carol massar. >> puerto rico's electric power authority has negotiated with creditors to push off repayment of bank loans until july 31. the island's main provider of electricity has until month's end to repay some bank lines of credit. it uses those to buy fuel. the authority has $8.6 billion of debt. petsmart investor longview asset management calling for the pet supply seller to consider a sale. longview says petsmart would be more highly valued by private holders than investors in public markets. and that is a look at some of monday.headlines this back over to you. >> thank you. the transportation safety administration is prohibiting battery-dead electric devices at airports. your smart phone has to have some battery life in it in order to board the plane. with more on electronics, i am joined by ziklag systems founder tom malatesta who joins me from washington. ziklag is behind the so-called fortressfone which boasts a self-destruct button. tom, great to have you with us. can you tell people what is fortessfone? >> a fortressfone is a secure phone. it works on the enterprise and basically hardens your phone calls from end to end. no man in the middle. the calls are secure. >> how do you do that? give us a little detail. >> well, basically, we use commercial, off-the-shelf technology. we are focused on the android platform right now. we manipulate the hardware in the phone and we add our own secret sauce, so to speak, so it can control the phone and everything that goes on when the phone is either being used in encrypted or non-encrypted mode. >> what does it cost? >> if you're on the enterprise, you have a couple of versions. the high-end phone is about $2000. it is not something consumers will buy. it is something that a corporation or an organization is going to buy to protect individuals or executives. we have a silver version that runs about $629-$649. that phone is more apt for the consumer market. >> in that consumer market, is there a special network that has to be in existence in order to tie the background, the data that would maybe be stored with the company's server? >> well, the network resides with the people that supply the phone. it would be us in that case. when you have the phone on and you were using our technology, you have to be on our network. >> ok. >> so, basically, that is how it works. >> how big is this network right now? >> the network is small because we are an early company, about two years old. so it is a small, early-stage company and coming into the marketplace as we speak. >> give people a little bit of your background. you have been dealing with electronics and security for quite a while. >> i have been on the entrepreneurial side of cyber security for about the last 20 years. i am a tech junkie. i really enjoy the subject matter. i want to thwart the miscreants so i am very interested in all technologies that help protect assets whether it is private information, company information, intellectual property or whatever. >> you have worked in a public-private partnership for the state of maryland, correct? >> i did, i was president of the infraguard chapter for the state of maryland which is a partnership with the fbi. i was president in 2013. a very good organization. it involves a lot of civilians who are trying to work with law enforcement to keep people informed about threats to the critical infrastructure. my area of interest was on the cyber side. >> talk about the infrastructure in the context of this new tsa move to ban certain smartphones that may lack a charge. in their battery. give us the details. what do you know about this? >> if you remember back after 9/11, if you are traveling, very often you take your notebook computer out of your bag. you have to start it up so they can see that the notebook itself actually worked. the same thing is going on with mobile devices. what they are concerned about is that there are explosives in phones that are hollowed out so that they can be remotely detonated at some point during the flight. >> i beg your pardon. go ahead. >> no, i'm sorry. go ahead. >> i was saying -- is that something that would be a response to a specific threat or is it a response to the greater sophistication of smartphones and tablet devices? >> i think what you're looking at is an ever evolving enemy. someone that is very good at developing new technologies to exploit weakness and to enhance their effort to hurt their enemies. we have the evolution of smart phones and mobile devices at the present time which are being used by tens of millions of people all over the world. and if you are looking to blow up an airplane, that would be something that a lot of people would have with them on the airplane. so tsa is very concerned about how to make sure those devices do not become a transmission base for evil, basically. >> what about the role of social media? the back-and-forth that goes on with facebook and twitter and the use of those services with, let's say, the fortressfone? >> you can use any social media that the fortressfone kernel recognizes. what you cannot do is download a bunch of apps on your phone that the enterprise is not aware of. the whole thing with enterprise is to make sure that whatever is on the phone when it is in encrypted mode, it is controlled by both the enterprise and the user. if you tried to download some app on the phone that is not authorized by the enterprise, you will be able to download it on the phone, you just will not be able to use the app when it is encrypted mode at all. >> talk about your high-end phone. i believe you said around $2000 but, of cours,e connected to a system. enterprise system. would this be the kind of phone you take the china? >> it will be the kind of phone you can take any place on the globe. the purpose of of the phone is to allow secure communications between you and whoever else on the enterprise. the ability to maintain privacy and maintain secure communications. >> is there a device on the market now which reports to offer the same type of feature? >> there are a number of competitors, yes. the one getting the most press right now is a device called the black phone. >> what do you make of that? is the market big enough for both of you? >> oh, yes, you are talking about tens of millions of people. the question is how secure do you want to be? if you have some really valuable information that you need to communicate and you are worried about it being pilfered away by miscreants, what you are going to do is go for the most secure capability you can for a designated number of people. if you want to go to a wider audience, the question is how secure do you want to be? do you want to be bulletproof, or 90%, 80%? whatever. that is a business decision. you have to prove the value-add for the people that want to buy this phone. >> very interesting. thank you very much, tom. the founder and chief executive of ziglag systems. joiniing us from washington, d.c. we are going to stay with technology next and talk to the cofounder of a company called shapeways, a 3-d building company that can build the next generation of manufacturing. it is mystery guest monday, time for your first clue. my mystery guest likes to suit up every day. this is "taking stock" on bloomberg. ♪ right, the world's largest 3-d printing community and marketplace is getting even bigger. shapeways announced it was adding four precious metals -- platinum, gold, rose gold, and 14 karat white gold. the dutch company planted a big flag in queens, new york. let's talk to the cofounder and chief executive, peter weijmarshausen. did i get that at all close? >> yes. >> thank you. let's talk about how did you end up -- i mean, you have been doing this a while. 2007, you got bitten by the 3-d bug. >> we started in 2007 because we saw the opportunity that 3-d printing would transform how we would think about products. then in 2010, in the summer, we moved our main office to new york. >> the 3-d printing technology that we may be familiar with is this constant layering that goes on. you do something slightly different and what comes out is a cube that really is like a present or something you have to pull apart to dig inside. and see what is going on. tell us about centering plastic. >> 3-d printing is actually the name for lots of different technologies and one of them is the plastic you talked about which basically is using a laser and powder to make products in plastic. it is a little like pulling out presents. >> what sets this apart? the material you can use? >> shapeways is a service that everybody can go to. we offer not only plastics, but also a wide variety of metals, ceramic. there are all types of options people can choose from whereas what you were referring to as the home printer is only in plastic now. >> right, and all you need is a cad file sent to you and you will basically do it for the cost of the material? >> the user gets opportunity software. the world is completely yours because you can make anything you can come up with. you can make it in all these materials. if you do not know how to use 3-d software, not all is lost. over 16000 designers have set up shop and you can choose from 8 million products. if you like something, you can buy it or you can contact the designer and ask them to change it for you. >> you are a marketplace as well. >> yes. yous an example of products can make, you can make little cars or little toys, but also you can make things out of precious metals. >> we started with plastics but then in 2009, we started first offering stainless and later we added silver. recent, quite a wide range of gold. people gravitated to making jewelry. it is a good product choice for them. >> is there any limitation you see on how big this could be? of the business side in a second, but in terms of the scale, model people want to make? >> we have different size limitations. plastic can get pretty big. for the precious metals, we have a limitation that is pretty sizable, but not as big as we can do in plastic. for those sizes, you are paying thousands of dollars for one item because you can make something in gold and gold is pretty expensive. >> it is one-of-a-kind? >> yes. >> let us talk about the business. what kinds of things do you get the most requests from in terms of the biggest growth right now? >> jewelry is pretty strong. it is growing the fastest at this point. there is a lot of hobby stuff. there are a lot of design items that don't have function but are beautiful to behold. there are quite a bunch of home accessories and gadgets. it is a wide range of things people make and that is the cool thing because we don't know what it is and then it is making someone happy. >> what about industrial products? are you interested in branching out? >> people do make prototypes with us. they do make parts for showcasing or to fix things. i am fine with that, but we are definitely focused on the consumer market. >> what would you like to say about the company six months from now? how big would you like to make it? how many sales, for example? >> we don't make any comments about sales, but we do say is that we currently make 150,000 unique products every month. products perique month. >> yes, and by the end of the year, i wouldn't be surprised if it was close to double. >> what about the funding for the actual machinery itself? these are not things you just buy off the shelves. >> the machines are available, but they are expensive. that is the model behind shapeways. we are community for the reason that the machines cost up to $1 million and we want to get everybody the ability to use these very high-end 3-d printers to make anything they want. >> the printer you are using could cost $1 million? who makes a printer that costs that much? >> the one made by eos, a german company. >> are they the leaddrs in this kind of printing? >> in the plastics, definitely. >> are they also the kind of thing you find out they are capable of producing new things and then you publicize that they can create these things that are so specific and small? >> the cool thing about 3-d printing is the machine really does not care. you can make things that are small where you almost cannot see them all to the way to the maximum size and it is up to you as the user to define it. we have apps you can use to customize things to define whatever you want. >> what about in the medical world? being able to create unique parts for people? >> definitely used in medical. implants and other things, although that is not our area of expertise. >> you founded this company in the netherlands. why are you now based in new york, in queens? >> good question. we already sold pretty fast after we launched that the united states was going to become the biggest market. it is a big country, obviously. we wanted to have an office in the united states. when we received our series-a funding, we really ask ourselves where do we want to have our main office because we want to attract a lot of top talent joining the team. and where can you find them? if you don't find them in the place, where can you motivate them to go to? it made a lot of sense for us to put our main office in new york. >> thank you very much for sharing your story with us. the cofounder and chief executive of shapeways, peter. we are going to talk about the so-called corn avalanche. u.s. farmers expect a record yield for corn. we will tell you what this means for you, next. ♪ >> this is "taking stock." on bloomberg, i'm pimm fox. food processing and commodity trading corporation archer daniels midland announced they are going to buy the food ingredients maker wild flavors for the price tag of $3 billion in cash. the deal marks their biggest acquisition yet. i am joined from washington by bloomberg's agriculture reporter, alan bjerga. alan, tell us about why they wanted to do this deal? >> commodities is a very volatile business. and it is also a global business. archer daniels midland, one of the world's largest shippers of grain. grain is volatile. they are looking both for some diversity and some stability. wild flavors promises to give them a little more of that. it gets them a little further downstream, a little closer to the consumer in countries where natural foods are more common. less processed foods more common. it expands their global footprint and it gives them a little more diversity within the food industry which should help archer daniels midland have a little more consistent financial performance. >> do you remember capri, the fruit juice? >> capri sun. it came out when i was a kid. we used to sit in elementary school and read through the ingredients. high fructose corn syrup always got a big laugh because we didn't know what it was. that is actually one of the revenue streams for archer daniels midland. they are number one in this. they didn't get capri sun in this deal. >> when you talk about high fructose corn syrup, that gives me a segue for you to tell us what is going on with the corn crop. a lot of farmers may wish they could have sold even more. >> corn is heading for another bumper crop. it is a dramatic turnaround when we had that drought. you are seeing the opposite situation. farmers cut back on their planting more than 4% this year. they planted less corn and more soybeans. but they are getting a great crop or corn. the usda's looking at record yields. that is making the corn crop larger even though they have less acreage. it is driving down prices which drives down profit margins. it is a huge turnaround from where we were 24 months ago. >> what are the implications for what farmers are going to plant next season or do we not know yet? >> it has to do with supply and demand and weather patterns. farmers cannot predict the weather, but they certainly can know what the supply situation will be. at the tight inventory of a couple of years ago come into a huge surplus over the next several years, you may see less corn planting, but in some parts of the country, corn is just what you were going to do. it is what the weather and the soil is suited to. it is what the infrastructure is suited for. there is a history of this with agriculture where you have a real bust and then there is a huge boon. >> there is a big pull for ethanol as well. >> ethanol has been a big driver of this market for about the past decade. you have seen the federal mandates level off and you are seeing in some ways less ethanol being required by the government than there has been before. the cellulosic varieties never took off. as you continue to have better seeds, yields, we are on a treadmill and the american farmer is going to have a hard time getting off. >> thank you very much, alan. it is 26 minutes past the hour, time for on the markets. s&p 500 drops about 4/10 of a percent, down seven points. the dow jones industrial average loses 44. climbing up one quarter of one percent. the nasdaq falling 34 points, down three quarters of a percent. this is "taking stock" on bloomberg. ♪ ♪ >> this is "taking stock" on bloomberg. i'm pimm fox. for a look at today's headlines, let's go to carol massar. >> bill ackman's pershing square capital management proposed six new directors for allergan. pershing square which ammassed stake ahead of valient's takeover bid has called for a meeting of allergan shareholders. highs winds and crashing waves are threatening okinawa as a super typhoon nears japan. it has maximum-sustained winds of about 150 miles per hour. making it the equivalent of a category 4 hurricane. that is the equivalent of a category four hurricane. back to you. >> in the digital health sector, there were nearly 250 deals in the first half of this year which raised a combined total of more than $3 billion. startup health is an investment platform that focuses on the sector and they hope to launch 1000 companies by 2020. the cofounder and chief executive, steven krein, joins me now. tell people what is a technology platform? you are trying to funnel money from point a to point b and, hopefully when it gets to b, it grows. >> it is a global startup platform that has an academy for entrepreneurs to help them build businesses. a network of all the stakeholders globally that are helping these people build businesses. a very vibrant community of entrepreneurs. they're working together to transform health care. >> how do companies that are seeking funding or advice get onto the network? >> they apply. we have had over 2000 companies apply. in the last 2.5 years. we've accepted 71 of those companies. three have already been acquired. it is the kinds of companies and from different locations that they come from that is most interesting to us. >> give us an idea of the companies -- the ones that were acquired. >> a company called basis which is a really risk one watch that has different accelerometers and devices and sensors to actually detect when you were getting sick. >> wearables? >> absolutely. we have a number of wearables companies that we are very excited about. a company that was acquired by web m.d. a huge area where all of a sudden patients are taking control of their health, but a way for doctors and patients to communicate in between visits. the third one is really fascinating out of houston which was acquired by a company in the consumer genomics space. >> anything that limits what kind of health care entrepreneur can apply? >> not doing anything in the therapeutic or medicine side. so, really, not any pharma. anything that touches data, that scales and has technology. the undercurrent across everything is the data piece. all the devices in the medical world are figuring out to collect data and analyze it to give doctors and patients and caregivers a lot of information from that data. that helps them live healthier lives. >> one of the things that helps you scale is your roster of investors and people helping you run this. >> we have a great group of really well-known entreprenuers that understand the power of the network effect which is a really our thesis for building the startup health. everyone from steve case, jerry levin, mark cuban. the entrepreneurs that built other industries and are putting their sights and efforts in the health care industry. >> it feels like it might be a bit of an irony with steve case having sold aol to jerry levin. of timewarner. that deal not precluding them from getting together on this. >> you have health care reform. you have the aging population. mobile devices and sensors and ipads and iphones emerging in the marketplace. finally, it is the golden age of entrepreneurship. you have these unique conditions converging. at the same time, and whether you saw it in the 1980's or 2000's, we are living in the beginning of an epic decade. i think all these well-known people, as well as people like ge and cleveland clinic, they really understand that the entrepreneurs who are imagining or reimagining health care are the ones to get behind. >> startup health -- if you are bringing together that academy you described plus the potential mentors and companies, where do you come in? >> we have a stake in the company anywhere from 2% to 10%. startup health. we make money when we build the business. >> you invest in the companies? >> we actually have an equity stake in each company through the development of this program which last three years. we support them for the first three years of the business where fund raising and capitalization and customer development come into play. >> those 71 companies you have a stake in. then you match them with individuals or existing companies for joint ventures? >> that is where the network comes in. if it is a big network like ge or a small one, our whole approach is to connect them with the individuals that the organizations that they want to partner with and see how we can match-make in a way that is actually going to help build a value in the company that is getting funded with as well as a large company. and that is the real important part. the big companies that want to lean in like ge and aarp and cleveland clinic and so many others that want to figure out how to partner with these early-stage entrepreneurs. >> you would then work with investment bankers at established organizations that would help them make deals? this is just a complementary set of offerings? >> all the stakeholders -- the payers, the providers, pharmaceutical, the venture capitalists, the foundations -- all the different stakeholders not just here in the u.s. but globally that are interested in tapping into this one moment in time where i think it is one of the most exciting times in history to be an entrepreneur, to lean in and help these organizations at a moment where these large organizations do not necessarily have an innovation agenda but they know they need to partner with these reimagination health care transformers. >> thank you for transforming all that information for us, steven krein. coming up, i will take a look at one company that is looking to become the netflix of lego. they will help you save some big bucks instead of buying those expensive bricks. guest monday.ery time for our second clue. my mystery guest got started working in the fashion industry when he was just 16 years old. this is "taking stock." ♪ >> this is "taking stock" on bloomberg. i am pimm fox. you know lego, the brick toy that is admired by children and adults. it generated $4.5 billion in sales last year. the actual lego sets -- they fit together like jigsaw pieces -- they can get a bit pricey. some of the sets can cost over $400. at that price, maybe you want to think about renting rather than buying. pley is a rental lego service. they accept requests for specific lego sets. i am joined by the chief executive and cofounder. great to have you with me. explain how you started this business. did you have a lego habit? >> thank you for having me here, pimm. the way it started was about a year and a half ago when i realized i spent about $3000 on my son's lego. but when i fan, looked at it, i said there is definitely a better way to go about it, a way that will make it a lot more affordable for consumers to get those amazing toys and make it a lot more convenient for them. basically, we created the model based on the traditional netflix model in which consumers can choose the lego set they want and it is being delivered to their door. >> pley, p-l-e-y, how does it work? >> the user comes to our website, pley.com, and can register and they can choose from a catalog of more than 300 lego sets. the set that they want, and there are sets for girls and boys and for unisex and architecture and plenty other sets. the user basically add it to their playlist and they get the first set to their door, they play it, anyway at that -- and when they are done, they send it back and get the second set. >> use the "star wars" lego set as an example in terms of cost and time and how often this would happen. how often this would happen. >> yes, so that's a great question. you look at "star wars," obviously a great franchise. the lego "star wars" set like the death star or star destroyer can cost up to almost $400. on pley.com, you can get it for $39 a month which is about 90% savings on the cost of actually getting it. overall, we save the user about 70% on purchases. >> is there any kind of refurbishing or any kind of cleaning that goes on with the legos before you let them out? question.cellent getting the lego sets and figuring out is probably the most challenging task. we have the former ceo of netflix and we figured out that we developed a very complex algorthim -- we weigh every piece to one hundredths of a gram and we can figure out from that what is missing within the set. we can replace those bricks with new bricks. those bricks then go to very professional, commercial cleaning and sanitation process that cleans them to the level of a restaurant. if you let your son and daughter go to restaurants and eat from a fork or a spoon, even enough definitely give them our lego sets. >> what happens if the lego users, children or adult, if they lose some of the pieces? >> we know kids will lose pieces, that is a very natural thing. the bricks are very small and tiny so we have left it up to a normal wear and tear which is about 15 pieces and we do not charge for it. >> what about the legos that have those motorized capabilities? they get more complex. are you offering those as well? >> we plan to offer them and extend to other educational toys on top of lego. i think the notion is we are trying to advocate science and engineering which is supported by the federal government as a curriculum. the notion is we are leveraging the sharing economy and helping kids that until now did not know how to share or learn how to share. we are the first company in the world that teaches kids how to share. >> you have been doing some math of your own as well. you have raised nearly $7 million. >> that is correct, yes. the funding is to make sure that our operation runs smoother. we are investigating in a second operation on the east coast to reduce the shipping time. >> i want to thank you very much for joining us. he is the chief executive and the cofounder of pley. p-l-e-y. time now for our mystery guest. i have no idea who it is, but the producers have put together some clues. my mystery guest likes to suit up every day. he started working in the fashion industry when he was just 16 years of old. my mystery guest was reunited last year with the company that he started. let us bring out our mystery guest. oh, i have to say -- it is not very hard. you are mr. abboud. >> yes. >> josephy abboud, nice to see you. i didn't have to start the clock. great to have you here. >> thank you. >> tell people -- you started when you were 16 years old. what were you doing at 16? >> working my way through high school and spending every dollar i had on clothing because i loved clothes when i was a kid. i worked my way through college working at a great men's store. i have loved it ever since. >> i remember you started out working at ralph lauren. not starting, but you actually created a part of your persona that you then took independent. >> when i worked for ralph lauren as one of the directors of design for four years, which was a great experience. because it is a great company. then, i started -- i thought there was a point of view for menswear which did not exist which is a more modern american concept, not so preppy, not so traditional, and the same time not european. >> is it designed to be for men as opposed to boys? there seems to be this big divide that goes on. >> i think i have always wanted men to look like a man and not boys. when i started my first collection, my first idea was to take men from being too ivy league and make it a little more sensual, a little more sexy using different fabrics. we hit a nerve and american men really gravitated towards the brand. >> yes, and then they really gravitated towards you in the sense that you sold your company? for millions and millions. >> it was the trademark issue and, through the relationship with men's wearhouse which has been amazing, we acquired the brand. we bought the factory in massachusetts where we employ 600 people on making incredibly beautiful suits. >> you are going to tell us more coming up. my mystery guest is not a mystery anymore. never was. menswear designer, joseph abboud. more next. ♪ >> this is "taking stock" on bloomberg. i am pimm fox. my mystery guest is a mystery no longer. he is menswear designer, joseph abboud, the chief creative director now at men's wearhouse. i want people to understand a little bit of your pedigree in the business. the awards that you have won, the changes you have made in menswear making it more accessible to more people. >> right, well, i think that was the whole thing when i launched my first collection was to get to the american man in not a pretentious way. to buy that perfect suit that makes you feel good. you are wearing a navy suit which is a great standard. it is not about dressing for somebody else, it is about dressing for you and feeling good and being professional. i have loved it my whole life and every day is a new adventure. >> i saw the national suit drive going on. >> yes, the national suit drive, it is the seventh year for men's wearhouse in helping americans who are out of work, unemployed to get gently-worn clothing that is donated to men's wearhouse so that we can empower them to get back into the workforce. you always stand a little straighter when you walk into a job interview with that right suit. we at men's warehouse have done an amazing job in terms of designing suits, selling suits, but also giving back to the community. >> tell us about making suits in massachusetts. >> yes, that is a true love. i grew up in boston -- >> the south end of boston. >> exactly. i loved clothing my whole life and i was able to work for ralph lauren. the factory in massachusetts has such a place in my heart because we have over 600 people who make extraordinary clothes. they make beautifully tailored suits and jackets that we sell in all locations. the nice part about it is the garment is made with a canvas chest piece which is more comfortable, made with italian fabrics, and it is an incredible value. incredible quality, and i am so proud of it. it is almost like going home because it is up in massachusetts. >> i will throw out some names. i want your thoughts on the experience. louis of boston. >> louis of boston. that was probably one of the best experiences i have had. the idea that to be a retailer and believe in something. murray who was like my dad and mentor taught me if you believe in something, do it all the way. he was a brilliant merchant, probably one of the greatest we have known. >> you have obviously known the industry has changed because of the online application of customized suiting. >> right. that's right. >> what do you take away from that? >> i think it is a reality and i think it is great we can do things online, but there is nothing like the experience of walking into a store and trying on a great suit and have a tailor custom fit it to you. we employ over 1200 tailors. at men's warehouse. think about that. a guy walks in and tries on the suit -- but, it is also the tailoring that becomes important. >> what are some of the trends now in men suiting? narrow lapels. wider lapels. narrow ties, wider ties, no ties. >> the problem with trends is that they are just that. i always believed in designing in the middle or little more on the fashion curve so that if i sell you a suit, i have an obligation to say if you buy the suit, it is good for you for three to four years. i don't want to tell you next year that the suit you bought was good last year and not good now. we have a certain obligation to the consumer to design on the forward side of the curve. but give them value. i don't like too extreme. i don't like anything to wide or too skinny. i think in the middle for men is always best. >> let us move away from the office because we know everybody is trying to get more casual. what are you seeing in terms of the kinds of things that are being offered to men specifically for summer wear? >> what is interesting is the swing back to guys getting dressed up again. the young consumer has never really tasted that wearing of a suit, the idea that he is getting dressed up. now with all the information on the internet, they're learning about custom tailoring. about bespoke london.ville row in there is a real hunger for the young guy to get dressed, but a guy can use a suit much differently. wear it with an open shirt. it is not a suit of armor anymore. it is a suit of clothes. >> when you see advertisements for blue jeans, denim that cost $600, what goes through your head? >> i always think there has to be a fair price value proposition. i know the price of fabric. i don't think anybody should pay for a name, they should pay for a product. for me, it is about price value proposition. when things get too expensive, i do not think they are credible and i think the customer is overpaying. >> are we going to see different lines of joseph abboud in men's wearhouse? >> yes, we have launched our collection now and it is performing really well. the signature suit is something we're really proud of, that suit made in massachusetts. shirts,will see dress you will see sportswear. it is a lifestyle brand. >> that is something that everybody is trying to capture. how do you do that? do you go to events? how do you make that happen? >> i think you have to understand the consumer. i spent my career trying to understand the american consumer and how he dresses both in his business attire and how do you dress to go to a brunch or meet your -- real life. that is what it is about. it is about fitting into your life. >> i want to thank you for fitting into our lives. menswear designer and legend, joseph abboud. thank you for "taking stock." i am pimm fox. good night. ♪
-- but will americans go with green? >> i thought whence they was hump day. is that weird? >> these are the top business stories from around the world. ukraine says it will block the convoy russia says is carrying humanitarian aid. it is headed for areas in eastern ukraine that are controlled by pro-russian rebels. ukraine is concerned that they might really be carrying weapons. farmers are spending less. makerggest farm equipment is cutting its full-year forecast. they said that sales may fall 10% in north america. the second largest health insurer in america is changing its name. the company has been doing more direct marketing to consumers because of obamacare. 14 of the new health-care exchanges. >> if you're looking for a retail recovery, you were a bit disappointed. macy's cut their sales forecast for the year. julie hyman covers detailed. we are hearing about how it will detract some fourth-quarter sales. the fourth quarter, even better. what happened? report, they this were relatively optimistic about where the numbers are going to be. people grasping to try to figure out what happens in july. i was just looking at a report from a bank of mitsubishi economist. maybe they were not spending as much. about thee talking wage inflation problem. that wages aren't rising fast enough. differenta lot of explanations as economists trying to figure out exactly -- >> we did see personal health 4/10 of alothing up percent. >> apparel has been a weaker spot. you saw general merchandise, department stores not doing well. mentioned,hat i websites, internet retail, which is a bit surprising. you think that it would be taking market share. at that point there were a lot of different pockets that created the weakness on the drag and the number and created no change for the headline number in the retail sales. >> it really comes through strongly in the numbers that we saw from macy's. >> yes, macy's has been a standout within retail. when you look at relative to their competitors. even this quarter is not terrible, it is just not great in terms of what people have become accustomed to, particularly the earnings-per-share number coming in a low estimates and they cut their comparable sales forecast for the full year. what is going on in particular, it seems like sales, discounts, promotions are part of the problem. >> they are doing too much of it? >> air doing too much of it to get people in the door. the gross margin shrank. this is best in class when you look at department stores. it is a bigger year over year decline than had been predicted. that seems to be part of the issue at macy's. when you look at the consumer right now, they are struggling with their purchasing choices. they are feeling cautious about what they want to spend on. >> macy's is being dragged into this sort of discounting downward spiral that many have had. >> that is improving to some extent. that is something we will be scrutinizing during this reporting. we are not only getting macy's, tomorrow we're getting nordstrom, coles, they see penny, walmart. we will be looking at the sales to inventory. in recent quarters we have had a buildup in inventories and the ratio of inventory to sales has been widening. that is not something that you want to see. you want to see them more closely in line. we will see if they are coming a little bit more closely. >> will receive some sort of payback later on in the coming months? you were talking about the overall sales environment. i expect you like to be revised upward. it doesn't match with what we have seen in same-store sales. the second quarter is typically not very strong for the retailers. coming out of it, there has been a lot of optimism. given these numbers, you might .uestion those assumptions of course, tomorrow's numbers will be important, not just for the second quarter but like macy's. >> now, when sweet returns to sour, that is the story today of king digital, maker of the game can be crushed. crusher of the game candy . they are developing some new games in an effort to try to players. by our internet media analyst who will explain what is happening in the social gaming business. where do we begin with king digital? over fourt with it is candy crush? been expecting this decline. it has been two years at the top. casual games actually don't monetize as well and it has been the big exception. can they develop games to offset such a megahit? >> this is free to play and then you can pay extra for extra live and stuff like that. do they need to rethink the entire business model? >> the thing with the premium model is when you look at 90% of the apps out there, they are rhenium. if you look at what has made the most money, it has been the premium apps. but they are really doing now is they are keeping the premium model. people spendtting one dollar on life, they are making that hard currency. -- buying gold bars within the portfolio so you can use for other games. >> why does it seem as though in the world of social gaming, so the of which is mobile that stickiness, if you will, is so much harder to maintain. is it because of many of the players are kids and kids interest in anything is often very fleeting. they are onto the next thing and what the next thing is is often anybody's guess. >> when you look at the mobile attentionverse, your span for these games is much shorter than pc games. when i am playing candy crush, very different from one i spent two hours playing half-life at home. a game has to keep me interested. the second thing is when you look at the cost of developing these games, it is much lower than like an nfl madden or half-life which takes hundreds of millions of dollars to develop and several years in the pipeline. more games out there. the competition is much higher for these games then anything. >> is that to say that a company like king digital shouldn't have gone public? >> that is one thing that investors will be looking at. only three companies have been successful with multiple hits in the top 10 and king has been only one of them. who are the other two? >> softbank and mobile. is it that hard to make popular items, will we see massive consolidation? zynga has the same issue. >> what they started doing once their farm world started declining, they went out and bought the words with friends game. they will spend hundreds of millions of dollars acquiring a studio. so, i think the problem with these companies is to turn out hits one after another, >> it seems like candy crush is blaming the new kim kardashian game for distracting users. crush, i would never play a kardashian game. >> the problem is that they have talked about a greater competition. that there was the step down in the usage of mobile games. i don't know people are watching a lot more soccer. i think that gaming is fickle. a third of cap usage is games. >> i talked myself back from the wall from candy crush because it addicting. i have to talk myself off of the ledge. >> is the comparison, you drew a comparison to movie studios. the scope back what you're saying about barriers to entry. the bigmore like for established console gamers like takeision, for example, or two. releases,predictable they invest hundreds of millions of dollars and you can determine how successful or not they are. harder in the social games, you have no idea where the next it will come from. lot moreeed to be a tighter over the release schedule. one of the reasons they cited for the u.s. users declining was this large gap between game releases. for a company like king.com, it is important for them to manage that release schedule and keep these new games come expecting that they will not perform as well, still try to offset candy crush. >> another lesson to be learned. thank you so much. >> coming up, are you hungry yet? what is on the menu at the salad restaurant chain chopped, we will talk to their ceo. >> it is a new generation of derivatives. this is making the financial crisis a great deal worse. to have heard this before, guns don't kill people, people kill people. you could say the same for credit derivatives. they are only weapons of mass destruction in the wrong hands. wall street is rearming investors with a new generation of derivatives, are we being set up for another crisis? has 52 billion under management. good morning to you. us begin with this. the appearance of new credit riveted's, total return swaps on loans, forleveraged example, is drawing comparisons thee pre-crisis period, appearance of credit default swaps on credit indices. is this a fair comparison? >> is not necessarily fair to say that because the word derivative is being used. see an unfunded position which could allow the investor to employ some leverage in the strategy. that is not inherently systematic risk being driven into the marketplace if used appropriately. the fact that it is referencing an index that we called leveraged loans does not mean that there is embedded leverage. it is all matter of how the issue it is used and ultimately what the objective is trying to be. i don't see this as a huge innovation that leads us down a very disastrous path. there was the synthetic cdo in the marketplace. the news that was taking place around that was saying, here we go again, we forgot our old ways. what happened was that there was a one-off transaction and i am not aware of there being another one in the marketplace. just because something smells like you crisis doesn't mean we are headed the same direction. >> banks are trying to create new credit derivative products and sell it to firms like yours. >> correct. let's go back to the motivation. if you look at what is taking , impacting then banks and their trading facilities. let's go back to the root of what investment banks do. they are trying to facilitate trading. it does not come as a shock to me that you were seeing innovation and product and indices that would facilitate this trading. the fact that it references a notit derivative itself is inherently dangerous to the system. >> it was scary. is there any kind of catalyst on the horizon could facilitate that? biggestusly, the concern on a low volatility right now where is their complacency in the marketplace and complacency freed itself to people getting comfortable in the position and inherently as those prices appreciate to get future returns. they start to employ a bit of leverage. if you look in the root of the word liquidation, it is the root of the word liquidity. the biggest risk that overhangs the market is that if investors rush to the exits, you mentioned the loans. has historically been a more illiquid asset class. i'm saying that in terms of trading. they're obviously price on a daily basis. they are over the transactions. once we have intraday liquidity on something that perhaps the underlying assets is kind of liquidity. we continuemething the funds within the space. is a nicere there balance. today, i don't see that being there but it is obviously on our list of concerns. >> the risk is that everyone runs for the exits at the same time. the question is, who? is the risk being distributed broadly or do you see concentrations building up in very large funds who cannot take enough risk in the underlying product and as a result have to result to derivative products which in some cases carry counterparty risk which adds another player of risk into the discussion. walk us through that if you don't mind. are we talking about the new intervention of the products that are taking place and those new products, are they leading to this new level of credit risk? i think the answer is no. anre talking about investment bank making markets in the total return swap. does this require institutional investors? you were talking about and experienced investor base when it comes to that. out there andds etf posterity or derivatives because they cannot get access to the cash market? absolutely so. is it a commission to convenience or the fact that asset classes are too big? i cannot discern the difference between those. i cannot speak to their strategy. on the other side of the equation, when you talk about is retail involved, is there the corner office, the wire houses doing these transactions, i think they are trading through the etf and mutual fund market. there was an innovation with powershares where they lost an etf. they cleverly titled tight and wide if you speak out the absolute tickers of those. i don't think that someone wants to necessarily go along with the baskets when they can buy the underlying credit but perhaps the wide instrument may have some following as investors look to go after that. these things just lost the last week or so so it is hard to gauge what that sentiment is going to be. >> what about the banks? are they keeping this risk to themselves? >> the idea, coming back to an earlier comment, is that they are there to facilitate trading flow. the banks would love to match up both sides of the equation. we do a double line on counterparty risk. if one will take counterparty risk, there should be some compensation. we are stewards of capital, these are our investors. if we're going to put investors risk in transactions, we want to make sure that it is doing something beneficial. coming back to the investment banks, i don't think that they are out there trying to take on new risks in the marketplace, they are trying to sit there in their role of facilitating training and they are being innovative and trying to create new ways to get investors to trade with them. if you look at volumes of trading. they are a really decade kind of lows. >> i'm afraid we have to run but thank you so much. a very thorough and expert view. ownering up, the newest in the nba. thate restaurant chain wants to make green something more than an afterthought. we will talk to the ceo of the salad company chopped. >> we will see how companies in southern israel are handling the conflict in gaza. live from bloomberg headquarters in new york, this erikarket makers, with schatzker and stephanie ruhle. >> good morning. >> how is this for a business strategy, turn what is on your side plate into the main course. it is working for a chain of salad restaurants that is so popular, i regularly see lines of more than 50 people long outside my local shop. the ceo is planning to expand beyond its current market in new york and washington, d.c. he is here to tell us all about it. where? >> so, yes, we do have big goals. our mission has been to help americans eat better. is to makeur mission money, don't be ridiculous. >> unfortunately now, there is so much demand that we are able to create a profitable business. >> even though some of your salads can be 800 calories. choose a lot of calories or you can choose not a lot of calories. you can be healthy or you can indulge. how to it is all about make festival at eating easy for people. as you pointed out, the vegetables, maybe the broadly pushed over here and maybe there is a little side of salad. we try to answer is how do we bring faraway flavors, how do we visit different regions and understand different cultures and the food that comes from their and integrated into local ingredients. you can eat a healthy lunch or a healthy dinner. >> what other markets do you believe that the chopped model will work in? >> here's what has been amazing over the readers or so, we get tons of feedback to a website and one of the most common comments we got is, hey, i visited your restaurant and when will you open one in my hometown, i think three or four years ago, that always came from los angeles or san francisco. it was sort of a coastal phenomenon. over the past two years, it is no longer driven by the coast. what we are getting now is from people in town and cities in the midwest, in the south in places where they're saying, i cannot get what you do. >> there is tremendous competition in that space, particularly in major cities in new york. you have places like sweet greens that pride themselves on local sourcing. how do you distinguish when it seems like everyone is doing it? >> the competition goes way beyond the other solid players. you have two of the greatest .hefs of our generation still, with the same concept of helping people get better. that was really sort of the first time or early on when the idea of bringing salads to the side dishes came. we are still an entrepreneurial driven company. those guys have a theory clear vision of where we want festival eating to go. you have a few changes and surprising us coming. >> is that mean different ingredients? >> is a salad have to have lead us? >> i actually don't love the fact that there's a lot of lettuce. so, i always order half lettuce. in fact? before, just tell them it's too much lettuce. >> i think that is a question that we asked him a when does it become a salad or not. we are introducing a line that we call warrior bowls. it is grain-based. so, we continue to explore ideas like that. >> other restaurant chains have tried to go big on salad. mcdonald's, for example, with mixed results. is it a better business selling the salads for $12 and it is for six dollars? >> the bar certainly higher. one of the things that comes , first of all, the fact that mcdonald's tries to do that and wendy's tries to do that demonstrates to me that there is nationwide demand for this, if it was only a coastal issue, you would not see the super big chains getting into salad. this is the product that people are demanding. at the $12 price point or we really try to shoot for the $10 price point. some of it is related to rent in manhattan. constantly trying to evolve and surprise people with the quality of what we do. >> what is your margin goal? i have to think that sourcing locally can get very expensive. >> so, i tell the story to people all the time, if you think about the product that we serve, the lettuce that we serve, it has to be planted by a person. it has to grow when the field. picked and truck hopefully not too far. the amount of economic input that goes into the ingredients in our bowl, and makes it a very very challenging business to deliver the quality that we want at the price point that consumers are willing to pay. >> so, what about margins? what is the goal? >> the goal for us is that we of run and generate north 20% margin at our restaurants. >> operating margin? >> yes. used to have this loyalty card, now you have migrated the loyalty aspect of your business to the iphone. this annoys some people. you're trapped in the apple world and they wondered to themselves, what are they doing with the data? >> it is also on android. it is still annoying to some people who say that i don't want to deal with the phone. we do believe that one of the things that we're trying to do is that we believe we are a modern company. we believe we are forward-looking. we believe that history will be on the side of this move from plastic cards to the phones. right now what we use, we give you more stuff. if you are on our app, we send you, come in and try this, we will give you two dollars off if you do this. overall, it has been pretty well received. >> some say you don't go mobile, you die. >> in our restaurants in new york city, 25% of our transactions are now on the phone. >> what is the winning ingredient that you cannot get right now? you could argue, like a year ago , quinoa. >> if something doesn't happen with the weather in california, there will be a lot of things we will not be able to get. right now, avocados are scarce. as people of avocados. what is the single biggest challenge to running your business and expanding it to where you want to be five years from now? >> in the restaurant industry, massively people intensive business. when you talk about growth, you have to remember no matter what you do, no matter how many great things i can tell you, we need a great restaurant manager to at the storeision level. for us, what we found was sort of a 25% unit growth rate is where we can be expanding the brand, feeling good about our timeh, but also have the and the stability to make sure that our managers are properly trained. what we have added to that is we have a managing partner program, so the managers earn a percentage of cash flow of the restaurant that they operate and it helps to maintain that entrepreneurial spirit. have two requests. one is from one of our viewers who says, please bring back the saigon summer roll salad. the second is from me. lately it hashat become more form over function. the benihana stuff going on. i just want the stuff to be chopped. >> that is a great point. that speaks to what we talked about. we will try to make sure that they smile and ask you how much they want. >> ok, thank you for coming. business up, running a under rocket fire, we will see how it is being done right now in southern israel. >> israel's dome has protected local businesses in the border but others are not so safe. we look at how the conflict is affecting business. firedund 3200 rockets are out of the gaza strip over the past five weeks. with residents of southern israel often the intended target. the iron dome defenses that may protect most people here but the impact this so still damaging local business. >> is not easy, you can see the parts. >> this is an israeli american father of three. he lives a 10 second rocket flight in the village where his employer was founded for the ages return to the main plant where his colleagues have been struggling to fulfill the daily quota. ,> we are doing 100 mattresses instead we do 50 or 60. you don't work as quickly. five or six times a day you run for the shelter. >> one consequence of the conflict is that orders are falling. the company's sales dropped around 30% compared to last july. they're looking to spend around 2 million dollars to renovate this whole factory but when comes to investing in business here in southern israel, there are some unusual factors including security. one, numbers of the military can take over your building. >> people are struggling with cash flow, with the payments, with tax payments. this is a plastics manufacturing firm that is a little farther south. the industry year played historically important role and despite the cost of keeping the company cash rich, national politics play a role in the decision. >> it is the combination of trying to be very competitive on one end and on the other end, it is a long-term view about the -- that israel should >> they have cut some shifts. the costs have risen. >> we are paying extra salaries to the employees, providing like a risk premium. >> there is some things that money cannot buy for those that live and work in this part of israel and that includes peace of mind. >> my wife asked me, what are we doing here, why can't we move? and it is hard. >> what did you say? >> you don't want away from your home every time it gets hard. so, we will give it another go. >> we are joined now from tel aviv. you asked the most question, why did the company stay where they are, why don't they pack up and move to a safer place? the history of that part of israel. lots of committees were established there in the last 50 years. industry asrned to opposed to agriculture, they had theseat they had within their communities. for these businesses to leave, the idea of doing that is difficult for many of these. families, that is a separate issue. some of them to move away during the conflict. >> even if those factories aren't going to leave israel, is it possible that at the margin theymay move additional or may initiate additional production outside of israel? well, the plastic manufacturers, they do in fact have facilities elsewhere and if need be they will start producing that product elsewhere. are payingthey storage fees. they are taking measures. when they do have an international presence, they are looking for shift and you factoring elsewhere. >> you mentioned that there out put is less and the expenses they are responsible for. what about on the demand side? this decreases demand for any kind of product. >> a lot of business owners said that consumer spending tends to drop pretty precipitously during this time. they operate in the domestic market. he tend to try to get support from israeli customers. they take their inventory earlier. international customers obviously don't have such pressures. >> can i return to what is the evergreen question in this discussion of israel versus gaza? that israelis have lived through this several times before and so while this particular entanglement is lasting longer than it has the it has the resigned to living with things the way they are. do you get the sense that that is changing? >> no, i think it depends on who you talk to. some of the older men down there i'm that said they are really used to this. i don'tg children said, want my kids growing up in this environment and usually they are the ones sending their families off to the north of israel. >> thank you so much for joining us. good to see you. >> coming up, it is a special. steve ballmer is the owner of the most expensive team in nba history. to dick parsons, the interim ceo of the clippers. >> the los angeles clippers have a new owner and it is a you thought it was going to be. steve ballmer. oflley sterling, the wife donald sterling had the authority to sell the team on behalf of the sterling family trust. regan spoke with both steve ballmer and the clippers interim chief executive dick parsons. let's begin with steve ballmer. >> my gosh, $2 billion for this team, it is absolutely incredible. he was elated, just absolutely thrilled. they have a propensity to get very excited. you can think about that one video clip that we have developed. you can see him screaming clippers, clippers, clippers. >> i am looking forward to seeing steve ballmer's halftime show. >> he said, i am thrilled, i'm here to support the team. he said, i'm going to figure out how to support the team and take it to the next level. you have got to be tenacious and keep pushing, pushing, pushing. he said, i will enthusiastically support this team. he said, i will be ready involved. i am not a micromanager and i certainly would not get involved. i am not just the basketball expert, i will not be designing plays but i am definitely enthusiastic at the end of the day. >> it sounds like he will be playing a role not unlike mark cuban and the dallas mavericks. is very much there. >> when you put in a billion dollars, you want to be involved in some ways. did he mention overpaying? >> i said, come on, $2 billion? this is four times the amount that any other team has sold for in the league taking a lot of league owners very very happy. he said, it is the price i paid and he let out a huge laugh and said, i am thrilled. he wanted to own this team. >> what did dick parsons have to say? this wentlled that through. it took about three and a half months. he thinks that steve ballmer will be phenomenal owner him and not just because he will rally the troops with enthusiasm but pretty bigs some pockets. is goingk his energy to be somewhat infectious and of everyoneporting will saysire and i that steve will just sit and opened his checkbook because he and b has rules and terms of how much you can spend anywhere, she can pay to keep some kind of parity within the league. fail for aill not lack of resources. said, i amhim and he really looking forward. she them all promised to guide me through the next couple of months. said, he is looking forward to being a grandfather again. he was spend some time with his grandson and maybe take it easy. he has been a big part of this as well, just helping to see this whole deal through, this sales process. don't forget, he is actually a former basketball player himself. the law asy knows well. it is kind of a good combination. >> and a good issue for clippers fans, doc rivers is staying on as coach. >> absolutely, 100%. aslooks like he will stay on coach. >> trish regan spoke not just to dick parsons but the new owner of the clippers, steve ballmer. >> it is time for bloomberg's on the markets. >> overall, the broader markets are trading higher. rebounding after yesterday's flight the client. the s&p is up over a quarter. trading is 1941. the nasdaq is up the most. strutting off a disappointing retail sales, showing a slowdown and really putting geopolitical concerns about iraq on the back burner. macy's numbers coming up soft, and looks like discounts have been eating into profit margins. they cut their full-year forecast. today afternging the earnings also disappointed. restarts in the red, overall we are higher. >> live from bloomberg headquarters in new york, this is "market makers." needs therapy. july was the worst month for retail sales in half a year. >> this time, it is personal. cyber thieves have a new target -- you and your mobile device. >> sprint dropped out of bidding, who is the new favorite to acquire t-mobile? >> this is "market makers," 11:00 in new york city. >> happy wednesday. for the newsfeed. the top business stories from around the world. alibaba setting the stage for what may be the biggest ipo in u.s. history. it will kick off a two week, three, roadshow on september 3. the ipo may take place the middle of next month. a new arrival for uber and lyft. haseli startup gettaxi funding that will start a service in new york and expand in europe. macy's had a sluggish first half of the year. looks like back to school and the holidays will not turn that around. macy's cut its annual sales forecast and posted quarterly profits that missed estimates. >> macy's is the beginning. a slow start the third quarter for american retailers. for july were unchanged. it has not been this low since january. statistics always obscure some success stories. what is and is not working, founder and chairman of the boutique advisory firm that has clients including neiman marcus and forever 21. what is working? easy to dwell on bad. there. maxx and ross, prices are working. >> thanks to my mother. across, hard to tell. the teenage retailers are suffering. >> forever 21, abercrombie & fitch? >> abercrombie, american eagle, aeropostale. kids today have five categories hone.eir cell po second, athletic shoes. that is one of the reasons why foot locker and some of the other shoe retailers have done well. shoes. third, games. they spend a lot of money on games. fourth is accessories. last comes a barrel. -- last comes apparel. there is no loyalty, nowhere near the loyalty to the brands we know the way they are. cheerful, themost cheapest, they do not care as much about quality as they had done before. >> why? where did the shift come from? >> one, the other preferences are taking a lot out of their pocket book. second, newness. is alldrexler says it about merchandise. unless you give the consumer something new and different, they will go into their closets and find something that had before. you have to innovate and change and bring the consumer into the market. >> what is innovative in retail today? >> they have got flowing skirts as opposed to straight skirts. >> no, no. from an operating standpoint. different, better, changing the experience? >> the biggest thing is e-commerce and the internet. 