Your snack business isnt necessarily that related its not a good analog but at the same time what is amazon doing to the food chain. Its not a center of the store item its highly expandable consumption and impulse driven and its one of the reasons that we should continue to seek growth of snacking in excess of the average food category but with respect to amazon, as i looked at the response that many of the analysts have had the impact is probably a little overplaid in terms of the magnitude and speed it might effect the overall industry but its a real testament to the fact that our consumer is shopping in many more channels and its one of the reasons we have invested in different package sizes and the ability to make ours available in Convenience Stores and discounters and traditional trading in emerging markets and on ecommerce. All of those are places our consumer is shopping we want to make sure that were available there. Consolidation has been a key part of your industry. You participated in it both ways buying and selling its too early to decide what his strategy will be obviously he will come on board in november and i will do everything i can to ensure a seemless transition but its far too early to comment on what his strategy will be for the company. Theres a job opening at uber. Stop it. I heard about that one. I dont think ill be on the beach but i certainly will take lal bit of time to enjoy my friends and family in the way the 24 7 demands of this job have not necessarily allowed. We appreciate you taking time with us this morning thank you. Thanks guys. Chairman and ceo of Mondelez International. She will spend more time. Its a Good Opportunity for her. I know her she was on the show with this. Its a great chance to be able to do more. She was working 18 hours. The premarket here, 2 sll2kti in our sights. Were back in a minute approaching medicare eligibility . Dont put off checking out your Medicare Options until 65. Now is a good time to get the ball rolling. Medicare only covers about eighty percent of part b medical costs. The rest is up to you. Thats where aarp Medicare Supplement insurance plans insured by Unitedhealthcare Insurance Company come in. Like all standardized Medicare Supplement insurance plans, they could help save you in outofpocket medical costs. Taking informed steps really makes a difference later. Thats what it means to go long™. Call now and request this free decision guide and explore the range of aarp Medicare Supplement plans. All plans like these let you choose any doctor or hospital that accepts medicare patients. These are the only Medicare Supplement insurance plans endorsed by aarp. Call now and request your free decision guide. And start gathering the information you need to help you go long™. Lets get a mad dash as we countdown to the opening bell. We talk about the destruction that amazon brought but we dont talk enough about the destruction. Netflix. I think the amount of time if you go back to netflix, our real competitor is not hbo. Our real competitor is time and the loser in time is amc and the fault may be in the stars and not themselves to some degree because youre talking about 4. 4. In the United States david this is techtonic. You mention netflix having to do with the iphone we mention every day having to do with the changing landscape and now movies or i should say movie theaters. We have to talk about peoples time and i know this is our mad dash but when you look at the iphone plus being so good, when you look at the hbo numbers from the Great American and you look at whats happening with grubhub and uber you can say that people are not going out except for to go on a cruise so they can take pictures and have experiences that they put on facebook. Time, facebook, time, netflix, no time, amc can got no time got no time. Thats going to be the theme for amc. Good song too. The challenge for exhibiters is intense. Its amazing. Wait until they start collapsing the windows. How much was just the the sequence carl . I didnt go to the movies this summer i havent been. Not to a single film . I wanted to go to dunkirk but my wife said are you killing me . The imax experience. We are watching every netflix. The largest body of water. Hes got those reclining seats. Oh, yeah. I had a couple really good and in the end id rather that that at home have it delivered by grubhub. You dont like the shared experience of having people answer their phones in the middle of a movie . Thats going to be the tough one of the morning a Health Care Real Estate company and the add council and the American Lung association raising awareness of lung cancer screenings so well wait and well see if dow 22k is a reality dow at 22,000 for the First Time Ever after hitting 21,000. Thats been awhile for us to surpass this next milestone. You have to hand it to boeing which has been responsible for about 40 of what it would have took us to get here. Im sure dave is going to Start Talking about how its a relic and we shouldnt be focused on it boeing had such an impact on it its a high priced stock and they had to keep it going that way so you can go back a long way but its not market weighted or not followed by any of the professionals. Its followed by President Trump. I say good luck because that thing is on fire and theyll start raising rates its going to be even more because the bank crisis is solved youre looking for 120 . I am. Which means the dow has room to run. Yes it does im going to flip that, 130. Im going to flip it she says why should we flip it we like it interesting. It doesnt come up anymore except when koimts to china and they claim they would have done good. We didnt get to talk about the latest news about potential trade or actions that will be taken by the administration outside of potentially the wto again this is in the journal in the times today. It doesnt mean theyre going to but that could have an impact. North korea they took 232 off the table. They took steel off the table. This is more subtle. Its about an intellectual property businesses have been complaining for years about how their intellectual proper city stolen by the chinese and copied by the chinese. That the need thes have for u. S. Business to open up all of their systems and everything in china so this has been a request to try to figure out a way to better protect them. Did he talk at all about china and qualcomm we talked a bit about it during our interview. That was a great interview. We did talk about it. Everybody has to deal with china. Qualcomm has a huge business there and i always felt that you have to go in there and really just, either sell coffee or sell Kentucky Fried Chicken not to be stolen. What about iphones, though . This is tillerson plagying hard ball hes easy when things are peaceful no better when things are tough. People still talking about what a solution might look like. As for apple china was down 95 year on year sounds bad but its the first time in five quarters it doesnt down double digit. And tim cook has an analysis of what would have happened and thats important because people still bashed him on china. But the Conference Call was no longer hey your best days have passed now let me ask you a question, no longer are those questions about so when are you going to do the car already chief . Its not that sports stuff they were doing for awhile. It was genuinely insulting the analysts are no longer insulting. No one said congratulations and my new fav and didnt even answer a question. They werent so sure about when i said can i get a phone for christmas, they were kind of, they laughed but theres reverence building the questions were no longer impertinent and the analysts no longer shameful. A lot of things coming together as for the cash level, 262 and buy backs since 2012 are almost equal to the market cap of disney when you look at the total cash and the memberships you really have a country, its a very solvent country, right . Wouldnt you say its a country in itself. Apple is only about a 20 move away from being a trillion dollar company. It really is. 830 billion market value this morning slowly but surely that becomes a real possibility if Growth Continues and even if the multiple remains the same let alone if they get that upward revision based on a larger component of revenues. I also felt that the gross margin is good the actual average price per phone went up even though its all nothing really new there was nothing that exciting and that was part of the mix was the 7 plus we even talk about the watch. The whole new face is going to be siri i thought it was funny and i just got the air buds. I like them. You have to wear both at the same time. You cant just wear one. Apple is not the only stock to watch automation under pressure. From continuing down 21. Certified preowned. Does bad Conference Call absolutely and gm down 15 yesterday. I thought there was a stunning moment on the Royal Caribbean call instead of buying tv and cars they seem to be buying medical risk as never before memories of course is Facebook Facebook of course is iphone plus it all comes together. Thats why theyre overvalued. This is a shift in how people look and do things they want to show on instagram what their life is like its incredible how much is generated by you. Its an incredible model. And mark makes a lot of money. Speaking of content, we talk about being what perhaps the second largest buyer of content out there after netflix when they get together. Discovery shares today up for the First Time Since they announced this deal. This stock got crushed they warned on earnings that scripps gave lower than expected guidance in terms of moving it off and on to a direct consumer platform after that. Try to look at the numbers for shark week and of course it came ill timed just when the safe was discovered. People dont believe that. That was a long time ago but its like yesterday when it comes to us swimming there. A lot of names we havent gotten to including papa johns but dow is up 65 lets get to bob. Dow 22,000. Yes we have a hat for every round number for the Dow Jones Industrial average and thats what theyre wearing down here apple is up 9 and thats put us over the top theyre also on the upside i want to point out what got tous 22,000 right now. Mostly its boeing 400 of those points of the 1,000 we had has been boeing but this was the close up yesterday. Pretty small numbers you got 4 to 5 stocks that moved us up here right now europe is down and the strong euro has been a problem. Look at germany thats the orange line its been going down and i dont know where its going to resolve itself but they have a problem over there. A lot of people are talking about august can you pull out a surprise . August is the lousy month. Nobody expects anything to period happen and thats why the bulls are hopeful that technology will hold up and not drop dramatically and that other rotation will happen so the hopes are around energy and financials yes energy with oil close tore 50 is another hope and theres some modest moves up so chevron had a good number overall. Its up about 6 eog had a good number so theres hope that oil may be starting to bottom the important thing is thats the issue right now. So also on bank stocks, kbe has been table for awhile now this will go up a little bit and finally you got the new leadership thats out there so we had the stocks that have been losers all year. So theyre looking great so at t and verizon hearnings. Theyre looking good bottoming of the retailers and eog is the biggest Production Company is there and they had Record Oil Production and theyre talking about increasing their growth targets. This is surprising everybody and they can generate high returns at relatively low prices so a lot of people are trying to figure out where the production levels will be going for these companies here we have dow 22,000 and you can thank am for that one. Back to you. Thank you. Its long time leader will be stepping down as the companys ceo in november and as its chairman at the end of march taking over, dirk van de put that runs a canadian private company. Earli earlier she was a guest on squawk on the street and i asked her why did the board of which she is chairman go outside the company to find its next leader what about his experience in particular was central to why he was chosen heres what she said. If you think about some of the challenges of the french fry category one would say thats not as on trend as other categories might be he has grown the top line together with his team by over 50 over the course of his tenure. 