10% oftill only 5% or sales, companies are growing their internet businesses 25% or 30%. look at the base. the stores themselves, the retail marketplace, that is where the consumer is still going for the most part. >> customization -- we have seen a lot of online stores, up with a personal stylist that will send you clothing and then you can send them back if you do not like it. it seems like that is where the industry seeo wanto go. idea.is a great it is costly. there is a lot of returns. it is still not the biggest percentage in the world. personal shopping is very, very good. especially in the luxury area where people are picking out the styles and giving the woman or the guy a number of choices. that is not where the action is. the action is still in the mass in the department stores. look at the problems that walmart, target, even macy's have been doing. if you look at the problems with lululemon, it is amazing. you look at michael kors, it has done phenomenally well. they slow down a little bit and the stock plummets. kate spade today is the same thing. you cannot grow at 30% a year. >> does that mean that they need to value sales versus margins? it seems like the strategy, we saw it with kate's painful stop cut margins enough to get sales up. the stores are doing everything to get the consumer in to buy. they're trying to clean inventory, they are lowering prices. when the next corner earnings come out in the middle of august or the beginning of september, you are going to see a drop in earnings. while the sales may be there, the gross margins are not going to be. >> there's only so much you can do at the storefront, physical or digital. you can have the right products, promote it well. if the people do not come, the people do not come. are we going to see more consolidation, like we saw with men's wearhouse edges of a guy -- men's wearhouse and joseph a. bank. >> an interesting six months. >> some might say nonsensical six months. >> we had the financing and we were ready to go. it is a whole another story. go.olidation continues to we have never been busier. we have more mandates, large and small. the other investment banking firms are saying the same. >> what's driving it? --number one, interest rates they are dirt cheap. so easy for a company, a strategic buyer as well as private equity firm, to borrow money at very good rates. the leverage is not that bad. that's the first thing. also, they need to save on expenses because when you consolidate, you are able to draw a lot of expenses down to the bottom line. that is only a one-time thing. that may happen over a year or two years. long-term, you have to have some form of a plan for growth and continued growth. " growth is another reason why we are seeing a lot. >> who is going to be more important to retailers: ford? -- to retailers going forward, me or erik? have surged,s but in terms of pure dollars, women spend most. >> i am doing better on a relative basis. >> men's business has been very good. retailers like nordstrom and walmart and others report, they are very different businesses. on the whole, the weakness we saw in macy's today, if that is replicated across the american retail spectrum, is that going to speed the pace of consolidation --multiples will come down? >> who can macy's consolidate with? >> 840 stores. >> they need to trim down and said. >> their effort will be in growing the e-commerce business and also doing the personal shopping, doing exclusive products for the store to get the consumer in. >> you are staying around, looking for to continuing the conversation with founder and chairman of financo. >> back to school. how business is stacking up at the container store. we talked to the chain's ceo. >> hackers are not just targeting your company, they are going after your smartphone. "ou're watching "market makers on bloomberg television. our stories can be seen at loomberg.com/tv. ♪ >> welcome back to "market makers." tech and media headlines. amazon is taking on square in the mobile payment business. the world's largest online retailer has unveiled amazon mobile register, a free app with a $10 card reader. the target is small businesses that want an easier way to process transactions. activision has an edge into the holiday shopping season, two "destiny" and the latest "call of duty." rivals have pushed back competing games until next year. rush"aker of "candy c plunged as much as 23%. fewer people are playing. newer games are not attracting as many players. >> what is wrong in retail? we talked about it with financo 's gil harrison. the container store ceo kip us from dallas. good morning. we know something is happening in retail that is not so great. july retail sales were unchanged. the worst performance since january. you have seen some of this yourself at the container store. look at your stock price, down in excess of 50% this year. days stock is down a bit, we came out with an ipo eight months ago. 36 dollars the first day. we are still at about 40 times 2014 estimates. the multiple is still about 40 is significant. i think retailers are seeing a little bit of a tough time with traffic. traffic is kind of flat, down for some people. it has been that way for a year or two. we have to figure out ways to get that 1% traffic declined to a 1 percent traffic increase. at the container store, we have most of our significant initiatives focused on average ticket. only two components to comp store sales, traffic and average ticket. we have a program where we come into your home and organize your closet, your pantry. moreso organize a solid, of a built in closet organization system people have asked for for 20 years or 30 years. programs have average tickets in the thousands of dollars. we expect that to lift our $60 overall average ticket greatly as we go into the third quarter and fourth quarter of this year. we are rolling out these programs now and they are being tested in several markets. one way to attack sluggish traffic is to know your average ticket. that is what we are optimistically focused on. >> does that mean you are moving away from a lower end consumer and targeting the higher end? >> no. the container store has always enjoyed a pretty high disposable income customer. the top 30 percent of our customers give us 83% of our sales. $125,000ortable, household incomes. we are targeting the customer that is there in the store. years, we have provided the best organization system for your closet in elfa. some customers want more of a solid, wood-look closet. system is even a little bit more higher end t han elfa. the average ticket with that. us to have been asking come to their home and do it for them for years. we also are attacking the slight traffic declines most retailers are doing by finally, after 36 years, starting a frequency program. we call it pop -- perfectly organized perks. we are up to about 600,000 customers. sign up forustomers that. i do not think a retailer can sit there with a 1% traffic decline, you have to make that an increase. at that to your average ticket increase. >> how are you? >> how are you? was telling the people here that you were a true merchant era.e of this >> that is awfully kind of you. >> now he will hit you with a question. >> tell us what you are doing with expansion and how you are going into your plan to go into smaller markets, which is one of the very exciting things that we talked about in the past. >> thank you. we did the ipl about eight months ago, we said we would have square footage growth in minimum 10%. we've raised that to 12% and we are going to achieve that with the addition of our eighth store in the phoenix area. footagethe square growth for the container store will come in at 12.2% or 12.3%. there is not that much retail development going on, retail real estate development. 12.2% or 12.3% is a leading number in the sector. we are very excited about that. we are achieving what we call eight four walls -- a four walls ebitda. -- >> how long does it take new stores to turn profitable? >> 22% of four walls ebitda the first year, we have spent much of our history growing more than 12%. time withing a good that. we have been expanding faster and faster. what you alluded to, we used to think we had to be an ally. we just opened a store in l.a. indianapolis-ing of the container store, we are having huge success with stores in raleigh, charlotte, indianapolis, metropolitan areas of about 1.5 million. it is less expensive to get the best location in indianapolis than the plan or l.a. to thees are close same. we are recouping our capital years withat about 2 a 23% -- >> fabulous. kip? kip? secondshave about 90 left. you were talking about raising your average ticket. that makes a lot of sense. so much of what you are describing involves customization and human capital. one of the things that people recognize about your store is the customer experience, people are really good and they take good care of you. >> the service is fantastic. youru are asking more of people if you are going to send them into my home to organize my closet or take out california closets by coming and building a new set up. how do you maintain the high-quality you have established with the salespeople inside the actual stores? easier to lot organize someone's closet or pantry in the home than in the store. you are there with the closet, you are there with the pantry. the container store has always -- to bed to employee an employee first culture. if you take better care of your employee, she will take better care of the customer. if you have an ecstatic employee, you will have an ecstatic shareholder. about both excited of these programs. i am excited about the pop program. the program directly attacks nationwide retailers, national parks, season-ticket holders, everybody is so busy. we're doing our favorite things a little less often. for most retailers, that is a tiny traffic decline. let's say that you get a 3% average ticket increase. if that traffic is plus one rather than minus one, you have a 4% comp store increase. through perfectly organized perks, we are trying to get the traffic a little the positive. what we are best at is raising the average ticket. last year we did in the neighborhood of 6% average ticket increase. this year, we think we can do enough to get our comp store sales where they expect to be. we are looking for to the third and fourth quarters. the good thing about the weather that retailers encountered at the holiday season is that this year we cannot have a worse -- >> no question you will do what you need to do to keep growing the company the way you have in the past. >> i'm afraid we have to leave it there. kip tindell, an internal optimist for the container store, he is the ceo. gil harrison of financo. >> coming up, either way for cyber thieves to make your life miserable. right to hack your mobile device. ♪ >> breaking news on "market makers," bill ackman's pershing square is going public. not clear how the billionaire hedge fund maker is quare to take pershing s public. is not takingbill his management company public. blackstone has done. an effort to raise permanent equity, which would be more akin to what phil falcone did with the harbinger group or did einhorn with greenlight. >> is this a surprise? >> i recall hearing that something like this might happen. it is coming from activist investor. activist strategies can blow hot and cold. you hope your investors are committed and willing to stay with you for a long time. hedge funds, unlike private equity, have to offer investors some equity. they cannot tie your money for seven years at a time. >> it makes them susceptible. >> this would give bill money to manage that he does not lose the risk of losing. ♪ >> live from bloomberg headquarters in new york. this is "market makers." ," goodket makers morning. it is almost noon. is a buzzword. it is a top priority for businesses. harriet is a reminder of how much of a priority it needs to be. hackers are getting more personal these days. yourng their sights on mobile device, smartphone, or tablet. here to talk about how to protect yourself is the cofounder of a mobile security company that just announced a million round of financing, one of the largest ever for a security computer from. talk about the worst thing that can happen to you via your mobile phone. identified, this is not just a board level issue. we are seeing this impact individuals. over one billion passwords getting compromise. we have seen these threats shift towards the mobile environment. a great example is something we have seen, a threat category called ransomware. hacked,device will be take control of your phone and control it so that if you do not pay money or take the action of the attacker's request, you have zero access to your phone. >> ransomware. >> let me be a cynic here. your business is trying to get people like me to hire you to protect my mobile data on my phone. isn't it good for you the more freaked out i get? goal is to solve cyber security problems on a fundamental level. what you have identified is a relic of legacy cyber security companies. how many people do you meet that her like i am so psyched i have security software on my computer? how do we build products people want? where ifed a feature someone tries to get into your phone and mistyped the password three times, we will take a front facing photo of the person and e-mail you to know that the person is trying to steal your phone. people love that feature. the product has gone viral, almost 50 million people have chosen to download the service. >> what should mobile security cost? to get an iphone, all i have to do is go to the apple i can back, everything up in the cloud. those are the things that matter the most. be willing to i spend on something that really just gets my phone working again? >> for most people, security should be fundamentally free. our strategy is to build product that enable most people to have free security, that provides them protection they need. advanced functionality does for power users, there are many who will upgrade to the .remium version governments who need sophisticated security and services areremium available. we think security should be free at the fundamental level. >> how do you build a business on a free product? with have designed this the intent of disrupting how .ecurity is done historically, it was very people centric. we want to use the network of users to aggregate threat intelligence to solve these problems. a user in china might download a piece of malicious software, i am sitting in san francisco, i would benefit from that. the more for users that showing, the safer it gets. a premium version, three dollars a month for our service. you can build a large business on top of that. monetizing us an enterprise is a huge focus going forward. securitylike mobile has become a hot phrase over the last year or so. what is the competition like for a business like yours? >> competition is a signal of the market being something that is very important to users. at the end of the day, we have two camps. the traditional legacy, public market competitors like symante c. they are having a hard time moving into the post-pc era. we have a number of upstarts who are directly competitive with us. at the end of the day, we win or lose based on our losers and we focus on building the best all caps and the best user experience and the best solutions. with 50 million users that have downloaded us, including at&t, sprint, and t-mobile, really an example of the attraction and leadership that we have in the market. >> what do you do with the $150 million you just raised? the salt that go towards marketing? -- does some of that go towards marketing? the network effect makes sense, but you have to build awareness and get people to sign up. >> that 50 million users that i talked about will go to hundreds of millions of users. internationally, we will open international offices around the world. we will be deeply investing in our enterprise expansion. we have been building this business for years. we are just getting started. >> is there one country in particular that you think is more vulnerable? look at threat statistics based on our threat networks, here in the u.s. for malware, the average person has likelihood of encountering malware. it is possible that not every day. the statistics we see in russia, upwards of 60% of devices will encounter something militias over the course of a year period. 30% in china. is threat landscape different. internationally there are huge opportunities. >> people of gotten used to the idea overtime that the apple environment is more secure than the indoor environment or the or event environment the blackberry environment. blackberry had a strong security reputation for many years. in your experience, are they all equally vulnerable? are some more vulnerable than others? >> look at the differences in types of threats. application-based threats have historically had a greater impact on android. that does not mean it is less secure. google has done a phenomenal job of improving the security model of android. something we have been very impressed with. apple, we have seen more targeted attacks. web oriented threats. i do not think it is fair to say that one platform is more secure than another. you have to really look at is the trends and where the attackers are going. there is a host of things that influence that, ranging from the scale of targets, meaning mass targets, down to the people themselves. for example, there is a target of government or corporate espionage. it is not about the platform, it is not the target. >> great conversation, looking for to talking to you again on bloomberg. cofounder of mobile security firm lookout. >> this is why i use cash. >> cash? >> coming up, when is an ipo not an ipo? plenty of embarrassment after a biotech country pulls its public offering. ♪ >> highly unusual for an ipo to fail, that is what happened with an israeli biotech company that cancel its ipo after six days of trading. a world of pain for the company and its underwriters, which are eutschebank and wells fargo. >> a highly unusual situation, a company allocated its shares -- some investors bought in. an insider agreed to by in awe half of the offering side. after the shares had already started trading, the insider decided i do not like how things are going, the shares plummeted 15% on the first day. they said i do not want to buy more shares. >> to ipo investors have the right to do that? >> it is not about the a right, it is about the ability. the terms of the agreement enabled him to back out. it is very uncommon. the incentives do not align with backing out of a deal. woulds why an underwriter not assume or need to find a back up investor to support this if they back out. >> why wouldn't they buy the shares to support the ipo? a they cannot hold them as proprietary measure, they would be allowed to hold them in a block trading capacity with the assumption that they can sell it off to someone else. the thing about biotechnology investing, you look at these companies, they are pre-revenue and it is difficult to model them. the models are based on a small group of investors that know the status of investments. if one of them backs out, difficult to find a substitute. bank and wells fargo or to acquire about $3 million worth of stock, it would be difficult to offer it back -- to offload that. >> any underwriter involved with this has egg on his face. what can we say about what they should've done differently? >> over the last decade or so, there's been a change in the rules for underwriters, they have to do best efforts. the underwriting agreement is not signed -- >> it is not real underwriting. >> they will have already received commitments from investors before agreeing to underwrite shares. a de-risks the role of the underwriter and places risk on the issuer. ipo process inhe general, isn't this the point? the company talks to investors and places the risk out there and then investors feel comfortable signing on? is not the point? >> the person that has been the loss here is the issuer. here they are, they need this capital to operate. drugs to creekng cancer. one insider, one single entity decided they did not like the way the shares were trading. that is a black spot on the ipo process. for everybody involved. does not happen very often. thank you. field ipo. ," coming up on "market makers the fight for t-mobile. who is the favorite to acquire the nation's fourth biggest wireless carrier stop ♪ >> who is going to buy t-mobile? sprint ended its courtship last week. you expect t-mobile to stay single for very long. is centering on a tie up between t-mobile and dish network. m&a, why islecom speculation on dish and charlie ergen? >> it has been rumored for 18 months or so, maybe even two years, that dish wants to get into wireless. they own all this wireless spectrum, the frequency airwaves that many of these companies need to own in order to have a robust service, basically the signal that when you talk on the phone -- >> does t-mobile need spectrum? company needs spectrum. that was the whole purpose of the at&t-t-mobile deal in 2011. >> it was busted up by the doj. part of a termination fee, at&t needed to give up mobile spectrum. that shows how important this is. this has a lot of spectrum but no network to use that on. that is where they would want to buy t-mobile. >> regulatory wise this would not be a big issue, you are not merging three and four. moneywise, what does it do? sprint was set to offer about $40 a share. roughly a 50-50 split between cash and stock. you would think dish would not need to offer quite as much as $40 because they do not have the regulatory risk. that pushed up the price. share. down to $35 a if you do a 50-50 cash stock split, that will push dish pre-up into the levy -- push dish pretty high up into the leverage ratio, 5.5 times. the area where companies become a little iffy. the satellite television business pumps out a ton of cash flow. that is why at&t wanted to buy directv, billions of dollars of cash flow even if it is not growing. >> should we look at the t-mobile stock price right now, , and draw the$29 conclusion that investors see it as a low probability scenario. >> the overriding probability is that t-mobile stays a standalone company. drives me crazy, . am not a t-mobile customer hisid john legere -- stock was trading north of $34, thanks in large part to your great reporting. with share agreement little hope of going up on -- hing other >> in the near term i do not expect t-mobile to be popping anytime soon. there is a possibility the french government can boost your offer. they are still periodically involved here. that might be the first near-term step. >> thank you. covering m&a. >> the big headline, no consumer. adam johnson joins us with a little insight and action on where the consumer is. dowe're going to try to later in the next hour is try to figure out how bad it is and whether there are any other companies that might present some problems. >> a lot. into earnings reporting season. the news cannot of macy's -- disappointing earnings, foot have seenhe worst we in about 16 weeks, declined for the 16th week and it grow. cole's, nordstrom, and walmart report tomorrow. estimates?ts lowered >> the bifurcation. >> adam johnson is quite the artist. ♪ >> that wraps it up for "market makers," erik, you don't play candy crush. >> and i do not carry cash. trying to get cisco going again. sales are currently projected to shrink 3% this year. earnings out earlier today. the ceo of cisco will be with us on "market makers." >> 56 pass the art, bloomberg is "on the markets." olivia has more. >> stocks trading higher today. rebounding after yesterday's decline. investors shrugging off the slowdown in retail sales we saw earlier this morning. thinking the fed will not be in a hurry to raise rates if the consumer environment is slowing down. joining me is strategist at baycrest partners. thank you for joining us. what are we seeing in the options market? how is the vix at 14? >> it will stay below 14. if you understand earnings this being the expiration week for artists, maybe there is a little bit of volatility market for friday. next week, volatility comes in even more. we are seeing that -- >> more volatility next week? >> volatility coming in, selling off more. the next -- >> why? >> earnings season is over. unless we see escalation and geopolitical risks from here. does not seem like there are many catalysts a big one could be mid-september for the next fomc meeting. >> when we are expecting the fed to phase out the final stimulus. bondg the last tranche of purchases. cisco reporting after the bell. we have a story on the bloomberg terminal about how john chambers is under pressure to step up the push into software instead of just out of hardware. what is the options market telling us? >> options have been playing a 5% move in the stock. see activity and calls more than puts. 3.5 calls for every put. activity is concentrated in two -- september 27 calls. i suspect this is the strike own was sold by people who the stock, they are selling some capture theer to call premium. they are discovering some of that ahead of earnings. august a big trade in 25 calls. bettingns traders are we are going to see an upward move about 5%. stock is return on the skewed towards the upside. >> another stock is tencent holdings. asia's largest internet company has shares hitting an all-time high. you have a trade on the chinese etf. tencentthe etf of which is the largest holding. a lot of bullish potential in the chinese market. the confluence of factors that are going to push the market higher, you have the market reforms by the government, foreign investors can now invest in chinese domestic shares as well as the chinese domestic investors who can invest in hong kong shares. devils advocate, we got members today out of china showing that industrial production slow. >> retail sales at 12%, where are you going to get that? there is renewed talk of more stimulus. >> what's the trade? $44.48 call.nuary risk-reward for a six-month tray. >> interesting to see how 10cent trades. thank you for joining us. "on the markets" in 30 minutes. "money clip" is coming up. ♪ >> welcome to "money clip," where we tie together the best stories, interview, and business news. the deal for a sports franchise is finally done, what is steve ballmer going to do? attention, shoppers, where are you? new numbers show that consumers are staying home and not spending. around the world, bank of england chief mark carney elaborates on the state of interest rates in his uk. antivirus pioneer john mcafee built a fortress around data. the mo
futures picking up on this. jim cramer was tweeting if you're buying this because of what happened in japan, be careful, because he does not think the markets are correlated. watch out for it. also, news out of europe, a survey showing that german analysts and investor sentiment climbed more than expected in august. that news suggests that europe's largest economy is regaining momentum. we'll have more from our colleagues in london in a few minutes. >> in corporate news, yum sales in china sliding more than expected in july, down 13%. among the reasons, the heat, some analysts say the company's lack of cool drinkz and ice cream meant could nsumers looke elsewhere. the kfc parent is trying to bounce back from the dublg double impact of a food safety square and bird flu outbreak. a new director may be named as part of an effort to resolve the dispute with bill ackman. ackman's effort immediately remove interim ceo mike ullman would apparently be put on hold. >> we talked about this story. i don't get this part. >> i've been thinking about this. i've been thinking about the deal, if i was on the board, i would try to reach with ackman. which is i would say to ackman, here's the deal, we will put this other person on the board -- >> ackman is director, they're saying here is someone that ackman wants on the board? >> or someone in the retail business. >> somebody with experience. >> right. >> that he would be happy with. we say, fine, we'll put this fellow on the board. however, you have to sign on the dotted line that you will not speak ever to the public, do anything outside of the bounds of the role not just of what you think a board member is, but i would write rules and if you are to -- if you were to contractually somehow get kicked off the board. that's the structure of whatever transaction here i would be setting up with that. i don't know if it is possible. but i was thinking this -- last night, what i would do if i was a boardmember. i had a strange dream last night. >> what is interesting about this whole episode, i think, and was, you know, laid out in all of the letters, whether from ackman's side or from the jcpenney board side is that nowhere did the jcpenney board push back and say, no, mike ullman is going to be our long-term guy. they in their own letter -- >> he was only supposed to be there for six months or something. >> he is the interim guy. in their own statement, to ackman, after this whole thing started, even they say they're going to initiate a search for a new ceo, it is simply the time frame that ackman and others wanted, you know, 30 to 45 days where as the board wanted a more deliberate take their time kind of a search to find the right person. >> this is because of timing of the new ceo? >> i think so. i think everyone grew -- ackman grew fraus traustrated with the that the stock price was going down on a daily basis. when the board agreed to initiate a search for a ceo in his mind, i think they seemed to be dragging their feet a little longer than the market had been telling them, get off your you know whats and let's do this. >> here is my question as our activist expert at the table that you are, in some cases here. do you believe this situation has strengthened or weakened bill's hand in his ability to go after other companies? and the reason i raise this is in recent years, he has played in some cases, unless you're shorting the company, the nice ackman. he goes in, he says i'd love to be your friend, take me under the tent, i want to be on your board. right? and because people have been semiscared of ackman, they take him under the tent because they think that's the better course. after this little episode, do companies say, i can't have him on the board because i'm worried about what just happened or do they say, i'm actually now even more scared of him than i really need him on my board. >> boy, that's a really tough question. i don't know that -- i think ultimately each case will be judged individually, that the next position he takes of scale or he wants a place on the board, people may be a little bit wary because of the situation. will they be absolutely not -- >> but may be so nervous they may decide that's a better course too. i could see him cutting both ways but wasn't sure how -- maybe i was not thinking about it. >> i don't know. i honestly don't know. it will be a good case study that next time he tries to take a seat on the board and see what if any pushback there is. he's not trying to get a board seat at -- that's his latest position. so i don't know. >> okay. >> at the end of the day, he's going to get what he wants here. they're going to get a new ceo. they're going to get a new director with retail experience. >> just the timing. >> it is the way in which it all went down. >> right. it is the way in which it all went down and the question is, long-term, is this good or bad for the future of jcpenney. you look at the company, does this disruption in the end help it because they get the things he wanted in, they get the things sooner or does it hurt it because it raises questions with suppliers and customers. >> i think those questions are already out there. i can't imagine that this whole circumstance could help. if it -- maybe if it creates more of a sense of immediacy within jcpenney that, okay, if we don't do something quickly, we may not all be around this table a year from now. i don't know. >> you know, we're not going to know until we look back a year from now. hindsight of where the stock stands that the point. we'll see. >> yeah. >> all right, activist investor glen view capital management says a majority of shareholders in health management associates voted to oust the hospital chain's board. the members will be replaced with glen view's slate of directors, david faber first reported the news yesterday morning. the board changeover complicates hma's planned sale to community health. you want to touch on this too. one thing about jcpenney, a story out there yesterday that glen view and the soros fund were taking jcpenney's side because they both are shareholders. now, i reported later in the afternoon that according to a source close to glen view, it is a passive state, they're not choosing sides, and, c, there is only one side according to them, at least according to this person, to take. and that is that everybody agrees that jcpenney needs a new -- >> yeah. >> so it comes full circle as we end on this glen view. unrelated story. >> but related. >> we have other news -- >> the federal reserve yesterday. >> jcpenney not related to this story, the cftc now subpoenaing a number of major metal ware housing firms including glenc e glencore. the regulator wants documents and communications from the last three years. the cftc looking into allegations by users of metals that ware housing firms have made it more expensive for them to buy metal by restricting the flow of metal out of warehouses. the financial times reports goldman sachs and jpmorgan received subpoenas as part of the inquiry. bp is suing the u.s. government. the company wants an injunction that would lift an order by the epa that suspends the company from contracts to supply fuel and other services. that ban was imposed after bp pleaded guilty to manslaughter and other criminal charges related to the 2010 gulf oil spill. and feels like so long ago. now to see bp turn around and sue the government, i don't know how i feel about all this. >> let's look at the markets this morning. you see the futures again are indicated higher after losing ground once again yesterday for the markets. markets were down but slightly. bigger drops early in the morning and that smoothed out through the course of the day. the dow futures up by 70 points above fair value. oil prices up by almost a dollar to 107.05. this will not move oil prices today but a huge story on the wall street journal about how mexico is trying to overhaul the oil industry. this is a huge deal. this is the world's biggest remaining untapped oil reserves. they'll be opening them to private companies and setting the stage for a new energy boom, which is right here on our doorstep. also, look at the ten-year note this morning, see that right now, it is yielding 2.658%, so the yield continues to creep higher. the dollar today is down against the euro, trading at 133.06. up against the yen at 97.90. gold prices this morning are down just slightly, down by 1.70. right now, time for the gloek markets report. carolin roth is standing by in london. good morning. >> good morning to you, becky. we are modestly higher to the tune of .4%. we are off the session highs, though, look we're much higher before that. but we'll take those gains. we are higher for the fourth straight day. getting a little boost from the zew index out of germany. want to show you the markets one by one. germany one of the outperformers, up by .8%. strong earnings from utility company e.on in germany. cac 40 up by .3%. the ftse 100, after inflation numbers for the month of july, higher than forecast 2.8%, but that tells you that inflation is still cooling. quick check of the forex markets for you, sterling dollar got a little bit of a boost after the inflation number, but has come back down. currently cable sitting at 1.5457. euro dollar getting a lift after the zew index beat expectations. now it is just above that 1.33 handle. coming back just a tad. and dollar/yen, once again, the big mover in the currency markets. you talked about this report in the nikkei newspaper saying that prime minister shinzo abe may want to offset the rise in the consumption tax with a cut in corporate tax. now, guys, this is nothing new. this has been reported before, but still it is managing to lead the dollar/yen higher up by 1%. back over to you. >> thank you, carolin. we have another buzz story this morning. elon musk now unveiling plans for a $10 billion hyperloop transportation system. we talked about it in a preview yesterday. but here is what is going on here. the plan is aimed at cutting the travel time between san francisco and los angeles down to get this 30 minutes. the price would be less than an airline ticket, musk says, and he hopes that someone will develop the concept because he says he doesn't have the time. but he's now suggesting he might try to create a prototype of some sort. it will take him three to four years, he says. also suggesting that they don't have to actually buy new land, so part of the problems with most trains is you have to buy people's houses, this would run down the median of a highway. they would -- they would put it up in the air, down the median of a highway, a little tube, vacuum tube, but not fully a vacuum. i don't know how -- >> like a modern day mono rail. >> in a tube. i don't understand why you don't get g-forces on you or something if you're going -- >> i don't understand a lot of it. elon musk figured out some impossible to solve problems before. >> i think he's the steve jobs -- the next generation version of steve jobs. if not, i give him the einstein or something. black stone reportedly agreed to buy a majority stake in about 80 apartment complexes from the financing arm of general electric. that deal values the portfolio at $2.7 billion. the apartment buildings contain roughly 30,000 units and located in dallas, atlanta, other parts of texas and the southeast. a judge has thrown out race-based claims in a paula deen lawsuit. those claims were made by a former savanna restaurant manager. the lawsuit ended up causing the celebrity cook to lose a big slice of her empire. when we come back, attention airline passengers. why some say that higher fares could soon be in the cards. "squawk box" will be right back. peace of mind is important when you're running a successful business. so we provide it services you can rely on. with centurylink as your trusted it partner, you'll experience reliable uptime for the network and services you depend on. multi-layered security solutions keep your information safe, and secure. and responsive dedicated support meets your needs, and eases your mind. centurylink. your link to what's next. time for "the executive edge," a daily segment focused on giving business leaders a leg up. first up, ford ceo is brushing off china slowdown fears. he tells cnbc he is not overly concerned about a pull gaback i growth, stressing there is a tremendous market there. >> china is the largest automobile market in the world. so as you pointed out, it is with -- we're the fastest growing brand in china, bringing all of our one ford vehicles to the consumers in china. i think our best estimate now is that it will continue to expand in between that 6% to 8% range. >> i guess the big question is, can you have a slowdown in china is fine for a big company like ford who is the fastest growing truck and car company there, but still have things come true that others have talked about? i always wonder if you can have both sides be right in this debate, depending how you play in the market. >> it depends how steep the slowdown can be. you can't have a slowdown at the same time you're having problems in europe. if ford is going to have more optimism about what is taking place there, you don't want that to be offset by a sizable slowdown in china. >> the type of slowdown na chanos talks about the slowdown that includes a real estate bust, which therefore you think you can mean you can get a loan for a car, all those things you think would trickle. i don't know how you play it. >> when you start off with such a small piece of such a large pie, i guess you can see a slowdown and still see a company able to expand into a much broader part of the market, just from starting from small numbers and being able to expand to an incredibly huge population. i don't know how that all works out. but chanos is interesting, the caterpillar call he made back in delivering alpha, saying that you can see the -- all of these slowdowns affect mining, the minerals, and spread beyond that. big companies you may not think about as being big china plays. i guess i would have to sit down and think deeply through all of this, but i wonder if you can have chanos be right and still alan mulally be right too. >> do you know the most popular u.s. car brand in china? >> cadillac? >> buick. >> buick. i did know this. i forgot. yes. >> little factoid for the morning. >> to our next story, attention cfos and investors. the government is set to unveil new annual audit report rules today. the wall street journal reports the accounting industry will be forced to disclose more about its views on a company. regulators argue that investors need more information from auditors about things like whether a company's accounting is aggressive and what auditors think of the most important features of a company's finances. we're back to a position, guys, of feeling like there have been failures even when some of the big firms are accounting things. there are some complaining we haven't made any progress since 2001. >> dare i compare for a moment the accounting firms to the rating agencies. >> i was thinking the same thing. >> that's what's going on here. the company pays the rating agency or in this case the accounting firm, the accounting firm doesn't feel they can say or speak openly exactly about how they feel, they always preferred just doing the numbers. this new plan, rule, would force them to actually say how they really feel about the situation, which is going to put them in certain cases in quite a conflict with their client, which could be good for investors. >> great for investors. >> if they're truthful. may make it hard because saying what they really think is always a difficult thing when you know who is paying you. >> paying the bill. >> a tricky issue. there have been so many complaints about accounting, it is one of those issues that charlie munger comes back to continually and blames for a lot of the things that went wrong in the financial crisis. we'll see if we get stronger rules on this. those rules are set to be released today. could the looming merger of american airlines and us airways spell trouble for consumers. the wall street journal says if past mergers are an indication, fares could rise at some hub cities. this reduced competition doesn't always boost ticket price because industry experts say discount airlines can still police pricing. airfare wars and is that going away from consolidation? >> this is your topic, becky. you know that anecdotally, i think the statistics bear it out, the prices go up. everywhere i've been traveling recently, prices have gone up. >> that's good news for investor because the airlines are gotten killed over years of stupid pricing wars. >> the business models of the airlines have changed so much for the better if you're a stockholder. >> bill miller, jim cramer jumping back in and saying, yeah, they like the airlines again and that's something you never expected to have happen. the question is, from a consumer perspective, not just the rise in fares, but how you get from here to there, do these roots end up getting canceled? do you have to go through another hub city before you get somewhere? that's something i noticed with the united continental tie-up here. you can't get there directly. got to fly through chicago to get to that market. >> flying stinks for the most part, right? say what it is. >> what every consumer -- >> you need to buy shares of the airlines so you can hedge your -- if you're going to pay more for the ticket, maybe your stock price goes up. >> it stinks. we will continue to fly. when we come back, we have the live report from florida where a 50 foot sinkhole swallowed up a third of a resort near disney world. buying a piece of the farm without having to do the hard work of the farmer. first, as we head to a break, check out the national weather forecast. we have the weather channel's alex wallace here. alex, good morning. >> good morning, becky. not a great morning in the northeast. this slug of moisture moving toward the 95 corridor. quite a bit of steady rain to deal with. approaching the philadelphia area and getting pretty close to new york city. not going to make for a very fun morning commute. that is for sure. this is all thanks to a cold front coming in from the west. that front will press through today. showers and storms associated with it with the moisture coming in from the south. some storms could pack a punch. there is the risk for strong to even severe storms anywhere in the red from eastern north carolina all the way up to eastern parts of new england. a lot of lightning and potential for damaging winds with these storms. but the good news is behind this front, cooler fall-like air mass, that will be settling in for a good chunk of the upper midwest, northeast and parts of the south as we head through the midweek. more "squawk box" up after the break. my mantra? trust your instincts to make the call. to treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. ask your doctor about the only underarm low t treatment, axiron. i've been doing a few things for playing this and trading.ove-- tdd#: 1-800-345-2550 and the better i am at them, the more i enjoy them. tdd#: 1-800-345-2550 so i'm always looking to take them up a notch or two. tdd#: 1-800-345-2550 and schwab really helps me step up my trading. tdd#: 1-800-345-2550 they've now put their most powerful platform, tdd#: 1-800-345-2550 streetsmart edge, in the cloud. tdd#: 1-800-345-2550 so i can use it on the web, where i trade from tdd#: 1-800-345-2550 most of the time. tdd#: 1-800-345-2550 which means i get schwab's most advanced tools tdd#: 1-800-345-2550 on whatever computer i'm on. tdd#: 1-800-345-2550 it's really taken my trading to the next level. tdd#: 1-800-345-2550 i've also got a dedicated team of schwab trading specialists. tdd#: 1-800-345-2550 they helped me set up my platform the way i wanted, tdd#: 1-800-345-2550 from the comfort of my home. tdd#: 1-800-345-2550 and we talked about ideas and strategies, one on one! tdd#: 1-800-345-2550 really gave my trading a boost. tdd#: 1-800-345-2550 all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 after all, i'm in this to win, right? tdd#: 1-800-345-2550 open a schwab account and learn how you can earn up to 300 tdd#: 1-800-345-2550 commission-free online trades for 6 months tdd#: 1-800-345-2550 with qualifying net deposits. tdd#: 1-800-345-2550 call 1-888-254-2600 today. tdd#: 1-800-345-2550 good morning. welcome to "squawk box" on cnbc. i'm andrew ross sorkin with becky quick. scott wapner is sitting in for joe kernen. 100 foot sinkhole has swallowed up a third of a resort outside of disney world. and diana olick joins us now from claremont, florida. good morning. >> good morning, andrew. the message here this morning from the developers, from the general manager of this homeowners area, is that they are open for business this morning and they have more than adequate insurance to cover all this. this despite the incredible scene you're seeing behind me. a 100 foot sinkhole that goes down about two stories, taking out this one building and the resort. this resort has time shares and just being a place for people to come visit for a week or so. we are at the height of the season out here right near orlando and near all the theme parks. what they're telling me is that this building is a total loss, but they're already talking about rebuilding and redeveloping more area. this is a huge area, one of 53 buildings in this entire resort area and they're saying it is just 3% of capacity. that's why the message from the general manager here this morning is, you know, keep coming down, we're still open. it is just one building. and they're relocating the folks here. thankfully no one was hurt. what is so interesting is when they talk about more development in this area they say, you know, we have permitting, we have prestripr restrictions in place and we do drilling. if drilling or that kind of checking was done, you have to wonder, five years, ten years, 15 years later, sink hoiholes develop over time. i want to show you an interesting graphic we put together from core logic which shows there are 19,280 known sinkholes in florida. you can probably add one to that given what is behind me. but the number of these in central and western florida, it is really amazing to see. and yet development continues here. but, again, they say this is where people want to come. this is a fact of nature. and they say they believe this area not prone to that many sinkholes and don't seem all that concerned about it happening in any of the other buildings, again, saying this is 3% of the capacity of this resort, and, again, that they're open for business. we'll be talking more to folks around here about what it takes to test for this kind of thing going forward throughout the day. it is an incredible site to see and amazing that nobody got hurt. >> they say they're open for business this is only 3% of the capacity of the resort, but how comfortable do people feel coming down, not knowing what exactly the situation is or staying in the place next door to the sinkhole? >> yeah, i mean, look, they relocated a lot of the folks in this building into other buildings in the resort. and from what i've seen, a lot of folks decided they are going to stay. and these are actually time shared, owned by a developer in st. louis. joe scott crown diversified. and what they say is they're actually homeowner associations here. they have the insurance for this area and they say this is just a fact of life in florida. i don't know if you go person to person if they're going to say, given what you see here, and what happened here and how amazing it was that everyone got out, how they feel about it, but this is over 19,000 sinkholes in florida and people continue to come here. >> are there people still there on the resort that you've seen since you've gotten there? it is very early in the morning but -- >> it is 6:00 in the morning. there are still people -- it is a very large resort and still people here. you see lights on, cars around. so it is not like everyone has evacuated the area. they did evacuate two buildings nearby and said they will determine whether or not they can reopen those in the coming days. this one is a total loss, but as you said, business is hurbl fus the rest of the area. >> diana, thank you. unbelievable story. also in 20 minutes, we should tell you we'll talk to dr. robert brinkman, the author of "florida sinkholes science and policy." >> florida's limestone, limestone actually is porous. it ends up developing holes that come that come through it and dissolves in water. over time, you can't have this, particularly when you build heavy structures on top of it. one thing if there is an orchard on top of it. another thing if you a building development on top of it. it can wear it down. >> a story last week that part of tiger woods' house down on jupiter island was sinking. they had to come in and stabilize. >> it is limestone, a porous rock, dissolves over time, particularly in acidic water when they go through decaying plants. yeah. whoa. we do have -- >> a little news. >> just hearing that bill ackman is resigning from the board of jcpenney. this is bill ackman, pershing square capital management, resigning from the board of jcpenney. jcpenney board is also reaffirming support for ceo mike ullman. the chairman. >> and electing a new member to the board, ronald tyso, is that how you pronounce it, elected to the board. >> okay. this changes the situation. ackman, we believe, still owns 18% of jcpenney. you can guess from his decision to step down from the board, to resign from the board this is going to get even more hostile. >> yeah. i wonder what he does with the 18% stake at this point. that becomes an interesting question. you don't want someone of that scale to be selling all of their shares. >> here is what ackman says, in this initial press release. jcpenney, during my time on the jcpenney board of directors i have always advocated for what i believed to be in the best interests of the company, its stock holders, employees and others a this time, i believe the addition of two new directors and my stepping down from the board is most constructive way forward for jcpenney and all other parties involved. what seems -- the negotiation seems to have been that they added -- put tyso on and he would go away. the company saying a retail industry executive who spent 16 years as vice chairman -- that's now macy's, he will join the board effective august 12th. in addition, the board saying he intends to name another highly qualified new director in the near future. this does change. >> the stock is up -- >> is this hostile situation or not. it sounds like maybe they negotiated this and it is -- they're okay with both of these sides? >> hostile, i suspect that -- i suspect ackman said i will get off the board if you put these two people in. i don't believe, by the way, either of these new positions are going to be -- neither of these board members are acting as approximaties for ackman. that's not what the suggestion is here. not that they're going to be on the board on his behalf. it looks like he's stepping down in reaction to or as part of the -- as part of a transaction, such that these two people get added to the board. >> still want to any what, if anything, this would do to a potential search for a -- the next ceo of jcpenney, if anything. i'm assuming the press release that jcpenney has put out makes no mention or does it? >> it does not. it reaffirms, however, the company's support for the ceo. the board reaffirming overwhelming support for -- this is important. chief executive officer ullman. it does not say interim chief executive. they also say they reaffirm the support for the chairman, both who worked tirelessly for the company, the important work is to stabilize the financial position, restoring confidence and express their deep appreciation for the company's associates, also known as workers. >> let's bring in dana telsy standing by and has more thoughts on this as well. we're just getting you on the phone. you're just hearing this news as we are. having watched what happened at jcpenney, is this a good development? >> the company needs stabilization. the key is getting through this back to school and christmas season in order to reinvigorate traffic, to bring people back in the stores, board room fights don't need to be played out on main driving sales should be the focus. anything that brings calm internally and externally is the right thing to do. >> what do you think about what jcpenney has in stores now. are they ready for the back to school season, will they be ready for the shopping season? >> i was just in chicago doing my shopping tour yesterday and they're ready for back to school, back to school signs are all over, traffic was a little bit better than we have seen there in the past. but the arizona jeans are out. and now it is getting the customers in the door. >> and just in terms of traffic, how does that match up with where jcpenney was a year ago and two years ago? >> a touch better than last year and two years ago better than what it is right now. keep in mind, overall mall traffic is still down around 1%. >> who is in the stores? is this the -- jcpenney customer of old or young people? who is shopping at this point? >> still not enough shoppers in the store. it is a mix. i think some of it is the shoppers of old and some is shoppers anew. it still needs more traffic in order to drive the sales. they're first getting in some older merchandise like st. john's bay, gets the older customer, and getting the families in with their kids for back to school for some of the newer products. what you need to do, private brands balance between private and national, make it an experience again. they're not yet there. >> there are a lot of people who are skeptical of being able to turn that around. what do you think about the prospects for the company? >> probably never be what it was. but you're starting from a different base. just getting it to a stabilization point where traffic overall was down 6% in the first quarter, down 17% in the fourth quarter, getting to flat would be a victory. >> $13 and change now. how would you -- what would you do with the stock? buy it? >> i think if you have to -- yes, if i have to buy it or sell it, i would not sell it. i would buy it. but it is a risky name, and the fact that tjx, macy's, they have all taken share, so this is not a risk-free name. >> while you were speaking with becky, i was e-mailing with someone very close to the board, we'll describe them as a source close to the board, suggesting that this negotiated settlement was actually not as negotiated as you might think. that the board had been discussing with bill ways for him to step down, apparently, all weekend. and that in fact the addition of tysoe had been in the works for quite some time, apparently not connected to ackman's decision to leave, but, in fact, the view inside the board was better to do it all at once, maybe for optics, maybe that's what happened here. they can say they're getting one board member while the other goes away. when you look at the different board members and look at whether ackman was a force for good, or not, or whether you think that tysoe will help, how do you think about that issue? >> overall, having retail experience is very important to putting the pieces back together again. i think definitely you have investors and activists that can be forces for good. but you need everyone to act in unity when you have a business like this which has been in such disarray. >> but, dana, if this eliminates the possibility of alan questrom coming back to jcpenney to be on the board in any capacity. there was that idea laid out in bill ackman's initial letter that alan questrom would come back to be chairman of the board, if he could support the selection of a new ceo, if that is totally off the table now, is that a net negative for jcpenney? >> i think certainly questrom has lots of history with jcpenney and knows a lot of what's happening. i don't think it is necessarily a net negative. i say let's see what the christmas season says. they had so much turmoil in 2013. >> they already placed all their orders for christmas at this point. >> that's done. the stuff is going to be coming in the stores probably by early october. back to school season will be later along this year taking us through september. >> wouldn't you think at this point not only for back to school but the holiday season, given the turmoil in the marketplace, given the issue that this company has had, given the fact that retailers are already having to do significant markdowns to entice people, to get into the store, that they're going to be sacrificing price, sacrificing margin even more because they have to do anything they can to get people to come into the store? >> i think that's a given already. i think overall in the retail landscape i think that the vendors they need jcpenney too. not that many choices of customers where you can go. so getting through this next three months or back half of the year is the key to determining what the plan will be going forward. >> all right, dana, thank you very much for joining us and particularly for joining us so quickly on breaking news. if you've been watching, the shares of jcpenney popped initially on the news, now they're up about 8 cents from where they closed yesterday. this has been a roller coaster ride and this has been something to watch just over the last week or two in particular. we'll continue to have update as we get more information on this. again, bill ackman has resigned from the board of jcpenney. jcpenney is going to be putting a new candidate on the board, they're adding the position for ron tysoe, who was with fed rated department stores for years. that is the precursor to what is today macy's. america's farming industry going through a major transition and that could open up bigger opportunities for individuals to invest in farm land. here now to tell us about the risks and rewards about farm land investing is john taylor, at u.s. trust. thank you for coming in today. >> thank you for having me. >> we should set the stage a little bit for why we're at this position. why you might need investors to come in to what used to be family farms. a lot more expensive to be a family farmer and have to be able to have a much bigger land parcel, correct? >> that's right. if you look at the most recent usda report, based on the census they did in 2007, you have farmers who are 65 and older and another 32% 55 and 65, so you kind of add it all up. >> 65% of the farmers. >> 65% of farmers are 5 ye5 yea and older. that's in transition over the next 10, 15 years. you need the next generation of america's farmers on the land. >> is it tougher to get younger people these days to do this? >> in a lot of ways, kids went off to college and they may have gone into other careers. now when they come back, the farming is an industry change too. the technology caught up. so as opposed to when i was grow up, i mean you had all this equipment. today, you have tractors with an board satellite and gps, maps that can be preloaded. tractors are more expensive combines. 