75 of that, three quarters of it is organic growth and at the same time he has been able to grow double digit each and every one of those years and he understands the power of the top line and the bottom line. Cost say key area of focus through the years in part pressured for awhile by nelson peltz on the board and put out a statement and congratulate her on her tenure the stock is down jim. That will be in part because those that would hope that mondelez would fall into the hands of kraft heinz when you see a transition like this one it says aint going to happen. Aint going to happen. Thats for sale and the chicken, being something from. George costanza. Middle industries but i think that, look i said that she did a good job if you can put together the numbers the idea that the stock was up big was wrong on two counts frankly theyre not for sale two they finally got the margin improvement and she was ready to roll maybe its my age but i dont regard her as old but maybe its my age. I dont think she is. Thank you they both laughed and it was kind of like, well, jim and i said no im going, my dad had a big month before he died in 92. Really closed a lot. Wed love to have you here at this desk in 2,000 im going to cover the olympics thats nothing. No, it would be nothing. Come to South Carolina in february. After he died those guys are relentless. When we come back its jobs day at amazon as the Company Looks to hire tense of thousands of workers details straight ahead take a look at the movement in treasuries this morning. Adp was a little belocon census and treasury threw some cold water on that in the Third Quarter at least were back in a minute we, the entertainmentloving people, want an unlimited data plan that gives us more. We want more than just texting. More than just surfing and shopping. Because sure, we want to use this to call the people we love like our directors. But mostly, to get the entertainment we love. Maaaaark switch to at t for the only unlimited plan that gives you 60 channels of Live Television on any screen all for 70 a month. Amazon is going on a hiring spree. And in buffalo new york where some of these centers are. They pay guys about 1350 to 1450 above minimum wage in most states i think and all part of their effort to hire 100,000 by the middle of next year. Try to figure out how many people are put out of work by amazon versus how many people are put to work by amazon and its not zero sum its negative. I believe that if you talk to all people in brick and mortar they need fewer and fewer people in the ware houses still robots arent good at picking things off shelves. And david, i remember that woman, what was it, tennessee . Yeah, we did an interview. My father said thats a violation of the 13th amendment. Its hard work but at the same time you watch the people lieng up, these are jobs in many of communities and has its faciliti facilities. Theyre talking real numbers there. Theyre coming really fast. I dont think that anyone is ready for them. This is the real question its about what are we going to do with the work force in retail when that gets automated as we know amazon will. The check out the check out. Right. Theres 3 million of them. And for driving. Dow settling back apple adds aut 6bo0 points to the dow. Were back in a minute experience uncompromising performance at the lexus golden opportunity sales event before it ends. Choose from the is turbo, es 350 or nx turbo for 299 a month for 36 months if you lease now. Experience amazing at your lexus dealer. Its a couple of stories, the old Food Machinery company they have a Lithium Division and its on fire they raise their numbers for lithium and theyre going to make it a separate company in the second half. This thing can go much higher. They were also the beneficiary beneficiary of really good ag products from dupon. People should focus on it. Mike jackson this morning suggested that the big three are not far behind tesla in terms of technology the next year or two. Youll need all the lithium there is in the world but it can go i cannot believe they got the ago division and the lithium lithium is the pure play that people can do for all the battery companies. Not just tesla so i like it a lot. Tonight. Im trying to finalize but i cant. Im trying to get groupon because its not too early. Its time to buy groupon. Its time. Been waiting for this day for awhile now. Yeah. Although i feel like you have said that before. I have its still at 3. It hasnt done anything yet. Its early. Its early. Well see you tonight if not before well get more reaction to apples earnings and the outlook. What to do with the stock at record highs dow is up 41 duncan just protected his family with a 500,000 Life Insurance policy. How much do you think it cost him . 100 a month . 75 . 50 . Actually, duncan got his 500,000 for under 28 a month. Less than 1 a day his secret . Selectquote. In just minutes a selectquote agent will comparison shop nearly a dozen highly rated Life Insurance companies, and give you a choice of your five best rates. Duncans wife cassie got a 750,000 policy for under 21 per month. Give your family the security it needs, at a price you can afford. Since 1985, selectquote has saved over a million families millions of dollars on Life Insurance. Thanks to apple in this case although were trying to hold four points above that level also watching adp and earnings from the likes of tesla. Thats where our road map begins with the dow surpassing a new milestone. 22,000 thanks to a surge from apple this morning well break down the rally and apples latest quarter and more. The Administration Planning to take action against china on intellectual property. The latest details straight ahead. And more from our exclusive interview with the outgoing ceo of mondelez nternational of course she is stepping down from her long time role helming that company. First up lets get straight to the markets the dow did pass a new milestone hitting 22,000 for the first time a lot being written about the impact on the dollar and how thats helping multinational stocks that are largely comprised of in the dow in addition to the impact at boeing which since the last milestone of 1,000 points back on march 1st boeing is responsible for about 380 or so points. Which is stunning and a remind their the dow is a price weighted index of course but the weaker dollar is certainly helping a lot of these Multinational Companies and one big reason why the german dax ended july negative and hasnt fought up with u. S. Markets they arent happy with the stronger euro lately. Im focused on this idea of rising trade tension with china and that doesnt seem to be disturbing the market the next step there could be sanctions and tariffs. Look at apple. China is the second most important market but we have to watch it if we see this. The gop and debt ceiling and other things the companiesrevenue over 45 billion selling more iphones than expected on last nights earnings call. Tim cook did highlight the Service Growth of 22 in the last year. Services revenue hit an all time quarterly record of 7. 3 billion 22 growth over last year. With double digit growth in each of our geographic segments over the last 12 months our Services Business has become the size of a fortune 100 company, a milestone we have reached even sooner than we had expected. A lot of things coming together for the company does this signal the end of am trading at a relative discount we sort of hope it does this is one of these unique quarters where it was not just an iphone. It was ipad and actually the entire spectrum that did well and there was a quarter where you could think that apple was less product cycle and more franchise and the path gets easier for the stock to get working. People debate how big of a broad example its going to be but we think the path of least resistance is for the stock to go higher. So directionally people might argue that makes sense but how do you put how does your model get you to your target and what is your target . If you believe that number is accurate then on a 15 multiple, the stock should work its way into the 175, 180 price point. Thats a reasonable scenario is this a one off or are we looking for a real turn . Ill answer that when we see the numbers but i would say on the ipad it was education that seemed to have lifted that up. We hope the ipad does but less conviction there. I wanted to ask you about that 10 sales down the company mostly said it was hong kong. The hong kong dollar is hurting tourism over there Greater China was flat but in light of increased trade there was a lot of discussion, that issue on the Conference Call how much of a concern is this . Broadly the one thing that we worry about in iphone x is does china upgrade the phones at the same pace that the western hemisphere has historically done china is a key wildcard in terms of how big the cycle is or not having said that the political issue or discussion that we have. Thank you for your time. Were joined now by the president at mark Asset Management youre having a goodyear too. Thank you you are doing well. Do you own any apple and what do you think of the quarter regardless i was impressed for three reasons. One the company gave every indication that the new product cycle will begin at the same time as the last one secondly i was intrigued with what tim had to say about Ar Technology augmented realization and he said were going to be the standard now they have Great Software which is they do that and they really had something to differentiate from everybody else and third he illuded to more innovation to come this year take these things together and the key thing is the cycle. Of course there also seems to be some focus on and he certainly wanted to bring it on the recurring revenue that will come from the subscriber business. The Service Business which is growing 22 and comprising a larger and larger portion of revenue. Not at the point that many would say youre willing to apply a higher multiple. Is that something that you think about . Absolutely. One of the keys, if thats really a paradigm for a new cycle its not a one or two year thing theres a billion iphones out there theyre all going to be replaced. That highlights a problem in china by the way thats just fabulous its worth more and thats why buffet owns it im not going to super impose but its like chewing gum youre going to keep buying this thing. Likes those kinds of businesses. Artificial intelligence is the paradigm for the future. You know its going to be in our pocket, echo is there. Its going to be used by businesses tim mentioned it yesterday in terms of Autonomous Technology being more than just vehicles and the key to that is Artificial Intelligence and its the key component in every Artificial Intelligence system thats being manufactured. Thats impressive and the company saw this coming and theyre developing the hardware and software to make it work for everybo everybody. Theyre well positioned but its not as though thats a name many people dont know and own at what point do you get worried here in terms of the multiple and in terms of them being able to please all the investors that piled in based on the thesis that you just outlined. It does have a multiple but when you look at the areas it on rats and what the chips are used for for gaming and Artificial Intelligence and Autonomous Vehicles