36 row, 48 row planters in some cases. so the scale changed. it went up dramatically. >> which means a farmer can individually farm a much larger plot. but an investment to get that equipment. >> millions of dollars in investment easily on the equipment. as you look at that, what you're going to see now, you see the younger farmers that are coming in, a lot more technology, you know, have a lot more technology in their back ground, more savvy on that. a lot of them have college degrees or some college -- in the background. it moved from that trade to a profession. and what they see is now in order to farm its scale, the old model of owning all the land or 80% and only leasing 20% probably flips going forward right. so they're going to own maybe 20% of the land and lease 80%. so they can continue to farm its scale. >> how is access to credit for farmers? when you talk about the tremendous expense that it is to buy a tractor, a combine, or whatever we're talking about, can farmers get credit? >> great question, scott. they can. if you look at the debt on farm balance sheet, you look at what the kansas city fed and others have said, when the question about bubbling land prices, they said that was the difference now versus the 80s. you don't have farmers overextended. they have the ability to get credit. but they haven't blown up their balance sheet. what you see now is the farmers are very intelligent. they remember those times. you can buy land or buy equipment, very hard to lever up and buy both for the new ones, the people that have it that are the aging farmers, that also represents the significant part of their wealth. of their estate. at some point in time, they may have to monetize that in order to be able to retire. and transition that to the new farmer coming in. >> i'm fascinated by the whole idea. i apologize for the breaking news but we would love to have you back again. still to come on "squawk box," from one john taylor to another, at the top of the hour, the man behind fx concepts. and more on the breaking news of the morning, bill ackman resigning from the board of jcpenney, shares rising in the premarket, up 8 cents now. a visit from the prophet, marcus lemonis is back at it again, spending his money to save dying businesses. we'll ask him what he thinks about the drama at jcpenney. marcus, hello. john, thank you, again. [ kitt ] you know what's impressive? a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ (announcer) at scottrade, our clto make their money do more.re (ann) to help me plan my next move, i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning every step of the way. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade... ranked "highest in customer loyalty for brokerage and investment companies." welcome back. we have big breaking news this morning. jcpenney announcing that bill ackman resign from the retailers board. we have marcus lemonis here, he knows all about turning around failed businesses. the most of cnbc's primetime show "the profit." i want to talk about jcpenney, if this is a broken company if you look at a decision like this by the board for ackman to step down what does it mean? >> it means they're starting to get focused on getting back to basics. this company got away from its competency, not only on the marketing side, but particularly on the merchandising side. i visited the store a year ago and couldn't understand what it was. it just -- they have an identity crisis. >> how fixable is this situation given the backdrop of bill ackman coming off the board. there will be a lot of match nations over the next several weeks if not longer. this may quiet things down a little bit, but i also imagine they may get louder. i was on the phone with somebody close to the board who said this gives everybody freedom and i assume what freedom mean, if bill wants to sell his shares or throw darts, he can now do that more openly or more easily than he did before. at the same time, it gives the board freedom to at least have a sort of closed community where at least they can trust each other, which is another big piece of this. >> without lighting anything on fire, i think people are spending too much time talking about the board, and not enough about i think people are spending time talking about the board, not the management team. the management team has to be right, whether it's the leader, having a permanent ceo, whether they know someone in the ranks and field they can count on. that's the model. we are spending time talking about board members, not who the manager is. >> they obviously had johnson, they have people in the ranks loyal to him going through it, is that the right choice to bring him in, would you keep him as a replace him? >> you have to respect a company that the ranks respect the leader. at this point i think it needs a fresh look, whether from the outside or inside, it's to stabilize things. it's not why you the ceo. what does the management look below that? what's the merchandiseing team and marketing team look like, bring in a dream team. that's what the company needs. >> what is so interesting about the most recent nonsense that's taken place for lack of a better, smarter word, they recently bring in a head of marketing, right, who had no retail experience whatsoever, who was from a food company. so even amidst all the turmoil, right, as the stock is going to pot, everybody is wondering about the future of this company, they continue to make these missteps, to your point, it's about bringing in the other people the management team. >> how difficult is that to do about a company that's implodeing? >> if you are going to bring if a senior executive like the head of marketing of a business that needs to be better marketed and you don't have somebody with retail experience, hello! >> yeah, i think the trouble we keep having, though, we keep saying they, it's the board. what the company nodes to do is get a tough ceo, man or woman, who will tell the board to get out of the way for a while, let me bring in my team. i don't want the board hiring my players. >> you get the new ceo. they pick. >> it's got to be a ceo that says get out of my way. >> you got to get right guys, ron johnson said get out of my way for a year, which is the problem. >> which is why the car crashed. but it's all about people. all about people. >> thank you for being here. we want to let everybody know, a new episode of "the profit" it is at 10:00 eastern time and pacific. still to come on "squawk box," management guru jeff sonenfield sounds off on the situation at j.c. pen fi. penney. >> still to come, we'll talk to analysts and john taylorment we have fortunes sounding off as well. we'll talk about the future of blackberry as the company continues to look at its options. "squawk box" will be right back. s golden opportunity sales event and choose from one of five lexus hybrids . . >> pershing square bill ackman resigns from j.c. penney. we have jeff sonenfield and on the set for the remainder of the program, andy sewer. jeff, we got you on the phone, you had some thoughts to this point on what's happening at j.c. penney, why don't you tell us what you think of this latest development. >> thanks. this is really great news. i think the "wall street journal," unfortunately, their legal adviser, some information wasn't accurate as people thought, that there was no prash against ackman for possibly a violation of his legal duties on the board member as a duty of loyalty. they could face litigation and certainly, there's a huge amount of pressure on ackman for violating confidential strategic staffing issues. so he ned to leave. they kind of destroyed shareholder value and violated the breach of trust on the board, bringing in ron tyso, there is a very constructive history as competitors in the macy's federated battles of the past back when mike was ceo. federated was coming after them, tysoe was ceo, vice chairman and things. they i think worked very effectively together in their past. i there is some misconceptions, scott, no offense, i think people misconstruing as ackman likes for the misconstrue with debra berman's role coming in, in marketing. she's not the o or chief merchant, she is come income with backgrounds. she knows advertising. she, therefore, campaigns, she has the exact appropriate backgrounds. you request look at people like steve jobs, rico, the plainest marketers in the world, they never were in the marketing fung per se. >> surely, you are not putting her in the same boat with them, jeff? come on? >> mike holloman started out as a career salesman. people's careers twists and turns, what deb berman is doing, she has this skill set for the image advertising of a major enterprise. that's the background she has. that's what she is going into. and i think questrom is ridiculous. mike had this company the share value of this company was four times what it is now under mike's frame. under allen questrom, it was half, for people to continually floating that name are one person, that's bill ackman. >> come on, jeff. >> he is left with this term -- >> i know you are a fan of ullman's, he, himself, questrom was on this network saying that he wanted to come back under the right circumstances to try and right the ship. >> why would they ever want him back, todd? i'm not trying to market j.c. pen fibefore, 3.5 years, he left early. he left federated early. he has been caught up in lawsuits. neiman marcus, he sued them. >> when bill ackman took his position and he brought if ron johnson and replaced mike ullman, the board agreed to replace meek ullman at that point. i don't remember back to exactly what the state of j.c. penney's business was. i can venture to guess when ackman took his stake, the business wasn't going all that great under the last years of mike ullman. >> in the auto industry the housing industry, we are going through a tremendous financial collapse at that time. >> jeff, let's just take one step back. our sources this morning, beyond this press release, are suggesting that we're going to be hearing through an ak what deal was reached with ackman and i don't want to presuppose what we're going to hear but i will, which is that this is going to give both sides enormous amount of freedom, including ackman, potentially now to share his shares. >> he can sell his shares, he crashes his own. >> understood. if he begins to sell his shares or potentially, by the way the company decides to buy back some of his shares, which could also happen, what does that ultimately mean for how this company is going to be viewed? >> i think it's far more attractive for bringing from a successor to mike, because you now have a far more stable supportive board. this is a board that's all on the same side, with the exception of one guy who just left, who is subject to his frat boy temper tantrums. that's not amenable to good governance, you can have plenty of debates and disputes within the board room, that you notice will go back to doing that. here we are, they told you seconds away from the back-to-school crush, it's very sensitive time for a reseller. >> andy is here on set, what do you think about this situation is. >> first of all, i'm concerned ackman didn't reseen on this network t. drama is basically his m-o. really, we forget how troubled this company is, how saturated this market is. and, you know, not only are people going to k-mart and sears and walmart, they're going to bed, bath and beyond, they're going to urban outfitters, they're going to ba nan fa republic, trying to get this ship right is going to be an incredible job, incredibly difficult job. >> although, macy's has do you know good job under terry lundgren. >> it's all about blocking, tackling, and stability. they've done neither of that over the past three, five years now. so they've got to get back to it. in 24 hours, this will start to you know, abide. they've got to get back to merchandising, buying, selling, getting their stores right. >> here's a complicated thing for bill ackman, the more i am thinking about this. she holding on to a loss on this stock. so for him to sell now would be a bit of a problem. >> so he's got to put his faith in mike. >> in mike and a board that he's no longer on. it creates all sorts of complicated issues, in terms of how even as an investor. then, what do you say to your lps, your limited partners who invested with you. you are for the longer on the board. >> he has limited partners that know the situation as pulling out, george tsoros have lost faith with bill ackman, they are puting their money districtly into jcp. >> i wonder what it means for other members of the board, like steve roth, for example, who many believe got into jc penney as a result of bill ackman. i wonder if, you know, has he's not thinking ought his future on the board, what all of that means. i don't know. jeff, i mean, what happens if you've got now more than ackman leaving the board? what happens if you have a guy like roth, who leaves next? >> i think to be clear, rob parted ways with ackman far back. i think he realized before anyone, he went quite public about what a disappointment ron johnson, what ron johnson is a fine human being, quest rom is a fine retailer for someone else, not here. they probably feel they made a mistake here and with toys 'r' us, you know, these brilliant people, richer and smarter than we are, can make some bad mistakes. i'm sure stephen roth wished they hasn't gone into this. >> jeff, let me ask you about bill ackman, he relies in part on the credibility of his reputation to make his case, to get on boards, to pursue proxy contests, to create tha-- owe c change at companies. i can see this cutting both ways, part of me says the board says i don't want him on the board. they probably never wanted him on the board. now they look at the jcp situation, they say, i don't want a guy on the board that will mouth off and talk publicly. >> probably more leverage. >> he is such a wildcard. i really have to put him under the tent now. >> i agree, he'd be too hot to touch. i don't think any board would want this guy, not only the public volatility, just looking at how tempermental he was about not being allowed to judge and review the debra berman hire. let's put deborah berman in perspective, it's important to the get this right, she is not in senior leadership. >> this is not -- this is not -- >> jeff, we got you. this is not about her. this is not about her. >> no, ackman was using her in his letters of excuse about not being coupled. >> he mentioned the fact that he read about the hiring in a press release. that's in the way that he mentioned it as i think trying to layout the case that he as a board member, there were certain people on the board who were making decisions without him. >> you know, every sunday morning, he puts out a blog of what's on his mine, what his decisions r. i think, you know, that ackman was extremely well briefed, but he doesn't get the chance to micromanage and call the shots. 50 people knee deep in management. >> you know what, at the end of the day, though, they bring in ron johnson the reason they failed was not bill ackman, it was ron johnson, he was a commuter ceo who didn't know how to do the job that he was hired to do. >> but he was heavily supported by ackman. >> he was heavily supported by ackman, at the end of the day, he was the guy in the office, he was commuting coast-to-coast, right, jeff? >> yeah, he should have been there. he should have made more of a commitment, let the opportunity go. it's really a shame. he, obviously, wasn't the right guy for the apple stores either, as people will tell you. he was the guy for the trade shows to talk about what apple was doing t. guys doing it were mickey dressler and steve jobs. they were running the apple stores. >> i think we can lay blame at both of their feet. why don't we leave it there for now. thank you for your perspective, it's a fascinating story. we are all trying to make sense of it. it's a crazy one, which is why you probably have some comments about the discussion this morning. questions, perhaps, about anything you see here on "squawk." send us an e-mail. you can follow us on twitter. and up next, it was once called crackberry bus of its addiction. now the struggling smartphone maker looking at all strategic options to save that company. we talk about what it means for blackberry users next. check out our yahoo logo update of the morning. it's a little better than yesterday, don't you think? >> it is better. >> "squawk" is backs after a break. n opportunity sales event and experience the connectivity of the available lexus enform, including the es and rx. ♪ this is the pursuit of perfection. ♪ a quarter million tweeters is beare tweeting. and 900 million dollars are changing hands online. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this&is gonna be big. hp moonshot. it's time to build a better enterprise. together. golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection. . >> welcome back, everybody, let's look at the futures. we are seeing green arrows. a reversal, by the end of the day, the markets barely budged. this morning, you see the dow futures are up by 56 points. ium sales in coin slooit sliding more than expected in july, down about 13%, among the reason, the heat wave, some analysts say the company's lack of cool drinks an ice cream meant a consumers looked elsewhere. the pampbt is trying to bounce back from the double impact of a food safety scare and a bird flu outbreak there. we have key economic numbers set to be released this morning. import prices are coming at 8:30 eastern time. >> we want to break in with more news over the dmeshl break. we d-- over the commercial brea. we had speculated whether a deal had been made, whether ackman was given anything in exchange for stepping down. he was not. there was a question of whether he might then decide to sell his shares, given the new freedom he has. ultimately, he will be able sell his shares. given the fact he is on the board and has had access to "inside information." sources say he still will be bound by his duties as a director for some period of time, that will depend in part on counsel and advice from his own lawyers. so for the next several months, likely will not be able to sell his shares on the assumption he has "inside information" and, therefore, can't sell his shares. >> it will be his lawyers that will guide him? >> it will be up to bill ackman's lawyers, not j.c. penney's lawyers. >> under water. >> he wouldn't want to sell now, anyway, other than to make a statement. >> to the extent that people were anxious, nervous, the are the of stepping down, because he has knowledge of "inside information" about the company's plan, at least currently, he won't be able to sell. the question is going to be, when can he sell? is it a three-month period, a six-month period? definitely not in the next several months. >> but there are a lot of dominos here that will fall in a certain direction. perry capital came out last week in support of bill ackman. they have what like a 7%, 7-plus percent stake? what did they do? they supported ackman in this whole battle. they wanted a new ceo to be put in. they would be supportive, they said, of, i mean, they threw a name out there at the time as well, what do they do? >> they not bound by the same agreements. >> i'm sure they're not. maybe they throw in the towel and get rid of their stake, who knows? >> a crazy story, kind of fun. >> all right. we will talk more about this coming up in a bit. in the meantime, blackberry exploring all options to save the struggling smartphone company. joining us to talk about it is david garrity. david, yesterday, we heard blackberry is exploring its options, i guess the question is, are there any buyers? >> well the question is going to be, if we look at blackberry's business, you can find a number of buyers, one thing that's happening is the shades of a technology company which is nortel. they went into a significant bankruptcy. the one thing that came out was the value that was found in its patent portfolio. one could argue looking at blackberry, yes, we could get support from canadian investors. we saw their largest shareholder resign from the board yesterday. he owns 10% of the company. we seen interest coming from canadian pension funds, one would arc you, though, looking at blackberry, they have to look at other buyers and the landscape has changed over the last decade because we have companies that hold patent portfolios such as vhc ticker symbol with a market cap over a billion dollars who might be interested coming in and trying to maximize the value of that patent portfolio. now the threat of vhc coming in, given the fact they have been an active litigator, might actually bring some other technologies off the side line the one most qualified but still conflicted at the same time is microsoft. >> with microsoft in that position, david, when you talk about this from what the shareholders will be looking at. is blackberry going to exist? or are my blackberry devices going to exist a year from now in. >> if canadian sentiment holds true, they will have some way of surviving going forward. the canadians aren't going as to see this thing go down. from that standpoint, if i was a consumer, i would say, fine, blackberry will continue to be in business. the u.s. department of defense approved blackberry as a possibly device management system software provider, i'm going to be comfortable with the fact the blackberry will exist. from the consumer standpoint, the argument is am i going to be happy with the user spoorns i have on the blackberry 10 devices? am i going to be happy if i don't have the same number of apps on an apple device or android device? >> if i'm a shareholder? >> the question is what is going to be left on the table, do we really see much upside from where we are right now. some are out there saying maybe on a buyout scenario, maybe $15, that's very questionable. >> david, you talk about buying the company for patents. i understand at google they bought motorola, not such a happy one, necessarily. you look at the deal between nokia and microsoft, not such a happy one. why would we believe there would be a deal that would work out well? >> well, from the standpoint, what i proposed sheer a structure where we are seeing a number of different parties that are coming in, obviously, the discussion about the patent portfolio, whether it would be a separate company, with i is really more focused around trying to maximize the value of a patent portfolio such as a birdnecks or as a result we will see other technology companies come in. granted, patent portfolios are basically playing cards at a table where you can try and get royalty income coming in. the issue from microsoft, obviously, they're conflicted. we said they have enough other issues, they do have their on activist shareholder in place. i would say, microsoft as a company the reason they got nokia was really more a seller of windows, not necessarily the devices. >> thank you very much, david. >> thank you. coming up next, traveling 700 miles per hour, that's elan music u muck's next big dream, can the hyper loop become a reality? we will discuss that. men in then an update from florida where a sink hole swallowed half of a resort 10 miles outside of disney. what it means for the snowbird state and the snowbirds that flock there in the winter. "squawk box" is coming back after this short break. a-a-a. f-f-f-f-f-f-f. lac-lac-lac. he's an actor who's known for his voice. but his accident took that away. thankfully, he's got aflac. they're gonna give him cash to help pay his bills so he can just focus on getting better. we're taking it one day at a time. one day at a time. [ male announcer ] see how the duck's lessons are going at aflac.com in a world that's changing faster than ever, we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. if then schwab is the placeing your trato trade. higher level, tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550 learn how you can earn up to 300 commission-free online trades tdd#: 1-800-345-2550 for six months with qualifying net deposits. tdd#: 1-800-345-2550 see how easy and intuitive it is to use tdd#: 1-800-345-2550 our most powerful platform, streetsmart edge. tdd#: 1-800-345-2550 we put it in the cloud so you can use it on the web. tdd#: 1-800-345-2550 and trade with our most advanced tools tdd#: 1-800-345-2550 on whatever computer you're on. tdd#: 1-800-345-2550 also, get a dedicated team of schwab trading specialists tdd#: 1-800-345-2550 who will help you customize your platform tdd#: 1-800-345-2550 even from the comfort of your home. tdd#: 1-800-345-2550 and talk about ideas and strategies, one on one. tdd#: 1-800-345-2550 get all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading tdd#: 1-800-345-2550 to open an account. tdd#: 1-800-345-2550 and learn how you can earn up to 300 commission-free tdd#: 1-800-345-2550 online trades for six months with qualifying net deposits. tdd#: 1-800-345-2550 our trading specialists are waiting to help you get started. tdd#: 1-800-345-2550 so call now. tdd#: 1-800-345-2550 . >> it has been all the buzz elan musk says he was up all night working on a design before he released it. this is elan musk. so we are, nbc's tom costello has more. >> what if getting from point a to point b no longer included trains, planes or automobiles. think the jet zorns, not jets. one of the world's most visionary entrepreneurs says it's no longer science fiction. >> it's concord and an air hockey table. >> l.a. to san francisco in just 30 minutes. it may sound crazy, consider elan musk's track record. the billionaire who founded paypal, was the first to dock with a space station. he has hyper loop passengers on a transportation system inside friction tuesday, similar to the ones used by bank tellers, passengers will travel up to 700 miles per hour. meanwhile, a california company called et3 has been working on similar technology for years. >> if there is a concerted effort to do it, that route can be built in a year or two. >> even if it works, critics say clearing the regulatory hurdles makes it impossible, at least in the near term. on the other hand, this is elan musk we are talking about the inspeculation for the ironman's tony stark character. the ironman's suits sits on the xais spacex factory store. >> can you save the world, save the country? >> i'll do my best. musk says he doesn't have time, he is hoping others will make his dream become a reality. >> all right. some interesting questions have been raised about this, such as, do you get drink service for the entire time? >> i don't understand how you can't feel the g forces. before there was flight the wright brothers. have you heard of this crazy idea? everyone is saying, no, it is not going to work. maybe a few years from now, it will start to get developed. you don't know. >>. >> this is under the english channel. it was an unbelievable idea. they went through it. lost billions of dollars on this. >> it's a great success. >> they eventually fixed it out. >> elan mufblg says he's not the one that will build it. >> amazing. >> a prototype or something. >> when we come back. what small businesses are saying about the state of the economy, plus, could a chilly fall season help retail stocks get hot? we will be looking at the sector and what investors can expect. stick around for that and a lot more. . . >> welcome back. who else but steve liesman. >> you need a sharp men sill to get the addition to the small business. that's up to 0.6. not even a whole point, folks, up to an unremarkable 94.1. there is one somewhat unremarkable number. you can recall the details here. the net percentage of owners they say will add jobs is 9%. that's up 2 points. what's good about that is even though it's a low number, it's one of the higher numbers we've had since the recession in 2008. you can see, the other details there. those expecting easier credit conditions, that fell, planning cpap exunchanged. that's up to expecting the economy to improve. is down two points. who better to explain all this, than the mind of the small business owner, chief economist for national federation of independent business. bill, on our remarkable 91.1, you would expect triple digit numbers, not with decimal points? >> absolutely, steve, we should be looking at numbers around 103, 4, 5, when you have an economy taking off, that obviously is not taking off, we're just not going anywhere. if you go to the start of the recession, which would be december of '07, january '08, you aring looking at about the same number. that's after the index fem for a year, telling us we were going into a recession. so, we have come a half a point, maybe, closer to that number. that's it. >> i had to dig to find something to make your, the time of your survey be true, which is the small business optimism index. that's job creation plans. does that give you hope? it's the second best number we've had. there is the optimism index. you see that flattening at a level far below the normal level for expansions. when i look at job creation plan, any reason they're inside that number? >> i think there is, steve, if you look at the job creation numbers, you will see 9 is now taking us back into normal territory from our 40-year history. so that's good to see it move up. of course the jobs, the hard to fill jobs opening number gave us another point. which suggested a downward pressure. worked out well. we are happy to see that. we are concerned about is the jobs. maybe we will start seeing more of them. the question will be like -- >> can you jump from these numbers here to a monthly payroll gain? >> well, you know, i would say, probably closer to 200,000 based on our recent history. the problem is, of course, will they be full time jobs or part time jobs? you look at those june number, remember 360 part time, 240 full time lost. that's like 3 for 2 match at the macro level. we want full-time jobs. >> bill, quickly, why is capital spending flattening out here? this is another time in the cycle where you would expect the company should be deploying their capital for new equipment. we see it flattening out. is there a particular reason for that? >> i think you nailed it earlier. you pointed out, the prospects six months are deteriorated. the owners don't see the economy doing well. you look at the rising health care costs, uncertainty by the economy, energy costs, uncertainty about economic policy and the cost of regulation or red tape. none of those things have gotten betterment so i'm not surprised the index didn't go anywherement i'm not surprised they're not willing really to bet their money on that kind of an uncertain future. >> bill, thanks for joining us today. chief economist for the national federation of independent business. he keeps coming back and the numbers keep not changing. i don't know what to do about it. >> steve, thank you. we will talk to you later, too. on set, sharing the thoughts on the economy an more the managing editor of "fortune" imagination and john taylor the chairman and ceo. it has been a little conundrum, i can't physical out why the dollar is not porping performing better, the other central banks are not in that position. water going on? >> it's true. one of the things is that the fed keeps backing away from its tightenning or whatever and saying this is not really a big deal. maybe we're beginning to believe it. if you look at europe, it's getting better. will is capital inflow, the stockmarkets are undervalued compared to the u.s. a lot of things going on that are more positive in europe than before. >> is this just a case of not believeing the fed, though, if the fed does end up cutting quantitative eadsing, dialing it back in september, are all bets off at that point? >> i think there will be some changes. i don't think that what we have in the world is what we think we have. i mean, i think that the dollar rates will go higher and that basically the dollar will get chased up. probably not this quarter. more likely next. >> you know, i think what's happening with the dollar is an exam of how random currency values will be. if are you in a vacuum and you said, will this create a stronger or a weaker dollar? no matter when the fed does it, it is definitely in the process of reducing the amount. u.s. exports have been extremely strong. economic performance much stronger than other places mentioned by john. also the deficit coming down, all four of those things, which suggest a stronger dollar. alan greenspan said famously, i would say, that there are no factors that tell you about the value of a currency that are better than the flip of a coin. currency values over a short-term period, becky, can be random. if i have to make a bet, i would say the dollar should strengthen because of those four factors. >> john, how do you make a living? >> it's a bear, what you said is very, very true, that's why, you know, we are quantitative technical, we depend almost entirely upon computers, no matter how many times i come and open my mouth and say things, it's the computer that tells us what to do. >> on the margin, there are some signs in europe, you know the signs are that the growing economy is contracting a little bit less. >> it sounds like four-and-a-half seconds. >> still 4.6% it's contracting by a quarter. >> but that's better than anticipated. so that adds to the pressure against the dollar. >> we don't care about greece anymore. it doesn't exist. so, i mean, but nevertheless, you request look at unemployment in spain and say, well, it's gotten a little bit better. now, there are only 59%. >> that's the story. >> i can tell you, becky, in a room full of bankers last 84, every one of them said the you're row would weaken and weaken substantially against the dollar. it did not happen. these are the -- i don't know, if i was going to put my money with the guys. it says about them. >> i put my money with john. >> mooem people should know where the currency is going to go, these guys were looking at 120. it never happened. now, there is a question as to whether or not draghi should move to make that happen. that's a different story. should he use verbal intervention to weaken that currency, would that be a better policy for the euro? that's a different story. >> i believe if that strongly that draghi is making a mistake. but the thing is, you can be very cynical and say the ecb is located in frankfort. >> right. >> they are absolutely. they go to lunch with german burgers. they hang around germany. so theying a like they're german. >> steve, thank you, john and andy are on set with us. >> up next, the business of nascar the company's facelift at daytona. "squawk" will be right back. it's just her way. but your erectile dysfunction - that could be a question of blood flow. . . >> welcome back to "squawk box." i just got off the telephone with him in an exclusive interview. we spoke to him about why he stepped down from the board, why he raised these issues publicly. he said, quote, i elevated a bunch of issues critically important. we came to an agreement on ron tysoe. he will be joining the board. he says the board will now function more effectively without the noise him he continued to say, i'm confident what he did would focus the bird on all the right things and on the issue of whether he's going to sell his shares, he said, if i wanted to sell, i could have sold all along during the quarterly window. so as a board member, because you have "inside information," there are windows in which you can sell. he will still. >> he said he didn't sell any? >> he did not. he will still, though, have to be. we talked about this before. because he has "inside information," he is like a board member today and will have to wait potentially for the next window, at some point, depending on the strategy of the company, though, he may be able to sell. he says he has confidence in this company and she on the right path. he believes making the conversations public, he has helped put the company on the right path. >> he still owns 18%. >> however, here's the important part, his basis is $25 per share. it is not clear he has any ambition to sell these shares at a low price. one other thing, he quoted warren buffet. warren buffet had a letter he wrote in 199 '. i want to read you a bit of it. he is wrapping himself in the buffet flag in terms of his decision to go public, people, including, myself, have been highly critical of. warren says a director who sees something he doesn't like should attempt to dissuade other views. suppose, though, that the unhappy director can't get other directors to agree with him. he should then feel free to make his views known to the absentee owners, otherwise known as the public shareholders. directors seldom do that the temperment would be incompatible with critical behavior of that sort. i see nothing improper, assumeing the issues are serious. the director can expect a vigorous rebuttal, a prospect that should discourage the center from pursuing trivial or non-rational causes. >> is this trivial or not? i don't like how you are searching for a new ceo. or the people are you putting there. if you asked buffet would say to rise to this level you need something that would be akin to this decision to boy this company is a horrible decision or i think the idea of what we're doing in terms of signing off on finances that i don't agree with or i don't agree with the accounting standards, those are things that rosie to that level. this, i'm not sure, you have to ask buffet, himself. i don't know that that qualifies to this level. >> it's an interesting question. i don't know either. but he does believe, of course, that he did the right thing. as i said, he's wrapped himself of it if sort of a buffet flag of doing this. >> you can't go along on the board if you completely disagree and think it's a horrible idea. i don't know every single bump on the road. >> buff ed rarely, if ever, did that himself, of course. then complained and has talked about how difficult it is to go against the board, which is included in those comments. it's not an easy thing to do. it's fraud. there is all kind of unintended consequences. >> you have to wonder what is best for the company long term, we are not going to know for a year. >> i think it's interesting. i thought he might have tried to get more for stepping down. if you step down, you'd say i want x, y, z. >> how much leverage did he have after this whole episode? >> he may have had more leverage, having said that. >> they will not get the guy the moon, they gave him a board help. >> having say that, i think he believes, at least, by getting rid of the noise, putting himself on the sideline the company has a brighter future. >> we can't do anything with the stock at 13 and change. >> i imagine be i the way, if he sees things now as an outsider that he doesn't like, we might be hearing from him, too. >> he's a large shareholder. >> right. >> all right. let's switch goers here, literally. >> oh. >> i didn't think of that. the daytona international speedway complex is getting a $400 million makeover t. project is called daytona rising where the goal is to make the one-day-to-day tone na complex a year round destination with vast pro shops as one of the anchor stores, ceo of the speedway corporation joins us now with more. good morning, welcome. >> good morning. thanks for having me. >> so what's the idea behind this? keep draw business year round to a place where people generally come seasonally? have well, two fold, the track, daytona international speedway was built in 1959. we need to take it to a newer level with modern amenities. that's why we will put dollars into that. we have a surrounding development that is called one daytona, where bass pro shop lrks an armor tenant and retail and dining. it will give fans more to do. while there in daytona, it would extend their stay and provide year round business and economic impact. >> are you modeling this directly after patriot place up in foxboro mass, which bob kraft has done around that stadium where there is a bass pro anchor store and there is retail and it has become tremendous success. >> i think that's great example and i have visited the patriot place. i think they have done a terrific job. but that's an example of the type of destination we are planning on creating. >> how many different events can you have during the 84? who are your plans will? sample well, at the daytona international speedway, we are busy more than 300 days a year. i think that's surprising to people. we have all kind of events. not just nascar. we have motorcycle events, go carts and all kind of charity events. worry busy. >> how busy, though? there have been reports over the last several years that ticket sales are down, television ratings are down, have we stemmed that tide at all? >> i believe so. and the consumer confidence to me has really rebounded. we are seeing tick sales on the rise again. we did have some tough times as many businesses henceforth did have at that time. we feel like it is rising. the second thing is we just signed two new deals with nbc and with fox. >> you did? >> they were terrific deals. largest tv deals in the history of our company. so we feel like the time is right and that things are on the uptick. >> the competition that you have against all of these other major sports, whether the nfl, obviously, the big gorilla in the room, but everything, is it harder to compete against these other sports than it ever has been? >> well, that's one reason we are doing the daytona rising project, which is to not keep up but to raise the boar in motor sports and all of the motor sports facilities. it will be a total different level of experience you have seen in the past. it will be exciting. >> good luck. we are happy about the nbc part of the tv deal. >> really fun. >> thanks so much. >> thank you so much. >> when we come back, we do have more on the market coming up at the top of the hour, asset management bob done el will join us with managing director rebeck that patterson, up next, courtney reagan joins us on the j.c. penney resignation and "squawk box" will be right back. t to experience the precision handling of the lexus performance vehicles, . s. >> welcome back, everybody. joining us is brian nag el. joining us on the set is courtney reagan. brian, tell us what you think this members for the stock. we haven't seen huge reaction for j.c. penney, what does it portend for the future? >> one is a pretty big distraction for j.c. penney over the last few days. is probably a positive. i think the bigger negative is this question with bill ackman leaving, does he exit his position? could you have this overhang in the stock. he still owns about 18% of the company. >> he owns 18% of the company the stock is trading at $13.45. my guess is he's not going anywhere any time quickly. >> yeah, there was no mention of, a press release from j.c. penney, no mention of this. i just think that i guess watching retail for a while now. i think this could be kind of an ongoing concern, it could represent somewhat of a cloud over the stock. >> courtney, this is definitely the next leg down in what has been a continuing saga. it's difficult to think of all this happening while they're in the midst of back-to-school and the holiday shopping season. >> earnings next week. it will be the first full quarter they report with mike ullman back in the seat. will be interesting, lots of overhang in the stock, still, lots of negative questions, i think that still remain. there has been question about inventory. what does that look like, mr. ackman brought up in some of these letters, sort of uncomfortable at the amount of inventory they've committed. the merchandise, i come back to that. that is the base of this business. you have to get the consumer back in. all of these headlines about the board, it's fun to talk about. i think the consumer pays more attention to what's happening in the store. has to be set right. you have to get a unified voice i think to go forward in a positive way and get the changes the customer wants to see, they're not there yet. >> brian, i don't know if you have been in the stores, or you have seen people reacting to the merchandise that's there? any thoughts? >> i agree completely with courtney saying, this at the end of the day as a retailer, to me, what i have seen of the stores, there definitely have been improvements. some of the stores look much better today tan two years ago. it doesn't seem, it's difficult. i go to a few stores. it doesn't seem like customers are reacting positively yet to this new product. you see a lot of clearance in the stores. it brings traffic in. >> were those ron johnson's changes, by the way? are those changes being continued? >> many of them. many of them more. home store was sort of officially launched under ullman. all of that was ron johnson's vision, all of his products, his relationships with those home members. back-to-school is probably half-and-half, if we are honest. we are still a little unclear about the strategy with what mr. ullman is wanting to do here. >> the problem is, the people i talked to, including the most respected people in retail think ron johnson set them back three to four years minimum. mike ullman, there is little he can do. >> exactly, how much can he unwind, when he came in, what cards have he dealt? >> there is little an incoming ceo will be able do for a significant period of time. because of the setbacks that took place under ron johnson. >> you can't keep blowing through it. i think the other question, i will throw this to courtney or brian the situation with the suppliers, that was something that mike ullman was supposed to be shoring up. did the suppliers still feel good with where things stand today? >> it appears they do. i think that eases the strong point because of the relationship he had in the past, that being said, manied is not really his strong suit, he was brought into stabilize the ship financially, which i think he did. he stabilized it. but moving the nodal forward is the new question. you need to make sure those vendors stay with you. once one leaves, if you have an issue with the financing, that's when the domino effects starts. that's when it gets dangerous. >> courtney, brian, thank you very much. coming up, we will have more on bill ackman leaving the board of jc penney. take a look at futures, though, see how the market is setting itself up. the dow looks like it will open 53 points higher. we are coming right back with a big hour. . . >> breaking economic data, retail sales hit the tape 8:30 eastern. >> the oregon ducks unveiling their new football performance center. >> thank you very much, mr. ducksworth, quack, quack, quack, quack, mr. ducksworth, quack, quack, quack, quack. >> gordon, stop quacking. >> jane wells has the scoop on the $68 million facility funded largely by nike. >> elan musk detailing plans for the hyper loop. a new transit system that would travel at speeds bordering on ridiculous. >> we have to go right to, ludicrous speed. >> ludicrous speed? sir, we've never gone that fast before. >> i don't know if the ship can take it. >> what's the matter, colonel sanderings, chicken? >> phil lebeau will bring us details. >> my dreams are going into my feet. >> the third hour of "squawk box" starts right now. ♪ >> welcome back to "squawk box" him i'm becky quick. scott wapner is in for joe who is still on vacation. our guest hosts have shawn taylor the chairman and ceo of sfx concepts. we have been watching the futures this morning. so far, it looks like there are some green arrows. it looks like the dow futures are up. s&p are up by about 5 points. >> the big corporate story of the morning the shakeup at j.c. penney. news breaking earlier, investor bill ackman resigning from the board of directors as part of his res ig nation, ronald tysoe former executive at federated department stores, now macy's, will be joining the board as will another board member and political ackman telling cnbc in a conversation we had exclusively earlier by telephone that he felt very comfortable with what ultimately happened. he says, i elevated a bunch of issues that are critically important by making them public. we came to an agreement t. board will now fung more effectively, he says, without the noise of him being on that board, he says what he has done will focus the bird on all the right things, also on the issue of whether he is off the board, whether he will now sell shares. number he says, if you wanted to sell, i could have sold all along during the quarterly window t. other issue, now he's off the board is that because he has insider information as part of the board, there will be a period of time with which he can't sell his basis in that company, by the way, about $25, those shares trading now at about 13, so ostensibly would not sell. as we talked in the last hour, one thing bill ackman did tell us and pointed us to was a quote from a letter by warren buffet saying, really, talking about how board members should act and says that if an unhappy director can't get other directors to agree with him, he should feel free to make his views known to the absentee owners. the temperment of many directors would be, in fact, incompatible with critical behavior of that sort. i see nothing improper in such actions assuming the issues are serious, of course, in this circumstance, are they. >> do i they arise to that level. >> do that level. yes. >> let me ask you a question. >> yes, sir. >> was he thrown off the board or quit? how would you characterize it? >> that's a great question. >> i would arc you that he quit and the only reason i suggest this is i'm sure there were legal levers or suggestions that maybe what he didgy going public could have been illegal, though, or could have caused a civil suit, i wouldn't say legal. but i also think as a board member, he was voted to be there. the only way to really leave in this day an age is to resign and i think that he felt at some point that he had become so toxic. i imagine when he sent his original letter, he knew it would become quite toxic. >> of course. >> therefore, few, he was hoping to persuade the board to do something like maybe hire tysoe or get the company a position, by airing these issues publicly, forced the board's hand potentially on ullman or other decisions on what the management will ultimately look like. >> knowing that will cause him to exit, perhaps. that's still a little unknown, right? >> apparently, this has been in the works all weekend. i should say people close to the board suggest that ron tysoe, that discussion with him, has been long in the works and those people close to the board suggest that bill ackman had very little to do with that decision but, of course, did sign off as part of his decision. >> why was it in the works for some time? because the board recognized that they needed some new blood to try and help fix what was going on will? i don't know. >> you asked a good question. i don't know the answer. >> i mean, what does that suggest, in this whole discussion? >> it suggests they were looking for more people e people with retail experience, they will add ron tysoe and additional board members, they say, i highly qualify new directors, does that mean they have more experience? i didn't qualify as director. >> it means it's not an activist shareholder. >> exactly. >> we have j.p. morgan, retail analyst, matthew boss on the news line to help us make sense of all this you're initial thoughts when you heard the news. >> hey, good morning. initial thoughts i think from a longer term perspective, i think the positive is this opens the door for a potentially qualified new ceo. i think that no having, not working under the eye of an activist, such as pershing squares, bill ackman is a positive. some of the candidates who have been thrown around, brendan hoffman from bon ton, i have no knowledge that they were interested to begin with. i think it's a positive. the second positive, this disrupts, quells some of the disruption in the near term. the big question mark, though, remain, is how much damage has been done. we're going to get earnings next week on the 20th. i think we will get lackluster results. same store sales down high singles to low double digits with a significant gross margin slide, balance sheet not on good footing, with probably a billion-and-a-half dollar cash flow burn and probably looking at $2.5 billion of cash flow burn on the year, the question isn't what stage has this company been left. >> let me play devil's advocate. i have been critical. i think it creates a trust issue on the board. is it possible what he has done will ultimately create value for the company? >> i think he's raised some valid questions t. truth is, the company put a succession plan for a new ceo in place three weeks ago, according to their letter back. so the question is, what has this really changed in the grand scheme? i think what it probably does is create a greater sense of urgency. i think as we head into the second quarter, the second question is, how much do the second quarter results now matter? i think it all depends on the magnitudement i think magnitude will be the negative side. particularly, people will be focused on this balance sheet and trying to determine what kind of length of time at this rate of burn does this company have? i think that's the analysis that people will be doing next tuesday. >> what kind of strategy should this company pursue going forward? what sort of merchandising, retailing plan should they put in place? >> yeah, i mean, look, when mike ullman came on, you kind of seen both sides. you had ron johnson as far to the right as you can get, trying to basically remerchandise the company, upscale the customer. then you had mike ullman come on, who is essentially going back to basics, bringing back private label, trying to reconnect with the core customer of the past. though, i go es the answer may be something in the middle. i'd probably say, taking some of the quotes from bill's letters, actually, talking about bringing back inventory as aggressively as mike did. you know, maybe that's the one area that you can potentially fault him and we'll see what the inventory looks like out of the quarter, but, personally, going back to the lower price points, bringing back private label, increasing inventory to an extent, i'm not so sure what ceo ullman did here, i don't know what bad decisions he's made t. question is, how much damage was done and the length of time it's going to take to refwan the traffic. that's really going to dictate future of j.c. penney. >> matt, real quick, i don't know if there is a correlation or what you could say about this. do you think the customer of j.c. penney cares about this? do you think they paid attention to this? do you think at the end of the day it matters to the customers going into the stores or not going? >> i don't think it matters who the ceo of j.c. penney is to customers. i do think what they do hear is the questions about bankruptcy. i will tell you, i have been in stores. i have heard customers, you know, walking up to store associates and managers and asking, you know, is this store going bankrupt? i think the reason is, they're wondering, are they going to get a better deal? i think in terms of who the ceo, it's relative to the every day customer. i think the rumors and disruption is very bad, especially during the high volume times, which is back-to-school and into holiday. i think the most important thing is to stabilize the ship and move forward. >> the next step, he dooems deals with customers on a day-to-day basis. that's a difficult position to be in. >> matthew, thank you, for your perspective this morning. we present it very much. among the other stories we are following, young sales in china sliding more than expected in july, among the reasons, the heat, some analysts say the company's lack of cool drinks and ice cream meant a consumers looked elsewhere. they are troying to bounce back from the dum double impact of that food safety scare and shares of orbits dropping, par chal management said they want to diversify it's portfolio. firm has been an investor in orbitz since 2007. when we come back, elan musk unveiling the concept for the hyper loop. it's a high speed low cost transportation system. phil lebeau will bring us the details. first, a check on the markets, we will be talking to bob dohle and rebecca patterson right after this. especially today, as people are looking for more low, and no calorie options. that's why on vending machines, we're making it easy for people to know how many calories are in their favorite beverages, before they choose. and we're offering more low calorie options, including over 70 in our innovative coca-cola free-style dispensers. working with our beverage industry and restaurant partners, we're helping provide choices that make sense for everyone. because when people come together, good things happen. a lot can happen in a second. with fidelity's guaranteed one-second 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. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. . >> welcome back to "squawk." eli lilly announcing positive results treating a kind of lung cancer. lily submits it to regulatory facilities before the end of 2014. let's get a check on the markets. economic data at 8:30 eastern time, joining us to discuss from rochester, new york, asset management, the keefe market strategist an rebecca patterson at the table. >> maybe he went to the pga championship. what is going on? are you a university of rochester person? did you grow up if rochester? what's the rochester connection? >> no, just here, seeing clients. that's what we're doing here. >> the old kodak town, anyway, let's tie to understand. we will get some data at 8:30, i'm going to you, sentence are you sitting right here. you just put out a note, talking about, what you call a leadership rotation going on in stocks, moving away from u.s. markets in terms of how people have moved into european stocks. is this a trend or is this just a weak? >> well, it's been a quarter so far, if you look at this quarter to date the s&p is up a little over 5% t. euro stock 50 is up 9%. europe is doing a lot better than the u.s. for a couple months now, not just a week. how much further can it go? is it discounted? i think we need to see it continue to be less bad numbers. it's all relative in europe. i would love to see, maybe it's not until after the german election. if we saw, i don't know if the election will be the catalyst. september 22nd, if after that we saw merck will being off on fiscal us a territory a touch, maybe the ecb feels a little more ability to ease, certainly they could, given their inflation mandate. if we got those sort of catalysts on top of improving growth, i think you could keep leading. >> bob, if you had money, would you put it in s&p 500 or europe? >> i'd certainly have it in equities in the near term, europe is probably given the news less bad will be more of a rally than the u.s. the u.s. has a lot of gains to digest and sideways action may digest it. >> john, why is the euro at 132 or 133, or wherever it is? does it deserve to be will? >> in many ways it doesn't deserve to be there. it shouldn't be there, it is there bus of strong trade blerngs all of those things, kind of force it up, right, on its own. >> how long is it going to last? >> well, it could last quite a long time. up with of the problems with this election this german election at the end of september is everybody is hoping that merck will be. >> assumeing she will win sample she will win. >> will she do anything with it? >> i think when we get the fed tapering, assuming we get tapering this fall, we see interest rates in the u.s. is that rt to edge higher again, then you could get some more dollar strength on that, that helps pull down the euro a bit. look what happened to the euro in may and june. it fell pretty dramatically. i don't think we see that repeated. i think risks are buys. >> expla enthe u.s. market. across the bottom of the screen, we say, what's moving the markets? sort of a good question. what do you think is moving what's happening? is it all worries about the taper? is that what this is all about? is it that the claims numbers in. >> no, i think we have an improving housing market t. trend continues. we have a labor market improving, slowly, it is improving. we have wealth effects from the stockmarket, helping consumer confidence, i think we will see that rethekt in retail sales today. we see a lot of buybacks. so the rise in equities so far this year is not just about the fed. will is a lot of variables, i think helping particularly with the multiples. i am worried. consensus is worried about september with a lot of event risks, medium, longer term, 12, 18 months, i'm with bob, i think we can see equity markets go higher still. >> what will move the markets? what's the catalyst that will take the market higher if one is to believe that it's going to go will? >> that's the right question. i think as rebecca said, there are a lot of fundamental also underpinning that strength we've already had, where do we go from here? in my view the next move up requires stronger revenue and earnings growth. i think we'll get it. the jury is out. that's not a done deal. we've had pretty sluggish revenue and earnings gains in the firk first two quarters this year. we need some more in order to have the market go higher. it seems to me, the p.e. move, which is pretty significant, is largely in the rear view mirror. fundamentals will now matter. >> one piece of data, i don't want to overemphsays one data point one that didn't get a lot of action is interesting the latest u.s. trade data report. our deficit is getting smaller, but within that report, you saw that u.s. exports to europe picked up a lot. you think about the multi-national nature of the u.s. stockmarket today. if europe does, if it can, fijerses crossed, continue to get less bad and there is more export demand that can help a lot of u.s. companies and that tail wind wasn't there a year ago. >> isn't the biggest argument for europe, though, valuation? because the less bad, it's less bad relative to itself, not to the united states the united states is much better, but, clearly, it's much more undervalued. the question is, is eight value trap or not, tow, right? >> i don't think so. i mean, we have seen price earnings, ratios move up quite lot. multiples moved up since last summer. i'd say from a valuation metric, whether you are looking at the discount to the u.s. or just versus itself, will is still value in europe. i do believe we need to see pmi's business sentiment continue to go higher from here, hopefully, some more support for growth, either from less us a territory or the ecb. could take us higher. if you don't get those things, we might give this all back very quickly. we're modestly overweight. we are overweight the u.s. we are keeping our big underwait to emerging markets mou. >> i would think have you to be more selective than ever in the types of stocks you are investing in europe i'm not sure you want to go out and put money into a european bank stock. maybe you'd feel differently. >> they feel well. >> they are performing, why, they were so deeply depressed. the fact of the matter is the survey came out. it was positive in germany. you look at germany, you can't see anything negative. you look at france, normally, there are all kind of problems. france is a heck of a big place, right? so there is a delicate balance going on there. >> since we're playing where in the world, would you put money in japan right now? >> we had been overweight last 84. we got underweight this spring, simply, the market moved so quickly. our portfolio managers said we're hitting our target. i do think there will be another opportunity to get in. we probably don't get much until i believe september or october the diet session, parliament session. we get new reforms push through i think they will be happy about that. you get a stronger dollar, weaker yen, u.s. momentum. i think japan can go higher. abe is risking his life. he may not succeed. he will go down ryeing. >> didn't we go down at find, are you long the nikkei, short the yen. >> absolutely. sab a samurai. he's got the wind behind him right now. and what people don't touk talk about all the time, he also has the old japan, they will re-arm the army. this gives him tremendous support that people aren'tiacing about, but, in fact, it drives a lot of people's thoughts. and just last night, he came out with an idea of a corporate tax cut. >> right. >> the stockmarket was up 2.5% t. yen was in the hole. all these things are wonderful, right? japan, we won't know for 18 months whether he will be successful or not. be you the man is doing the right things. you got to go with him. >> john, thank you. rebecca, thank you. bob in rochester, say hi to the dlients for us. thank you. coming up, we will give you the inside scoop, phil lebeau will join us with more details. and we got breaking economic data. we will get retail sales at import/export prices in a couple minutes. we are coming right back. i've been doing a few things for a while that i really love-- tdd#: 1-800-345-2550 playing this and trading. tdd#: 1-800-345-2550 and the better i am at them, the more i enjoy them. tdd#: 1-800-345-2550 so i'm always looking to take them up a notch or two. tdd#: 1-800-345-2550 and schwab really helps me step up my trading. tdd#: 1-800-345-2550 they've now put their most powerful platform, tdd#: 1-800-345-2550 streetsmart edge, in the cloud. tdd#: 1-800-345-2550 so i can use it on the web, where i trade from tdd#: 1-800-345-2550 most of the time. tdd#: 1-800-345-2550 which means i get schwab's most advanced tools tdd#: 1-800-345-2550 on whatever computer i'm on. tdd#: 1-800-345-2550 it's really taken my trading to the next level. tdd#: 1-800-345-2550 i've also got a dedicated team of schwab trading specialists. tdd#: 1-800-345-2550 they helped me set up my platform the way i wanted, tdd#: 1-800-345-2550 from the comfort of my home. tdd#: 1-800-345-2550 and we talked about ideas and strategies, one on one! tdd#: 1-800-345-2550 really gave my trading a boost. tdd#: 1-800-345-2550 all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 after all, i'm in this to win, right? tdd#: 1-800-345-2550 open a schwab account and learn how you can earn up to 300 tdd#: 1-800-345-2550 commission-free online trades for 6 months tdd#: 1-800-345-2550 with qualifying net deposits. tdd#: 1-800-345-2550 call 1-888-254-2600 today. tdd#: 1-800-345-2550 . >> welcome back, everybody, elan musk unveiling plans for a $10 billion hydroloop transportation system. phil lebeau joins us from chicago on this incredible story. >> i think what booem people are interesting is in one, would they do that, two, would it actually work? here's his vision. essentially the hyper loop are two parallel tubes. you'd be riding in capsules. they can seat up to 2008 people. you would riding, essentially glideing on air cusions once you got up to speed. by the way the top speed one year in these capsules would be up to 800 miles per hour, that's if all the conditions are perfect and are you going on the straight away t. hyper loop g-force would be comparable to what are you on an airplane. here's him explaining what he feel what is the ride would be like. >> it would be initial acceleration, once you were at the speed, you wouldn't notice the speed, it would be extremely smooth like you were riding on a cushion of air really. >> so how would they propel these tubes or capsules down this tube? this is one drawing. you see the solar panels, one tube going one direction. the example that they used yesterday if releasing the hyper loop was a trip between l.a. and san francisco. they say if you get the capsule up to 800 miles per hour, a trip could happen in 30 minutes. elon musk estimates the california hyper loop building it would cost just $6 billion. that's gotten a number of people saying, wait a second, that seems incredibly low in terms of getting something back in a minute like this. musk says he might, he might build a hyper loop prototype. would people ride it? here's what a few people in california had to say yesterday. >> the concept is right. it's a good idea. i would take that all the time. but where is the money going to come from? >> i love elon musk. i think he's a genius. i would go with what he's doing. i definitely would. it sounds so cool. >> definitely technology, a little fear in apprehension, for travelers, this train gets you there fast ev, more comfortably, it's something that is good for everybody. i would definitely ride it after it's taken a few test drives. >> well the hyper loop is getting a lot of attention. investors are clearly more focused for now on tesla, fluctuating between that 145, 153 range. up in the last year. one last thing, becky. i mentioned this morning, would you ride on this? you said i'm not sure if i would get sick what would happen? yes. that's what you said. you might puke. you foe what a lot of people said to me? yes. >> they want me to ride in the back? >> no, a, can i get up and walk around. i said, no, it's a tube. they said, where is the bathroom? the primary concern of people i have been talking with. >> i can see. that although, we were laughing with the people you had been interviewing, we were agreeing, really great, interesting concept. i love the idea. you go first. >> right. >> it's a short ride. you might be able to hold zblit for 30 minutes. >> yes. thank you. stick around. >> you got diapers. have a whole new business. >> with more on this is rod deredeevenl we should point out he's worked on many projects, many on the transit and the environment. thank you for joining us. >> thank you, becky. >> so what do you think, a, it possible, b, how quickly could we see something like this? >> i think there is 84-a. is that it's needed. in california, we have such serious gridlock and climate change is so serious, we need to have something that operates off of freeways and is sustainable. so we need something like that and elon has the helptation for delivering the impossible. we should be encouraged. the problem is we have to have an operating prototype before we can identify the actual cost of development, whether it operates effectively and safely and is veermtally attractive. so the next step, if he's really in this game, is to develop a truly operational prototype that can be compared with the other modes in the world. >> unfortunately, we have economic data that rick has for us. we will thank you, ron, we appreciate it. rick, what do you got? >> all right. july retail sales, well, if you just look at the headline, it's oup up .2. now we go through the ordeal, let's take out autos, it's up .5, obviously they contributed. autos and gas up .4. so we see auto, transportation, will be areas to pay attention to. they have a metric called the control group. that's up half of 1%. so pretty much these numbers match expectations, but if you take a step back and you look at things historically, you know, they're a bit light. they do match expectations. if you look at import prices and other data series that we're receiving, it was up much less than expected. we were looking for a number close to up 1%. it was only up .2 of 1%. that's month over month. we take that import price index on a year over year, it was up 1%, which is less than a 1.5 we were looking for. so, overall, i would think that retail sales pass the mustard test for the lower bar based on expectations. as we look around the world and see better numbers, i think the whisper number here was it's stronger than the reality. we're at a 267 yield. we're only about a half a dozen basis points away from retesting that 274 yield close on the 5th of july, which exhibited a two-year high. back to you. >> okay. thank you, rick. for more on the data, we got steve liesman at the table. >> a mixed back here, autos were down more than expected 1.1, furniture down 1.4, that's a number if the housing market was doing better, you'd expect it was up 2.5%. electronics down a bit. then have you things like clothing, sporting goods, general merchandise, department stores up pretty healthy from a half to a full point. we've looking for here, the thing that matters the help from the consumer the concern whether or not the tax hikes earlier this year the sequester hurting the consume were. the consumer seems okay here. ly guess when i get off set, i see the guys to'ing the forecast, they run about 2%, maybe 1.8%, which is about in line with last quarter. not that healthy, not that bad, either, if you consider that we were concerned about a much steeper decline. >> john, can i put you on the spot, do have you views on this? >> yeah,i'm disappointed. i expected more kick coming here. there's been, we might be worried about the sequestration and the tax hikes. those happened a while ago. we should be over them. >> from what, john? that's the question a lot of economists are asking what are the sources of demand, if deficit is coming down, you have the tax hike earlier this year, and you have relatively, you don't have the kick to income that you'd expect from job growth, what is the source of demand? i had a lot of concern from economists riding the last couple days. >> there is no doubt about it. there doesn't seem to be anything but mood that ought to be doing this, right? i believe the mood is relatively important here. >> you need some wages. we all know that has not happened. >> there's the tax hike, this is not updated. this is through june. can you see that decline in disposable income in january. you can see, we've never had a pop from that level. we've maintained relatively modest gains since then. so a question as to the source office where growth will come from, corporate earnings doing okay. if you will have the fed reduce its stimulus, what you want, you want the growth to come in its place. there is some doubt about what the source of that will be. >> rick, you think it's enough, relatively speaking? are you with steve here? >> well, i think that the footballs are what the numbers are. my first observation would be if you took the last seven years of data and you put all the important data points on a chart, i really doubt if anybody would notice, for example, the sequester or even some of the tax issues at the end of the laugh year, which makes me doubt that it's anything we should pay close attention to. i do think the one area we can point to, we do see some benefits, and that, of course, is in the dropping deficits. but we have to see what the federal government fiscal year looks like, because we pulled so much tax ref now forward. >> rick, i don't want to -- >> hey, guys. >> tell me where the benefits are. i'm still looking for an economist who shows us greater than, smaller than expected deficit and that increases gdp as a result of that. i'm not seeing the benefits of the lower deficit. >> oh, no, no, no, i think you are right. i think we need to advocate to shoot for $25 trillion debt to see how many benefits we can extoll on the economy. >> the economy is not bigged a assertive rick, which is what you did. i'm saying if you keep things level at a time when you struggle for demand. >> what is your question to keep things level? take from taxpayer a to give to taxpayer b through government spending? that's going to create final demand? it's worked so well, hasn't it? the unemployment rate is still close to 14%, is it not? >> it's not deficit spending. >> what do we do, dig it up from the ground, it comes from a spring of money. >> i will buy both of you lunch, i will thank both of you. >> maybe drinks? >> drinks at lunch. >> that's the point that is what was supposed to happen. >> i have deep respect for the arguments of rick santelli. i just disagree. when we come back, bill ackman stepping down from the board of directors. and another interesting story for you. you are looking at nike co-founder phil knight's parking spot at the university performance center. jane wells has more on the $68 million facility. [ kitt ] you know what's impressive? a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ . >> back to "squawk," pershing square activist bill ackman resigning from the bird of directors. at the same, the board announcing ronald tysoe, former viets chairman at federated, now macy's, is going to be joining that board. this is big news given the role of bill ackman, his stake in the company. we should say he will hold on to those shares some period of time, considering he is still an insider. he bought those shares at about $25. you can see those shares trading at $13.34 in the premarket up a little over 1%. another story we are following closely this morning. 100 foot sink hole has swallowed up about a third of a resort outside of disney world. guests had 10 to 15 minutes to escape. these collapsing buildings have the summer bay resort. no one was injured. one building suffered catastrophic destruction. who neighboring ones are being evaluated for possible damage and perhaps structural integrity. all right, coming up, look at those images. the university of nike, that itself tongue in cheek name given to the university of oregon as a result of nike co-founder phil knight's sponsorship of the oregon duck's football program. jane wells got a look at the program's new $68 million football performance center and she is going to join us next. eno the gulf, bp had two big goals: help the gulf recover and learn from what happened . . >> welcome back. the university of oregon unveiling its new performance center. jane wells is there with more. i can't wait to see this. i've heard it's amazing. >> scott, are you not going to believe it. i'm inside a wait room that will make nfl players drool. the weight room alone is 25,000 square feet t. floors are so tough, they're made of brazilian wood. they can bend nails. so if money can buy you a championshipth in and the pressure is on the university of oregon. in this facility, money has been no object. let show you the picture. no detail too small. no material too out of reach for the football performance center paid for by nike koe founder fig knight and player penny, whether it's hand made rugs from nepal complete with custom foosball tables with oregon ducks or the over the top locker room, check it out, bacteria resistant surfaces where your shoulder pads and helmets go down the coach's hot tub, hydrotherapy pool t. war room with the 32-foot long table, 500 pound rug. nicknamed area 51 or the auditorium. with 170 seats made of ferrari leather. each capable of holding won swaeing 500 pounds, incredible artwork throughout. all this united the facility called by some the duck star. here's how i'm told the deal worked. the land for the facility was leased by the university of oregon to phil knight's foundation. he fntsed the building, donated it back to the university. now this state owned school is selling nameing opportunities to finance the maintenance of it. the ducks are ranked anywhere from 2nd to 4th in preseason polls. the school is dealing with relatively light penalties for recruiting violation. they have a new head coach. as you see them practicing on some of their three new practice fields. is this enough to help them finally win the bcs championship? if recruitings is an arm's race, guys this is a nuclear weapon, we will be here all day. we will talk to the a.d. the star coach the star quarterback and the duck, yes, scott the duck will be joining us as we talk about the business of college football. >> we'll be most looking forward to the duck and you, jane. >> i have one question. what is the economic health of the school right now? >> it's a state-owned school and the thing about this, and so the school is oregon is doing relatively well, but this facility is really the economic engine for the football program, which is the economic engine for the university as it is at most schools. and this facility the whole point about the way they did the deal is it basically came to them grat is is to make it alon a cash flow wash in terms of that. >> it probably will be. football is a rain-maker as jane said. i don't have any problem with this. the guy paid for it, himself. >> i am curious what the maintenance costs are to keep it going. >> is there any endowment for that? >> no, that's what they're selling nameing opportunities for. there are people to pay for the power the water. yeah. it's a fun day. the most glamorous thing in the world to see. i paid for the sewage and the garbage. you know, they're raising money for it. >> jane, you got to step up. >> no, no, honey, no, no, no, no, no, this is not my school. i'm in enemy territory. >> very nice. your school is going to have to keep up with this, though, right, you talk about the arm's race in. >> believe me, this is the beginning. when alabama hears about this, watch out. yeah, this is just the beginning. it has set the new bar. this won't be the last place this is happening. imagine what happens to oklahoma state. >> 250 tvs. 100 tvs maybe. >> aren't these people in the business of education? >> the school's reputation is an educational experience. >> if you just spent $68 million endowing, you know, professorships. >> we spent a lot of money at the school. it's a lot more than -- >> look, phil nooifth has been spending money at the school all throughout. >> quack quack. okay. >> jane, thank you. we will see you throughout the day. >> when we come back, is the stockmarket entering no man's land? jim cramer will tell us why the lack of the leadership in the market could put the rally in jeopardy. we will head down to the new york stock exchange right after this. here at fidelity, we give you the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account. it's been that way since the day you met. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than 4 hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. welcome back to "squawk b box", everybody. the futures are indicated higher and they are up but not as strong as earlier. and the dow is up 33 points and the s&p up by 33.3. jim, i know you have been talking about on "mad money" how you are concerned about the lack of leadership in the market, and what is that telling you? we could be reaching a stalling out point? >> i think that -- yes, that is great way to put it. tech has lost any pizazz other than tell cecom and there is ci maybe wednesday night. and re-fi is not that great and no pickup in the construction loans, and autos are a bright spot, but i'm looking for the bright spots, and i don't see it in housing. there are not enough good companies right now to do enough so that i feel that we can go dramatically higher. >> jimmy, did you see the performance center up there at the university of oregon that your guy chip kelly left behind? >> well, i spent two fridays with chip and i think that the nova care center will match that. i think that the -- it is interesting to see that the ducks left -- this is a chip facility, and you needed chip to be able to take advantage of it and what we are speaking about is of course the new eagle's coach, and chip kelly could use some of the wide receivers that the ducks have. >> and the facilities are better and the players are better, and come on, jim. >> ouch. >> that is tough, man. >> i have to tell you that when i saw chip, the amazing thing about him unlike andy reid, he comes over to say, thank you for being a season ticket holder and i don't know who is going to start for quarterback. one thing that you knew is that andy reid was etched in stone, but everything is up in the air with chip. >> i thought you guys looked good and you will be good. >> well, it is tough to see, because they were not hitting. it is tough to see who tackles when you don't tackle. >> and jim, are you buy jcpenney? >> well, rg3 does not start until game five. sorry, scott. >> i disagree. >> and with ackman, i would set up a separate fund and raise a couple of billion and then buy a lot of stuff at jcpenney, because in the end, that is what matters. >> go redskins. >> oh, yeah. >> i have an ally next to me. >> yeah, the redskins are number one. >> he should go buy a team, and then we would like him more probab probably. >> jim, see you in a few minutes. >> thank you. and coming up the guest hosts all morning have been john taylor and andy, and we will give them the last word when "squawk box" continues. the stock of the day comes up. you are watching "squawk box" on cnbc, first in business worldwide. right now, 7 years of music is being streamed. a quarter million tweeters are tweeting. and 900 million dollars are changing hands online. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this&is gonna be big. hp moonshot. it's time to build a better enterprise. together. [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] as if there was any question as to what the stock of the day is, there it is, jcpenney up nearly 2% premarket, and the hedge fund manager big ackman resigning from the retailers board. let's go to geontjohn taylor an for the last word. >> i wonder if jcpenney can right the ship in terms of having a sustainable business and i wonder, two, if europe is sustainable as well. >> when you say does jcpenney have a sustainable biz usinesbu does that mean -- >> toast, you mean. >> b as in billions or the other word b? >> well, toast is a possibility, right. it is terrible to say that, but you know, it is not a healthy thriving place. >> and you don't think that europe is sustainable? >> well, europe is going to be exist, but the question is, is the rally sustainable. >> perfect segue to john. >> well, europe is toast, and maybe the euro is toast in the long term, but the problem is that in the long term, we are all dead and the euro is, too. but getting to the shorter term, the u.s. is really the best house on a bad block, and the bad block includes japan, china, europe, and the u.s. is the best looking place, and on the other hand, the dollar is not acting well. >> and when do the currency traders figure that out? >> i argue that in the next six years the dollar is stronger, but tomorrow, jesus, who knows, it could be anything. >> would you surprise a violent reaction to the fed if they decide to taper in mark, or has the market baked in some it? >> i don't think that there is a reaction at all, because for start, the u.s. treasury does not need as much money, because the deficit is down and why do they need $85 billion a month and the housing market, does it need that much money, too? i didn't think that tapering is going to be a big issue when we get to doing it, and everybody will go ho-hum. >> yeah, things are better than people realize. >> yes. >> and things are really. >> and you think that the market is going to do a ho-hum? >> well, the big crisis was in may and june when they said that they are changing. >> and we have had plenty of lead-up, and it is when it happens. >> you look at the historical precedents like 1994 which is the closest parallel. >> and hasn't the last several days in the mafshgt, and ending the six weeks of gains, hasn't that told you that the market is not ready? >> is that the reason that the market stalled or the fact that there is no earnings growth? >> well, i think that people are hoping that it is pushed off to december and when they realize that it may be in september, it is going to be a tantrum again. >> and maybe we have a little tantr tantrum, and that is why we are worried about the market until september, but the fact of the matter is that when it happens, everybody is going to say, where is the impact, and they won't find it. >> john, thank you for joining us. john taylor and andy sseywer. >>ly be on "squawk on the street" for a couple of days so all of this sleep will not be needed. >> thank you for joining us. now it is time for "squawk on the street." good morning and welcome to "squawk on the street." i'm david faber with jim cramer live from the new york stock exchange and our partner carl quintanilla is off. retail sales growth came in slightly lower than forecast came in, and now over to japan, and because the nikkei is on the
looks like almost a half a percent drop for both the ftse and the dax in germany. in the u.s., a packed economic calendar today. at 8:30, weekly jobless claims. july cpi and empire state survey. then at 9:00, tick data. 15 minutes later, july industrial production. at 10:00, the philly fed survey and the national association of home builders survey. and the consumer is in focus once again today. walmart and kohl's among the names to show results before the bell. we'll be hearing from dell. this is a little bit of a surprise because the pc maker was originally scheduled to report results next week. no shortage of numbers to be running through. >> lots to do today. in other economic news, u.s. home foreclosures on track for a six-year low. foreclosure listing firm realty tracks shows 30,000 homes last month, that's down 31% from july last year. though up 4% from june. demand for physical gold soaring 53% in the second quarter. the world gold council reports the jump was led by opportunistic buyers in emerging markets at a time when the metal suffered record quarterly losses. india accounted for the biggest share, followed by china. looking at gold this morning, up 5 bucks, 13.38. >> a bit of corporate news for you this morning. a u.s. judge saying the california attorney general's office can proceed with a lawsuit that accuses standard & poor's of misleading investors by inflating credit ratings. a court finally showing the judge rejected the rating agency's effort to dismiss that case. a little bit of other legal news this morning, the jpmorgan executives who supervised the traders at the center of the london whale scandal unlikely to face any charges. yesterday, they brought criminal charges against two former traders. the complaints only make passing reference to the trader's former bosses and neither former chief investment officer iona drew nor achilles mackris are mentioned by name. it refers to them by title only and says it puts pressure on subordinates to deal with the high degree of risk being taken on the portfolios, derivative trades that led to the losses. a little pressure but not -- this goes to the point you made the other day that we discussed, it is hard to charge the people above you with fraud if the people below you are also being charged with fraud because arguably the people above you were defrauded. >> right. it is just interesting to see whether this was a firm wide situation that they're looking at or whether these were rogue traders or someone who rogue traders are a rogue group that was acting in one way and trying to cover it up on the books in another. >> it now appears there is a criminal probe going on into the firm. so the fbi just looking at the firm, that that's not looking at a sort of system wide problem, that's looking at the statements and other things that were made publicly by people like jamie dimon, doug bronstein and others after some of the whale issues became public. >> made to investors. >> to investors and they tried to tamp some of that down. >> the firm wide stuff would be civil. >> no. that's the interesting part. >> i'm confused by that. if it is criminal -- >> fbi and justice are looking more on a criminal basis at that. unclear to me. >> at jpmorgan? >> at the firm. not at individuals, not at jamie or doug bronstein or the individuals, it is at the firm. >> but they have not done this in the past, is that right? >> right. >> what happens when -- if a firm, an institution like this were to be found criminally whatever in this case? >> that's a good question. >> i have an idea on that. >> it is an awesome question. you could say does it turn into drexel and all of a sudden everything stops. >> they can't do business anymore. >> i find that astounding. >> look at sac capital, the firm has been indicted. you can argue that firm maybe -- i would have thought if you -- >> that's a different -- >> that's a different regulatory regime, though. it is a -- it is not a bank h d holding company. >> you go back to what eric holder said, too big to jail. arguably as a firm it is because if you think about all of the unintended consequences that something like that would create -- >> i'm still a little stunned to have things like that being tossed around by justice or fbi or anywhere else. it is hard for me to imagine that a company like jpmorgan is being considered in the same realm as some of the others. >> i want to just stress that i'm out of my league on this, in the sense of understanding this notion. i do know that banks have avoided criminal charges and gone out of their way to avoid that, because there is something to do with their ability to continue operating. >> i don't know enough about this. it makes me uncomfortable. i can't even believe this is the situation where you would be putting that in the same sentence. >> being very tough. i think that's what's clear. >> that is. >> that's a new regime out there. >> that's a new regime. the question about whether you're too big to jail and also whether people actually stopped doing business with you is an interesting one. i would have thought, actually, with sac, for example, they have institutions, goldman sachs has come out, we're still doing business with sac. >> but the idea that you would stop doing business with any of them just because there have been charges that have been made without anything -- without being indicted. >> that's what happened. arthur anderson, before they were convicted of anything, people said, we just can't have you as our auditor anymore because you are indicted. we can't, you know, we're a fortune 25, 50, 500 company, we don't want to do witness with you. and that's what put them out of business. maybe the world also changed. >> let's you and i and andrew and becky do more work on this and figure out what these are. i've come across this in my reporting career. and done some work on this. but the rules have changed dramatically. >> right. >> and it is a different world right now. a post dodd frank world and there is a lot going on here we have to figure out. >> let's get to whale watching of a different kind. here are a few highlights. first up, bill ackman's pershing square has a new stake in air products. we talked about this. the company is saying this, but we have talked about it here before. the firm is also dissolved its stake in mondelez. david einhorn's green light capital cut stakes in cigna, gm, computer sciences and marvel technology. it also took a stake in rite-aid. it increases its stake in aetna and dissolves stakes in microsoft, hess, barrett gold, western digital, seagate and cvs. dan lobe's third point dissolve stakes in hess, spider gold, apple, delphi, and advi. what is that? i don't even know what that is. it cut its holdings in sprint, delphi, mylan labs and hartford. took new stakes in thrm thermo, cooper tire. trian had new stakes in dupont, gnc and sotheby's. george soros added 2 million shares of his stake to jcpenney. right now, let's get a check on the markets this morning. >> a quick note, berkshire hathaway coming out with its numbers now in terms of its stake, cut its stake in american express. wale go throu we'll go through it and give you some of the details as we peel away. >> okay. let's get a check on the markets. the futures are at this point indicating a little weaker. dow futures down by 37 points. s&p off by 5. you have oil in this morning and right now oil prices are up about 93 cents to 107.78. the ten-year at this point is yielding 2.735%. and the dollar right now, take a look, you're going to see, dollar is down against the euro at 132.84. also down with the yen at 98.07. >> while we're on the list, berkshire cutting the stake in wells fargo by 30%. >> by 30%. >> by 30%. >> do you think that's a rebalancing? >> i don't know if that's a rebalancing. >> look at the shares of wells. they have gone up and -- >> could be a rebalancing. hard to say. there is that and then also the cutting of the stake in amex. both things could be -- >> i would be stunned. >> that's what it says. >> we're -- >> if there is a headline from reuters berkshire hathaway, cuts stakes in -- >> we'll do a little bit of work on this in the meantime. >> at 13%. >> on amex. >> on amex, right. let's look at global news. we started bringing you this story yesterday when the numbers were smaller. now the death toll in egypt climbing to 421. the muslim brotherhood pledging to fight back. we'll check in with reporters on the ground in the next half hour. that difficult situation there. time now for the global markets report. carolin roth is standing by in london. how does your morning coming on to afternoon look today? >> good morning to you, guys. we are seeing a little bit of a pullback in terms of core european markets. having said that, it is nothing to be too worried about, because volumes are pretty low. it is a holiday across many markets in europe today. and we have had six weeks of stellar performance for the european markets, so, yeah, give the markets a chance to breathe a little bit and take some profits. the smi is a little bit of an underperformer today in relative terms. it is down by .8%. dragged down by earnings from zurich insurance, this is one of the biggest insurance companies in switzerland. stock is up by 3.4%. it was hit by natural catastrophes, bad weather essentially, in north america. but also in europe. net profit missing expectations for the second quarter, and companies also pretty cautious about its outlook. last but not least, i want to show you what is happening in the currency space. sterling dollar at a two-month high, sitting at 155.78. getting closer and closer to that 156 level. this is on the back of better -- much stronger than expected retail sales for the month of july. certainly benefitting from that heat wave we have been seeing in the uk. euro dollar pretty resilient at 132.82, back below the 133 level. and dollar yen seeing a little bit of softness at 98.07. this is because the finance minister in japan pretty much quashed hopes of that cut in the corporate tax rate and this is what the markets had been hoping for. so we are seeing some yen strength. and on the back of that, we are seeing declines, pretty big ones, actually, in the nikkei 225. back over to you guys. >> thanks very much, carolin. becky, are you still looking? >> looking for some of these. cisco shares, they are under pressure today. the tech giant giving weaker than expected revenue guidance for the current quarter. the company also plans to cut 4,000 jobs or about 5% of its workforce. joining us right now is simon leopold, raymond james communications equipment analyst and thank you very much for coming in today, simon. >> thanks for having me. >> they made a lot of talk about different things, actually beat expectations slightly for the current quarter. that stock was down 10% in the after hours on some concerns about what is happening in the current quarter, particularly with asia. what was the big concern there? >> yeah, so i think there are two elements to the concern. one was the lower guidance for the october quarter. but i think the bigger surprise was the comment about retuesddi head count, 5%, 4,000 people. they refer to it as a realignment, and anytime with cisco reports we look at the choice of words pretty carefully. and in what we think they're doing is trying to control costs. it is not a situation of trying to reduce costs or cut costs. but i think this is going to make investors nervous today. >> why is that? when you hear realignment, hear -- i hate to say it, but wall street at times, when they hear about layoffs, they cheer on the news because they think it is going to be improving the cost structure. why is it such bad news when you look at cisco for this? >> cisco is a tech bellwether, an indicator for it spending, tech spending overall and the other word that came up on the call that was interesting is inconsistent in terms of john chambers' discussion about the macro recovery. and so i think heading into call, all of us, myself included, we're pretty optimistic that things were going to be sounding a little bit better. and this did not support the idea that, hey, the world is getting better. it is choppy. >> choppy, particularly in asia? >> yeah, so they did bring up asia. cisco had issues in china for some time. that's not new. but india sounded good, but that was probably the only bright spot in asia. japan in particular was tough. a year ago cisco had very good business in japan. so they're facing a tough year over year comparison there. that is an economy that certainly took a toll this quarter. >> is this more concerns about cisco specifically or the health of it spending overall? >> i believe it is some of both. the aspects of cisco specific are share loss here and there, competitiveness, for example, set top boxes for cable tv. but it is also a reflection on the overall macro, cisco is so big, so diverse, it does reflect on what is going on in tech spending. >> the overall macro, does that mean in addition to being concerned about cisco, you're concerned about other companies today too? >> somewhat. somewhat. i don't think that the macro recovery is turning around. it is just a very slow painful recovery. and so i think heading into this, we thought things were going to sound a little bit better. and they're not. but cisco is looking at, you know, flattish subsequential guidance, not calling for a decline. they talk about controlling expenses, not cutting expenses. so these are really, i think, issues of tone more than a sharp decline. >> chambers made some comments yesterday where he was saying something like he sees cisco really returning to be the top it company out there. would you agree with that, or no? >> i still don't quite understand what he means by that. and it has been discussed for some time. i think when he talks about being the top it company, he's talking about position and sentiment, not necessarily being the number one revenue generator in all it because there is some really big players in that space already. >> so what do you do with the stock today? >> i hate the phrase buy on weakness. but i remain a buyer of this stock. we maintained our price target at $30. to us, cisco is not an investment that is a growth story. it is very much about the earnings. and our earnings estimates really didn't change. so why should our price target change? and so we do think that trading oriented folks may sell off the stock. we're not surprised to see it weak today. but from an investment perspective, we continue to like it, and we continue to be buyers of the stock. >> all right, great. >> thank you. >> simon, thank you very much for joining us today. programming note for you as well. we will have cisco ceo john chambers, he'll be joining the show later this morning at 8:40 eastern time. make sure you join us again then. want to talk about the other headlines before we go to break or go to -- i'm told we're going to wait. we'll wait. >> we'll wait until we get back. >> changes on berkshire holdings. we'll come back after the break with those. coming up, why an economist is changing his opinion on deflation after 20 years. but first, as we head to break, let's check on the national forecast with the weather channel's reynolds wolf. good morning, reynolds. >> hey, good morning, guys. let's look at the forecast around the country, even in parts of the tropics, we're watching this one area near the yucatan for potential development. not named yet, but going to be five separate aircraft that are are going to fly into the system and take a peek at it. meanwhile, the chance of more showers and thunderstorms across the southeast. more rainfall for parts of the upper midwest and cool and dry for you across the northeast. life is beautiful there. no problems to really deal with there. but more rain in parts of the southeast could be a problem. scattered thunderstorms in the central plains and plenty of sunshine out towards the west. in terms of travel today, look for potential backups in miami, also atlanta, los angeles, a mix of sun and clouds, maybe a little bit of a rain layer, otherwise, no major issues. that's a look at the forecast. we have so much more coming up around the corner on "squawk box." welcome back, e everybody. we have a wiquick note for you. it looks like some headlines are wrong. we're redoing the math now, we'll get you an update on the latest filings from the s.e.c. now it is time for the executive edge. this is a daily segment that focuses on biffi igiving busine leaders a leg up. david rosenberg, frequent guest here, says he's finally giving up on his 20-year-old deflation call. in a note published by business insider, rosenberg argues the deflation camp is way too crowded at this point. he suggests the fed chairman bernanke will be successful in his anti-deflation drive. and you combine that with an economy with less and less capacity, hoonly time before prices rise again. if you're an issuer and the time for refinancing is now, not later. if you're an investor, don't spend too long debating whether hedging your portfolio before the prospect of long-term rising interest rates and that environment. even as central banks continue to keep short-term policy yields at the floor. gentlemen, this is a big call for rosenberg to make a transition like this, it is something we should probably set up and pay attention to. >> i'm not an expert. i'm a student of steve liesman. let me say he and others have been calling for this moment to happen for a long time. so i'm not -- this does not feel like the call. i remember him -- i thought saying something similar about a year and a half ago. many people making this call. the problem is you got to make it the right time. it will happen, just a matter of when. >> steve? >> i think he's sort of set up a, what do you call it a white elephant here. i don't think the deflation trade is that crowded. i don't see so many people on the fed over on that side. >> what about bullard? >> i think there is concern out there. i think there is a bit of a pause created by the inflation numbers, becky, but i don't think there is a whole lot of action and i don't think -- >> you want that line in the last fed minutes, though, put in because of bullard, i believe. >> right. because they're watching it. there is a concern about it. the numbers have come down. it is something they're watching, but it has not been a reason for action. i don't hear a whole lot of fed people saying this is something we're going to act upon, something we're going to watch, something that gives us pause. one of the interesting things about rosenberg's comments is the notion of capacity destruction. and that's another thing on the other side that is worth watching. one of the theories of the 1970s is that why fed policy was wrong was that capacity was being destroyed in a way we weren't measuring at the time. it is an interesting idea that is out there, all of a sudden what we think is all of this excess capacity in the economy is much smaller and the way the policymakers aren't really paying attention to. so that's something for i like to talk to david about and ask some other folks, something that at a time like this, you have weak economic demand, factories are shuttered. watching capacity is a big part of the inflation. >> while we're talking about the fed, let's stick with the thwait. an opinion piece out there today worth reading. sheila bear criticizing the fed. she writes in part, thanking the fed for avoiding another great depression say little like thanking a doctor for successfully removing a malignant tumor after misdiagnosing it and letting it grow for many years. wow. bernanke has learned from the great depression, she writes, but has he learned from the fed's more recent errors in deregulation? to be sure, the regulatory culture of the fed has changed under bernanke. it has supported stress testing to bolster big banks capital cushions, yet much is left undone. wow. that's tough talk. but bear also goes on to smack the fed for failing to finalize rules that were called for by dodd frank. gentlemen? >> i'll defer to professor sorkin. >> i don't know where to start. i like sheila. we love having her on the show. she's part of what might be described as anti-wall street, anti-fed inc. she has made a sort of mini career over the past several years sort of throwing darts. that's what she likes to do. i think she's right, there is still a lot to be done that has not been done. however, to suggest somehow ben bernanke, as i said a million times, i think bernanke's history will look fondly upon what he did during the crisis and frankly i think might even look fondly about what he's doing now. i think that's obviously a b bigger -- >> the financial crisis. >> i find it odd she's taken this tact. i understand sort of where she's coming from. but sort of to me at this point a strange tact to take. >> i'll offer one bit of support for sheila here, which is this, i don't think that she's right now, but i believe she'll be right in the future. and the reason is because the banks will fight these rules forever, but the people on the other side, which are a disparate group of people, sometimes they're consumer folks and sometimes they're other parts of the financial industry. they don't have the staying power to fight these things. what happens is, when i was a county commission reporter in sarasota, guy would show up to build a community and 700 people would show up to protest it. the commission would table it, and then six months later the developer would come back with no publicity and they would approve it. that's not -- that's not happening now. i think there is a big light on it. but it is over time that the banks wear down the regulators and that's when we should be worried. i don't think sheila is right now. i think she's right to raise the red flag about this and she'll be right in a couple of years. >> all right. let's talk about an article in the financial times. it looks at u.s. companies targeting europe to reduce taxes. the firms in focus relocated to the continent after completing takeovers there. suggesting the companies are set to save hundreds of millions of dollars in taxes as a result. in one example, pharma group pergo said its acquisition of elan will lead to freedredomici in ireland. wow, guys, with all this talk about what needs to happen with corporate rates, this puts the spotlight on where you stand to lose on this. >> is the spotlight on the problem in my mind, which is to race to the bottom. and unfortunately we can lower our rates to whatever number you want, and i argue we should, however, it is not clear to me you win the game then. >> the economics of this are that you shouldn't really tax the company. the company ends up being just a tax on the consumer. that you can tax the shareholder who gets the dividend you can tax the executive who gets the salary and you can, you know, there is a good argument for zero and ireland and other places in europe are finding it is a good way to attract people, create salaries. the inefficiency of the corporate tax is manifest in this story. >> yes, it is. tells you a little bit about that we're fighting and what we're dealing with out there. when we come back, we're going to talk more about berkshire hathaway's latest filing on investment holdings. we have been running through these numbers. all those headline before from reuters were wrong. there is not a drop in the stake of wells fargo. there is an increase. we'll bring you the full story right after this. first, awe he as we head to br at yesterday's winners and losers. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550 then schwab is the place to trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550 learn how you can earn up to 300 commission-free online trades tdd#: 1-800-345-2550 for six months with qualifying net deposits. tdd#: 1-800-345-2550 see how easy and intuitive it is to use tdd#: 1-800-345-2550 our most powerful platform, streetsmart edge. tdd#: 1-800-345-2550 we put it in the cloud so you can use it on the web. tdd#: 1-800-345-2550 and trade with our most advanced tools tdd#: 1-800-345-2550 on whatever computer you're on. tdd#: 1-800-345-2550 also, get a dedicated team of schwab trading specialists tdd#: 1-800-345-2550 who will help you customize your platform tdd#: 1-800-345-2550 even from the comfort of your home. tdd#: 1-800-345-2550 and talk about ideas and strategies, one on one. tdd#: 1-800-345-2550 get all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading tdd#: 1-800-345-2550 to open an account. tdd#: 1-800-345-2550 and learn how you can earn up to 300 commission-free tdd#: 1-800-345-2550 online trades for six months with qualifying net deposits. tdd#: 1-800-345-2550 our trading specialists are waiting to help you get started. tdd#: 1-800-345-2550 so call now. tdd#: 1-800-345-2550 ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] ♪ good morning, everybody. welcome back to "squawk box" here on cnbc. i'm becky quick with andrew ross sorkin and steve liesman, in for joe, who is still on vacation. but we are going to hear from joe in 20 minutes. we have been combing through berkshire eighthhathaway's 13 f morning. what reuters had been reporting before was incorrect. let's run through some of the numbers now. the berkshire hathaway stake in american express is unchanged. earlier reuters had reported that it was down by about 13%. berkshire stake in wells fargo is actually up by 1.1%, a headline that moved earlier on reuter said it was down by 30%. that's not true. coca-cola is unchanged. the stake in coca-cola, reuters headline earlier, suggested it was down 45%. as we talked about on the air, none of that made sense to us, wanted to go through and run the numbers. a time consuming process. you have to go through with a calculator and add them all up. this is the actual situation. american express unchanged at berkshire hathaway. wells fargo up 1.1%. coca-cola unchanged. want to run through some of the other numbers, there are some issues, craft and mondelez looks like they have dropped their stake by 88% and kraft and monday louise probably not a surprise given the -- >> can i point out the most accurate thing this morning has been your intuition about what buffett is doing. when i read that headline and you said, that made no sense, and i'm looking at a headline, i'm, like, which do i believe, now i know which one to believe in the future. >> if you follow him, watch him over the years, you know you can change the stake like that. he did drop the stake in kraft and mondelez to 88%. dropped shares in moodys. he made comments on the air before that wouldn't surprise you seeing some of the moves. >> pretty transparent about that. he wouldn't say something now and the next quarter, when is the last time you talked to him, not too long go, right? >> the last time we had him on, we had him on in depth when we were out, when andrew and i were out at berkshire annual meeting. >> and still high on the financials was part of what he was saying. >> particularly on wells fargo. he's not allowed to buy more shares of american express. when his stake goes up, it is because they buy back shares. >> my suggestion at the time, maybe he was rebalancing after a rise in the stock. that would be a reason. but that's obviously not what happened. >> i'm interested -- i find the mondelez stake interesting. only because -- >> it was in play. >> it is in play. >> and nelson peltz who is in there, trying to make the case that it needs to merge with pepsi. >> pepsi is like, forget it. >> they're saying talk to the hand. there is interesting things going on there. i think overall it is fair to say, you tell me, you're the buffett watcher on this, that he was not particularly happy with that -- >> i don't think he was thrilled with the mondelez spin-off. and with some of the other purchases that were made. he's talk ed about that on our air. i don't think we're putting words in his mouth. you look at what he said, he wasn't thrilled about it. >> how does -- can we put buff net c et in contact with ackman. he doesn't say anything -- i want to see a side by side comparison. >> i will try to channel and becky can probably correct me, i think if i like the business, i buy the business. if i don't like the business, i sell the business. i'm not trying to change the business. >> right. >> that's -- >> can i ask a question, though? with buffett, isn't there this 18% zone that he gets into. he's either, like, in the smaller zone or owning the company, does he go in there and say 18% and then kind of press for change like that? does he do that? >> i don't think so. i wouldn't call him an activist investor. >> no interest in changing. >> he'll buy the company, put in his own management or keep the management. >> he keeps the management. he buys companies with management teams. >> he only wants to buy if he likes the people. that's the whole game. if he likes you, and he likes what you're doing, he'll buy you. if he -- >> that doesn't make him right or wrong. ackman has a different strategy, a different approach. >> ackman believes he's going to create value by changing the company. warren believes he's -- >> by publicly announcing he's going to change. remember, that's the little twist there. >> i would also except for this, i think if you look -- for all of our talk about short-termism among the activists, which i do think is a problem, overall by owning shares longer actually than most -- >> they're not day traders. >> it is not literally go on tv, stock pops and settlement. that's in the exactly what is happening. you have to affect some form of change. >> has anybody -- >> usually by bringing in new manage. that's usually the way to go about it. >> but buffett doesn't call up the guys and say, you know what, guys, you're sitting on all this cash, we would like some of it back. >> i don't think that's his style at all. if he likes what you're doing, he'll buy your stock. if he doesn't, he's out. that's what andrew said. >> we will have more information as we go through the document, but, again, it is a process where you have to go through and add up line by line to see how these changes have gone in. it would surprise us in many cases to see massive changes in any of these stakes. and that's the latest that we have. steve? >> in global news, the death toll in egypt climbing to 421 million. the muslim brotherhood promising -- pledging to fight back. do we have yousuf gamal el-din? he's not available. he's bringing us terrific reports about the horrific situation there. i'm sure we'll have him on later and give us what is happening in that country. yesterday, he started bringing to us just early in the morning our time, of course, and gave us the first inkling of what was happening there. we were reporting numbers like 2025 and that's become much, much worse. >> we're going to go to beijing for now and then try to come back to the egypt story at some point. right now, china is known as the factory of the world, but consumers are becoming more savvy. many are now questioning the safety of counterfeit goods. eunice yoon joins us now with more on that story. good morning. >> good morning, guys. counterfeiting as you know is a major problem pour american companies like pfizer, time warner and apple. but now it looks as though there is a glimmer of hope that chinese consumers could force things to change for the better. >> wang hai is a crusader for the chinese consumer. he shrouds his identity. one way this investigator can track counterfeiters. fake crocs. after sniffing out fakes for nearly two decades, he finally feels consumers here are backing him up in the fight. people have a stronger sense to protect their rights against counterfeits, he says. china has long been the land of the fakes, famous for everything from bogus luxury handbags and watches to gadgets. but recent health scares involving food and iphone knockoffs are making consumers here think twice. >> translator: i don't think buying counterfeits should be the norm of our lives. we should boycott them. >> translator: i don't trust the quality and they're harmful to the genuine products. >> counterfeits have harmed international businesses for decades, with hundreds of billions of dollars in estimated losses every year. beijing says it is clamping down on violators, but to many companies, progress has been slow. this twice wine importer opened shops here more than two years ago. she's already dealt with one copycat and is pursuing another. >> so they copied our store, twice, already, from the price concept, from the wine descriptions, from the wine, sometimes even the uniform of our staff, everything is copied. >> investigator wang says the situation will only improve, if consumer are allowed to move from complaining to advocating the government enforce the law. otherwise, china will only be known for cheap low quality and unreliable products, he says, a reputation china wants to change. and having to deal with so many fakes is really feeding into the culture of mistrust here in china. and that's one of the reasons why a lot of people believe chinese consumers gravitate towards foreign branded goods. guys? >> okay. thank you, eunice. it is, you know, it is different than canal street. you can get all the same counterfeit goods. better counterfeits though. coming up, the state of the nation's electric grid. many warn it is more vulnerable than ever. that story and the investment implications next. we're on the anniversary of the big blackout, ten years ago. 50 million people left in the dark as we had that blackout. we'll talk about it when we come back. hey, it's me, progressive insurance. you know, from our 4,000 television commercials. yep, there i am with flo. hoo-hoo! watch it! [chuckles] anyhoo, 3 million people switched to me last year, saving an average of $475. [sigh] it feels good to help people save... with great discounts like safe driver, multicar, and multipolicy. so call me today. you'll be glad you did. cannonbox! [splash!] and you wouldn't have it any other way.e. but your erectile dysfunction - you know, that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. welcome back, everybody. if you're just waking up this morning, we have been combing through some of the 13 fs out there, berkshire hathaway. increased the stake in wells fargo by 1.1%. coca-cola and american express unchanged. incorrect headlines in there, still uncorrect stor incorrect reuters saying there are drops. it didn't make sense to us at the table when we saw the headlines. looking through some of those. coca-cola reported the stake was down 45%. coca-cola's stake is unchanged for berkshire hathaway. wells fargo, they said down 30%, this doesn't make sense to us either. wells fargo is up 1.1%. berkshire hathaway stake's in wells fargo, american express, reuters reporting it is down 13%, it is not, it is unchanged. there were some shifts if you look to kraft and mondelez, a drop. also decrease the share or the stake that berkshire hathaway holds in moodys, not a huge surprise. we'll look through some of the filings. >> we confirmed the dish thing yet? is that something we're still working on? >> i have not seen the dish numbers. >> i've seen it, it is on the sheet. i don't believe it was on there before. >> this is right. >> staff screaming across the newsroom. says berkshire has taken a stake in dish, a new stake. >> alex quip is looking through all the situations. dish is something i think that todd and ted had potentially looked at in the past. >> what i was going to say, so interesting, now looking at the filings, compared to before, a dish or technology company you normally look and go, really? but now that you have todd and ted there, we're working on this stuff, you can start to see they're making investments in things that maybe warren wouldn't necessarily. >> there were changes in the berkshire holdings when lou simpson retired. they closed out his position so they could start fresh. you saw some big moves coming through on some of these. a name like american express and coca-cola, wells fargo, those are buffett positions, long, long-term held stocks. that's not something you would expect to see any big changes in. >> we saw he sold kinect. >> that's confirmed. >> 1.7 million. >> which appeared to be -- >> i'm nervous now. i'm not saying anything until i get a thumbs up from alex. thumbs up on gannett? okay, that is accurate. >> he's taking other stakes in other newspaper companies. >> alex is the atlas upon the shoulders of who the entire network rests. >> we're going to talk about electricity now. ten years ago, 50 million people including myself were left in the dark, i don't know if you remember where you were, as a cas clading blackout crippled the northeast. and if you haven't seen it, go online there is online. there is an amazing video of carl quintanilla who did the report for the "today" show ten years ago, katie couric and lester holt hosting it, no electricity, standing, looks like he's ten years old, standing in the middle of times square, and it is pretty cool. anyway, so has the nation -- >> we have the greatest barbecue. >> on that day? >> what else could you do but take all the meat out of the freeze and -- >> cook it. we had 30 people over from our neighborhood who had nowhere else to go. we had the flashlights. >> we'll talk about where we are today. the question, of course, as the nation's power grid improved over the last decade and christie tezak, are we in any better of a position than we were ten years ago? >> i think we are. i think we have done a lot to change what we're putting into the grid in terms of having a better awareness of the system overall. and we have taken care of a lot of the low hanging fruit and now we're moving on to the high impact, low frequency events that keep people up at night, literally. >> when you say high frequency, low impact events, those are what, but what about the low -- the lhigh impact and low frequency events? >> those growing to be things like cybersecurity attacks or someone going off a transformer with a rifle like we saw in california or even these very incredibly big storms like dr h derrachios or hurricane sandy. >> i don't know if we're smart yet on the grid. how far are we away from that? and the security implications of a smart grid given cybersecurity. >> of course, as you know, as we go to a more modern grid, it comes with more modern problems. more advanced technology is going to require different systems and different levels of protection. but, you know, look at the end states we can achieve. if we're confident in mobile banking, i think it is realistic to expect at some point we can feel more confident about the digital protection that we're giving to the grid. but it is not free. it does require investment and money. >> talking about investment, why aren't we burying cables. why do we still have communities all across this country with cables in the air that seemed to be blown down by the wind and we're surprised by that. >> well, if you would like to pay ten times more for your electricity, we can underground absolutely everything. >> is that what the story -- ten times more. what about the ultimate cost of having -- of not having the kind of blackouts we have when we have storms? doesn't that save you money? >> well, it might, but it is an awfully long payback period to consider. you look at the fact that the doe just this week, you know, forecasted, we might lose 18 to about $33 billion a year in service interruptions, are you really willing to spend hundreds and hundreds of billions of dollars to avoid that? all at one time, and all together up front? it is a very, very big investment challenge. already utilities put about $55 billion into the grid over the next three years. this is a lot of money, and when you still feel the economy is not strong, when you're looking at a power system that is going to be changing where we're getting our changing, where we get you power supply that, stuff adds up. it's hard for regulators to see rate increases. >> i'm happy to know it's august, it's hot. not that hot. >> not that hot out east. >> it will be okay. it sound like we will be okay on that front. anyway, thank you, christy. >> coming up, i'm excited about this, joe's postcard from vacation. do you know where he is? >> i do. >> undisclosed. later, the news maker of the moin morning, i'm abouted about this cisco, ceo, john chambers, job cuts. john has explaining to do. he will join us at 8:45 a.m. eastern. right now, 7 years of music is being streamed. a quarter million tweeters are tweeting. and 900 million dollars are changing hands online. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this&is gonna be big. hp moonshot. it's time to build a better enterprise. together. and experience the connectivity of the available lexus enform, including the es and rx. ♪ this is the pursuit of perfection. ♪ always go the extra mile. to treat my low testosterone, i did my research. my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. ask your doctor about the only underarm low t treatment, axiron. golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection. 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. ♪ it's time to do everything better than before. the new blackberry q10. it's time. . >> welcome back to "squawk box," everybody. we have heard from the man, himself, via twitter. joe kernen's hair, that parody account was tweeting him, saying he loves his vacation. well, joe wrote back. here's what he sent in. the hair does love vacation. here's a picture and, yeah, we're not going to tell you where it is. an undisclosed location. there is a beach. and he sent another tweet that says hair magesty and pongo. yeah, that's right. >> trying to stay out of the sun. >> not much surf there on that beach. can we get the picture back up? i will see if i can do it. the second one, you can see his shadow. okay. >> the picture of penelope? >> that's pretty much noon. you can't tell. i was thinking, is that an east facing beach or a west facing beach? >> i know the answers. so i'll zip it. >> i will say like gulf of mexico kind of thing. is that your face? >> you know, there is a lot of stalkers out there. we got to protect the -- >> the hair? >> the hair, exactly. >> all right. coming up, we will have more on berkshire hathaway filings. oil prices are extending their gains. we are coming back with a big two hours in just a moment. okay, listen up! i'm re-workin' the menu. mayo? corn dogs? you are so outta here! aah! [ female announcer ] the complete balanced nutrition of great-tasting ensure. 24 vitamins and minerals, antioxidants, and 9 grams of protein. [ bottle ] ensure®. nutrition in charge™. but when it comes to investing, i just think it's better to work with someone. someone you feel you can really partner with. unfortunately, i've found that some brokerage firms don't always encourage that kind of relationship. that's why i stopped working at the old brokerage, and started working for charles schwab. avo: what kind of financial consultant are you looking for? talk to us today. >> good morning, welcome to "squawk box." we're going to take a look at futures, see how markets are setting themselves up for the day t. dow looks like it will open off right now t. nasdaq off about 22 points. the s&p 500 off about 7.5 points. let's get you caught up on the morning headlines. before the open, we will be getting initial jobless claims the producer price index the empire state index and shortly after the opening bell, we will get the latest home builder sentiment numbers and the philadelphia fed index will be out. lots to chew on. also, talks between china mobile and apple. they are apparently progressing smoothly. that's according to chairman, both sides said to be hopeful about reaching a deal, china mobile the largest carrier, doesn't yet actually offer apple's iphones to its subdescribesu subscribers. home possessions fell 31% in july. at that price the year's foreclosures would together 490,000, down 27% from last year the lowest since 2007. some of the world most powerful investors revealing their latest bets with filings. berkshire hathaway relateing its latest moves. berkshire increasing its share holdings by 1.1%. this is something we have talked a lot about in the past. wells fargo has been a favorite of his. he has continued to add to that stake. berkshire hathaway sold most of its stakes in the two descend ants of the kraft foods, probably not a surprise that, stake dropped by about 88%. again, that is something buffet has been clear when we asked until in the past what he thought about that spin-off and some of the other things that have been there. in the past, buffet has made critical comments about the management sometime of irene rosenfield the ceo of the old staff and mondolez. the company atco ka cola has taken a new stake at dish network. berkshire raised its stake in gannett. before this, it had 1.7 million shares at gannett. bill ackman's pershing square, has a new stake. that's something we reported on air as well t. firm resolved its stake. green horn capital cut its stake in christi in cigna. also, dan loeb's third point, dissolve stakes in hess, spider gold, delta automotive and abbvie. >> okay. real quick, check it out, by the way, walmart reporting g2 eps $1.34. they're adding $2.7 billion in net new sales. we can go through this. becky. why don't you take a quick look? i will give you a little j.p. morgan news. the executives who supervised the traders at the london whale scan dan reportedly unlikely to face charges. yesterday they brought criminal charges against two former traders. they make passing references to the former bosses. chief investment officer, the top former executive, achilles macris are mentioned by name. they says they put pressure, though, on subordinates at one point to deal with the high degree risk taken on the portfolios of derivative trades that led to those losses. again, we go back to this issue, if you will charge the underlings with fraud, it's hard to charge the supervisors with fraud because os sensibly you have defrauded the supervisors. that's what's going on in that story. we come back to walmart for a second. >> the earnings came in at $1.24. a penny light of what the streeted a been expected. they talked about net sales, we're up 2.4%. if you take a look, i'm looking through right now, of revenue, it came in the at $116.9 billion. the street was looking for $1 fifteen 18.4. >> becky, i think the headline here, let me read this right, updating forecast for net sales to grow between 2 and 3% for the fullier vs. a previous range of 5 to 6%. >> that will come down big. >> if i have that right. >> for the current quarter, 1.25 is the excise number. >> if line. >> for the full 84, we are updating our guidance range between 5.10 and 0.30. is lower than the previous range which was 5.20 to 5.40. if you look at the street, steve, are you right, it will be the number of the guidance for the full year the street is looking at. the street was at $5.30 a share. the street was in the mid-point it is lowering. the next two quarters will be better than the first half. but a bit like praise perhaps. >> the big thing is the guidance. the guidance takes into account challenging sales and operating environment. they are talking about trouble they had with the entire environment. this is something we had heard from several retailsers. they say in the past, discreet tax items had a meaningful effect and the fiscal years, yeah, so they're now looking at a wider range of between 31 and 33%, it's possible for the full year, vs. the pleef range of 32 to 33%. they're getting perhaps an improvement on the tax rate, it's a challengings sales and operating environment they are talking about that will be effective. >> they are echoing comments. i forget who we reported yesterday, macy's saying of the calgarying consumer environment, saying the 2% continues to impact our customers. that has always been an issue out there and also i didn't see where that international, becky, did you see how they did on that? >> the tax issues. the companies, at lowest they're claiming, it's the new problem for why they're having pro bs. >> consumers in mature and emerging markets curb their spending. >> that's from the walmart international president and ceo. he is saying the international markets, growth and consumer spending is under pressure there. this is not a u.s. story, it's an international story as well for walmart. it tells you about the current climate. every time you think things are going strong, it's similar to what we heard from cisco yesterday, we heard about the uncertain situations they have seen in terms of what to expect from asia. >> and the question is to the extent this is in the rear view my roar or yet ocome? >> it sounds like yet to come if they are talking about the full year. they met expectations per quarter. if you are lowering your guidance, you expect the 2nd half will be different as well. >> andrew was saying, we expected this to have happened. the second quarter was the one with the biggest hit. >> right. >> from a great of change standpoint. >> very quickly at walmart shares, that's a dow component. will affect the dow futures today. it closed at 76.40, down by about $2 this morning. take a look. >> let's move from that story. be i the way, we have an analyst on walmart in a bit. we will get to these details and physical out what is going on with the stock. more violence in egypt, protesters clash, the u.s. condemning the crackdown, the egyptian health ministry saying this is a new number for me. 500 people are dead out there. joining us, jan our man on the ground in cairo. good afternoon. >> reporter: good to see you, steve. i can confirm that number from the ministry of health. 525 people have died in the last 36 hours or so since the security forces decided to disperse the two protest camps. now, the injuries am to some close to 4,000 people were injured. the accounts from the muslim brotherhood claim the toll is much, much higher. we expect the number to generally rise as we get a proper sense of the scale of the violence that we saw in the last day. now, the muslim brotherhood is not giving up. they're planning more march, standing by the president. they are calling on their supporters to march and battle the police, they crittize what happened they are calling a pass kerr, unpolice dented scale of violence on what they were claiming were maesful demonstrations, the vice president has resigned in protest. mohammed el-barradei, a well known physical. he said he could not stand by and watch owl of this happening. a state of emergency is in place. a curfew is happening every day from 7:00 p.m. to 6:00 a.m. that gives you a sense as well of how much the security acquisition i situation deteriorated. to take these unprecedented steps. is what they are hoping will happen they will share with you a research note. they are saying that there are fears of civil war looming now in egypt, it will be extremely difficult for the government to find support after the scale of violence and you are e'ing this reflected in some of the credit, the five-84 cost of insureing egyptian sovereign debt, that went up 30 basis points to 800 basis points and the international condemnation adds pressure to the interim government. there is a lot of trepidation in the air here in downtown cairo. the scene behind me is a cairo that is very quiet. this is a city of some 25 million people. it's usually jam packed and a lot of traffic jams. this is not the case now. it gives you also an idea of how worried people are of what's to come in the next few hours and in the next few days. andrew. >> okay. thank you for that report. we will be coming back to you with continuing coverage. joining us now to talk about egypt, the global economy animatet miller, ombc adviser and columnist for the washington post. it's great to have you to help us make sense of this. the question i have, maybe it's just such a myoptic view of the united states, what is the president supposed to do with all this? >> it's a question, because we mid-wived the coup they had. we were basically in the ticking to pieces you saw at the time the military took over to restore democracy, we were involved. we helped usher in the change. we keen of legitimized it by not calling it a coup so military aid could continue to flow. we bankrupted the military billions of dollars. >> is it kerry or mccain? i have seen some. >> mccain may have. i don't think perry has. official policy can't be it's a coup or we have to cut off aid. so our hands aren't really clean in this. now we got this terrible mess. i'm not saying it's easy. be you the idea, you know, in retrospect, could we have been patient and let the brotherhood folded out two years from now? >> that's the history. what do we do now? do we have a role? if we do, what is it supposed to be? >> i think we have no credibility now when it comes to the actual street. we have little credibility when it comes to honoring democrat ec processes, i wish i had a dictator answer to what to do here. >> matt, i have to say, there was the thought if we get voted out in two years, but there were real concerns on the street that they were moving, mursi was moving to try to take away the position of ever having a legitimate vote again, of taking down structures. the idea of a one vote, one time, you vote once, then we're never going to do this again. >> look, it's hard to know that in retrospect. we got nothing but bad options. but the idea that we were on the side of the military coup makes it hard for us to have credibility in the region. >> you took something out of the 1950s the cia backing, something in latin america. >> americans don't understand why we're not perceived as the benevolent force abroad, you know. >> i get that. i also don't foe what becky suggests what good options the administration has. >> i agree. i'm not here with the miller plan for how we should move forward. it's a very difficult situation. >> does the united states have to play a role in this. >> i think we have to somehow, you got israel and egyptian relations at stake. if egypt, which is the major power in the region with 70 million people implodes into a civil war. it's another big mess on top of the steering mess. >> is there any effect on that, what's happening next door with the peace talks between the israelis and the palestinians? >> i'm sure we'll have some kind of ripple effect. you talk about violence in the sinai now. you have uncontrolled areas under egyptian control, sources of violence, essential terror, if they lose, if there is a full scale civil war that breaks out in egypt, we got a total mess. >> tell me what that mess means. best case, worst case scenario. >> the best case is somehow cooler heads prevail. maybe john kerry, who seems to be, you know, on the world stage, having better luck than his predecessor, in getting people to the table, find some way to call off the extremists in both side. we come to some mod us mod us-operandi. >> matt will be here. we will talk about the global economy. stay with you are. >> this is a big news morning. walmart miss, we have moves by berkshire hathaway, criminal charges against j.p. morgan. follow us on twitter at "squawk" cnbc is our hand him. at least good music. up next the dow is suffering its first triple digit decline since june. it could be in the offing for september. the fed's b jim bullard says there is a chance as we head to brake. here are the futures right now. [ male announcer ] come to the golden opportunity sales event to experience the precision handling of the lexus performance vehicles, including the gs and all-new is. ♪ this is the pursuit of perfection. >> welcome back, eb, warren buffet's berkshire hathaway releasing the filing in ten minutes or so. wells fargo, we are going over this again, there are a lot of erroneous reports out there on the wire, it started at reuters. we mentioned some of the headlines before we corrected ourselves. we looked at it, they are reporting massive declines in buffet's long standing stakes. they said he cut his wells fargo steak by 30%. is not the case. wells fargo remains bun u one of buffet's investments. they increased their holdings. is not a surprise, if you follow his investing style, he buys into companies, holds on to them for a long time, meaning forever. by the way, wells fargo says he has been increasing his stake in the latest filing. berkshire hathaway selling most of its stakes in the two descend ants of kraft foods, monelez, they have made criticism about the management style of the ceo of the old kraft. so again the stake there developing by about 88%, probably not a surprise. if you havet's stakes in coca-cola and american express, which earlier, there had been reports on reuters they were dropping by 13% on amex. is not true. there was a report that his stake in coca-cola was down by 45%. that is not true. again, these comments haven't been corrected on the other wires. >> they have corrected it following us, just for the record. >> other things we should point out, there is a new stake in dish network t. dish network stake, you might look at it and think that is a surprising investment for warren buffet. >> they made investments in direct tv if i remember historically. >> historically. so that's probably not a surprise if you have been following what todd and ted have been doing to see these new stakes that have come out. >> it's interesting to see them go at the satellite providers, not the cable operators, though. >> both dish. the distinction there, given that i believe the cable operators lately have outperformed the satellite providers, there is still a big question mark over what satellite ultimately looks like. >> particularly at the cable companies, it's been the internet connection. >> what's your thinking? there is a cash flow, becky? is there any sense? >> they told me the method behind it. >> give us a call. >> we'd love to hear from you. calm us. berkshire, by the way, upped its stake by 60%. it sold its stake in gannett. they had shares at stake. that's been sold, i think if you look through moody's, it stole additional shares, which they talked about before. he has been selling it for a while. >> coming up, you've heard the phrase chicken of the sea, it's making me think of jessica simpson, be i the way, remember that reality show? but have you heard of tur duncan of the sea. the image is unreal. it's right after the break. then legalizes pot is one thing. regulating it is another. jane wells is in denver's green mile in a grow house doing god knows what, hopefully getting ready to tell us the challenges the lawmakers are facing when it comes to smoking up, "squawk box" is coming back with that and a lot more. a great read there. thank you. oh, he's a fighter alright. since aflac is helping with his expenses while he can't work, he can focus on his recovery. he doesn't have to worry so much about his mortgage, groceries, or even gas bills. kick! kick... feel it! feel it! feel it! nice work! ♪ you got it! you got it! yes! aflac's gonna help take care of his expenses. and us...we're gonna get him back in fighting shape. ♪ [ male announcer ] see what's happening behind the scenes at aflac.com. [ male announcer ] see what's happening behind the scenes in a we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant, we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because the future belongs to those who challenge the present. i've been doing a few things for playing this and trading.ove-- tdd#: 1-800-345-2550 and the better i am at them, the more i enjoy them. tdd#: 1-800-345-2550 so i'm always looking to take them up a notch or two. tdd#: 1-800-345-2550 and schwab really helps me step up my trading. tdd#: 1-800-345-2550 they've now put their most powerful platform, tdd#: 1-800-345-2550 streetsmart edge, in the cloud. tdd#: 1-800-345-2550 so i can use it on the web, where i trade from tdd#: 1-800-345-2550 most of the time. tdd#: 1-800-345-2550 which means i get schwab's most advanced tools tdd#: 1-800-345-2550 on whatever computer i'm on. tdd#: 1-800-345-2550 it's really taken my trading to the next level. tdd#: 1-800-345-2550 i've also got a dedicated team of schwab trading specialists. tdd#: 1-800-345-2550 they helped me set up my platform the way i wanted, tdd#: 1-800-345-2550 from the comfort of my home. tdd#: 1-800-345-2550 and we talked about ideas and strategies, one on one! tdd#: 1-800-345-2550 really gave my trading a boost. tdd#: 1-800-345-2550 all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 after all, i'm in this to win, right? tdd#: 1-800-345-2550 open a schwab account and learn how you can earn up to 300 tdd#: 1-800-345-2550 commission-free online trades for 6 months tdd#: 1-800-345-2550 with qualifying net deposits. tdd#: 1-800-345-2550 call 1-888-254-2600 today. tdd#: 1-800-345-2550 . >> it's been called the tur ducken of the sea. they're trying to get a sand shark. instead it's a dog fish. it's a small shark about 3-feet long, a nuisance. here's where it gets interesting. reeling it in, it was attacked and swallowed by a much larger sand tiger shark the fish was at least unharmed, but look at that. what do you think? >> i'm trying to figure out what that would be named? >> it's a tiger shark swallowing a san shark. nice. >> to the a turducken. >> it's a tiger, whatever. anyway, you were hoping you don't make the daily show on that one, aren't you? >> thank you for remaining the writers will. >> the daily show could pick that up, they could, never mine. when we come back, we will have some reaction to walmart earnings. the company reporting a short time ago. we will find out what the nation's retailer is saying about the state of the economy. here's a hint. it's not good. we will find out what analysts are saying about this stock. take a look at walmartment lit have an impact on the dow futures today. we are over an hour away from our special interview with cisco, ceo john chambers at 8:40 a.m. eastern time. "squawk box" will be right back. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ . >> welcome back to "squawk box" this morning. in the headlines, warren buffet's berkshire hathaway upped its stake in wells fargo, that filing show agnew stake in dish network. a vastly increased state in general motors and sales of most of berkshire's holdings. they sold down kraft group and mondelez, we'll say it again, there are erroneous reports he cut his stake in wells fargo, cut his stake in american express, those reports are not correct. >> they're correcting them now. we see our view, which is based on the numbers. it's correct. >> we are also an hour away from the latest consumer price index. jobless claim reports. the cpi is seen increasing .2 of july. initial claims last week, they're expected to remain unchanged. dow component cisco systems cutting 4,000 jobs, it gives a revenue forecast this quarter, it was much weaker than wall street had expected. we will ask ceo john chambers when he joins us as our special guest in the next hour right here on "squawk box." the dow suffering its first triple digit decline since june yesterday. john lynch is regional chief investment officer. on set with us is the asset management, j.p. morgan asset management global market strategist. joe, thank you for being here with us. guys, great to see both of you. i want to start out, joe, talking about where you think the parks are right now. because we see a triple denl it decline, it's suddenly big news, it's not something we see very often. >> look at what's happening on the markets over the past few months. you seen the rally moving higher and higher. looking at valuation, it should seem clear we are hovering in line with our ten year average. you have to look at a 15-year average to make the arguments that stocks are cheap. i would argue directionally, markets continue to move higher. if you look at any valuation metric out there, it doesn't hit average and all of a sudden capitulate. you have to ask yourself, what is that catalyst that pulls markets back or what might happen in consumer sentiment happens over the next few years. >> you looked a sentiment today with walmart. it's a stunner. it's the giant. it makes up 10% of retail sales in the united states. they say they're having a tough operating environment and they're concerned about the consumer, not only here, but around the globe. does that make you rethink any of this and give you cause for concern? >> i think it gives me cause for concern. in particular, one thing you mentioned was exposure vs. the consumer abroad, for example. you have to think selectively how you allocate your capital in the u.s.. >> they said things stink around the globe. >> i think we are muddleing through at the margin, if i say what's going on in the emerging markets, i would hold more conviction of things improving here. >> cisco was the same. they said north america an northern europe were okay and asia was lousy and peripheral europe. >> a lot of what is going on in china. china is the big elephant. you are talking roughly one-quarter of global economic growth. given the focus right now on the quality of growth, rather than the quantity of growth. you have to consider the impact. >> the us consumer walmart was concerned about, too, there is not a strong consumer, necessarily, at least from what they're saying. >> let's be clear, we're not jumping up and down things are perfect. things are improving, they're not fantastic. things are improving, we still have a long ways to go. >> there is still 20 million people who want full-time work who can't find it. >> that's a telling statistic. >> that's a big deal. >> that tells you an awful lot of where things stand. john, how about you? is it a fair valuation for what's going on? >> i think from a valuation standpoint, multiples are starting to get closer to averages. i encourage all investors to focus on valuation or p.e.s relative to earnings and interest rates. i think as long as you don't look at p.e.s myopically and look at the short curve, we will get another favorable indicator this morning it would appear, i still think upside over the next 12, 15 months, we got about 10 or 12%. what we've seen the last few days is there is some trepidation, i don't want it's the devil's workshop, right, when you consider low volume, lower confidence in the most recent few days. i think a lot of people are worried about debt ceiling debate, fiscal budget. we are starting to re-assess. >> there was an article in the "wall street journal." this was a column, he said that based on one valuation model that has a very impressive record, he looks at stocks and says they could be at their most overvalued since 2007, does that sit right with you, joen? >> no, it doesn't, i did see the report, again, i think the most important thing, can you look at so many valuation metric, fed model, things really change when the fed quadrupled its balance sheet, the government was spending a deficit of output. so that's really altered things. you can use the rule of 20, which would suggest we have an 18.5 p.e. i wouldn't be comfortable with a p.e. along that range. if you look at 16.7 times number which we're looking for calendar 2014, 113, 114 the streets may be 122. we're a little more conservative in the street, you can get to 18.50, 1,900 relatively. >> 1850 to 1,900 over what period? >> year end 2014. >> okay. question for you. we were talking about dave rosenberg, i don't know if you saw this in the 6:00 hour, a few report, he's a deflation guy, he's about to say we're about to have run away inflation, that's where this is going, directionally. he recently e-mailed me during the show, i had suggested that he was in this camp earlier. he says this is a new move for him, if you want to correct that. do you think he's right? terms of heading down the road of deflation? >> inflation. >> inflation. >> no, he's saying this is the tipping point he's claiming the deflation camp was too crowded, now he's sort of switching camps. >> you know, i would agree, i don't think deflation is in the cards, at least not in the near term, why take a look at what's happening in the u.s., we talked about things are improving. it's a great deal of slafk. it's hard to imagine sustainable pressure without a lot of wage pressure. look. one day down the road as a result of what the fed has done, is it possible we end up with these inflationary pressures controlled. i think anything is possible. can you make that argument. this is pressing monetary policy. as far as in the next few years, i have a hard time wrapping my hands around that. >> can i talk mortgages? it's changing the outlook now. they are up about 80, 100 basis points, 3.6%, where are they going? what's the impact? >> well, the mortgages all of a sudden, we've seen this 100 basis point move in the ten year, so you may say actually more people trying to get in. it's almost like people chasing a rising stockmarket, right? they don't want to be the last one in. from a housing standpoint, we've seen job growth, to joe's point about inflation, i think it's very important to the keep in mind, while we may have seen home prices up 12% year over year, sales 10% year over year, the jobs we're creating are largely part time, so consequently, you are not going to see the sustainable intranslationary threat. i'm fascinated that rosenberg has made the switch. to some degree, it can be argued that joe bullard made the switch. he was one of the few fed members talking about deflation. i think from a standpoint on the recent jump in housing, i'm not sure the demand will be there to push, to push it significantly higher. >> all right. john, joe, gentleman, thank you very much for joining us. again, matt miller is with us. why don't we talk a little more about walmart? the numbers out a few moments ago. joining us with reaction is a retail analyst at j.p. morgan. chris irks it's not the numbers for the corner concerning people on the street. it's the guidance for the full year. the company saying it is looking at earnings of $5.30 for the full 84. that is below the earlier guidance the high end is right where the street is at 5.30. does the come as a big surprise to you? >> we're not surprised that they missed on sales and they're guiding down. we alluded to that, there was risk to the comps. if you peel back that number, they actually lowered their tax rate for the year. so to really guiding the street down about 15 cents, about 3% overall, which for a company like walmart, who is almost two-thirds consumables, that 3% is a significant number. >> yeah, that 3% is a significant number. if you take look at what they're saying about the consumer, that might be more concerning. not only here in the united states but around the globe. are we having a tougher recovery tan we expected? can we read more into this than walmart specific? >> i think there are three key pressure points on their sales right now. obviously, the 2% tax increase is only about 2 poeven 8% and that low enconsumer tends to spend in line. is being mitigated with payroll tax increase. the second thing that's really pressureing their sales is inflation. they are about 55% growth rate and to the previous conversation, you are not seeing any inflation versus a year ago, you might have been seeing 100 basis points, that's pressuring their top lean as well and i think the final thing is, to the mid to high en, will is the shift of spending. will is a share of wallet shift back to the durable goods, we're seeing better home spending. >> chris, i want to interrupt you, we had a bit of discussion about inflation. you are saying there is no food inflation. so wal part can't raise its prices and increase its margins in the food business, the food margins are coming down. is that what are you saying? >> essentially that, yeah. you are seeing, they can't raise their prices, so you are not e'ing it in total toppleing growth. mitigates the leverage on the fixed cost structure. >> i was saying, somebody was saying something different. i don't remember what it was. >> i remember what it was. >> somebody was saying something completely different. >> a guy at 78:30? >> i'm not saying what he was sayle. let's move on. >> chris, let me ask you again, though, what does this mean about walmart specifically? what do you do with the stock here and what do you think apt their competitors in this arena? >> yeah, i think as you look at the stock, we have a $75 price tarpth for december. so essentially, we're seeing it's that fair value. we have downgraded the stock from overweight to neutral at 71 back in february on a number of these risks. it seems playing out. i think you have to look across the spectrum and think about a company like target. target's average income is about 60,000. national average is about 50. they have a good swath, their customer base is going to be impacted by the taim same payroll tax precious and they've invested in the grocery business, they have become more of a leveraged play as well. >> chris, thank you so much. good talking to you. >> thank you. coming up, real time mobile advertising. that's the business of act savvy, the company's founder joins us to discuss how they're disrupting the world of online ads. first the business of recreational pot. why did i get this read? cnbc's jane wells is joining us with a preview. >> reporter: stheev, this bud's for you, as washington state and colorado ran situation to selling recreational pot legally, it's one thing to vote for. it's another thing to make it happen. the challenges if reaching for the pot of gold when we come back. ♪ right now, 7 years of music is being streamed. a quarter million tweeters are tweeting. and 900 million dollars are changing hands online. that's why hp built a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this&is gonna be big. hp moonshot. it's time to build a better enterprise. together. my mantra? trust your instincts to make the call. to treat my low testosterone, my doctor and i went with axiron, the only underarm low t treatment. axiron can restore t levels to normal in about 2 weeks in most men. axiron is not for use in women or anyone younger than 18 or men with prostate or breast cancer. women, especially those who are or who may become pregnant and children should avoid contact where axiron is applied as unexpected signs of puberty in children or changes in body hair or increased acne in women may occur. report these symptoms to your doctor. tell your doctor about all medical conditions and medications. serious side effects could include increased risk of prostate cancer; worsening prostate symptoms; decreased sperm count; ankle, feet or body swelling; enlarged or painful breasts; problems breathing while sleeping; and blood clots in the legs. common side effects include skin redness or irritation where applied, increased red blood cell count, headache, diarrhea, vomiting, and increase in psa. ask your doctor about the only underarm low t treatment, axiron. . >> you are listening to the grateful dead. colorado wants to regulate pot. each state is taking a different regulatory approach and there's only one person that can do this story for us. cnbc's jane wells made it to broadsterdam, denver's pot center. somewhere in there is jane wells. >> is she kidding? >> reporter: steve, i'm not sure why you think i was the right person to do this. welcome to the mile high city. this is a greenhouse. this is legal cannabis. growing recreational pot is still illegal, but it's coming. however, it has taken a while to physical out how to do that. in the meantime, can you smoke 'em if you got them. we have video for you. if you are over 21, only have as much as an ounce and they're not using it in public spaces, but there are some differences, by the way, in colorado, can you grow some of your own in limited amounts. it turns out, though, nothing has been easy enacting these new laws. while colorado hospitals to take licenses to produce recreational pot in october, walk may not have rules ready until mid-november, while recreational pot could be sold in january in colorado, it could be next spring in washington. while colorado is gearing up for outsiders to come in and buy, washington is actually limiting recreational pot production to just what its own residents need to avoid creating an export economy. . >> we have to determine what the production level needs to be in the state to meet the needs of those over 21 an from there, we have to create a model for how many producers do you need, how many processors and retailers to meet that production limit. typically, you don't have to limit that marketplace to start it, which is what we are being asked to do here. >> friday is one of our most popular days. >> i wonder why. >> a medical pot disspencery in seattle, he hopes to go into recreational sales. the biggest concern is whether they can be operated through bank account and not all cash which is dangerous. he had one bank account shut down. >> how else are we going to do sfwhs they want to make this tax money in colorado, they got to give us some banking. >> colorado has got an jump in one area. you see it at river rock, they have established a system to track the property from seed-to-sale. this is very important to the make sure everyone along the way is licensed and keep the fed itself at bay. although, who knows. there are some kinks that need to be worked out. >> the most discouraging thing about the new law is that we still don't know a couple of the things having to do with packageing. it's very hard to get ready for adult use which is nearly five months away from having all the data points of what's expected. >> reporter: okay. now, everyone thinks eventually it will work out. even though this all remains completely illegal on the federal level and the justice department has given neither state any clue on how they're going to react. later on "squawk" on the street, what are the different tax systems each state is use something how much do they hope to raise? what is the rick they tax it so much it defeats the purpose of legalizing, guys. >> is there a product demo coming? we're a morning show. usually that, i have cooking, they took the product, then they eat the product. what's your plan? >> my plan is i'm a reporter and i into ed to keep all my faculties good to go here and i would send you some, but then i would get arrested. >> jane what do the mexicans think about this? >> they don't like it one bit. one of the goals we have read, according to authorities is because the mexican drug cartel, i read they get as much as half of their profits from the pot business in the u.s. what they may try to do is sell a cheap product. they'll be the illegal walmart of pot and that i probably shouldn't say, i'm not disparaging walmart in anyway. they will be this low price leader. but the argument for taxing it and regulating it is, you know what you got, it's going to say on the packaging how much is in there. you know it's been -- >> this is the walter white of -- >> we got to go. we make fun of this story, it's a very serious business story. it's an international stoempl it's a taxation story. and it's a great business story about how these ents (knew, which is what they are, deal with this new emerging regulation. >> you will hear from them later. >> it's a fascinating story. >> it is. >> and i didn't think i'd be around for this to happen. >> we got to go. >> thanks, indiana. >> you never thought you'd see the day is there that we're talking about legal drugs on tv? >> it was the dumbest things we did in the '70s, these draconian drug law, people rot income jail for no reason. >> when we come back, they have been named the worst places in new york city. we will find out how abbvie is disrupting ads. check out the futures this morning. after the news from walmart, the futures took a decidedly turn for the worse. s&p futures off by about 10. by the way, jobless claims in july cpi, those numbers are just ahead. stick around, "squawk box" will be right back. when we made our commitment to the gulf, bp had two big goals: help the gulf recover and learn from what happened so we could be a better, safer energy company. i can tell you - safety is at the heart of everything we do. we've added cutting-edge technology, like a new deepwater well cap and a state-of-the-art monitoring center, where experts watch over all drilling activity twenty-four-seven. and we're sharing what we've learned, so we can all produce energy more safely. our commitment has never been stronger. . >> welcome back to "squawk box." today we have a disruptor who wants to define how we view advertisements. chris cunningham is the co-founder and ceo of act savvy. thank you for being here. >> thank you for having me. >> explain this him when i go online, for the most part, i don't really look at the ads that often. within i do, i rarely click on them. what's my problem? >> the perfect tf. >> i'm trying to tf. that was the goal. it was a softball. >> yes, thank you for this so early in the morning. that's been the problem for the last 20 years in digital advertising. we've seen purely no pure innovation in how and when ads get delivered. generally, it's a page litter impression. ads get delivered, but will is no context to why you received that ad. that's why there is a massive problem with online advertising, as far as the performance:ic the rate, viewability. so the problem is that we haven't actually understood how and what -- >> what do you guys do about it? >> we go to a publisher. we understand what people are doing. people are commenting on skwaux book. people are sharing their fate show that you guys produce here. those are native activities on your show. we would then find the timing to deliver an ad for an american express or coca-cola at a logical time that's not prebut potentially mid or post. so we call them natural breaks. >> is it all about the timing or the size and scale of what the ads look like. now you see the page, the full ad, they go back up. is that what are you doing? >> good questions. i'd say it's more of the former. more about timing and context. those are the two biggest elements that have been missing in digital advertising since the conception. it's when to deliver a message. can you have all the data on a consumer that you wish. if you don't have the timing, you are missing the point. >> the if you don't make me read it before we go in, you are not catching. >> it's perfect in the sense, it's still advertising, right? we have to understand there is always a form of brand advertising where we are. but if users are generally more receptive to advertising, you give them context to say, thank you for visiting us, "squawk box," have a nice day, a word from our friends at american express. so it's on your way out. we call them natural breaks, it's no different than finding a 30-second spots on television. but it's not going to work in an online experience when you put ads adjacent to your reading content here. you see ads to the top of the fold. it doesn't make any sense. >> are you guys going to raise cpms over time with this? one of the big problems is online advertising is not as valuable as the print ads and the other stuff the washington post, all the things that goen, as they shift eyeballs, you can't get the value. >> 100%. so predominantly, there has been such a glut of supply created in our industry, the value of online advertising has sort of fallen, right? outside of search, with i is about 42% of what spend is today, ecpms can raise assumeing 2 points, one that more people are actually performing or interacting with the ads and, number two, to earn your question, are they larger, buechel and more effective. from our standpoint, our network the publishers, advertisers we work with we have much higher cpms in industry. ultimately to scale, we want to give our platform to larger publishers that can often use our technology. >> chris, thank you for coming here. >> thanks for having us. >> before we go. we have a minute more. we had you a full hour. we haven't gotten enough out of you. this one second, you did a piece the big mac statesmanship. it was awesome. i thought it was a fascinating issue. i don't know if i agree with you. expla into the audience what that issue was about. i think it's an interesting issue. >> you have all these fast food strikes, people are protesting, federal minimum wage 9-$10 an hour, the hamburger flippers aren't just teenagers, they're people that lost their jobs. i think we need to make in person service sector work, a path to the middle class. these jobs, retail sales, home health care, fast food jobs can't be offshored. there is about 30 million of them. >> realistically, what went wrong? >> well, they used to be stepping stones. >> mcdonald's used to be the training grounds for so many things. >> they're training grounds, they're still, it's a teeny fraction of folks who get upward mobility to get into management. >> is that a new reality. >> we have to say, 130 million jobs out of 150 million jobs, as we try as a nation to say let's figure out how to make this more viable. that's an important thing for the company. >> if we raise those salaries, how do you billion competitive? >> it's a big question. >> thank you for coming back. >> it's a greater thatry, when we come back, we have key jobless claims, a first interview with the ceo of cisco john chambers. the picture has gotten decidedly weaker than where we started this morning. right now you see the dow futures down 86 points. s&p futures up by 10. "squawk box" will be right back. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550 then schwab is the place to trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550 learn how you can earn up to 300 commission-free online trades tdd#: 1-800-345-2550 for six months with qualifying net deposits. tdd#: 1-800-345-2550 see how easy and intuitive it is to use tdd#: 1-800-345-2550 our most powerful platform, streetsmart edge. tdd#: 1-800-345-2550 we put it in the cloud so you can use it on the web. tdd#: 1-800-345-2550 and trade with our most advanced tools tdd#: 1-800-345-2550 on whatever computer you're on. tdd#: 1-800-345-2550 also, get a dedicated team of schwab trading specialists tdd#: 1-800-345-2550 who will help you customize your platform tdd#: 1-800-345-2550 even from the comfort of your home. tdd#: 1-800-345-2550 and talk about ideas and strategies, one on one. tdd#: 1-800-345-2550 get all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading tdd#: 1-800-345-2550 to open an account. tdd#: 1-800-345-2550 and learn how you can earn up to 300 commission-free tdd#: 1-800-345-2550 online trades for six months with qualifying net deposits. tdd#: 1-800-345-2550 our trading specialists are waiting to help you get started. tdd#: 1-800-345-2550 so call now. tdd#: 1-800-345-2550 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. ♪ it's time to do everything better than before. the new blackberry q10. it's time. . >> our guest host for the hour, president and ceo of the aspen institute. >> so where you headed? >>s . >> aspen. >> hmm, catch, beautiful. >> ceo john chambers is joining us first on cnbc. >> inflation and employment, breaking economic data. . >> july cpi and weekly jobless picks hitting the tape at 8:30 a.m. eastern, the third hour of "squawk box" beginning right now. ♪ >> welcome back. good morning again, everybody, i'm becky quick, andrew ross sorkin in for joe. most powerful investors revealing their latest bets. warren buffet, berkshire hathaway numbers in the last two hours or so. wells fargo remains one of buffet's favorite investments, we are making a big deal about the because there has been some confusion with alternate reports out there. these sec filings are not easy to go through. you can easily go through the wrong number, you literally have to go line-by-line. there were reports he dropped his stake in wells peshmerga by 30%. that is not the stablg. it increased the stake by 1.1%. the company also sold most of its stake in the two descend ants of the former kraft foods, mondelez international. dropped 88%. probably not a surprise if you have been watching what buffet had to say about them in the past. buffet made critical comments of the irene rosen field, who was the ceo of the old krovt kraft and currently ceo at mondolez. we were talking about this, coca-cola and american express, berkshire's stake is unchanged in both of those positions. there were headlines earlier about a decline there of 13% for american express and 45% for coca-cola. not the case if you are a long-time buffet watcher you know these are stakes and stocks he buys, when he buy, he buys forever. is certainly the case here t. company, berkshire hathaway has taken a new stake in dish network. you might attribute this to ty combs and dick wechslor. i think it was todd and ted who had each taken stakes in that. berkshire upping its stake in general motors 60% and selling its stakes in gannett. i used to hold shares. not so today. >> it went from a newspaper company to being a broadcaster in recent months. >> i want to underscore what i'm learning here, that buffet comes on, he talks to you. >> to all of zblus he tells us what he thinks. then he goes and he's either acting on it. he doesn't come on and say one thing and do another with this portfolio. that's why you flagged first thing when i read, andrew and i read these errant headlines from another source. you said that can't be true because of what he had told you in the past. >> honestly, anybody, not just from us talking to him here. anybody who read buffet's annual report, he's not somebody who will turn around and sell 45% of coca-co coca-cola. >> he is long term. these are stock, companies he loves and that he has continued to buy a stake in. american express, he can't buy any more shares. when his stake goes up in it. it's because they have been buying back stock t. idea he would come in and sell a substantial stake in any of those companies, that doesn't compute. >> i whether get in trouble for saying this, i want to say this reuters reported this. >> you want to flag the -- >> you need experts to actually look through the information and as you all know, reuters and other news organizations over the past two or three years decided to outsource a lot of their business, they're global enterprises. they do business in asia and elsewhere. this report came out from the data group in bangalor. >> you sure about that? >> they put the "dateline" at the bottom. it's not to suggest there is not good work being done in dangalor. it was a mistake. >> it was a mistake. >> by the way, it has. >> it's to move stock. >> i wish that when there is important market-moving stuff leak this, they have the experts focused on it. >> people should be more detailed than they want. it usually comes out the evening before. >> yes. >> there was a group of people forced to deal with a news report they're not used to deal w. it requires a little math. >> i think there was a technical snafu at the sec last night, which is why it didn't come out. >> that's a big story. . we have notable misses by walmart. >> walmart came in with inline. >> they lowered their guidance to $5.10 to $5.30 a share. that was below their earlier guidance t. street was already at 5 pochlt 30. >> the other beg story this morning is more violence in egypt as protesters clash with security forces. the u.s. is condemning the crackdown. the egyptian health men industry saying more than 500 people are dead, our man oaks a contirmd that number. the muslim brotherhood vowed to fight back. we will get an update from cairo in a few minutes. let's look at market, which deteriorated unweakness. we came in, we were flattish to down 20. 86 points to be preciseen implied open there. s&p would be down 10. the nasdaq down about 27.5 points. overseas in asia, hang seng down not much, not as much as you might expect, given how sometimes it trades in sympathy with the united states futures. shanghai down a bit more. over in europe, there is a bit more sympathy. down on the footsie or 88 points. the frank kak down twmp. france kak down 28 points. germany dax down 70, 0.84 points andrew. >> the stock managed to get back to the $500 level a day after carl icahn announced he took a position in the brand. icahn talking to ceo tim cook about a possible buyback. joining us, the perfect person to talk about all this for the next hour. he is the as spin president ceo walter isaacson, author of the best book, steve jobs. i want to talk to you about united and the airline business as well and the washington post, bezos. let's start with apple. it's great to have you here. tim skook gets a call from carl icahn. you know tim cook. >> right. >> he thinks what? >> you know, tim cook is a very measured, sensible guy. so he's not emotional. he probably thinks, let me do what's right. let me figure out the shareholders. i think apple's issue that tim cook is facing is what's the next big product? every three years, steve jobs came along and kind of blew us away. we didn't know we needed 1,000 songs in our ipod. we didn't know we needed a new cell phone, our own cell phone was broken dead. what's the time? >> within i finished your book. there was a moment when he talked about revolutionizeing the tv business. i think anybody that finished the book thought the next big rell revolution at apple. the next industry disrupted was tv. it's probably been about two years since then. we haven't seen that happen. what do you think has gone wrong? was there something steve had planned that hasn't got him out the gate? >> yeah, disrupting the television business is not just a hardware issue. it's not even just a software issue. it's like what happened when steve and apple had to disrupt the music industry. you had to get all the big music labels to play. then you had to get the artists in. you had to be able to get the content on demand. that's very hard with the cable bundleing system we have and it would mean disrupting -- >> i remember you said in your book, he thought he cracked the code on tv. do you know what that was? >> he was talking about being able to get whatever you want on demand like you could with any song for 99 cents instantly in the original itunes store. and it was an easy interface. it's not that tough. how to get rid of two ridiculous remote control boxes you can't physical out when you go to a hotel room or something. that is something i think apple can crack. i think the harder nut to crack is how do you disaggregate content from this bundleing article. >> they won't want to go the way of the industry. >> content. exactly. that's what digital disruption is all about. >> i think television is great hardware and software. that's why there is trouble disrupting it. i think the idea of the remote, it's like a better web interface than the web can provide. that's why i think it's hard to crack. i still want to ask you about this thing with icahn. is icahn right, in your opinion, to push cook and apple to give away, more of that money, is there a rational reason for apple to sit on, what was the number yesterday, becky? 137. >> 145, instead of 137. >> 140 billion in cash. is there any possible investment? >> you are if expert. if you buy back the stock that way, it's because you do not have anything better to do with that money. you don't have something you want to launch, to buy, you don't have something you want to invest. >> somebody sat in that same chair and said i do not see those as mutually exclusive. you can have a bunch of ideas. the trouble is andrew couldn't name a single investment that had double digits to it. let alone triple digits, a lot of 2z, 7s and 8s. >> it's a social network business. those are many digits. you might say that, you know, in mobile, we need some other things. >> do you think they're ready to make that type of transformation? the type of deals would transform people. unsteve, they never did that. is tim cook prepared? >> i have to admit, i don't know, steve jobs didn't do that sort of thing. he bought small companies. wonderful technology. he never did a transforming deal. i don't know whether tim cook will want to do that. >> if charm was on the other line with steve what would steve say? >> we will take the call. >> look. take the call. >> i can just say one thing that i can predict. he would not have been quite as polite as tim cook would have been. >> right. >> he apparently had a nice chat. >> we will slip in a quick brake. >> i want to point one thing out, andrew the wire service you mentioned has corrected a lot of mistakes, just to be clear. >> these mistakes happen. i just want to say. by the grace of god, it does happen. >> it's an honest mistake in terms of we were able recreate it. they were looking at the wrong column in terms of the math they were doing. these sec filings. >> can somebody? >> that's what people have wondered. i don't think that's the case from following it. >> no, not this time. but could it? >> if you got ahold of a wire service, potentially. there have been those fake reports. remember when there was the fake tweet that came out? >> i can tweet out warren buffet's holdings. >> this was on the wire, itself. it wasn't on the twitter service. >> this is what happens. what the sheet looks leak, you pick the wrong column. that's what happens. >> anyway, we will come back with a little bit more from walter is there when we come back, also, we will talk about shares of cisco. they dropped sharply after the company beat expectations for earnings and revenue t. forecast for the current quarter was disappointing. and they announced they will cut 4,000 jobs. coming up, we will talk to cisco chairman john chambers. right now, as we head to a brake though, check out the skwaux box market indicator. there has been more weakness, dow futures down 81 points below fair value. s&p futures off by 9. "squawk box" will be right back. t and experience the connectivity of the available lexus enform, including the es and rx. ♪ this is the pursuit of perfection. oh, he's a fighter alright. since aflac is helping with his expenses while he can't work, he can focus on his recovery. he doesn't have to worry so much about his mortgage, groceries, or even gas bills. kick! kick... feel it! feel it! feel it! nice work! ♪ you got it! you got it! yes! aflac's gonna help take care of his expenses. and us...we're gonna get him back in fighting shape. ♪ [ male announcer ] see what's happening behind the scenes at aflac.com. golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection. . >> welcome book to "squawk box" a. comment from yesterday, they say they need more data before making a tapering judgment, that echos comments by lockhart, they say tapering does not change the near zero interest rate commitment and that he's generally been too opt mick about the u.s. physical growth. guys, now, here's the bottom line, there are two fed officials sort of in the center that seem to be casting doubt on september. that's the time when they do it. not pause they don't want to do it. a couple reasons, one is they don't feel they have enough information. lockhart's point was the most interesting of all. he said if you start tapering, it is a process that gens to wind it down to zero. you don't begin that process until you have sure you can get to the end point. >> but that's, i mean, we had been of the understanding that maybe they could start and raise it back up again, is that not the case? >> that's not the case. he is adding something interesting, he did yesterday, anyway, he thinks the fed cannot ask the market to differentiate between tapering and raising rates. he said. >> i thought that, too. you are talking about this idea that tapering is not tightening. i'm not trying to be a jerk about this. when you are shrinking the amount you are putting out there, you are, in effect, tightenning. >> that may be true, bullard's point is you cannot taper and expect the market not to bring forward when it believes it will raise rates. that's the distinction that bernanke has tried to do. it's been a part of the thesis for how the feds move forward. you saw what the market did. it put 100 basis.in the market on the news of the tapering. bullard is saying the market did what the market is going to do. the fed is wrong to expect the market to differentiate. my hats off, be i the way to simon hobs. >> walter isaacson is our guest host today. he is obviously the president and ceo of the aspen institute. it's interesting the fed now has to unwine, his tori to -- you h historically. >> you have an economy that seems to be coming back. you don't have inflation worries. maybe i'm not seeing it, but you also don't have great growth. so it's a little bit hard to tell with employment being so stubborn, especially people being able to get to the middle class as you were talking in the earlier hour. the fed's got to balance that employment issue versus inflation an monetary issues. i think it's a trickier time to be doing it. >> it raises excess about what happens if things go wrong. >> also, speaking of things going wrong, we used to be able to control our fiscal policy, we used to not be able to get budgets out totally, at least sequester and government shut down every september and so when you are doing that, it puts a lit more pressure on honus on the fed to keep the ship from sinking. >> bullard said it yesterday, lockhart said it the day before. but specifically with those two guys said is they are reluctant to taper because they can't be sure there isn't going to be a debelltateing budget fight. >> and that has raised all these other potentials of what happens in september. have you the president coming back from vacation. the idea that we may hear about hits nom napgs for the next head of the fed. that's going to be happening at the same time when congress is stepping right back into the fray. na raises all kind of potential problems. >> i mean, the fed chairs in the old days, you know, in the voelker on greenspan occasionally could say things that would chain congress into action. i do thought think it is possible this day to same congress into being sensible the way it used to be to be done. >> because they're shameless? >> they are paralyzed maybe is a better what toy say it. >> and go ahead. >> no, i was going to, i wanted to switch topics. i was desperate to get walter's view on airlines. this is your favorite topic. i know we only have a couple minutes be every the break, are you on the bird of united. do you think it's crazy this deal isn't going lou? >> well, leaving aside specifics of the deal, speaking only for ourselves, you can look at the airline industry and it's been losing money for deck ka idz, right? it's been serial bankruptcy. now the airline industry is in a position where it can invest in new product, new plane, new services, it can provide some security so its employees and workers. that's happened. that's a good thing for consumers, partly because of consolidation i think. >> there is a column in which robert crandall wrote, every finding of the doj, this will be worse for the consumer. it will mean higher price, less service. he says the merger has to go through, it's only for them to be profitable. in the long run, it's the only way for them to increase the service industry. >> you want to protect workers, you want to protect consumers. you can't just have a system that can't possibly work. >> it's an architect for a cartel or a monopoly. >> we decided that this industry cannot be profitable if it's competitive. >> that's not true. the u.s. competitive. >> but he argues it's a duopoly now. you have to have a third big one in order for it to be completely competitive. >> he was the ceo. >> i forgot when. he comes on, dissuade me, becky. >> gordon has always made the argument, in airline, you are only as smart as your stupidest competitor. there are stupid competitors who have devastated things. i understand, especially from the perspective of an investor, airlines look like a better bet now. >> consumers, for workers, for communities, you got to say, we have some stability in an industry is there that's not what i say. i say it's terrible out there. i traveled two, three times a month. it is awful, walter. can you just tell them that they need to do a better job out will? >> i think they're doing a good job. >> what do you think? >> i go back and forth. as a consumer, i have been very frustrated. part or it i admit of the troubles the airlines have been in the past. i think you are dealing with workers who are frustrated and rightly so, because they've gotten jipd out of their pensions and things that were promised to them. i think those legacy issues are around and they impact consumer service. i do understand from the investor's perspective, that you need airlines that can be profitable. we haven't had that before. >> where are you? >> generally, i'm probably in the camp of the doj. you know me, i'm usually ready to block these things. only because i think you ned some pressure on the other guys. i don't know creating this last. >> the duopoly argument makes sense. >> except for the fact that the pricekey going up. >> we have much more from walter isaacson, our guest host for the program. we will get july cpi and jobless claims at 8:30 even e eastern time. then a first on cnbc interview, john chambers, cisco's ceo. he will join us and talk about the slow environment for growth. as we head to break, take a look at shares of walmart, earnings reported inline with expectation t. important important is walmart cutting its full year forecast. will be impacting the markets today. today. >> still co come, we are a few machine away from july cpi and weekly jobless claims, later, cisco's ceo john chambers will join us to talk about his latest quarter. stay right here, "squawk box" will be right back. lecoca-cola is partneringg. with nashville parent and charlotte parent magazines, along with the mayors of those cities, in the fit family challenge. a community wide program that offers free classes that inspire families to get out, enjoy moving together, and even track their activity online. it's part of our goal to inspire more than three million people to rediscover the joy of being active this summer. see the difference all of us can make... together. . >> welcome back to "squawk box." we're second away from july cpi and jobless claims. we have rick santelli standing by in chicago. steve weissman to stand by the numbers. rick. the number, sir. >> all right. let's start out the empire. it's august. 8.24. a bit of a miss. we were looking for 10. last look was 9.46. buckle up. a big down week. last week argue nalley 333, revised to 335, then shaved 15,000 down to 320,000. boy i wish the correlation for real job creation correlated 100% with this number. if we look at cpi, july number up .2, headline as expected. take out the all important energy, match, expectations up .2. 84 over year look on headline, .2 lan the last look of 2%. exactly as expected. if you look at the all important, well, taking out the all important food energy the core year of year basis, it's at 1.7. also matching expectations. i guess i would have to give a tip of the hat to the analyst, pretty much all these numbers hitting the mark. remember, matching expectations gives you a flims of this moment in time. it really is the stand alone number you need to incorporate in your longer term strategy. in this dais case, i would think the empire index is offset by those who significantly pay much more attention to jobless the real issue is how that coral correlates. it's the day after the 4th of july 2.74 has remained the high yield close going back to august, we are now touching into for the date levels on yield that comp to fresh, fresh high yields. should they close in this range, going back to late july of 2011 and yields getting close to 190 even though the equities in europe, they had some gains yesterday on the fact that whether you look at it quarter over quarter or annualized, their gdp was much improved. back to you. >> rick, thank you for that. we have our number of other experts. >> yeah, the first thing i did was check the story that is written by the wires, because they do not appear to be anything extraordinary in this number, which i initially would have looked for, a drop to 220. a number we have not seen. rick is correct not 100% of the change in claims shows up in payrolls, it's not a bad proxy for it. it would tend to suggest employment would be improving. pardon me, the other thing that's happening, we're through the period when this data is messed up by the auto plant shutdowns and the labor department is saying itted the not seem to be -- there is less volatility in this data this time. so some legitimate strengthening perhaps, in the employment data. i don't know what would normally correspond with. but we have been running 200k on employment with 350 on the claims. now you might suggest that's going to be a little bit better. would be one thing to look for. the inflation data, rick and i argued about yesterday, didn't come to any conclusions, we'll let that pass. >> we will go out to l.a. it's about 5:30 west coast time. jeff, what do you make of this? >> good morning. steve pointed out the low level claims, now five, six year low on initial clachls i think the real disconnect for us is still between layoffs and actual hiring. layoffs are low. that's not the issue. it's that job option and the actual pace of hiring hasn't come back. it's not consistent with other cycles. so i still think we're sort of in that 150 to 200,000 type window on non-farm pay roms right now based on this data. >> i don't disagree at all, the idea that will is less firing, does not mean there is more hiring. the way we get to 100,000 jobs is 4 million people leave their jobs and 4.1 million people are hired. that's plus 100,000. it's that kind of churn. so it's a necessary prerequisite, not necessarily enough to have less fire in the economy. >> absolutely. absolutely. then i did enjoy the segment yesterday on inflation, steve. you know, i just wanted to say, i think this comes up a lot from clients on the real inflation story. i think what's missed is that inflation is the change in the purchasing power of money. that's the key. cpi is just one ganl. it's a gauge. it's not the inflation print i think that's where a lot of people find confusion because they focus on one particular one as the real inflation rate. >> jeff, i thought a lot about that conversation we had yesterday and i think maybe rick and i are talking about different things. i don't disagree rick prices are going up. i concern myself the gauge that policy makers should set policy with, if there is a better gauge, i know they would want i. i know the shadow statistics ha has that gauge, that thaj i gauge is also declining. >> okay. we will leave it there. >> you want to give rick a word on this? >> is there a better gage? >> i think there is a better gage. suffice it to say, let's leave on agreement the government is measureing something. it said something doesn't match up with the feelings that most consumers, especially middle class have, i'll take it one step farther, i must add 40 different e-mails highlighting some of the shadow statistics using the original cpi xutations altered, that more than doubled the current cpi rate. can you make these numbers what you want. it's a compeling incentive to keep it lower and we'll leave it will. >> all right. you guys agree on that point. we'll take it. thank you. when we return, the "squawk box" ceo call is in session. john chambers joins us to talk about his latest quarter and planned job cuts. "squawk box" will be right back. so we could be a better, safer energy company. i can tell you - safety is at the heart of everything we do. we've added cutting-edge technology, like a new deepwater well cap and a state-of-the-art monitoring center, where experts watch over all drilling activity twenty-four-seven. and we're sharing what we've learned, so we can all produce energy more safely. our commitment has never been stronger. the ones getting involved and staying engaged. they're not afraid to question the path they're on. because the one question they never want to ask is "how did i end up here?" i started schwab for those people. people who want to take ownership of their investments, like they do in every other aspect of their lives. to experience the precision handling of the lexus performance vehicles, including the gs and all-new is. ♪ this is the pursuit of perfection. >> welcome back to skwaux this morning. we have red arose after a couple stif different stocks t. dow off about 115 points. nasdaq opened 35 points t. s&p 500 opens about 14 points. we have a takeover deal in the semi conductor industry. maxim integrated buys volterra. today's value, that values the transaction at $605 million. cisco systems reporting fiscal 4th quarter profits above expectations. revenue guidance for the current quarter, that has the stock under pressure this morning. cisco is cutting its work force by 4,000. let's talk more about what's ahead for cisco with chairman and ceo john chambers. john, thank you very much for being here this morning. >> becky, it's a pleasure to be back with you and steve and wamter this morning. >> it's great. we have been trying to physical out what you said last night, john. we spoke with an analyst this morning. he said, look, when you look at cisco. he said heading into that conference calm, he was very optimistic about how tech spending was going. after he heard from you, he was a little less optimistic. why don't you tell us about what you see and you think the current environment is right now. >> sure, becky. if you look what we are seeing, we just announced our 10th quarter in a row record revenues. if we hit our expectations for the next quarter, you will continue to see that type of momentum. we also announced our 7th quarter in a row where profits grew faster than revenuesch delivering what we told the street we would do, gross margins in line. for the next quarter, actually the consensus is coming out, earnings per share, exactly where it was before the call. and the expectations on revenue is down like 110 million from $12 billion 461 down 110 million for that 1%, becky. now, there are a lot of things in the quarter that went very well. it's a very small adjustment. we also in terms of -- >> a small adjustment in terms of stock is reacting a. drop of 10% last night in the after hours. what do you think happened? what did wall street misunderstand? >> well, i think, bake amy, we will always be transparent, becky. you can criticize me for. that i talked to a lot of analysts last night and shareholders. all expect honesty and trance parency from us. secondly, i think the markets perhaps missed, we're talking about expenses that will not be reduced this year. they will be flat up slightly. we are talking about re-aligning resource, a number we did on the positive side to look where our growth opportunities would be, you saw that at 43%. you saw it in wireless at 32%. you saw it in video growing at 23%. you saw it in switching goods at 5%. public sector around the world i think people missed. it was the key slowdown if you looked a year ago, including in the u.s. it grou 6% globally. in europe, too early to call for a shorter turn. europe in total grew 6%. that's up from minus 13% four quarters ago. so a lot of positives. inconsistencies, asia pacific, japan, weaker than we would expect. we saw for the first time some emerging markets weakness in our five top emerging markets. emerging markets only grew 8%. the top five emerging markets only grew 1. >> john you sound like i feel, i was surprised to see the stock off so sharply. i was trying to figure out what people were seeing, so many things were so positive. were you caught surprised by the stock's reaction? >> well, i think there might have been a lot of fast, sure money into it. if you look, where is the stock two weeks from now, a quarter from now? it's so important to continue on our financial modem. we have delivered on everything we told the street we would do at the high end of expectations. our intent is to continue to do so. we will always be transparent, becky. will you 93 know where you feel good and what's occurring about the u.s. momentum, u.s. enterprise grew 9%. that's good for the u.s. as we look out over a period of time. europe recovering public sector recovering. a couple careers that are a little bit softer than we would like to see. so i think, becky the real issue is where is the stock, two weeks, four weeks, a quarter from now. i feel good about that by the way. >> why layoffs of 4,000? if things are looking pretty strong from your per sfekttive -- perspective, why lay off 4,000 people? >> it's ba us the market is moving so fast. if you watch historically the mistakes i made is when i moved too slow or too fast without process. the market in terms of these new areas of technology, the cloud where we became the number one player in cloud, people didn't think pede play in. mobility, where we got the best architecture in the industry, you have to do acquisitions. you have to do internal development. perhaps the key driver of our growth and key customer's profitability over the next decade, you've got to move resources into those areas through acquisitions and others. by definition, you then got to move them out of your traditional business. if the market were growing at no more rates, the pace was slower, we'd do it over a period of one to two years. in today's market, you got to do it quickly. one thing as a leader, i will be making to make the top decisions. right for our ploy years and shareholders in the long run. >> of the 4,000 employees losing their jobs, where do you think the job cuts come from? i know it's middle management, i'm saying geographically. >> andrew, i think it's a fair question. you know our culture pretty well. we are meeting after this on a video capability. so what we will do is share with our employees what we lo do, share them the time frame, what we notify them by, et cetera. we will look at watching our control in layers. think about it largely as more individual contributors speeding up how fast we move into these new markets across the organization as a whole. >> the reason i'm asking the question, a, we want to know what else it mean, in cisco when you talked about investing abroad, i'm sort of trying to get a gauge, to the extent that cisco will be hurting or helping the picture globally, what ultly that's going to look like? >> i want to be careful, i don't know the numbers exactly, andrew t. question is, are we moving numbers abroad? the answer is no. we are still an american company. the majority of our employees here. one of the few large high-tech companies that are. the real issue i'm signal having 23409 a long-term problem in this market. we are being cautious because of the inconsistencies walmart reported today, gdp growth, it's been revised down again and again and again. the same thing is inconsistency in our business. we have a portfolio play that allows to us navigate through this perhaps smoother than others. because when switching goes up, another sector may be weaker, mobile goes up, europe goes up, asia pacific balances the other way. >> does this impact any of your acquisition strategy? because the last time we talked, you talked about investing abroad in part because of the tax picture here in the united states and in part because of the growth opportunities. >> andrew, if i can raise it one level up, are we going to continue in acquisitions? the answer is, absolutely, yes. source fire is an example, a tremendous acquisition in security. we're going to be adding resources to that as they come on board to get approved. this is where you got to free up resources now for where your growth will be. miraki grew 100% quarter over quarter. that's the commercial marketplace. it's on fire, $250 million annual run rate already. when you combine that acquisition with great technology, with cisco's architectural play. we will be very careful how we do itch when you do acquisition, you must be willing to back them up with resources. third issue involved, andrew, a lat of these acquisitions are deferred revenue or incurring revenue. you get all the expenses up front. so as that occurs, you got to free up resources to keep your profitability in line as well. so i'm very comfortable with where we are. i think you will continue to see us leading this industry and become the number one i.t. player. in this corner, things we can control couldn't have gone better. >> john, i couldn't understand your response to becky's question why the 4,000 were laid off. you said because of a fast moving market. did the business that these people were hired for not materialize? you talk about a relatively optimistic outlook, yet you are reducing your work force by 5%? i'm having trouble skwark up those two concepts. >> sure. steve. if you watch what really occurs is as we do acquisitions and we have done a number of them or we move into new areas like our semi product which is going to be really hot and probably go for an architectural play. you will have to add resources to those. the resources have you in place aren't necessarily the same ones you need to grow. we literally are investing for the future and have to balance that in terms of where those resources come from. normally, steve, we do it slowly through attrition, looking at it in terms of performance management over a period of one-to-years. this is something that has to be done in a quarter or two. this is the pace of change that leadership will be required. >> don, you have been talking about the internet of everything is the new push for cisco. explain how that's going and we as a consumer might actually see any time soon. >> well, what you are going to see, walter, you will see everything imaginable checked. you could go back to a short time ago, there was 100 million devices connected to the internet. think of it like phone systems the power of the network is the number of phones squared. you got two phones. the power is 4, 10, 100, 10,000. think about 500 billion devices checked. everything will be connected. it will change your health care. it will change your education. it will drive profit opportunities for our customers to 14 trillion over this next decade. that's profits. it will change everything from health care to education to business profitability. it is going very well, our smart plus connector communities is going extremely well. our smart grid capability, we are the standard for moving electricity over the internet. our connected industries, again, we're the leadner this push of the internet of things. speaks to our. play you have to move resources now and you have to move them with the skill sets that you need now inclouding acquisitions. >> okay. john, thank you very much for joining us this morning. >> it's a pleasure, becky, as always. look forward to see i don't guess you next quarter. coming up, we want to talk to jim krcramer to see what he s to say about cisco and walmart and others. if you have high cholesterol, here's some information that may be worth looking into. in a clinical trial versus lipitor, crestor got more high-risk patients' bad cholesterol to a goal of under 100. getting to goal is important, especially if you have high cholesterol plus any of these risk factors because you could be at increased risk for plaque buildup in your arteries over time. and that's why when diet and exercise alone aren't enough to lower cholesterol i prescribe crestor. [ female announcer ] crestor is not right for everyone. like people with liver disease or women who are nursing, pregnant or may become pregnant. tell your doctor about other medicines you're taking. call your doctor right away if you have muscle pain or weakness, feel unusually tired, have loss of appetite, upper belly pain, dark urine or yellowing of skin or eyes. these could be signs of rare but serious side effects. is your cholesterol at goal? ask your doctor about crestor. [ female announcer ] if you can't afford your medication, astrazeneca may be able to help. a lot can happen in a second. with fidelity's guaranteed one-second 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. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. welcome back to "squawk box." take a look at futures. i think it's gotten worse since the data came out. it got worse and a little better. i'm trying to see -- >> it's down. >> it's down 115 now. the jobless claims coming in t better than expected at 320,000, a big drop from the prior week. the earnings data has not been good. walmart cfo making comments on a conference call saying shoppers are showing, quote, reluctance to spend on discretionary items. >> interesting, too. >> we heard a bit of that, that they're more likely to buy big ticket items and not the smaller discretionary ones. meanti meantime, the retailers international says, quote, tough environment on the end of the year. that coming on the heels of disappointment from cisco. we heard this morning -- >> macy's yesterday. >> there have been some concerns. >> we can also -- i didn't quite understand john chambers. let's get down to the new york stock exchange and hear what jim cramer heard from john chambers this morning. what did you hear? >> i got to tell you, this was a very good conference call. i think people really got it wrong. i'm with john. at times i've been against john. he's taking the stock down to its outlook to the same price during the multiples, as microsoft, as oracle, as ibm, as intel. secular decline. his business isn't secular upswing as my good friend and also, they are the internet of everything. that should have a higher multiple. the stock has to be bought 23, 24. >> jim, what about the claims this morning andhe market reacted? that claims looks like to me to be legitimately good news but the markets seem to sell-off dmt face of that. is that just fear of the taper now? >> i think fear of taper and the fact that there's this kind of weird ten-year goes to 2.8 at the same time that walmart is saying, listen, 100 million shoppers aren't feel that well. at the same time, cisco is saying that the -- it wasn't john chambers says, listen, how am i supposed to do well when walmart says things aren't that good? it's all packaged. rates going up. earnings going down. all the different headwinds. it's not a great moment. looking for leaders. >> walmart should be selling discounted routers from cisco at walmart. thanks, jim. >> absolutely. >> okay. >> thanks. we're going to get the last word from our guest host when we return. lecoca-cola is partneringg. with nashville parent and charlotte parent magazines, along with the mayors of those cities, in the fit family challenge. a community wide program that offers free classes that inspire families to get out, enjoy moving together, and even track their activity online. it's part of our goal to inspire more than three million people to rediscover the joy of being active this summer. see the difference all of us can make... together. she's always been able it's just her way.day. but your erectile dysfunction - that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ welcome back to "squawk box." let's get back to our guest host for the last word. we haven't talked about media and some think that jeff bezos is the next steve jobs? >> i think jeff bezos is astounding by creative but he's not just an technologist or internet person. i remember in 1999 when they made him person of the year. as you know as they got near the end of '99 it looked like the bubble was starting to deplate flat, i went to don logan, wise president. making a mistake, is the internet thing going to deflate? he said jeff bezos isn't in the internet business, he's in the customer service business. he's deeply focused on customers and he will succeed. >> succeed with t"the washingto pos post"? >> absolutely. >> will it change newspapers? >> i think being customer focused would change newspapers. i think that would help. i also think that, you know -- well, it's true. i mean, i'm in that trade. you know. i did it for 30 years. i think it would be good to have a relentless focus on what customers need and want and, secondly, to be able to disrupt the way jeff is and be local and mobile and everything that jeff knows how to do. that's what newspapers know how to do. i think it's really cool that everybody wants to buy newspapers. i kind of like this trend. >> me, too. >> yeah. walter, thank you very much for joining us today. it's been a pleasure. thank you so much, steve, for joining us. you, too. that does it for us today. see you tomorrow. right now it's time for "squawk on the street." good morning. welcome to "squawk on the street." i'm david faber along with jim cramer and scott wapner. of course, we are live from the new york stock exchange. carl quintanilla has the day off. on this morning after the dow's worst day since june, well, since late june, stocks poised to open lower yet again. we're talking about guidance from walmart and cisco that was not good and is being met with a negative reception as you might expect. take a look at the futures
affecting our business. europe is, i think, fully bottomed out. >> easing from china's central bank, the pboc saying it will cut the requirement for rural areas on friday in order to bolster the agricultural sector. he was described as the chosen one. manchester united have sacked their manager, david moise. you're watching "worldwide exchange," bringing you business news from around the globe. hi, everybody, welcome. yes, you're watching "worldwide exchange," after a long easter weekend for many of you, now back at work in full in europe, coming on to speed after we saw a thinner trade in the u.s. compared to what's normal given the european holiday yesterday and the stock is higher, just shy of 1%. we're still early days, right? our main european markets looking like this. the ftse a big higher, the xetra dax shy and the ftse is a couple of points lower. it's been about m & a, it's also about worries and ukraine and what's taking place there. back to what's going on in m & a, astrazeneca shares soaring after pfizer made an informal $100 billion takeover offer in what could be the biggest pharma deal ever. meanwhile, investors have been welcoming news that the swiss pharmaceutical company novartis will be requiring the oncology division of glaxo smithkline for $14.5 billion. it's also selling glaxo smithkline's vaccine unit for $5.25 billion. big news there. novartis is selling its animal health division to eli lilly for $5.4 billion. all of these stocks trading higher. over here on the corner, philips posting a bigger than anticipated drop in its quarterly profits. restructuring costs and the strong euro, they say, have weighed on earnings. we'll be talking about the m & a momentum, especially heading into the session today. let's take it back to the macro environment. we're seeing selling of the 10-year gilt. as well as the bund. we'll be getting thoughts from one of our main guests this morning about what he thinks of periphery bond markets. currency rates, here we're looking at the euro dollar, very flat. still around 1:38 level. no change there. dollar/yen hanging on to 102.5. remember, we've got both the u.s. fed, we have the bank of japan, giving announcements later on this month. so we're kind of gearing up once again to be looking at a macro environment. let's check in on markets in asia and what's been going on there. sri is in singapore. good to see you. >> hi, great to see you as well. >> more stimulus in the chinese government in the form of cart in the triple law. the chinese premier didn't outline details. now we have the details. what this effectively means is that these rural banks will have less incentive to park some of their funds with the central bank, the pboc, the people's bank of china. that should mean in theory there's more cash available to lend, to deploy into the real economy and stimulate growth, remember, which has been slowing. that's the basic background. you have to appreciate the timing here, come on the back of the release tomorrow. scheduled release of the flash manufacturing pmi number from hsbc, the private forecaster and for all intents and purposes, luis, l louise, we are looking at levels below 50, whether it stays below 50 or drops precipitously below 48 is the big question, and if it does signal a sharper decline in economic activity, that could be negative for asian equities. shanghai composite clawing back some of the losses 2,072. dollar weakening against its japanese counterpart. so a stronger yen doesn't body well for the exporters and by implication the equities market. we're coming off from this two-week high we saw on monday. residual caution as we hit the full stride in japanese corporate earnings in the next couple of weeks. be watching that as an indicator and as a prism to view its success or failure if the case may be through. elsewhere, broad consolidation in some markets. i want to point out the -- there's a sense it could be hotter than expected. back to our top story, astrazeneca shares have been soaring in london on reports of an informal takeover offer from pfizer. cnbc understands that pfizer is mulling an offer which values astrazeneca at more than $100 billion. a separate report is saying astrazeneca has hired morgan stanley to advise on this potential bid. novartis has unveiled big changes to its portfolio. it's going to be acquiring the oncology division of glaxo smithkline for $14.5 billion but also selling glaxo smithkline its vaccine unit. a lot to talk about this morning. tim skeet is the managing director of financial institutions at rbc. welco welcome. >> rbs. >> it says rbc. i know it's rbs. i said rbc. it's rbs. let's start with this m & a momentum we're seeing heading into the session today on drugs, especially. what do you make of the latest deals? >> we saw a lot of activity in 2009 when we had three mega mergers led by pfizer, actually. and a consolidation in the sector. today what we're seeing is what is rumored to be the caring in the sector, big cap pharma, too big to grow earnings and revenue sustainably. we're seeing a narrowing and focusing of businesses along strategic lines for many of the pharma companies out there. >> do you think the deals we've heard so far, do they make sense in terms of the amounts being paid first and foremost? if you look at pfizer's informal offer for astrazeneca, $100 billion. >> that makes sense to some degree. i think shareholders would probably welcome such an offer because it would take the uncertainty astra has. so from that perspective, i think that would make sense for pfizer. they have stock cash pile to use which is valuable for them from a tax perspective. >> when you look at what's continuing to drive our markets and what's continuing to drive news flow, ipos definitely up there, m & a definitely up there as well. >> i think there's a lot of appetite to take a fresh look at everything right now. we've just come out of this period of all sitting in the gloom and the dark, particularly in the west. i'm not saying the sun is shining but from an economic perspective, things look so much better, politically in person europe and north america. you can argue what's going on. the underlying economics point in same direction. that's the confidence, right? i think business leaders have got confidence. therefore they'll put their money on the table. >> i agree. i think that the level of confidence in the secretary are, despite the fact there is pressure on revenues and margins are driven by revenue. the pharma companies want to effectively capture that value chain effectively. that's why we're seeing the structural changes occurring. >> when i look at the novartis deal, they're buying this oncology unit from glaxo, they're combining the consumer division as well and they're selling the animal health division, too. they're doing a lot of things. it seems that this revamp is really quite broad for them and it also means -- what ends up happening is glaxo smithkline will be running this consumer health business with novartis but at the same time, giving up ambitions to be an oncology leader. >> we've seen this with bristol. the land escape is uncertain. there will be cancer vaccines that will dominate this whole sector. glaxo has taken a strategic view of getting out of oncology and focusing on its strengths. that's the reason why novartis is divesting animal health as america is doing. the focus will be in the on-call areas rather than getting distracted by peripheral areas. >> glaxo, they're returning 4 billion pounds to shareholders after these changes as well? >> yes. >> how much of it is about figuring out how to provide value for shareholders at the moment because you can? because markets are in a beneficial stage to do precisely this? >> part of it is about appeasing shareholder concern about growth prospects in glaxo. the 4 billion pound return helps. more importantly than that, it's about the signaling and the longer term story, the revenue and earnings profile and the growth of those things. within glaxo, that's very important. that's what glaxo is intending to deliver on. >> it's one of those sectors where you have to plan incredibly long term with huge amounts of uncertainty and risk. presumably this is further consolidation of the sector. is it driven purely by the shareholders or find other interests come into play here as well. >> to some degree, the shareholders are sitting on the sidelines to be honest. i think shareholders are not sure where this market is going, where the sector is going in the pharma world. large cap pharma companies are under pressure. they can't provide that revenue growth they enjoyed historically. as a result, i think the large cap pharma companies are in the end game, as far as i'm concerned, no more mega mergers, they're not pattalable for shareholders, they don't want them. that's the end game. if this doesn't work, the pharma sector will have to take a long, hard look at themselves. >> is this the recognition that we're moving away from high growth to something which is going to be very -- >> perhaps even more fmcg, fast moving consumer goods and potentially utilities as an angle. where i do see the growth is the biotechnology sector. i think it's tremendous in terms of enknow vacation, growth, look at gilead and hepatitis c. the pharma sector will dip in and acquire assets s on an as needed basis. >> lovely seeing you this morning. head of life sciences research at senco securities. get your questions through on e-mail or twitter. @cnbcwex is the twitter address at cnbc.com as well. staying in the sector, bill ackman is making a joint bid for botoxmaker allergen. ackman's pershing square began building a stake in allergan in february. they will finalize and announce the proposal soon. allergan is advising shareholders not to do anything right now. coming up, russia could face further sanctions from the white house as rebels in eastern ukraine show no sign of backing down. we're live in the eastern ukrainian city of donetsk in just a couple moments. you're watching "worldwide exchange." hi, everybody, welcome back. the white house is threatening to implement further sanctions against russia if the kremlin doesn't call on separatists to vacate buildings in east ukraine. there's been little sign of rebels backing down. the u.s. has also revealed images which it says shows russian troops operating in ukraine, a claim which moscow has always denied. now, this all happening as the u.s. vice president biden is set to meet with ukraine's new leadership in kiev today. joining us now is nbc's elbina kovalyova. >> reporter: at the moment they're expected to talk about the elections due from may 25th and an aid package to ukraine. while that is taking place, the tensions here in east ukraine are high. this follows an attack on sunday that left three people dead. today, the first funeral is taking place. it is unclear who is behind the attack. the ukrainians have called it -- called responsible the russian secret services and russia has in turn said it is the far right sector, far right group. now, the tensions here are also high because there are reports that journalists are missing, these are russian journalists, ukrainian journalists and foreign journalists from other countries, international journalists. speaking to people on the ground here, also the worries are growing of some sort of armed conflict. ukrainians here don't understand which side is which, who to believe, whether they can believe the reports on television and the fear is growing, that something bad is going to happen and the situation is going to escalate. louisa? >> thank you very much. we have a former british ambassador to russia. he joins us now in the studio. welcome and thank you very much for being with us. what's your take on the activities that are taking place now and how do you read the situation? >> your correspondent has accurately reflected the confused situation there. what is actually happening is that russia is pursuing, very successfully, a policy of destabilization, infiltration, strangulation, designed to lead eventually to the capitulation of this fairly weak, fragile interim government in kiev so that it sues for peaces on russia's terms which have been clearly stated. russia will hope to achieve that without formally invading ukraine. that's the problem for the west. they've held out the deterrent of sanctions, but triggered by an invasion in this unclear situation, what's the west do? >> you're saying russia wants influence of ukraine but doesn't want the full takeover? >> if russia had to own ukraine, it would land itself with a big and expensive problem. if it invaded ukraine, it would put itself on the wrong side of the world for as long as its occupation lasted. it seems to me there's a lot of down side to that for russia. what russia wants is an emasculated ukraine. and a weak ukraine dominated by moscow would, i think, suit the kremlin very well. >> doesn't russia just want a place at the table, a seat at the table? isn't that all that it's afraid of? the ties from the eu, the proposals from the eu have been quite binary, you either choose to be with the eu or choose to be russia. russia doesn't want to lose that opportunity. >> i don't think that's the case at all. anybody who looks at a sensible long-term future for ukraine has to say ukraine needs to have a strong relationship with russia. it's absolutely natural and needs to be free to have strong relations with its neighbors on the other side. ultimately that's the way ukraine will develop. when ultimately will be is hard to say at the moment. >> it kind of gets the sense that policy is being made up on the spur of the moment, it's opportunistic as opposed to strategic, though obviously you painted the big picture. what is this going to cost russia economically and politically in the medium to long term? it's already costing russia. ukraine was not a probable for russia. putin's problem is russia. this is neatly diverted atension away from it. the russian economy did extremely badly last year. it will do even worse this year, partly as a result of what they're doing now. the former finance minister forecast the capital flight will reach $160 billion out of retof russia. the markets have gone down, the ruble has weakened. putin failed to deliver on his promises, diversify. the people are not happy about that. people were delighted russia has crimea, pretty unhappy about their own domestic situation. that's his real problem. he doesn't solve it by doing what he's doing in ukraine but he does divert attention away from it. >> you're talking to a short-term victory with a medium turn. >> you have an apparent victim in crimea already. russia already had the naval base in crimea. over time, if putin is able to achieve what he wants, which is essentially a subserviant ukraine. putin originally wanted russia to be a respected international status quo player, one of the world's advanced countries. this is another step away from that original objective. >> so the final question is, why should we do anything in the west? what should we do? >> defending the principle of the sovereignty of a member state of the united nations, the sovereignty of ukraine is critically important. if we just ignore that, then there are thousands of situations around the world where other people's sovereignty will be vulnerable. 100 members of the united nations voted against the annexation of crimea. the only country which is supported russia were maverick states like north korea, syria, places -- zimbabwe. >> both our guests will stay with us in studio. we'll continue on and give you more details. u.s. president obama will be leaving for south korea, malaysia, philippines and security and trades are on the agenda. last year, obama had to cancel a trip due to the budget wranglings. cantor is also in e. yesterday's boston marathon, bombings at last year's race left 3 people dead and hundreds injured. a crowd of 1 million people showed up to cheer the runners on. and in other sports news, manchester united soccer club were they've sacked david moise after only one season as manager. moise was hand picked by alex ferguson but the team failed to secure a spot in next season's lucrative champions league. they've been largely flat over the last 12 months. they're up 14% year to date. you're a man u. fan. what do you make of this? >> the point about them, they'll come back again. they're a real football club. they're not the result of injection of billions of -- pounds of foreign money by a foreign owner. it's healthy for football. they won't completely dox nature the premier league this season as they have done for so long. it's good to see real football clubs like liverpool, everen to, southampton, swanzey doing well. >> who is poised to take over? >> i think they'll have to go probably for a foreign manager. >> and will the person who takes on the role now, will they have a better chance at leading the club to better highs? >> david moise is obviously a decent man. he had a find record at everton. i think he's been unlucky. very interesting, the loss of self-confidence. they had a very good away record this season. it's the fact they haven't been able to win at home. if you don't can win in front of your own crowd at trafford, that shows lack of confidence. i think the new manager can build on that. they'll come back. >> i love it. brilliant. coming up, we want to know, is shareholder pressure unhealthy for the long-term success of sports clubs, how long should a new coach or manager get to prove his worth? one season or do you need more than that? especially if you have big shoes to fill. cnbc.com by e-mail, twitter @cnbcwex or @louisa or @louisabojesen. as part of your service, we did a 27-point inspection on your chevy, you got new tires and our price match guarantee. who's this little guy? that's birney. oh, i bet that cone gives him supersonic hearing. watch what you say around him. i've been talking a lot about his procedure... (whispering) what? get our everyday price match guarantee plus a $100 rebate on 4 select tires from your tire experts. chevy certified service. why relocating manufacturingpany to upstate new york? i tell people it's for the climate. the conditions in new york state are great for business. new york is ranked #2 in the nation for new private sector job creation. and now it's even better because they've introduced startup new york - dozens of tax-free zones where businesses pay no taxes for ten years. you'll get a warm welcome in the new new york. see if your business qualifies at startupny.com you're watching "worldwide exchange," bringing you business news from around the globe. hi, everybody, welcome to "worldwide exchange," i'm louisa bojesen. these are your headlines from around the world. drug deals, shares of astrazeneca soaring on an informal offer from pfizer. glaxo smithkline also on the rise after announcing a deal with novartis for its consumer business. philips announce a restructuring project. >> we talk about less momentum in the market, it is actually a china that has slowed down. we see the situation in russia affecting our business. europe is, i think, fully bottomed out. >> well, easing from china's central bank, the pboc is saying it will cut the reserve ratio requirement for some rural lenders on friday in an effort to bolster the agricultural sector. as you just heard, he was described as the chosen one. but after one disastrous season, manchester united have sacked manager david moise. hi, everybody, welcome back. our european markets seeing a little bit of buying. we saw positive session overnight. we saw a positive session in the u.s. yesterday, although on thinner volumes, given the europeans were off for this long easter weekend. this morning, coming back to trade, we're seeing a hop for most of our european markets, the tooftse mib slightly down t morning. the treasury and the italian tenure, the u.s. ten-year treasury and the italian ten-year bond both seeing yields coming off just by a tad. when it comes to the currency markets, we're hanging on to these range-bound levels we've seen for a very long time. still hanging on to that 138 level. we'll talk more about that later on. back to some of our main business stories this morning. barclays is the latest bank planning on winding down its commodities division by exiting parts of its metals, agricultural and energy businesses according to reports. we are joined on set by helia with the details. some might be thinking if the economy is recovering, we're seeing a slowdown in china. we can still live with 7.5% growth. why would you choose to get out of commodities? >> it's a big part of barclays business but it's a part of their business that's been under pressure, under pressure twin-fold. one because regulation is increasing in those areas, becoming more difficult to operate in those areas. and two, profits are declining, partly because of the regulatory environment. last year we had the david moise of banking, anthony jenkins say to investors, look, on ethical grounds, as part of the transform program, i'm going to make sure we only follow clients who are in food production. we're not going to help investors just speculate on price. that's not the barclays that i'm in charge of. remember that barclays is trying to shift monumentally its culture at the moment from the bank that was run by bob diamond, based on heavy bets and risks and the investment bank to one that's safe and secure. i think commodities like lots of benchmark rates, is a potential ground for investigation. there's several investigations into gold, for example. and oil. and as we know, into fx, following going from the libor situation. other commodities could follow suit. barclays has its agm this week. that's going to be hugely controversial because of the massive bonuses it's paying bankers is trying to hard to win the public round and win investors round. >> but you have a division as well with regards to who's staying in commodities and who's getting out. it's not barclays saying we might take a back step on this one. >> you have jpmorgan who also moved out of that sector. as i said, it's an area that has suffered in terms of investment bank. i think a lot of parts of investment banking has suffered. the whole has had a difficult year, two years. that's not to say if barclays was to close all of this, i think you'll see a third of its profits disappear. it's a big tight rope act that anthony jenkins has to follow, on the one hand making sure a huge part of its investment bank is growing and still returning money to investors. on the other hand, making sure that that investment bank is being managed safely and soundly and employees aren't being paid too much. they got out of the tax business which was a huge money spitter for barclays just a while ago. >> thank you very much for now. helia rahimi. we'll talk more later on. the french government wants the nation's top bankers to justify their 2013 pay rises. what's this all about? stephan is in paris. how are they going to do that if you have to justify your pay rise? >> the new economy minister wants to organize a meeting with the top bankers to ask them about their recent pay rise. earnings rose by 38% last year, by 29% at bpc and 14% at another company. it wants to discuss it with the banking community not only because of the pay rise but he believes bankers in france are not doing their job properly. small companies have trouble to get funding for their investment, forcing them to turn to the market historically, 75% of the funding comes from the banking industry and 25% from the market. in france. it's now the ratio has changed recently, 35% only is coming from the banks and it's a problem for small companies because they don't have access to the market. it seems as the economy minister is using the excuse of the pay rise to discuss that funding problem with the community. it's not a first-time that a minister or president in france is pointing the finger at the banking industry. if you'll remember, a few years ago, the former president, nicolas sarkozy accused bankers of being overpaid, not doing their job. they'll have to attend the meeting with the economy minister. we don't know the date, when it's going to happen. of course we'll follow the story. >> as usual, stephan, sounds good. >> as usual. >> did you have a nice easter weekend? >> fantastic weekend. >> what did you do? >> can i say that on tv? >> i don't know. i don't know. i wasn't there. >> no. i had a fantastic weekend. what did you do. >> i ended up going to the middle east. yes. saw some friends, et cetera, et cetera, fantastic. really nice. you? you don't want to tell? >> i was in the south of france. >> very nice. very nice. >> i stayed in france. >> excellent. long way to go for a chocolate egg. what did you do, tim? >> i did jobs around the house. i painted a bench. how's that? >> very nice. >> handy man. >> put in, changed some lightbulbs. >> excellent. we love men who can do stuff like that. >> try to be useful occasionally. >> it's all good. stephan, thank you very much. astrazeneca shares soaring after pfizer reportedly making an informal $100 billion takeover offer in what could be the biggest pharma deal ever. meanwhile, investors welcoming news that the swiss pharmaceutical company novartis will acquire the oncology department of glaxo smithkline. in a completely different deal, novartis is selling its animal health division to eli lilly for $5.4 billion. shares in philips taking a tumble this morning as the company kicked off european earnings season by posting a bigger than expected drop in quarterly profits. restructuring costs and the strong euro weighing on earnings. now, switching over to something else, portugal's short-term economic prospects are improving but it must keep up reforms, including the job market, liberalization to avoid falling back into growing debt. this is according to the imf. meanwhile, the troubled nation which is set to exit its international bailout next month, it's announced that it will offer up to 750 million euros in ten-year bonds on wednesday. this auction could be portugal's first since april of 2011. what do you think, tim, do we buy into the peripheral european bonds now? >> i'm torn in two different directions here, louisa. on the one hand i've been saying consistently let's not worry too much about countries like spain. i've been a skin the supporter, i wouldn't say a bull, right away through the darkette hours of the crisis. i come out of this saying i told you so. on the other hand i don't want to say that either. within i look at the buying interest that's underpinning all of the markets, i begin to say, well, why is it quite so strong? where is the risk judgment here in? we understand people want yield. therefore, there is a current rush to yield as witnessed by the tremendous success of the greeks the other week. looking also at the hybrid securities issued by financial institutions. all of that points to the fact that people are investing first, then asking questions after. i wonder if that's perhaps where we are right now. >> if i bought greek bonds at 25 and i sold at 10, why would i want to get in at 5? >> this is -- i think people are turning the page. i think people say, look, i took a loss back then. those were the markets then. i had to deal with what i had to deal with. remember, a lot of investor activity is by reference to what's happening in every other investment fund around them. if everyone is doing one thing at one minute, you say i'm following, doing what i have to do. let's change tack. we're talking about a different market and now i have to bench mark myself on what other people are doing today. we've got this curious mixture of short-to-medium termism creeping in. one still has to ask the question, are people doing their home work? that's the question i've consistently asked. are people really sitting down and thinking long term over what they should be doing? that said, i remain a supporter of these peripheral markets. i think the eu stepped in, ecb has been very credible. that kind of glitch we had at the beginning that plunged this into the mess, that sort of patched it up. it's a little bit fragile. >> you'd buy portuguese bonds? >> i think i'd be supportive of portuguese bonds, absolutely. >> tim skeet, managing director of financial institutions at rbs with us this morning. thank you. toyota is considering expanding production in china, aiming to catch up with rivals like vw and gm which have been eating into market share. toyota wants to double annual sales there to 2 million vehicles. electronic carmaker, the electric carmaker, tesla is looking to manufacture its car locally in china over the next three to four years. that move will be helping tesla to avoid china's import tariff of 25%. today is a historic day in china as it makes the delivery of its model s in the nation. customers outside beijing and shanghai will have to wait until at least june due to a lack of service centers and changing stations. now, full-year earnings, they're getting well under way in japan. we go to the nikkei for the early results from tokyo. how are they looking so far? >> hi, louisa. the nikkei news is reporting today that some of the major japanese firms generated strong results, topping forecasts. japan's second largest drugmaker is offering profit likely grew 14% on the fiscal year. it's expected to post $1.7 billion, achieving a third straight year of operating profit gains. strong sales of cancer treatment xtandi tripled to $90 million in the u.s. market. higher revenue helped absorb the costs of research and investment. up 56% on the year. brisk demand for products related through solar power generation helped drive growth. the firm's revenue and profit are expected to grow for this fiscal year as well. and tokyo disney resort operator operating profit rose 35% on the year to $1 billion in fiscal 2013, setting a new record. thanks to the weaker yen, the number of visitors from abroad also increased. back to you. >> thank you very much. good seeing you. staying in asia, the chinese president xi jinping has backtracked on the country's policy of capping medicine retail prices in his move to provide affordable health care. the country is now set to allow pharmaceutical companies to set prices to are some drugs. they also want to support burdened public hospitals. how about the private hospitals, though? the u.s. health care provider xindex has agreed to a sweetened $461 million deal, a takeover offer from a group led by tpg and shanghai pharma. eunice yoon looks at the prescription for profit. >> reporter: if you travel to beijing and find yourself under the weather you could wind up at this hospital run by american roberta lipson. l lipson was one of the first in china to establish a private hospital. if the government has its way, there could be more of them. >> the private sector should play a supplemental role to the public system. >> this is the central lab. >> reporter: the nasdaq listed company manages a chain of clinics here. she first arrived in 1979, selling medical equipment as the economy was opening to the world. >> this whole concept of private health care in the people's republic of china, a communist country, was to some people abhorrent. to some people laughable. by 1997 we finally had the final approval. it took 180 different government chops to finally get our doors open. >> the government here wants to reform health care. its system is dominated by the state. but public hospitals like this one are overtaxed and underfunded. so too many chinese consumers save for future medical bills rather than spend. right now only 12% of china's hospital beds are private. by 2015, the government wants to raise that to 20%. yet it's unclear how quickly the doors will open wider. private health care providers are burdened with red tape. >> now, of course, the government has decided that private health care is an integral part of their health care reform plan. the approval process has been somewhat simplified. but what's satisfying to me is that the government now really recognizes well regulated, well run private hospitals can take some of the pressure off of the public system. >> reporter: with health care spending here estimated to hit $1 trillion by 2020, that could be just the remedy china needs. eunice yoon, cnbc, beijing. and let's give you a look at what's on the agenda in asia. tomorrow, president obama arriving in japan on wednesday, seibu holding will be listing on the tokyo stock exchange. and you have hsbc's china flash pmi reading for april will be released and expect earnings out from korea's lg display. a lot on the agenda. coming up, ipo fail. we'll be hearing from weibo's chairman saying the ipo listing was price today low. stay tuned to find out more about weibo and the market. you're watching wch. on cnbc. good morning, everyone. hi, everybody, welcome back. you're watching "worldwide exchange." i'm louisa bojesen. netflix first quarter profit rose beating forecasts while revenue was roughly in estimates. the streaming video company added 4 million new subscribers worldwide, more than expected, thanks in part to the launch of season two of the original show "house of cards." netflix plans to raise prices for new customers by $1 to $2 per month this quarter. the company is also making public its opposition to the proposed comcast/time warner cable merger saying it would give comcast, the parent of cnbc, leverage to charge higher fees on content companies that rely on its high-speed broadband network. >> brian roberts is incredibly thoughtful. if there's anyone you wanted to trust with controlling half of the u.s. internet, you might pick brian roberts. he's thoughtful, long-term about it. reasonable. i don't know if we want anybody to control half of the u.s. internet. that's the base is of our objection to the mergeer. >> in a statement, comcast says netflix's opposition isn't about protecting the consumer or net neutrality. it's about improving its business model. netflix, you can see, the german listing higher by almost 12% this year, pretty flat, up by a meager 2% or so. shares in philips have taken a tumble as the company kicks off european earnings season by posting a bigger than expected drop in quarterly profits. restructuring costs weighing on earnings in the first three months of the year. speaking first to "squawk box" earlier, the ceo told us he remains concerned about emerging markets. >> when we talk about less momentum in the market, it is actually china slowed down, we see the situation in russia affecting our business and then there are many smaller countries that are under pressure that have volatile currencies. europe is, i think, fully bottomed out. we saw some upticks in the southern european countries which is giving us confidence. but at the same time, the northern european countries are not yet getting into second gear. so europe is still flat for us. now moving on, weibo shares have risen 33% above the ipo price of $17 since its bay due on the nasdaq last thursday. were the shares price today low? that's a question many people are asking. susan lee caught up with the company's chairman, charles chow, and asked him why the offer price was lower from what many people thought. >> in hindsight, it was priced low. but if you look at the market in the last two weeks with be it was very tough. if you had a chance to, i mean, take a look at all the ipos in the market in the last two weeks, most of the ipo were priced we low the range and the most ipos traded below the ipo price. actually we were lucky enough. price was in the range and it traded up after that. so i think it will be okay. >> weibo listed on the nasdaq and of course everybody is waiting for the nyse debut of alibaba. why are chinese tech companies still choosing to go to the u.s. instead of closer to home? >> i think, you know, most of chinese internet companies are listed overseas, mostly in u.s. i mean, fewer in hong kong. part of it because current china's listing law or regulation actually have some problem with a lot of internet companies in china have the structure. you have a problem listing any chinese symptom exchange. if we have a choice, we always wanted to list the whole market, which is closer to our user base, which makes a lot of sense. and asia comes in higher than any other exchange in the world. it was just by default. i mean, the u.s. market becomes the place for listing. >> now, alibaba continues to generate buzz ahead of its much anticipated ipo. what exactly is the e-commerce giant all about? and just how big is it? josh lipton breaks it all down. >> in only 15 years, it has exploded from just an idea to an e-commerce powerhouse, responsible for for half the parcels delivered in china and more than 60,000 transactions per second. jack ma founded alibaba in 1 999. now he's prepared to take the country public. alibaba is often compared to american e-commerce giants such as amazon. alibaba does not directly sell goods. it operates websites to which consumers buy and sell goods with each other. alibaba then makes money from advertising, which accounts for the bulk of its revenue. in the final quarter of 2013, alibaba generated revenue of 3 about the $1 billion, a 6% jump year-over-year on the top line. analysts at cantor fitzgerald peg its valuation at $184 billion. for investors, alibaba offers exposure to the chinese e-commerce market. by 2020 that market is expected to be bigger than the u.s., britain, japan, germany and france combined. j josh lipton, cnbc, silicon valley. in other sports news, manchester united soccer club have sacked david moise after only one season as manager. moise was hand picked by his predecessor, alex ferguson. the team failed to secure a spot in next season's lucrative champions league. is shareholder pressure unhealthy for the long-term success of sports clubs. how long should a new club get to prove its worth? if you want to join the conversation here on "worldwide exchange," get in touch with us by e-mail, worldwide@cnbc.com. or via twitter cnbcwex or directly to me at louisa boje@l. we'll see you straight after the break. hi, everybody, welcome to "worldwide exchange." i'm louisa bojesen. shares of astrazeneca soaring on a rival offer from pfizer. glaxo smithkline also on the rise after announcing a deal with novartis for its consumer business. philips posting a bigger than expected drop. the ceo telling us he's more optimistic about europe. >> we talk about less momentum in the market. it is actually a china that has slowed down. we see the situation in russia affecting our business. europe is, i this i, fully bottomed out. and easing from china's central bank, the pboc is saying it will cut the ratio requirement for some rural lenders on friday in order to bolster the agricultural sector. as you may have heard, he was described as chosen one, but after one disastrous season, manchester united has sacked manager david moise. you're watching "worldwide exchange," bringing you business news from around the globe. >> hi, everybody. you are indeed. welcome to "worldwide exchange," the second hour of the program. we're just getting under way with trade here in europe. we've been up and at it for about two hours now. we're looking here at the u.s. futures and how they're shaping up. we're a couple hours away from the opening in the u.s. we're looking relatively flattish right now in terms of the opening call state side here in europe, we were called a little bit higher. we are hanging on to the slight gains. we saw gains in asia overnight, positivity in the u.s. yesterday. europe was off yesterday for that wonderful long easter weekend. thank you very much. today we're all back at work. the ftse 100 higher by 0.8%. xetra dax up by 1%. the cac adding a delicate half a percent. the bond markets, a portuguese bond offering. buying in the treasuries and in the ten-year italian while the ten-year bund and gilt are selling back a bit. when it comes to the conferencecy markets we're not seeing much movement. the euro dollar hanging on tight to that 138 level, very range-bound trade. we've seen a little bit of repositioning, all depending on what the ecb president is saying. we seem to come back and hang on to the 138 level. as we get forthinto european trade, let's check in on the markets in asia. and hear what the news has been there. sri jegarajah joins us from singapore. sri, what do they need to know about what took place in the asian markets? >> we saw consolidation thanks to the momentum in the u.s. markets and also the upbeat earnings. but there was some divergence as well. there was negativity, especially coming out of the nikkei 225. i suspect that are related to the fact we are getting into the full stride of earnings season in corporate japan in the coming weeks. there is a degree of caution in the markets. these earnings will be, once again, a big test to whether arboonomics is succeeding there. shanghai composite, worth looking at this one as well. in the last hour or so, we did hear from the chinese authorities in beijing has said they will cut the triple r effective on april 25th. this is this friday incrementally. this cut will be apply to some of the rural banks. what this means in practice is that these banks have less incentive to park funds at the central bank, the pboc. that forced them, to a degree, to deploy that cash and lend into the real economy. this is stimulative. this is once again, a prudent macro economic management is the way that beijing would like to describe it. it's incremental, gradual. they've gone to great pains to explain this isn't necessarily a prelude to broader monetary policy easing. interesting, though, to say the least. this is coming just before tomorrow's hsbc flash pmi number, the initial number for managing from the private forecast for the month of april. so if it does weaken, then this would be in line with this rebalancing in the chinese economy, away from investment-led growth and towards more quality consumer-led growth. this is going to be a long process. there will be bumps in that process. the markets will question if it is weaker than expected. we have aussie cpi. the aussie dollar will be watching. if it's hotter than expected, expect the aussie to make a run towards 94 cents against the dollar. those are the big highlights. back to you now. >> sri, lovely seeing you again. sri jegarajah joining us with the latest out of asia. now, lots of news in the drug sector today. bill ackman is teaming up with valiant to make a bid for allergan. it's worth about $42 billion. the move is unusual for investors who typically buy a stake in order to force change like a sale. ackman's began building its stake in allergan in february. valeant says it will finalize and announce its proposal soon. the board will evaluate any offer but advises shareholders not to do anything right now. you can see valeant and shares of allergan higher in today's trade. astrazeneca, their shares are soaring in london on reports of an informal takeover offer from american rival pfizer. cnbc understands that pfizer is mulling an offer which values astrazeneca at more than $100 billion. a huge deal. a separate report says that astra has hired morgan stanley and goldman sachs to advise on the potential takeover bid. then you also have the swiss pharmaceutical company novartis unveiling big changes to its portfolio because it's going to be acquiring the oncology division of glaxo smithkline for $14.5 billion. but it's also selling glaxo smithkline its vaccine unit for $5.25 billion. in a different deal, novartis is selling its animal health division to eli lilly for $5.4 billion. got that? there's a lot going on. cnbc's katherine boyle joins with us more. i wasn't kidding when i said about the diagrams. that's what i did this morning. >> we have to have a tree system going on to understand what's going on in the sector at the minute. if you want to look at the overarching view, i spoke to a chief executive this morning, he said this is farm soot call companies planning for the next 10 to 20 years. there's no point in doing short term, three-year deals. they are looking down the track. if the pfizer/astrazeneca deal ends up happening, and there seems to be skepticism in the market about that at the minute, that will show the return to the days of the mega merger. for american companies and big pharmaceutical companies are pretty much universally american, it can mean that you can diversify your tax base and potentially make some savings on your tax return by buying an offshore company. >> why would glaxo smithkline choose at this point to pull out of oncology, which essentially is what they would end doing. it's about positioning your pipeline for where you want to be in the future. >> from the glaxo smithkline perspective they want to focus on the vaccines business. they've been trying to work on what to do with consumer health care. it looks as what they have decided to do is keep it within their core business but beef it up through the novartis acquisition. within the vaccines operations there's always the potential to acquire another business. this is area of the pharmaceutical business that seems to keep on going and could do very well in emerging markets, too. >> i'm still drawing the diagram. thank you, katherine boyle, cnbc participant. thank you. stewart richardson is a partner at rmg wealth management. he johns us nor foot the next half hour in the studio as well. hi, stewart. >> good morning. >> how are you. >> very good. >> back from a long easter weekend. >> very enjoyable. >> what did you do? >> family stuff. has anything changed since last week? >> i don't think a huge am has changed. in terms of the m & a deal, it's always create buzz in the market. if there had been a bid for astrazeneca, that would have been a big deal as you say. >> people think it's going to happen, right? >> clearly the market wants soming to happen. >> within novartis and gsk, change of direction, it's more like a shuffling to the deck of cards to me. each company wants to reorient itself with the future. i'm not sure how much value we'd see in the short term. it would appear the more mature drugs industry is potentially somewhat undervalued in a low-growth, low-interest rate world. >> in terms of the market, we've very much looking at the low growth high liquidity environment. valuations remain pretty high for most markets. the down side seems to be protected in terms of search for-year-old, continued qe from the fed and so on. but at the same time changing. there was not enough growth in terms of the western world to support valuations longer term. the fed is clearly looking to end qe as soon as it practically can, fourth quarter this year. we've heard from your own guys about qe and japan, ecb seems to to be able to pull the trigger there. >> is that what you're waiting to are were either new liquidity actually being injected or suns of injection? i mean because it doesn't seem we're seeing profit taking at the moment. i know we've had a volatile couple of weeks recently. it still seems like we are on track for continued march higher in equities if you listen to the majority of people here. >> i think -- the trouble is people need, in the big world, people need to be invested. it's a search for yield. it's just about rising trends in developed markets and yet we know that liquidity is slowly being turned off. i don't think anyone wants to be the first to present bearish. there's not enough bearish feeling for the whole market to be really getting worried what the market isn't anticipating is the potential risks for there. they are not going up much when you look at year-to-date performances. we're not going down much. the risk in terms of policy from the fed or ecb, escalation on the geopolitical front, which may be more worry between japan and china than ukraine, none of these risks appear to be factor into the market. without these risks coming to bear, markets may be drawing sideways to slightly higher. the risk is liquidity becoming less and less, liquidity injections becoming less and less, the markets will struggle to move higher. it's a fairly balanced market at the moment. everyone is anticipating growth for the u.s. to kick higher. that may happen in q2. the rest of the year we're not so sure. >> you're here for the next hour or so. get your e-mail questions through, your comments through. it would be lovely to include you on the show. worldwide@cnbc.com. find us on twitter, @louisa bojesen is the direct twitter address that you can reach us at. i'll pose your questions to my guests. let's give you a look at what's on today's agenda. in the united states, though, march existing home sales are out at 10:00 a.m. eastern time, forecaster dropped by 0.7% to an annual rate of just over 4.5 million. it's a busy day for earnings as well. comcast, the parent of cnbc reports results before the opening bell. we get numbers from mcdonald's, travelers, united technologies, bank of new york mellon, harley-davidson, lockheed, zeier rove, amgen, gilead, juniper and yum grands. the automaker will soon name mark fields to replace alan mulally. fields was appointed coo in 2012 and was previously northern american sales chief. fields hand been assuming more of ford's day-to-day operations, something he talked about with cnbc's phil lebeau just last week. >> i take over some of the bpr meetings and the daily operations of the company. we're all working as one team, staying focused on this record number of launches we have this year, growing the business both here and in international markets. we're not missing a beat. we're staying focused and doing our jobs. >> mulally who entertained the idea of becoming microsoft ceo last year is reportedly expected to explore taking on another high profile position. ford in germany is trading higher by 1.5%. as we were talking about russia could face further sanctions from the white house has rebels in eastern ukraine show no sign of backing down. more of that after the break. more strategy on what you should be doing with the markets. stay with us here on cnbc's "worldwide exchange." you're watching "worldwide exchange." >> hi, everybody, welcome back to "worldwide exchange." these are your headlines. shares of astrazeneca soaring on an informal offer from pfizer, reportedly valued at $100 billion. netflix topping earnings forecasts as people flock to watch original shows like "house of cards." in europe, philips disappoints. just after one disastrous season, manchester united have sacked manager david moise. hi, everybody. welcome back. i'm louisa bojesen. i want to get you up to date on flashes we're getting through on our wires on china mobile being presented via reuters. china's mobile's unaudited key performance indicators for the first quarter of 2014 are coming through. first quarter revenue rising by 7.8%, they say that the quarterly profit attributable to equity shareholders was down by 9.4% over the same period of last year. the average monthly net additional customers for the first quarter exceeded 4.6 million. and that means that the group's total customers reached 781 million. just be aware of that, that coming through on china mobile. now, the white house is threatening to implement further sanctions against russia, if the kremlin does not publicly call on separatists to vacate government buildings in east ukraine. following the deal struck in geneva, there's been little sign of rebels backing down. the the u.s. revealed images of what it says is russian troops operating in ukraine, a claim moscow denied. this all happening as u.s. vice president biden is set to be in kiev today. bring us up to speed on the latest in ukraine. >> reporter: as you mentioned, vice president biden is meeting with the current acting government in kiev. but the tensions in east ukraine are still high, local people don't people that the kiev government can protect them. they don't believe anyone here is in charge. there is no sign that any of the captured buildings by the militia are going to be vacated. the militia are still there. on sunday there was a violent shooting that left three local people dead in the town of slovyansk. the first funerals are saying place today. local people are very worried. they don't know what is coming next and if more violence is going to spill out. there are reports that journalists are being captured by militia, held. these are ukrainian, russian and international journalists having the trouble, it seems. so the oce is here on a mission as well. but no one knows what is coming next. >> thank you very much. netflix is on the rise, later on the show, will the online streaming service group release better than expected first quarter results. the details, next. before that, a view of the heat map here in europe to see how our european markets are trading right now. hi, everybody, welcome back. you're still watching "worldwide exchange." i'm louisa bojesen. netflix beating forecasts. morgan brennan has this report. >> it's been a busy first quarter for netflix, the video streaming giant beating the street on the bottom line, reporting earnings of 86 cents per share on revenues of 1.27 billion, in line with expectations. the biggest news coming out of the earnings, price increases for new subscribers, netflix saying it will raise monthly subscriber fees $1 to $2, depending on territory starting this quarter. speaking of subscribers, net subscriber growth strong as the second season of "house of cards" kicked off, adding 2.25 million new viewers in the u.s. and 1.75 million internationally. that was actually better than netflix or analysts anticipated. so the company saying it's on track for profitability in international later this year. right now, though, it's still losing money there. overall, more than 48 million subscribers worldwide. that's a 9% increase over last quarter. last week, on the earnings web cast, netflix ceo reed hastings coming out against a proposed comcast/time warner cable merger saying he's concerned that such a deal would give the combined company control of internet in half of all u.s. homes. back to you. >> here in europe, shares of philips have been taking a big tumble as the company kicks off european earnings season by posting a better-than-expected drop in quarterly profits. speaking first to "squawk box" earlier, the ceo toll us he remains concerned about emerging markets. >> when we talk about less momentum in the market, it is actually a china that has slowed down. we see the situation in russia affecting our business and then there are many smaller countries that are under pressure that have volatile currencies. europe is, i think, fully bottomed out. we saw upticks in the southern european countries which is giving us confidence. but at the same time, the northern european countries are not yet getting into second gear. so europe is still flat for us. >> well, stewart richardson is still with us, partner at rmg wealth management. do you think the chinese debt story is going to come back to haunt us? are you concerned about the slowdowns seen in the chinese economy? >> i think this is one of the potential risks which i was talking about earlier in terms of if there's going to be a policy error, it would be china's response to the slowdown which is clearly parent from the last week's data. at the same time, we do have incredible increase in debt in the last five or six years. we're beginning to see the onset of the debt default cycle in china. for the first time they're beginning to let companies default on bonds or trust products, et cetera. there's a huge raft of maturities in that area during q2 and the rest of the year. we'll see this as an ongoing potential flash point in emerging markets in china. it will be a potential rollover of debt which may or may not go through smoothly. behind a lot of debt, on the asset debt is the property growth market. prices are coming down in tier three and four cities. with the collateral beginning to be questioned again, there could be a real problem for the chinese authorities to try and hand as they try and re-engineer the economy away from fixed asset growth towards the domestic consumption. it's a huge thing for them to have to achieve. they may do it. this is one of the biggest risks in markets in our opinion. >> it's been nice having you in the studio. thank you very much. >> thank you. >> partner at rmg wealth management. we'll leave you with a look at how the futures are trading on wall street. still a couple hours away. early day, nice to set yourself up for what is potentially to come. we'll see you in a second here on "worldwide exchange." hi, everybody. welcome. you're watching "worldwide exchange." i'm louisa bojesen. these are your headlines from around the world. drug deals, shares of astrazeneca soaring on an informal offer from u.s. rival pfizer. glaxo smithkline also on the rise after announcing a deal with novartis for its consumer business. netflix topping earnings forecast as people flock to watch original shows like "house of cards." the company also taking a swipe at the proposed mega merger between comcast and time warner cable. philips posting an expected drop in quarterly profits. the ceo tells us he's more optimistic about europe. >> when we talk about less momentum in the market, it is china that has slowed down. we see the situation in russia affecting our business. europe is, i think, fully bottomed out. you're watching "worldwide exchange," bringing you business news from around the globe. >> hi, everybody. welcome back to work. many of you having a long easter weekend off. hope you are bright and bushy tailed today, ready to get in on the action we are seeing this morning. many of you already have by the looks of things we looking at the big drug announcements we've been talking about. u.s. futures, we're shaping up relatively for a flat open. europe, playing catch up in today's session. we recall higher on our european markets and we've been hanging on to that slightly higher trade here in europe this morning. the ftse mib reversing earlier losses, trading just a hair, a witness kerr higher. the cac 40 off by a tad, the xetra dax down by 1% and the ftse 100 lower by shy of 1% as well. when it comes to the asian markets in the overnight session, you saw a little bit of a mixed story with the nikkei off over there in the corner by 0.8%, the kospi, the shanghai composite and the sapp&p/asx hir as well. the pboc says that the move does not mean a change to its current wider policy stance. how do you make money, though, in these markets? we keep asking this question. this is what some of the experts have been telling us it morning. >> it's been astonishing, the continued momentum behind this compression story. you wonder what will come along that might upset the apple cart. one thing that might do this would be a downside shock to the growth outlook. i don't think it's likely that we'll see anything to the pmi numbers but if we see big downside prices, that could begin to unsettle this. >> clearly the ruble is at risk if we're talking about emerging market currencies. in g-10 space, what we've seen typically is the dollar/yen will trade lower. there are downside risks were we to see a significant flare-up in the conflict. if the rhetoric from the u.s. does get a lot more -- if it's ratcheted up in the next two days, we could see dollar/yen low. >> that has died away. what you're finding is relative value. we are talking about commodities, supply and demand balances. this seems to be going back away from risk on, risk off, back to the old ways of analyzing things where you think the sector is undervalued. that thought process, i think is very positive for the market. well, weibo shares have risen 33% above the ipo price of $17 since its debut on the nasdaq last thursday. were the shares priced too low? susan lee caught up with the company's chairman, charles chow, and asked him why the offer price was lower than what many had thought. >> from behindsight it was priced a little bit low. if you look at the mark net the last two weeks it was very tough. take a look at all the ipos in the market the last two weeks. most of the ipo were priced below the range. most ipos traded below the ipo price. we were lucky enough to -- price was in the range and traded up after that. so i think we're doing okay. >> joining me from chicago now is joseph shuster, founder of ipoc shuster. what's your take on the ipo market? do you think we'll continue to see this type of momentum continuing over the next couple of weeks or are we going to start to say the lofty levels are too lofty at the moment? >> i think the ipo pricing sentiment to market is becoming kind of selective, small deals in specialty industries like technology, health care, energy, are well in demand but surprising sentiment for lather deals is going to be more difficult down the road. that's reflect ed that weibo is priced way below initial range and other larger ipos have done so as well. >> do you think that the u.s. now is the default market to ipo in? the actual ipos and success they're having, a lot of them are nasdaq listings. >> maybe well true, especially in technology. alibaba is coming to the u.s. but the european ipo market has recovered very well. a lot of deals out of london on the continent as well, japan is coming back, more difficulty in hong kong. the really big deal, the significant deals in terms of generational growth opportunity, they're going to happen in the u.s. no matter what. >> you mentioned alibaba. alibaba continuing to generate buzz ahead of its much-anticipated ipo. what exactly is the e-commerce giant about and how big is it? josh lipton breaks it down. >> in only 15 years it's exploded from an idea to an e-commerce powerhouse, responsible for hthe half parcsl delivered in china. and more than 60,000 transactions per second. jack ma founded alibaba in 1999. now he's prepared to take the country public. alibaba is often compared to american e-commerce giants such as amazon. alibaba does not directly sell goods. it operates websites to which consumers buy and sell goods with each other. alibaba then makes money from advertising, which accounts for the bulk of its revenue. in the final quarter of 2013, alibaba generated revenue of $3.1 billion, a 6% jump year-over-year on the top line. analysts at cantor fitzgerald peg its valuation at $184 billion. for investors, alibaba offers exposure to the chinese e-commerce market. by 2020 that market is expected to be bigger than the u.s., britain, japan, germany and france combined. josh lipton, cnbc, silicon valley. this would be huge, joseph, absolutely huge. what are your expectations for alibaba? >> obviously fundamentals are improving substantially into the ipo of what we would expect from any deals like that. so revelations in the market plays now are between 150 billion and $200 billion. in our opinion, valuation should be slightly lower given the default risk of ipos in general. other ipos should trade sat a discount to u.s. domiciled ipos. the company needs to leave some money on the table for the institutional investors which are required for the deal. it's a large deal, up to $15 billion. obviously for this kind of money you need very large investors and large investors shared their facebook experience, bought into the offering the ipo price, to see the stock tank in the after-market. that's what alibaba wants to avoid. >> alibaba doesn't actually sell goods, they operate websites where you can buy and sell goods through. how susceptible is alibaba to a potential slowdown in the macro environment? >> obviously, it is susceptible but there's a generational opportunity growth there. just like casinos in macao and so forth. on average, as the economy goes up and down, alibaba is likely going to grow nevertheless. that sets excitement about the stock and that's where potentially very large valuations can come from. >> joseph shuster, founder of ipox shuster, we appreciate it. now back to some of the top stories we've been following. ford's annual meeting happening on may 8th. fields was appointed coo back in december of 2012 and was previously northern american sales chief. he's long been seen as mulally's successor. he talked about this with cnbc's phil lebeau last week. >> i take over some of the bpr meetings and the running of the daily operations of the company. but we're all working as one team and staying very focused on this record number of launches that we have this year, growing the business, both here and in international markets. so we're not missing a beat. we're staying focused and doing our jobs. >> mulally who entertained the idea of becoming microsoft's ceo is expected to take on another high-profile position as well. ford higher by 1.5% in german trade today. it's one of those songs you can't get out of your head, "it's a small world." 50 years ago disney unveiled the it's a small world after all ride. disney hosted a 24-hour around the world sing along at all of its theme parks. much to the delight of many, many, many parents. for those of us who are still children at heart. right? still to come here on the show, our mega mergers set to make a comeback in pharmas? we'll be talking takeovers on both sides of the atlantic. let's next. tweet us directly @louisa bojesen. good to have your company this morning. see you in a second. you're watching "worldwide exchange." >> hi, everyone, you are indeed. shares of astrazeneca soaring on an informal offer from u.s. rival pfizer, reportedly valued at $100 billion. netflix topping earnings forecast as people flock to watch original shows like house of cards in europe. philips disappointing. after just one disastrous season, manchester united have sacked manager david moise. now we've had a flurry of m & a activity in the drug sector today on both sides of the atlantic. we go to the cnbc hq. we're trading higher, getting a nice boost. >> let's start in europe as novartis unveils a major overhaul. they are buying glaxo smithkline's oncology unit for $14.5 billion. novartis is selling its vaccines business to british drugmaker for $5.25 billion, both deals include milestone payments that could raise the total values. novartis and glaxo plan to combine their consumer divisions in a joint venture. glaxo will own 63% of venture which will be one of the world's largest with nearly $11 billion in annual revenue. the deal's fundamentally reshape novartis, bringing it higher, margin products such as cancer drugs. separately, novartis will sell its animal health division to eli lilly for $5.4 billion and is also looking to sell its flu business, checking shares of novartis, glaxo and lilly, all higher on the day. a programming note, sir andrew witty will be on "squawk box" at 6:40 a.m. eastern and john lickliter will follow at 7:15. allergan has a market cap of $42 billion. a deal would combine two midsize drugmakers with expertise in skin and eye care products. allergan is larger by revenue generating $6.3 billion last year while valaent reported $6.5 billion in sales. ackman's firm began buying allergan shares in february, spending about $4 billion. its biggest investment ever. it now has a 9.7% stake in the company. in a filing, ackman says valeant will pay with a combination of stock and cash and expects the cash component to be about $15 billion. valeant has been on a buying spree, most recently acquiring bosch and loam. valeant higher been 13%. in other corporate news, china mobile has reported first quarter numbers. the firm says that net profits in the period fell by 9.5% to its lowest level seen in five years. china mobile is suffering from an explosion in online messaging and call service which allow mobile users to make calls and send messages without incurring additional charges. china mobile is the biggest mobile carrier by subscribers. the fate of one south american country's finances could be in the hands of the u.s. supreme court as the high court could rule this summer on a dispute between argentina and one of its long-time bond holders. cnbc's kate kelly was at the supreme court and files this report from washington. i'm standing outside the u.s. supreme court in washington, d.c. where the nine justices heard arguments today in a now infamous case at least in the world of finance which is to say argentina versus nml capital. the issue at stake here is whether or not elliott can pursue assets that the government of argentina may own outside of the u.s., for example, seizing a ship or piece of land they may own in a foreign country in an attempt to eventually be paid back on their bonds. there's a long history behind this case, dating from 2001 when argentina defaulted on its debts. it was the largest default in global history at the time. elliott sued argentina for repayment while other bond holders took a restructuring deal for a quarter to 30 cents on the dollar. elliott was trying to seize assets, including a naval vessel docked on the waters of ghana off the coast of africa. fast forward today. the justices heard about whether the foreign sovereign immunities act applies here. that protects countries from having assets seized in cases like this. these particulars have never been looked at in this court. especially, argentina, whether they should be able to rely on it nonetheless in a case like this. we'll hear more about this in june when the justices are expected to issue an opinion and also we may find out that month whether they'll take up a larger case about the lawfulness of the payback itself. back to you. now, in sports news, manchester united soccer club have sacked david moise after one season as manager. moise was hand picked by his predecessor alex ferguson but the team failed to secure a spot in next season's lucrative champions league. now, we want to know, is shareholder pressure unhealthy for the long-term success of sports clubs? how long should a new coach get to prove his worth? jeff tweets in to say its hard for moise or anyone to meetly foll -- immediately follow a legend, he's referring to sir alex ferguson. do you agree? if you want to join the conversation, get in touch by e-mail @worldwide, worldwidworldwide worldwide@cnbc.com. the chosen one was a description that jose marino gave to himself. it wasn't david moise. he said helia should know that since she's a chelsea fan. there we go. keep e-mails coming through, tweets coming through as well, @louisa bojesen. see you in just a minute. hi, everyone. welcome back. u.s. futures indicating relatively flattish open state side this afternoon. we still have a couple hours to go. europe was being called a little bit heighter this morning. joining us now, president of traders audio.com. again, good as usual to see you. we're coming back from a long easter weekend here in europe. we have earnings to look forward to in the u.s. today. >> we have over a third -- roughly about a third of the s&p 500 scheduled to report first quarter earnings. you know, again, we did have kind of a quiet trading day yesterday. the focus is on the earnings. ahead next week to the fomc, netflix coming out, surging higher yesterday. up 22 after surging earnings, again, a big day to the upside there. expected to see continuation for the most part. we've been watching this divergent type activity that's developing. laggers right now are the russell and the nasdaq. so that's going to resolve itself one way or the other. you have to give the benefit of the doubt to the bulls at this point until we see significant pullback, this market right now continues to seek higher highs and higher lows. >> what do you think is going to happen in the slightly longer term when looking at the whole selling man go away and stay away for a couple of months? is that going to happen this year as well? >> well, that's a great question. everybody's been kind of predicting that for years right now at this point. it really has yet to develop. i think you have to focus on the areas of value that this market has been establishing on the way up. those have been the same significant areas we have been looking at on the way down. i'm not looking at that or considering that type of activity at this point. again, this market's been so strong to the upside right now, you know, we have significant areas that are in place before we would start to talk about downside activity, they'd need to take those areas out. >> good seeing you. have a lovely morning. president of tradersaudio.com. >> thank you. "squawk box" is next. see you later. good morning and welcome to "squawk box." novartis doing some buying and selling. the couple of different big partners. it's all part of a major restructuring. netflix tops expectations and a price hike is on the way. reed hastings has more to say about the comcast/time warner deal and ford's alan mulally may be about to step down as ceo of the automaker. mark fields is next in line. it is tuesday, april 22nd, 2014. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen. andrew is off this week. novartis announcing a majoring restructuring including several mega deals. it will be paying glaxo smithkline $14.5 billion for glaxo's cancer drug business. the price tag on that transaction could rise to $16 billion if certain development milestones are met. novartis is also selling its vaccine business to glaxo for $5.3 billion. that price tag could rise to $7 billion depending on milestone payments as well. glaxo and novartis are combining consumer units in a join the venture. in a separate deal, novartis is selling its animal health division to eli lilly to $5.4 billion. ceo joseph jimenez says these deal will improve the financial strength and add