and the fact that the product is differentiated they have a number of engineers, the capability, the research, google is developing its own technology you have to expect that but the market is huge and growing dramatically and this company is in the right place. How are you identifying even on all the secular trends that are going to change our lives the companies that you suspect wont execute as well as the promise. Its a lot of research. A lot of time. The financials and capitalization and management and dedication look at facebook, if you go on his facebook hes barbecuing in his backyard hes not sitting in his mansion. Now maybe thats some pr but this is real when you go to the companies and see how they operate, when people want privacy they can have it so theres a difference in attitude and these are businesses that can pay huge dividends and theyre taking that money and putting it to work and theres great opportunity. You and i used to talk many years ago about media. Youre a media guy. We still are we own the two most Important Media companies in the World Facebook and alphabet. So you transitioned to being a new media guy so to speak. What do you make of the influence of netflix we were having a conversation earlier netflixs impact on movie theaters amc is getting crushed today not to mention the distribution of program. I think about what gets me to go to the movies now but im not sure what else but why bother theres more do they keep the disney franchise because i think thats a plus its a company thats intent on creating its own exclusive programming and its programming that they can distribute internationally theyre doing the right thing. Valuation is an issue. We have an investment but we keep it under control until we see more evidence of, you know, more cash generation but theyre just investing it. Theyre doing the right thing. A lot of it why not take it to the bank there are things you cant control. The thing that concerns us most is not the fed and not the fact that we have a government thats business friendly whether it accomplishes anything i dont know its not out to hurt you the ability to conduct the policy when theres so much in this country there was a great column in the journal yesterday talking about all of the areas of the world that we should be concerned about and this is countries that have nuclear or potential Nuclear Capabilities and its america protects the world. It because and if theres something really horrific it wont matter what you own whether its a bond or anything so you have to be aware of it. Be sensitive to it and try to take advantage of opportunities. Thank you. Youre welcome. When we come back, green arrows across the screen, more on the markets and dow 22,000. Speaking of apple adding 51 points or so to the dow, 6 right now plus a possible trade warning to china reports that the Trump Administration is considering aggressive action. We have the details. Squawk on street will be right back world ugly and messy. They are the natural born enemy of the way things are. Yes, ideas are scary, and messy and fragile. But under the proper care, they become something beautiful. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. For years, centurylink has been promising fast internet to small businesses. But for many businesses, its out of reach. Why promise something you cant deliver . Comcast business is different. We deliver superfast internet with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. We do business where you do business. Shares town 4. 5 daily, the retailer may be running out of time and options if theyre aiming for the deal to close before year end. This follows a report last week suggesting preferred equity has also been offered to private equity firms as further enticement for financing remember in june nordstrom announced that the family is in the process of seeking partners to take the company private. You can see the reaction down almost 5 . Thank you. Thanks. Now 2thirds of the s p 500 reported earnings so far this quarter. The earnings season in aggregate has gone better than expected 70 of companies being higher than average if you look at the forward estimates coming out of the earnings season its the best in six years and yet you had this real sell on the news instinct where you had Companies Reporting or he showing a decline in the stock on the first day and people are also investing. Were already pretty fully invested people were mostly positively oriented toward stocks the high yield credit market is incredibly strong and supportive youre back to the strongest level of 2014. Thats basically the best levels of this entire cycle so its up two points in two weeks. They were worst than expected a few months running now keeping bond yields low and keeping the dollar weak and thats why earnings are the story which is interesting that theyre raising expectations. I think the dollar is part of the raising of expectations and the fact that the dow is starting to out perform the s p on a year to date basis shows you the reference for the very big Global Companies so thats going to help but its still slow growth and high liquidity. Would you be surprised if maybe taxes do come together the debt ceiling show down is not as messy you have the makings of that because you had nothing priced in at this point to Something Like that. This is my favorite chart were showing. On gdp, the 2. 6 Economic Growth to this discussion President Trump boasted about it said we havent seen it in a long time but look what happened in the Third Quarter of 2016 we got up to near 3 after all the revisions. We have seen this quarter after quarter. Goes up and comes back down. We never get to 3 . I think you have been around 2. 5 since 2010 give or take. I also noted in and the s p 500 revenue is up 4 this year which is okay but how much farther does it get you. Its a narrow market. In terms of the fundamentals those are the aggregate dollars of profits and sales its pretty concentrated. Boeing was the new fang. Boeing and goldman together are 15 of the dow although goldman has not been out there. Mike santolli a lot more with our exclusive with Irene Rosenfeld dow is up. Were just below 22 k now. Back in a minute she will give up the ceo job in november. And become no longer associated with the company at all as of march 31st will when he will take over as that companys chairman we spoke earlier this morning on squawk on the street to irene and asked her why mr. Van de put an outside their runs a private foo food company in canada is the right person to run the 90,000 employee mondelez. I think dirk is is a seasoned ceo. He has a very strong and proven track record at a variety of Different Companies. Of growing both top and bottom line even in challenging circumstances. And i think he comes with a tremendous set of skills that will be very relevant as we start to write the next chapter of the mondelez story. Part of that story will be unleashing top line Growth Potential. Something indicated mr. Van de put has been successful in doing even in a some what tired category of frozen potatoes and french fries and things of that nature at mccain which is a large producer of those products she has operated in a challenging macro environment. Certainly pushed by certain shareholders to focus on cost. Something that she has done, getting margins up to about 16, 16. 5 this year. I asked her about that environment and about what she believes mr. Van de put will be able to achieve in the future. Its been an incredibly challenging environment an just about every front. Were at a point where its a good time to hand the reigns over to my Leadership Team to take this to the next level but i have great confidence about the future of the company and im a sizable shareholder so ill be cheering loudly from the sidelines. The next level and a new fresh set of eyes. Its interesting to see a company of this size go outside for well, within that industry he may be known. The biggest question that investors are going to have is how open is he to a deal and what strategic path is he going to pursue for mondelez that has been something that she has been in interview after interview unwilling to entertain. She helped break apart craft and mondelez so when this idea came that kraft was looking for a new partner all eyes were on mondelez she shut that down she also by the way shutdown the prospect of having a new ceo speaking in early may saying the reports were greatly exaggerated soy wonder how much pressure there is at the board level at the shareholder level to get fresh blood in there and someone that might think about Strategic Alternatives its a leap for sure. It is and consolidation comes both ways and its typically not the case when a new ceo comes in theyre not thinking about selling the company. Theyre much more focused on having a 5, 7, 10 year run of their own at the top most investors are taking this succession as a sign that mondelez is certainly not for sale and will not be. Thats going to be the question organic revenues are still declining. They got slammed in north america and the company is blaming the cyberattacks. They are which is very serious. 8. 5 negative sales growth. Thats been the story margins, cost control, eps has driven the stock its beat the overall market during her tenure but the question next is when does top line growth come in . Its a question for all the package Food Companies really and will we see a deal. As we head to break, take a look at stocks at this hour. The Dow Jones Industrial average is above 2,000 for the First Time Ever. Just above there now but got above there a few minutes ago. Apple feeling the gains there. The s p is taking a legs lower squawk on the street will be right back ting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. When this bell rings. It starts a chain reaction. Thats heard throughout the connected business world. At t Network Security helps protect business, from the largest Financial Markets to the smallest transactions, by sensing cyberattacks in near real time and automatically deploying countermeasures. Keeping the world of business connected and protected. Thats the power of and. For years, centurylink has been promising fast internet to small businesses. But for many businesses, its out of reach. Why promise something you cant deliver . Comcast business is different. We deliver superfast internet with speeds of 250 megabits per second across our entire network, to more companies, in more locations, than centurylink. We do business where you do business. Vice president fence urging condemnation of the regime of the venezuelan president after he arrested two opposition leaders. Separately the future of the balkins belongs to the west. We truly believe the future of the western balkins is in the west and we look forward to reaffirming the commitment of the United States to build the relationships that will strengthen the ties between the European Community and the western balkins and the United States of america. Bill cosby is looking for another defense attorney before he is retried on sex Assault Charges in november. Seeking to with draw from cosbys defense team he will stay on until cosby can get them in place. And choking hazard prompted the recall of 2,000 children magnetic building sets it involves the Rainbow Dream builder and solid builder. It can break causing the panels and the frames to separate thats the news update this hour over to jackie with the eia inventory report good morning. Good morning. Thank you sue. If youre look at oil prices we took a leg lower after the department of energy announced inventory numbers this week. Crude oil a draw of 1. 5 million barrels. Gasoline a draw of 2. 5 million barrels. Interesting that were lower because you would think the draws would be supportive but theyre not as steep as what we have been seeing in the past few weeks and the market doesnt seem to love these numbers in the last four weeks we have seen draw downs of 25. 8 million barrels. That kept us elevated to 50. They saw a build in crude Oil Inventories so right now crude is trading around 48. 73 and could take another leg lower from here. Back to you guys on squawk on the street. Shares of am are the star of the show today surging after posting an earnings beat and issuing guidance he joins us now from san francisco. He had 24 hours almost to digest it whats the takeaway. One concern we know heading into apples report impacting that q4 performance i asked apple ceo tim cook about that worry and he told me they should look at our guidance and judge for themselves but we think were going to do 49 to 52 billion and thats what we think and they can look at our track record of achieving it and then come to their own conclusion rbc says that q4 guy danidance implies 12 on the top of the line this guidance implies it wont be material to q4 a big reason you see that stock surging this morning a set of tools allow developers to build ar enabled apps really i was interesting in how he was thinking about pricing the iphone 8 we look at the value that were delivering innovation and were delivering and priced accordingly. So if youre doing a great job there then you know people will pay a bit more guys back to you thank you very much with technology the lead performer right now on the s p the dow hitting 22,000 for the First Time Ever. Joining us is bill snead good morning to both of you i wanted to ask you. You bill yourself a Value Investor how do you find value theres quite a bit of value out there. People are willing to pay 150 times earnings to buy glamorous very large capitalization earnings and theyre beating the pulp out of media and Health Care Related issues at the same time so were selectively picking through the mine fields. I see you like target and walgreens. Youre not scared of the Amazon Effect its priced in. Our portfolio trades at 16 times and many of these stocks trade at 12 times earnings we look atwal greens back for 30 years. This is the lowest pe ratio on wall greens putting all of the crummy markets and bad stuff that happened in on a relative basis. Its so much cheaper than it normally is. Next, what about you, 22,000 round number always a Good Opportunity to assess the valuation of the overall market how does that look for you the valuation overall is expensive. I take comfort that theyre not growing more than 2 because our growth rate is only 2 anyway. And then momentum is still strong so i think i wouldnt be buying u. S. Large caps theyre relatively expensive relative to their own history but theres still more run way there. You mentioned this Economic Growth environment i wanted to bring up this point that its been this scenario but can Earnings Growth and out performance and beats continue in that environment as well. I do think were seeing a clustering of earnings, profitability and growth among the Largest Companies and thats been a trend thats been going on now we arent seeing the start ups. Its down probably half that it was 30 years ago and i think a lot of it is this concentration of market power among the Largest Companies so while im not here to, you know, deal the cards im trying to just play the cards the way theyre dealt and i do think the Largest Companies are going to continue to gather most of the earnings power until terms change buying a lot of houses and buying a lot of furniture and Television Sets and mathematically over the next ten years thats likely to happen but in the short run, theres not enough of them yet to drive 3 or 4 gdp growth and force the Federal Reserve to raise Interest Rates enough to invert the yield curve and then the second thing we watch is professionals are very enthusiastic about this market because all they have to do is own an index and 1,000 stocks and individual investors dont own 1,000 stocks and the level of interest in the public is very low we call it, low investor enthusiasm and until you get investors individual investors interested in the market its really hard to top out a market and cant name the five Largest Companies and tech stocks. Apple is the company keep in mind tech is the one area thats got Earnings Growth this year so its a good place to be. Theres a good article in the wall street journal about good ipos how theyre not hitting their initial price. I think thats a good sign the fact is that investors do want something fundamental though it has seemed to be a hated unloved rally thats been a chronic theme. Well leave it there guys. Thank you. Thank you. When we come back, the Trump White House reportedly considering some trade action against china. What that means for u. S. Companies doing business in that country and for Economic Growth. Thats coming up next. And the wolf huffed and puffed. Like you do sometimes, grandpa . Well, when you have copd, it can be hard to breathe. It can be hard to get air out, which can make it hard to get air in. So i talked to my doctor. She said. Symbicort could help you breathe better, starting within 5 minutes. Symbicort doesnt replace a rescue inhaler for sudden symptoms. 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Fidelitys active trader pro can help you find smarter entry and exit points and can help protect your potential profits. Fidelity where smarter investors will always be. The Trump Administration is planning to take new trade actions against china. Also news the president has signed the russia sanctions bill that Congress Passed with a broad majority kayla is watching all of that from the white house. The signature had been awaited for several days and now we await new trade actions on china that could come as early as this week though im told no firm date to release these is currently set for these trade actions it will be a relatively narrow focus which has long been a simmering issue between china and the u. S. Im also told that a decision is set to be pursued separately but now the administration has to weigh the risk of these unilateral actions would cause its how china chooses to retaliate. They could hold up any licenses or applications or trademarks that u. S. Companies including the Trump Organization have on file some 40 of the u. S. Soybean crop goes to china and farmers in illinois, iowa, wisconsin and indiana rely on the income from this crop. They could slap tariffs or quotas on soybeans and that would have a dramatic effect on the u. S. Economy and then theres boeing chinas aircraft Manufacturing Industry is still maturing but there could be restrictions on commitments for boeing aircraft if china feels that thats the way it would like to retaliate meanwhile lawmakers on capitol hill are proposing that the u. S challenge china in other ways. For instance Senate Majority leader chuck chumer says until china deal with north korea the u. S. Should not approve any pending deals for china and chinese investors to acquire any u. S. Companies theres about 36 of those pending worth about 13 billion. Some names that you might recognize, gen worth financial so theres a lot of issues at the same time. The president also suggested that north korea and china are related. But meanwhile chinese officials said theres no direct link. Those topics cannot be discussed together. Thats a great set up for this discussion lets bring in former deputy commerce secretary andrews. Good morning to you both kayla says this could start with a narrow focus but how broad can you invision this getting . The chinese probably wont let it get too far out of hand north korea is creating a crisis for the United States and that were doing what we have to do i dont think the chinese think were doing this frivilously. Would this be different if their response to pyongyang had been different we need to delink the trade issues from north korea. The trade issues are very important and reflect a great deal of frustration. Separate the two issues both of which are important and need to put them on separate tracks and not link them together because i think that north korea is one bucket but the trade is a whole separate and important set of issues as well. Fair enough so kayla mentioned agricultural. Do you see one sector being at risk more than others . The chinese are very experienced looking at our economy, but what i think is interesting is in the past the u. S. Business economy had not wanted us to be as tough on the chinese because they feared retaliation. I think the frustration over the lack of reciprocal treatment in the Chinese Market has now reached both a point politically in the United States but also within the Business Community of reflecting that the chinese competitive behavior is denying u. S. Companies the access that we believe we would get under the wto succession of china. So i think we have to move forward using, not just doing it in a unilateral way, because frankly the chinese will push back on that, but using the wto in working with our allies thats a really important part because right now the administration is picking fights with the eu, with japan, with korea. We need to be working with our allies and recognizing that the only way to make the chinese follow the rules and to give fair access to companies is by working with our allies. Instead of working with our allies, it looks like the administration is going for section 301 of the 1974 trade act. Matthew, when was the last time that was used and is this an appropriate use case it hasnt been used for a while. It is appropriate in this situation. China takes a lot of actions that do violate our trade agreement obligations to them, or their trade obligations to us we are entitled to use section 301 to retaliate, but we are required to go through a wto resolution process first have the wto recognize their retaliation. Here the Trump Administration is going to take a very serious and, i think, dangerous temperature to retaliate without wto approval i also want to say, although it is a convention in all of our diplomacy to keep trade negotiations and National Security negotiations separate and not to mix them, in this case with north korea, i think the situation is so serious that the administration is really compelled to use every hour at its quiver were going to have this conversation again, i imagine. Matthew gold, bruce andrews, thank you so much for your time today. Good insights. Thank you. Heres what is coming up on squawk alley with john we are going to break down apples quarter. It is more than just a lot of iphones sold pushing this stock higher, what that bodes for the iphone launch that we expect in eest a few wks thats coming up on squawk alley. Shares of amc plummeting this morning they projected a quarterly lost revealing a cost production plan and issuing disappointing guidance the stock tanking down 26 last night. Down 25 right now the theater channel also released Second Quarter earnings next week anticipating a miss and revenue to come in about 50 million lighter than forecast. Amc doesnt expect the Third Quarter to give much relief to theater owners calling it, quote, very challenging. They partially blame the u. S. Box office that declined 4. 4 in the Second Quarter compared to the same last year but clearly, this is going to be a struggle yes, speaking of china, the large owner here of this company, they have been having their own issues in terms of being forced to sell assets by the Chinese Government thats a huge decline when we come back, well get a rks. More on amc, on the overall maet the dow below 22,000 t welcome back to squawk on the street. For the first time, the s p and nasdaq are a different story moving lower for the fourth time in five session, that may be due in part to a drop in the Energy Sector down 1 this after crude oil fell after showing u. S. Supplies declined by less than expected. Keep an eye on the stocks in the s p 500 energy specifically. That does it for this hour of squawk on the street. Well go back downtown for the start of squawk alley. It is 11 00 a. M. And squawk alley is live