and valeant pharmaceuticals teaming up for allergan. we'll explain. novartis unveiling a restructuring plan amid a flurry of deals involving glaxo and lily totalling $28.5 billion. netflix says it will raise prices for subscribers as the jump in earnings pushes the shares in premarket and slew of dow components reporting, mcdonald's, united technologies, we have it covered. shares of allergan are surging as we said bill ackman backing pharmaceutical bid to acquire the maker of botox, valeant offering 38.40 a share in cash. since february, ackman's pershing square amassed a 9.7% stake in allergan, but all the discussion guys, today, is about the role of the activist investorer. the times calls it the boldest move yet from an activist. >> absolutely. i hope to hear from david. we were going back and forth last night about how does someone kind of basically know there's going to be a bid and be allowed to accumulate stock. classically that would be front money. if we had an sec that was on the case i think they would opine on this. they're not going to. this is going to be blessed i believe. everything will be fine. it's unfortunate because i don't think it is the way that things should be done, but being right and being legal, are two different things. david, am i wrong about that? >> nop. i think you're right, jim, in the sense at least that people are taking a close look at this and wondering, how is this something that is allowed to happen? that being said, it is and it is legal. they have formed a group that is valeant and bill ackman. you may ask why did valeant need to form a group with bill ackman. couldn't they have purchased the stock and options purchased by mr. ackman to take the position on its own and the answer might be yes, but in acting with mr. ackman, perhaps they -- he gets the toe hold for them and validates their currency. of all the reasons that may be the main one. he is going to hold $1.5 billion or more of stock after the deal occurs if it occurs. he's going to take his allocation all in stock or at least elect for it, he may get cash, it's one third, two thirds in terms of stock to cash ratio and he will be a significant shareholder in the combination should it occur. but you're right, jim, it does look funny in that he can put up a little over $3 billion. by the way, they both needed to file hsr. he took about $75 million worth of stock and bought the rest through these very low cost options which is one strategy to do it. the reason the stock moved is you had the -- you had -- the people ginchts options had to buy the stock and allergan's stock moved up from an unaffected stock price from 116 to 148 during the period of furious buying he did after he passed the 5% threshold. but you're right, i mean to come back to your original point. yesterday's conversation, throughout the night on twitter, you and i were having it, how is this something that's allowed? it is. it is legal. in fact, it's been done once before. ralph whitworth did it after waste management in i think the late '90s he's here, i'm going to be speaking to ralph later, another well-known activist. >> it's not without precedent entirely. >> no. >> clearly herbal life has not made ackman gun shy about pulling different tools out of his tool bag. >> this is a brilliant deal and here's why. about the face and the eyes. because valeant has bausch and lom. we keep hearing botox. it has a fantastic business. david, the ceo, came on "mad money" when the stock was at 88 saying listen, we do not have res stay tis patent problems. that had been the worry for dry eye. botox works. not that i know this personally but i've had him on many times. botox works from here to here. restylane works from here to here. allergan does have a problem called ju va derm, not sold as well as res sta lin. res sta lin is why valeant bought meta sis. you would have full face and eyes. it's brilliant. allergan spends $1.14 billion a year in r and d, 16.5% of revenue, dramatically higher than every single major company that people are worried who follow valeant. they slash the r and d, take out the cost, you don't need two sales forces to sell to dermatologists and you have a home run. >> coca-cola talks about share of stomach. you're talking about share of face. >> this is about face and eyes. looking youthful, it is about seeing well, and it makes a ton of sense. >> david? >> jim, very well said i think in terms of the synergies, as much as 25 to $30 a share. there are those who do not believe in valeant who would point to its tax rate as being really its main asset. it has a bermuda tax inversion. a canadian company as well. it's able to take cash back unless our u.s. companies and use it for acquisitions. they're paying less than 5% in taxes. that will go up. the blended rate should they succeed in buying allergan will be in the high single digits. that has been a key driver of why they've been able to do deals. they take out a lot of costs and by the way, bill ackman would tell you, i think these guys are great managers, like the 3g of the guys who run 3g which he's had experience with of pharmaceuticals. others would say all they do is slash costs and have a tax rate that many would say is unsustainable and without doing deal after deal after deal as they run through the costs and benefit of the low tax rate they have to keep getting bigger and bigger. if they succeed with allergan, a $100 billion company, only imagine what's next. >> these guys, valeant is a roll up. a lot of people who don't like valeant but they keep being. herb greenberg writes for the street, he has been adamant they have to keep doing deals. they keep doing deals. i come back, david is right, we are seeing this over and over again. the tax code is a joke. it's a joke. we've seen how many times have we seen these companies. >> a lot. parago and endo. the tax inversion thing is as significant a part of the story as the activist which is a milestone in many ways. it's been done, but i think these tax inversions because also, let's not forget, there may be an opportunity here, at least allergan will look for an opportunity to have a white knight or somebody come in, who can compete with that tax rate? unless you have an inversion already, unless allergan tries to find an inversion of its own. this plays an important role here, one we've talked about a lot and we have to keep talking about it. it's just not right in terms of what it means for the pharmaceuticals. >> you think senators are watching? you're like, rise above? >> well, regardless of whether it's right or -- >> no buttons. >> just a scam, man. but it's a legal scam. it's really incredible. what's legal is often far worse than what's illegal. david has this right. look for glaxo, got a war chest, maybe glaxo comes in. >> novartis striking -- >> they're doing a big deal today already glaxo. carl, let me get into the m and a tactics. allergan is going to be up. we're talking about a deal that is exceeding $45 billion, the move up in valeant stock keep an eye on it. the path here, they've missed the annual meeting. you can act by -- you can act by 25% to call a special meeting but you need a 50% vote to actually vote out all the directors. so this could be a battle at the same time with the stock moving from 116 to 166, it's going to be difficult for allergan to say no, thank you. the question is what they will choose to do. they will have some time to figure out a strategy. of course we're going to be following this battle a long time i have a sense to come. >> one last thing. the analyst, many, many analysts downgraded the stock from 120 down to 80. as david came on "mad money," over and over, said don't worry about patent protection for the op that mall drug. he was right. once they got the patent protection and not worried about the generic this thing has been on fire and then scott wapner reported the talks had gone on, congratulations scott. david owns this story. this is amazing. we're not done. >> just beginning. >> novartis striking two separate deals. the swiss drugmaker acquiring to acquire glaxo's oncology products unit for $42.5 billion, divesting most of its business to glaxo and selling animal health division to lily for $5.4 billion in cash. a complicated trio of deals. >> main take away you this industry regarded as a value industry and overnight it's an m and a value growth and whether it be pfizer doing astrazeneca, bern stein says that's doable, eli lilly in the game. merck's animal business is for sale. david talked about a huge number. these companies are undervalued by the street because they do not have the great growth. if lily's animal health, has got this business that is not as good as merck's, who knows how much merck's consumer and animal health business is worth? >> right. consumer is a big name. recit is the name i keep hearing about. we've been waiting to see what novartis would do with this. somewhat complicated in terms of forming the joint venture and glaxo as well with the big transaction, jim. but there is a lot going on in pharma. no doubt about that. i would pour a little cold water on pfizer and astra zen ka, yesterday's story we had to entertain as a result of the sunday times of london. >> bernstein says it can be done? >> it's doable. i want to know, the brokers did not have blow away m and a. do you think in the last 48 hours, did everybody just make their numbers in the investment banking industry? >> it helps. i mean, you know, don't forget at financing here. you have $48.30 a share in cash for allergan as part of the consideration that valeant is offering. that's going to be financed to the likes of barclay's and i think it's rbc if i'm not mistaken. bet a lot of banks want to get involved in that. you will have defense, of course, in the side of allergan. not sure who's been hired up there yet. surprised allergan wasn't on this more unless i'm mistaken. it wasn't just 18 months ago. they came to them, valeant came at the beginning of this year. we kind of knew it. it was out there. they need to do a big deal, valeant so i'm surprised allergan we hadn't heard about them yet. banks will have work. >> we were worried about the res stay sis patent. botox is a miracle drug and they have a lot, migraine drug, incontinence drugs. >> more broadly why is all of this happening in such a hurry and does it mean we're in for a larger story when it comes to m and a this year? >> i think these companies are sick and tired of having a low multiple, low growth businesses, where they have to -- they have to shuffle, there are way too many large pharma companies. it's happening at a time when the bioteches are -- >> all that money coming their way anyway. >> these guys, people historically -- these companies wanted to buy biotech companies, witness the way that they have historically gotten. bristol-myers, built itself on a biotech buy buy buy. the biotechs got too big, merging with each other. glaxo has been stuck at 52.53, novartis has not been able to talk their stock up. this is the way to get things going. no longer flat lining they're going. >> with all of that we'll talk more about -- >> they need tax inversions. >> yes. >> we'll talk more about earnings including results from mcdonald's, of course. we'll talk about netflix's numbers last night. how the stock is reacting on both of those fronts and also ahead, david's exclusive with valueact ceo jeff uben. hear what he has to say about buying allergan. we'll find out if today is another turnaround tuesday. more "squawk on the street" in just a minute. just a minute.@@ netflix reporting better than expected first quarter earnings. total up by 4 million in the period. company intends to increase u.s. prices by new subscribers by a dollar or two and expressing opposition of nbc's parent comcast and time warner cable. netflix ceo reed hastings on last night's conference call. >> we're concerned about what happens when the combined entity, if the merger were to go through, would have with, you know, over 60% of u.s. homes passed and over 50% of u.s. homes subscribing to cable internet, and, you know, that's a worrisome factor. so we think it's more in the public interest to either not have them merge or if the government goes ahead with it, to at least put some significant merger agreements, settlements in there. >> comcast has response to that, quote, netflix's opposition to our time warner cable transaction is based on inaccurate can claims and arguments. there has been no company that has had a stronger commitment to openness of the internet than comcast and we are the only isp in the country legally bounded by the fcc's vacated neutrality rules. one of the benefits will be the extension of net neutrality protections to millions of additional americans. it was hastings' fiercest statements. >> he cites at&t as being the slow one. brilliant by reed. what he's saying is listen, congress you're going to bless this thing, throw us a bone, man. come on, give us a little juice. don't -- otherwise comcast is too powerful. i thought it was a completely gratuitous attempt by reid to make more money of which he will be able to get. my favorite line what was an amazing conference call other than he said listen, think france won't like pus? the mentalist is the biggest thing, said with a little irony. total addressable market which we always talk about. how about human beings that enjoy tv shows and movies. hey, 7 billion people. this call was brilliant. i love him. great sense of humor. >> why not. i did think it was interesting as well when asked about -- and carl about competition from amaz amazon, talked about it being complimentary, part of an echo system, which on the face you might say come on, but at the same time when you think about over the top offerings and what you have on your tv, your digitally wi-fi enabled television it is potentially an echo system. there is something that does ring true there in terms of that comment. but it's interesting to think about, of course, in light of the overall concern and changes taking place in the landscape as we watch over the top. in other words, people pulling out video and sticking with broadband proliferate. >> does bring us to their guidance for q2, right. look for 1.12. street at a dollar. comcast today adding video subs for the second consecutive quarter. >> here's a little odd one. could it be about jason business, taylor schilling, laura, one of my favorite, orange the new black the star of the conference call. i was amazed. thought it would be house of cards. talking about getting the finest programming, better calls saw. this was a conference call and i have to tell you, the original programming is working. david, this thing is going to take europe by storm. the fact that they're putting a price increase, i think they could charge much more and the amazon thing was funny, basically, listen, we're all frenemies, get along. i love you, you love me, we're a happy family. wow. >> that's a good barney reference right there. >> thank you. >> cantor and -- >> cantor and rayjay do upgrade it. cantor says the subgrowth even though they're already in a third of u.s. domestic households is impressive and the 24% discount off the high. >> like espn. everybody's going to have it. my favorite comment by bank of america and merrill lynch, they are taking the price objective from 226 to 246. that's what happens when you have an underperform on a red hot stock. value. >> that hurts. that hurts. when we come back cramer's mad dash as we count down to the owing bell. busy day. we've not gotten to mcdonald's yet. an interesting miss and we'll talk about what it means for the ceo in a moment more "squawk on the street" from the nyse straight ahead. [ male announcer ] this is the age of knowing what you're made of. why let erectile dysfunction get in your way? talk to your doctor about viagra. ask if your heart is healthy enough for sex. do not take viagra if you take nitrates for chest pain. it may cause an unsafe drop in blood pressure. side effects include headache, flushing, upset stomach, and abnormal vision. to avoid long term injury, seek immediate medical help for an erection lasting more than four hours. stop taking viagra and call your doctor right away if you experience a sudden decrease or loss in vision or hearing. this is the age of taking action. viagra. talk to your doctor. if your doctor decides viagra is right for you, you can fill your prescription at your pharmacy. or, check out viagra home delivery, a convenient place to fill your prescription online and have it shipped that hurts. straight ahead. raht ahead. straight to your door. viagra home delivery. get started at viagra.com. improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we'll raise it yet again. ♪ s just about seven minutes to the bell. let's get jim's mad dash ahead of the open. mcdonald's misses. >> doesn't matter because there's a secret sauce here, carl. >> the dividend? >> yes! this is a value play. 3.25%. you're being paid to wait until they turn it. i began this, you started to get the quarter was getting better all the way, i like global comp sales, increasing 0.5%. we had a bottom in mcdonald's, last time they reported. this has become one of the ultimate value stocks with growth. really good balance sheet. never know what they're going to do. this stock is one to own simply because it is a sleeping tiger. >> yeah. people want to compare, though, u.s. comps down 1.7 to chipotle's 13 plus and they wonder if you can't fix the restaurants, jim, then does don thompson turn to the balance sheet. >> i think he does. understand that chipotle quarter. i love the 13% comp but go through it they had a gawk apocalyp apocalypse, meat, cheese problems. who can go to the suppliers and say here's the price that i'm paying? chipotle does not have pricing power to be able to deal with the people giving them organic. mcdonald's does. i still love chipotle. the 13% was amazing. understand, mcdonald's is a power. when they sit down with beef, they say beef here's your price. >> absolutely. >> how about facebook and this analyst move today? into this is incredible. they report april 23rd, tomorrow. this is one of those, credit suisse is hold the buy, time to rebuild your facebook models, sells at a discount to the s&p 500 on 2016 numbers. basically saying, you should buy ahead of the quarter. now, we know buying ahead of the quarter has been fraught but this upgrade, time to rebuild your facebook, street models to conservative, doing video, people keep forgetting about the instagram. >> yep. >> this basically says facebook is taken over the world. now taking over the world does require a lot of smart guys. facebook does have it. this was one of the upgrades. this is probably the most i would say bullish upgrade i have ever seen the day ahead of a quarter. >> yeah. >> putting your -- his neck is in a noose in a guillotine. you better be right stepien. you better be right. you are out there, partner. >> we're going to revisit that in about 48 hours. >> smoking. >> when we come back, the opening bell in about 4:30. don't go away. ♪ [ dog barks ] ♪ [ male announcer ] imagine the cars we drive... being able to see so clearly... to respond so intelligently and so quickly, they can help protect us from a world of unseen danger. it's the stuff of science fiction... minus the fiction. and it is mercedes-benz... today. see your authorized dealer for exceptional offers through mercedes-benz financial services. see your authorized dealer for exceptional offers predibut, manufacturings a prettin the united states do. means advanced technology. we learned that technology allows us to be craft oriented. no one's losing their job. there's no beer robot that has suddenly chased them out. the technology is actually creating new jobs. siemens designed and built the right tools and resources to get the job done. [ bell ringing, applause ] five tech stocks with more than a 10%... change in after-market trading. ♪ all the tech stocks with a market cap... of at least 50 billion... are up on the day. 12 low-volume stocks... breaking into 52-week highs. six upcoming earnings plays... that recently gapped up. [ male announcer ] now the world is your trading floor. get real-time market scanning wherever you are with the mobile trader app. from td ameritrade. you're watching cnbc "squawk on the street" on this tuesday. live from the financial capital of the world. opening bell set to ring in just about a minute or so. busy day for earnings. busy day for pharma, m and a, the s&p is up seven straight tuesdays, jim, and we're less than a point from break-even for april which as we know has been a wild ride. >> yeah. and this big fpharma, these are big members of the s&p. glaxo was the winner in the deal with novartis and i see that biotech is going to have a hard time staying down given the fact that the multiples that some of these companies are paying for various businesses make it seem like that gill adis cheap. we have earnings later in the week we're worried about. >> some have said we've gone from a biotech bubble to a pharma m and a bubble is that fair? >> no. when you have -- yeah, well, they're paying 11 times rev for some of them. stocks selling at low multiples so if that's a bubble i mean what's -- geez, maybe anything at 12 times earnings is not a bubble. >> there's a look at the opening bell and the s&p right at the top of your screen. at the big board, new york, reit incorporated selling its recent listing at the nasdaq, pdc energy, gas oil and exploration company. >> they have good drilling which i like very much. they're drilling in places where there's a lot of oil and people don't talk about. >> one name to watch at the open will be hog, 1.21, shipments up more than 7. asia pack up 21. the winter did not stop people from buying motorcycles. >> what a wonderful story. american company putting up unbelievable numbers. this is one of those quarters which tells you that there is a lot of capital going around. people are a little wealthier than you realize. people do not need a hog. my friends who have them swear by them, of course. >> a seven-year high on hog. the former hdi, and they keep their shipping guidance intact. bull market as nicole said, bull market in motorcycles. >> wondering polaris, you have to go in there, they make snowmobiles, a lot of other stuff you don't nieecessarily need. i'm not saying -- let's call them discretionary. you don't need a harley-davidson, people who have one say yes, you do. >> how important both allergan and valeant are going to be up at the open? >> you know, valeant makes the business doing exactly what they're doing. this is part of their cost of doing business is what they do. i totally understand. david was talking about the -- any time you have a situation where you've got that tax dom soil thing going for you you raise numbers when you acquire anybody that doesn't have that. raise numbers, valeant, if they get the deal done i totally get why it's higher. >> travelers, 295, beats 216. revenue was in line. 10% div hike. >> travelers you always have to worry about what they say in the conference call and whether there is price cutting and property casualty, my favorite company in the industry. i think that fishman's really just a remarkable guy. those of us who have used travelers know you pay a premium because they tend to be the only guy in town for a lot of businesses. i hope they pull it off in the conference call. last time the conference call was downbeat, a big reversal in the stock. please wait for the conference call before you take travelers. >> yeah. >> we mentioned netflix obviously in the past half hour. that's a 9% move today on netflix. that's more than it was up in the afterhours last night. >> yes. the stock had been down heavily coming in. there had been remember the great trade that was going on was to short everything high multiple. suddenly all the people were short everything high multiple are scrambling furiously trying to figure out we got bagged, got bagged in the industrials, we got bagged in the high multiples do we have to cover tesla, do we have to buy solar city? is amazon going to be good? of course just appro po of that, we have positive chatter, amazon, deutsch bank says you have to buy amazon. software service names. morgan stanley says this is the time for work day. work day down yesterday. the key one to watch is fireeye. unbelievably. unbelievably they -- the insiders, the company they bought, files a gigantic secondary. the fireeye people have been punished. they must have fire in their eyes. >> utx, 132 beats 1.27, close to an all-time high. >> can we just say -- i'm going to put it to people now. those who have been saying there's no revenue growth go look at the united technologies, the number, how strong pratt and whitney, these are revenue stories. lockheed martin not a revenue story, defense. those who say there's no revenue growth. i'm calling them out here. empirically they've been wrong. only through about -- we have -- very small part of the earnings season so far but the reeve new beats are extraordinary. the united technologies doing incredibly well. they bought a company but they are on fire. i like them. >> a good one to mention. you mention lmt, 287 beats 253. they see pentagon spending declining 6% this year. they bought back so many shares not the point. >> they keep buying back stock. it's a cash machine. some of our allies are feeling you know what we got to start defending ourselves. i think one of the subtle issues behind the defense contractors is you know what the united states may not be the warrior for the world. some of these other countries have to bulk up. lockheed martin good quarter. houston doing a great job. doesn't seek any publicity. she's welcome on our show. >> alan mulally according to the journal is going to leave earlier than some expected as early as july. here's "usa today." helped ford fly. >> he did. >> mark fields the coo probably going to take over. >> i like mark fields. been together with him many times. he's a stead yes auto happened, has good ideas. involved in all aspects. seamless transition. mark, a local boy. local boy made good. he is not from detroit. he's from around here. >> already running some of the meetings that mulally used to run. >> mark's been involved. i saw mark and met him at the super bowl last year, met him a number of times. he's a consummate insider who will be a terrific spokesman for the company and i don't mean any slight toward alan. he's been on "mad money" multiple times. mark fields you will not skip a beat with that company. >> some of the interesting color in the journal piece the board was a little unhappy with mulally's flirtation with microsoft which some argue went on a little longer than it should have. >> that hamlet thing to be or not to be, alan, i sent alan a nice e-mail this morning i left out the hamlet illusion. the hamlet thing, nobody likes hamlet. i mean the play is good. okay. the play is good. but it's got that kind of how was it mrs. lincoln feel about it. >> i wish you had been here yesterday we talked about micron in your absence up again today. another almost 3% here. >> a classic game of chicken. will the other guy start building flash plants? will they buy plants. i got a lot of heat when i said i liked micron. herb greenberg took the other side. back away from the other side. if they are not building foundries this goes much higher. if they are building foundries it's a game of click be and the stock dinz. >> one retailer not putting together many new stores is home depot. gets hold to buy at bmo. that's going to be in the top ten list. >> positive story. what's more important wane hood, one of my favorite analysts had been bearish about home depot some time. obviously adding one store this year in williston. what is interesting about the upgrade he cut numbers for 2014. he did boost for 2015. but he's now below the street 2014. stock has pulled back. those who think i'll buy it, beware if wayne hood is right you have another number cut. frank blake said over and over again it's planting season you have to get better weather for home depot to blow out 2014, he left wiggle room wayne hood, but he is the best. >> finally our own parent comcast we mentioned 68 cents. does beat 64 cents. you mentioned revenue growth up 14. cable revenue up 5. nbc revenue up 29. >> nice. that's a lot of things going right including the olympics. my favorite number for the comcast parent company of this network operating cash flow up 10%. that is remarkable. a lot will be returned to shareholders. david cohen who i know from previous dealings, candidly from other -- from politically things, because he worked with rendell. >> former chief of staff. >> nice guy too. am i allowed to say that? david will get that thing through congress. they have to give netflix a couple smackers somewhere i don't know. i like david very much. i like his wife too. >> with all of that dow up almost 15. mary thompson with us on the floor today. hey. >> carl, kind of a lack luster open given all the news and not only on the earnings fronts but m and a space. the dow and s&p and nasdaq all positive. the nasdaq the winner on percentage basis up about 16 points right now. a little weakness in the energy space as well as reits and banks today. other than that, kind of broad very modest gains today. the s&p, of course, on track now with the 2-point gain plus for its sixth straight session and very close, about 1% from its all-time high. quick check of the dow movers. several reported earnings including mcdonald's, disappointing. you can see its stock down slightly. travelers coming in with very strong results. but its stock pulling back as well. citi cautious on the outlook for travelers saying they're not sure if they can sustain these results they reported in the first quarter. united technologies raising the low end of its guidance for the year. the company helped in the quarter by restructuring or hurt i should say by restructuring costs. raising the low end of its forecast for the full year. we highlight merck and pfizer because of all the deals in the pharma space. valeant and allergan and also the news about glaxosmithkline and lily and novartis, kind of trifecta that they are doing today, the trifecta deals they are doing. harley-davidson, the company's stock opening at a seven-year high after the company came out with better than expected results. said benefited not only from strong u.s. sales but worldwide sales as well. as you can see its stock up 7.5%. lockheed martin coming in with better than expected results of 287 a share. the company also raised its full-year outlook for the year thanks in part to restructuring efforts at the company, up over 1%. xerox coming in with earnings and revenue that beats. nevertheless the company lowered its full year outlook. the company transitioning and that has proven difficult to a document management company, its share up 1.4%. let's touch on intuitive surgical because it did receive fda approval for its surgical tool, stock up over 3% on that news. just two quick stocks i want to mention, specialty stocks, allegheny technologies with a wider than expected loss. the company's ceo saying he does believe it's turning a quarter. stock off 1.25. cell lan niece which is a chemical company better than expected results its shares up. the dow up 27. >> mary thompson. >> a check on energy and commodities. jackie deangelis is at the nymex. hey. >> good tuesday morning to you, carl. let's start with what we're seeing in the energy pits here. some moderate selling pressure right now at this point after both benchmarks hit a seven-week high. we are seeing profit taking here from traders. now they are saying that they are watching geopolitical tensions, keeping an eye on it. that's adding to some of the price support but also seeing some downward pressure because we're expecting crude oil inventory report from the api tonight. expecting to see a build again in weekly supplies. addison armstrong at tradition energy saying when we look at the supplies right now, versus the five-year average, we're 7% above that level. so this market does have a lot of supply in it right now. meantime we are watching wti prices, they are trading just around $103 a barrel. last but not least want to talk about metals. we saw early buying in the gold pits but wasn't able to sustain. still well under 1300 despite the weaker dollar today. carl, back to you. >> all right. jackie, thank you very much. jackie deangelis. when we come back the battle over darden's plan to spin off red lobster. david with an exclusive with jeffery smith, co-founder and ceo of starboard value and then later on we'll talk with shark tank's kevin o'leary. get ready for fireworks on that when "squawk on the street" continues. continues. those little things still get you. cialis tadalafil for daily use helps you be ready anytime the moment is right. cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. ♪ "first day of my life" by bright eyes ♪ you're not just looking for a house. you're looking for a place for your life to happen. ♪ i ♪ and i got the tools ira ♪ to do it my way ♪ i got a lock on equities ♪ that's why i'm type e ♪ ♪ that's why i'm tyyyyype eeeee, ♪ ♪ i can do it all from my mobile phone ♪ ♪ that's why i'm tyyyyype eeeee, ♪ ♪ if i need some help i'm not alone ♪ ♪ we're all tyyyyype eeeee, ♪ ♪ we've got a place that we call home ♪ ♪ we're all type e ♪ welcome back to "squawk on the street." i'm david faber at the active passive summit in midtown, manhattan. we have a great lineup of guests starting with jeff smith the managing member, chief executive officer of starboard value. by the way, a fund that is -- we did this interview last year, i think you doubled in size. >> about that, yeah. >> almost $3 billion. >> that's right. >> all you activists getting so big, throwing your weight around in a lot of different areas these days. >> we've been fortunate and we have terrific investors. >> let's start off with something you've been visible on your opposition to darden's plan to separate its red lobster business essentially. transaction seemed to be entered into relatively quickly or an idea by management after some not particularly good quarters. you've been leading the charge against that. there is a solicitation a couple days ago trying to call a meeting of the board. >> we believe we will. it is a high hurdle. we need to receive support from over 50% of the shares outstanding which is actually a really large percentage of the available votes. a large retail component here and shares that are out on loans so getting over 50% would be an enormous percentage of what's available but we're confident. >> okay. if you succeed in doing that as you say a significant vote it would be in a sense of if you do manage to get to 50.1%, what then? what will then take place in terms of your ability to actually stop a transaction at this point is not required to have a shareholder vote to go forward? >> right. so look darden is a terrific company. a lot of value at darden. the challenge here is that the red lobster separation as proposed could really harm that value in multiple ways. we need to stop it. it's not a great idea. >> what are the multiple ways you talk about when you say it's a terrible idea? >> spinning off red lobster as stand-alone company we believe could destroy as much as $800 million in value. it also will track about $800 million worth of darden's real estate. you have to put those two together and you're talking about pretty large delta in terms of potential value, but more importantly than that it's just not the right operational idea. so if you're going to spin off a business, look, we're in favor of spinoffs if you have a large conglomerate which darden is, spinning off one of the assets or several of the assets could make a lot of sense to get operational focus, but to do that with a struggling business, red lobster is a terrific franchise, it's a terrific concept, but it's struggling right now. high seafood prices and the operational performance hasn't been good. traffic patterns have been declining. so they're right that it needs more focus, they're right it needs to be turned around, we agree, but to spin it off as stand-alone public company and have a new ceo have to figure out how to turn around that business and in the public spotlight as stand-alone public company while they have to be distracted meeting with shareholders, research analysts isn't the best idea. >> if you're successful in actually having them shelf this idea, it is interesting to see an ac vi test advocating to keep a company together, typically they try to act to separate companies, do you want to see management change clarence otis retired as the ceo? >> clearly there have been operational and strategic issues now and that all starts with the top. so as a shareholder, our power, our control is with the board. our power is in theory at some point to be able to nominate directors and potentially replace the board if they're not doing a great job in overseeing management and how the business is being run. the biggest decision for a board is in choosing the ceo and continuing to choose the ceo and i think there are strategic and operational issues. is mr. otis in a hot seat? i think he is in a hot seat. >> it would seem to me you would hope to perhaps accomplish a great deal simply through the consent. if you are successful that sends a message. boards hear that message long before a special meeting even is called. there can be action. i have no idea if that will take place here. i would assume that's your hope? >> yeah. this doesn't make a lot of sense for us to have to jump through all of these hurdles. you're absolutely right. again, the red lobster separation doesn't make sense. shareholders are voicing their opinions vo strong lir ly they're not in favor. we've had to go to lengths to receive over 50% in the shares to call the special meeting. you would think that management and the board would have gotten the message long before now change would be required and that the strategic decision is not the best one for shareholders. >> want to take you to the present moment as well. we're at, of course, every year we get together a lot of activists at the conference, talk of the morning as you might expect yesterday's news from bill ackman and valeant, following by news of the hostile offer for allergan. some saying this changes the face of activism because for the first time, first time in a long time or in memory have a partnership and that is what it is, between a corporate and an activi activist. something we're going to see more of? >> it's tough to tell this early. i'll say there is an opportunity. so we have heard from private equity firms, strategic buyers they've been frustrated for years but we hear from them when companies don't answer them. >> so when companies give them -- >> when companies approach them, those potential buyers get frustrated. without going the last step and using the tool of potentially going hostile, then they are just left being frustrated. it's akin to passive shareholders. passive shareholders can talk to management and ask for change, ask for change but unless you're willing to go to the next step and do something about it and potentially replace boards or make an offer or become active you're going to be frustrated. it's not surprising that buyers that want to buy assets are willing to go to the next step and possibly be hostile and i'm not sure it's a huge leap for them to team up with activist investors who are skilled in knowing how to do this. >> although, this is leaving a bad taste in some people's mouth. the volume of e-mails i've gotten from sophisticated investors and bankers and everybody involved in m and a over the last 24 hours or less than that saying how is that -- he able to do this? he is by the way, that being bill ackman. it is perfectly legal to form this group, bought the stock, bringing things to the so-called partnership, but it doesn't feel quite right he's able to go out with knowledge that conceivably at some point down the road the stock will get bought by valeant and he had knowledge the fact that they were making the hostile bid. >> i'm not a lawyer but i would say as long as you're working with the attorneys and part of the same group and you are doing this together, then you're able to trade on your own information which is what this is. so i agree with you, it seems legal, but from the outside perspective i understand why people might have questions. time will tell. i think it's very, very interesting. >> it is indeed. jeff smith, appreciate it. hope we'll see you within a year given we've done this on an annual basis. jeff smith from starboard. the fight for darden something we'll be following closely, perhaps in a couple of days, carl, send it back to you. >> david, sounds great. david faber. when we come back stop trading with jim as the s&p has gone positive for april. "squawk on the street" will be right back. there is no substitute for experience. for what reality teaches you... firsthand. in the face of danger, and under the most demanding circumstances. experience builds character. experience builds confidence. and experience... has built this. the 2014 glk. the engineering, and the experience, of mercedes-benz. see your authorized dealer for exceptional offers through mercedes-benz financial services. beautiful day in baltimore where most people probably know that geico could save them money on car insurance, right? you see the thing is geico, well, could help them save on boat insurance too. hey! okay...i'm ready to come in now. hello? i'm trying my best. seriously, i'm...i'm serious. request to come ashore. geico. saving people money on more than just car insurance. all stations come over to mithis is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. i hate when my computer gets grouchy. it's probably due to lack of sleep. set your computers to hibernate after 30 minutes. the rest will do it some good, and save energy. the more you know. trwith secure wifie for your business. it also comes with public wifi for your customers. not so with internet from the phone company. i would email the phone company to inquire as to why they have shortchanged these customers. but that would require wifi. switch to comcast business internet and get two wifi networks included. comcast business built for business. time for cramer and stop trading. >> morgan stanley blows me away here. gw pharmaceuticals symbol gwph, stock will be up the most of any stock other than allergan today. why? this is a cannabis stock. i am shocked at this. of course, it's not necessarily -- it's not a medical marijuana stock. they have a novel platform. epilepsy company. when people ask me, jim, what marijuana stock do you like? i always go cannas business, gw pharma. stock had basically -- it was up the most of any stock i follow, came back. this is a timely upgrade. people are going to buy it at 103 price target. people will go for every one of these penny stocks, forget it. if you like cannabis, it's gw pharma. bold, bold recommendation by morgan stanley. >> what's their target 103? >> 103. >> probably going to be there in 48 hours. this is a real company, it is a -- there's a lot of pent up demand to play medical marijuana stocks. you want a real company that dabbles in it, it's gw pharma. >> keep our eye on that. >> mad tonight? >> three of the controversial stocks out there. rich kiner from kinder morgan, dramatic under performer, gme paul raines, people short that thing, one of the heavily shorted stocks and david lesar has not done tv in a decade, halliburton has done a smoke show quarter and he's coming on to talk about it. i feel like we did the boston marathon, congratulations. >> see you tonight 6:00. existing homes after break. don't go away. ♪ [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ she can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ in today's market, a lot can happen in a second. with fidelity's guaranteed one-second 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. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. welcome back to "squawk on the street." i'm diana olick breaking news from the realtors, existing home sales in march barely moved, down 0.2% month to month to a seasonally adjusted annual rate of 4.95 million units, home sales down 7.5% from one year ago to the slowest pace since july of 2012. what's interesting in this report is the regional divergence we're seeing in home sales. sales popped up 9% in the northeast and up 4% in the midwest but they were down 3% in the south and down 3.7% in the west. why? prices. prices are jumping much higher in the south and west regions that's hitting affordability and dropping sales. prices gains not so big in the northeast and the midwest. that's why you're seeing sales coming up. speaking of prices the median existing home price in march was $198,500 up 7.9% year over year. that rate increase is slowing a bit. we were seeing price jumps in the double digits over the past several months. that's coming down. again, though, homes in the lower price ranges are really falling. sales down 18% in homes priced under $100,000. what's selling? the million dollar homes. inventories are rising slightly up 3.1% in march from a year ago. sara? >> thanks very much, diana. we'll have to see what happens as the spring selling season continues for housing. now to the news of the morning, big deals. friendly deals and hostile deals in big pharma. meg is busy today, back at hq and meg, let's go through some of these, the three-way friendly deal announced this morning. >> yeah. absolutely, a $28.5 billion three-way pharma shuffle that happened this morning between novart novartis, glaxo and eli lilly. novartis is buying glaxo's cancer business for $16 billion. in exchange glaxo is buying novartis' vaccine business for $7.1 billion and novartis selling its animal health business to eli lilly for $5.4 billion. on top of that novartis and glaxo partnering in consumer health care. this is a swap the trading that's going on, among these big pharma companies. each trying to beef up in areas where it's strong and getting out of the areas where it's not competing as successfully. >> the focus. the laser focus on some of their businesses seems to be the theme. the one that involves bill ackman not so much for the activist which is unusual for itself but what it would mean, a tie up of allergan and valeant. >> this is a fascinating merger. yesterday market caps of $42 billion. valeant has been on the acquisition spree part of its strategy, buying companies, getting out of r and d, cutting jobs, selling the drugs more efficiently and making more money that way. they've said they want to be ap top five big pharma company in the world by the end of 2016. they would need a market value of $150 billion. this one would get them about $90 billion. merger biggest acquisition valeant would ever do and they get the blockbuster botox, $2 billion product for allergan in facial fillers, getting rid of wrinkles but therapeutic sales, that's more than half their sales. >> botox big sales. what's driving pharma? there are major health care changes in the country. is this about cost efficiencies? >> it's about that. it's also these companies have gone through big changes in the last few years, losing top selling products, patent protection on those. analysts are saying today who i'm talking to, this is a repositioning of these big pharma companies as they go through the patent clips, kind of trying to put themselves in areas of strength going forward? >> all right. we'll continue to watch more pharma deals in the pike, thanks very much on the deals of the morning. pharma sales up in europe and the u.s. today. >> shares of netflix are moving higher this morning after it reported quarterly profits last night that exceeded expectations and, of course, said that it plans to increase prices for subscribers. new subscribers first. but eventually everyone. the senior analyst at fbr capital markets. good morning. >> good morning. >> i guess the crucial question is, can you raise prices by 1 or $2 per user per month and still drive subscription growth at the rate that the market expects it? what's your view? >> okay. i think you can. i mean to be clear we have a market performer of netflix for valuation sensitive but we've done survey work of consumers and people like netflix, they're using netflix, as much, much or more than hbo and your hbo subscription will cost you 10 to $15 more on your cable bill. netflix around $8 in the u.s. consumers like it as much or more than hbo. >> pacific crest last week put out an upgrade and at that point estimating a $1 increase in revenue per user could actually raise the operating profit for 2016 by 84% to $1.6 billion. the question becomes, can reed hastings take that profit or does he need effectively to enter an arm's race with everybody else who seems to want to produce original video from yahoo! the right the way down. >> i think with netflix you have to assume they reinvest in content. they're spending more than hbo on content. that's a big part of why consumers like them as much or more than hbo. i push back on that thought that it drops purely to the bottom line. you know, i think they're going to have great earnings growth n place of expanding leverage but it's not pure leverage. the contribution margins are not 100%. >> we should mention, of course, that reed hastings last night who has an interesting relationship with our parent company comcast, became the first big media company to oppose our parent's acquisition $40 billion acquisition of time warner cable. the argument seems to be in part that he had personally no choice but to be forced in into paying interconnection fees through the comcast system and then our own parent company has come back with quite a spicy statement suggesting that a lot of the claims that he made were inaccurate, that his arguments were false, and importantly, that netflix wanted to unfairly shift in comcast's view the costs from its customers to all internet customers and said look he came to us to do a deal because he's using his size to his own advantage. what do you make of that relationship between comcast and netflix and where it eventually takes them if comcast does do a deal with the likes of apple to stream content and basically hits back at netflix's core business. >> well look, i think that, you know, this is getting to the political realm. with all due respect to your parent company and netflix, neither entity is really on the right here. this is big corporate titans looking for leverage in a politically and economically. i think economically netflix has a lot of leverage if you want to sell a broadband area you need netflix to work well on that service otherwise consumers won't be interested. what reed is trying to do is set the groundwork for regulators to puts conditions on comcast to protect his relationship with comcast. so right now what they're spending for access to comcast is not very large in the grand scheme of what they spend on content. he doesn't want that to change. he wants regulate tors to put safe guards in. they will have over 50% of all broadband homes in their footprint. they would have cloud to exercise leverage given there's not a lot of broadband. he has a reasonable argument there. >> this has been a roller coaster for the stock recently. it lost over $100 a share. >> right. >> quarter of its market cap. where do you think we're likely to trade from here? what is the valuation argument? >> look, i'm arguing for a $393 price target which is saying that international is worth a little more than domestic. i think you have to squint and think really hard to make a valuation argument. the stock is going to be largely momentum driven. the international momentum is good argument for the stock to hang on to the gains it's had for the day but hard to sea a great risk/reward argument from here. >> barton joining us from fbr capital markets. >> great. >> coming up on the show, what day to be live from the fifth annual active passive investor summit. cnbc the exclusive broadcast partner, keith meister is next, the founder of corvex management, and jeff ubber, valeant pharmaceuticals, largest shareholder. what day after they announced a bid for allergan along with bill ackman. the investorer who rattled microsoft's board, jeff ubben, coming up on "squawk on the street." street." this is mike. his long race day starts with back pain... ...and a choice. take 4 advil in a day which is 2 aleve... ...for all day relief. "start your engines" welcome back to sho"squawk the street." i'm david faber. we are joined by keith meister, managing partner of corevex management. activist fund with $5.5 billion under management. jeff smith, last year half that size, you are growing so quickly. you know what, i love to start on this idea which is sometimes you hear it's a bubble. you guys are not an asset class, activism is going to jump the shark soon. and these incredible appreciation of assets amongst the funds is going to stop. your response? >> i would say we're in the business of investing in great companies going through change. so i don't think it's a bubble. i think it's just very right for today. we can create bona fide ar ba trojs in investing in a company trading at one value because the market has a certain expectation of the future and if we can help that company create a different path forward, change how they allocate capital, think of m and a, corporate structure, tax structure, balance sheet we can help create a new outcome, a new path. we're fundamentalal investors. we can hedge our risks we don't want to take and invest in great businesses going through change. i don't think it's a bubble. what's changed a lot over the last year has been the willingness of other institutional participants to support active investing. the reason for that is quite simple. it works. why is the stock going to go up over the next 12 months? it's going to go up because -- or the next five years. >> that's -- you said 12 months and then five years. the chorus is growing here, whether marty lip upon, i'll x him off, joe per rel la it's 12 months and then 24 months later we were knee where. how do you respond to those who say short term is the key to activism and you create value over a short period of time? >> i would disagree. i would say the engagement of the joe -- the idea of getting all shareholders to interact with management to share views, so that companies can take actions consistent with creating value long term makes sense. if the activist, bill ackman or carl icahn has to be the leader, they're only as effective as getting the other institutional share holders to buy in. if bill ackman is successful with allergan, it's not going to be because it creates a short-term pop, it's not going to be because a handful of hedge funds support it, because the market supports it broadly because allergan will have to avail itself of the synergies from valeant, avail it self from the tax ar ba traj or better yet find an alternative of their own that's better. he identified an opportunity. a great business that wasn't using the right capital structure, wasn't using the right corporate structure, wasn't taking advantage of its opportunity, so this is a real positive. he presented a different choice. it's a good choice for valeant shareholders, valeant's stock is up a lot today. great choice for allergan shareholders. what allergan's board should do shouldn't just say yes, study it as a possibility. >> they've been saying no to valeant for some time and it was valeant that i mean -- ackman was interested in valeant as an investment and he will be a significant holder here if in fact this all goes through. it was valeant that was unsuccessful in getting allergan to engage. is this a game changer? there's a number of people here, you can hear them a lot of the conversation is about this partnership. really the first we've seen of this type certainly in a long time, if ever. does it change the nature of the relationship between corporate america and activists and the future of perhaps hostile bids? >> i hope so. what i mean by that, i don't know if you'll see a lot of other things that look like this. i think they were a rare set of circumstances that created this opportunity. what is the bigger picture? the bigger picture is, bill ackman partnering with a company valeant to help them have an opportunity that they could not have on their own, and to also provide an opportunity for allergan shareholders. i would say, you know, in the larry fink vernacular or in the marty lipton this is a win win. a new opportunity is being presented not short term but it's long term for both companies. now there may be better options and the board of allergan should study that. if they are allergan shareholders will get a better chance. but what bill was able to do was partner with a company to create a new opportunity, a new option, for two sets of investors. one of the things we spent a lot of time thinking about is m and a. should be more m and a, more opportunities and lots of reasons we know why deals don't happen. and here, a company that wanted it to do m and a was able to give themselves what they thought was a path. you've covered hostile takeovers for a long time. >> i have. >> they're hard to get done. >> they are extraordinarily difficult. hardly see any of them any longer because of that. >> to valeant's credit they were able to come up with an innovative structure, if they're unsuccessfulful they get compensated. >> 15% if there is a topping bid. people are pointing to the partnership, even though it's legal doesn't feel right. ackman buys most of the options, buys a significant a stake in the company knowing, of course, he's part of the group so it's not insider trading, knowing the bid is coming and immediately can print a billion dollar profit so to speak on paper. how is that fair? >> i make two statements. firstly, this is the bona fide ar ba traj of actors. if you're going to do something you can act on it. it's not someone else's information it's your information. if i change the way i describe the opportunity and said ge or ibm wanted to make a hostile bid for xep xyz and before they made that bid they bought 9.9%, great, happens all the time. >> valeant could have done this on its own but chose not to. >> because valeant wasn't sitting with $5 billion or $4 billion on its balance sheet. bill ackman happened to be. they were able to figure out a way to be a partnership. whether it's about the valeant/allergan situation, probably rare, or importantly what we're doing at corvex reaching out to the companies we're invested in, we have capitals, ways we can help you, somehow activism has been portrayed as good guy versus bad guy, right. the activist versus the corporation. that's the wrong dialog. the dialog should be how can the public market investor, corvex partner to create value. every once in a while there will be a commonwealth where we have to fight against what we would describe as bad actors and have fundamental change in -- >> glad you took us there. only a minute left. let's get to commonwealth in this. i followed it. you won a consent to solicitation. the second we saw, larry robbins also at glen view having one won as well not that long prior to you. throw out the board and now what? who's running it and what's the strategy? >> commonwealth is a $5 billion reit that has 155 assets, 55 million square feet of real estate across america. related partner with us, presented an idea, saw a path to remove the board. there were a bunch of reasons i won't get into for why the discount existed but misalignment of incentives. we brought in sam zell to be chairman of a new company and his former cio at equity office, david, to be ceo and they will run commonwealth as a best in class reit the way zell has run his previous reits. the management of the company will be up to them. and my opinion of what they want to do with the company is rebuild an equity office. $7 billion platform to take and reallocate capital and grow in the commercial office space with collectively in sam's words getting the old band back together, old guys from equity office back together, reallocating capital and using commonwealth to create a real living business. for us we're thrilled to be long-term shareholders we have best in class management and what this shows me take the optimistic side of this, we took a situation where there was really bad assets, bad actors really undermanaging good assets and with the support of nearly all the institutional shareholders, support of iss, glass lewis, we twice were able to run consent solicitation, 70% plus the vote, vote out the board because we showed a good plan. a plan about shareholders taking back commonwealth and we're optimistic about future. >> we could talk for a lot more time but i'm glad we were able to spend some time with you and cover quickly the landscape of activism. keith meister, one of the larger important activist funs funds out there. back to you. >> thank you so much. still ahead david will talk with jeff ubben founder and ceo of valueact on the board of valeant with a bid this morning for rival allergan coming up this morning. plus mcdonald's results are out. missing on both the top and the bottom lines. comps just barely positive. blaming weather, of course. challenging industry dynamics. stock has been all over the map just below 100 today. we'll dive into that next. n you? yes sir. alright. let's share the news tomorrow. today we failrly busy. tomorrow we're booked solid. we close on the house tomorrow. i want one of these opened up. because tomorow we go live... it's a day full of promise. and often, that day arrives by train. big day today? even bigger one tomorrow. when csx trains move forward, so does the rest of the economy. csx. how tomorrow moves. predibut, manufacturings a prettin the united states do. means advanced technology. we learned that technology allows us to be craft oriented. no one's losing their job. there's no beer robot that has suddenly chased them out. the technology is actually creating new jobs. siemens designed and built the right tools and resources to get the job done. [ banker ] sydney needed some financial guidance so she could take her dream to the next level. so we talked about her options. her valuable assets were staying. and selling her car wouldn't fly. we helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today...and tomorrow. so let's see what we can do about that... remodel. motorcycle. [ female announcer ] some questions take more than a bank. they take a banker. make a my financial priorities appointment today. because when people talk, great things happen. make a my financial priorities appointment today. drivers, tgo!our marks. it's chaos out there. but the m-class sees in your blind spot... pulls you back into your lane... even brakes all by itself. it's almost like it couldn't crash... even if it tried. the 2014 m-class. see your authorized dealer for exceptional offers through mercedes-benz financial services. mcdonald's a lower quarterly profit as sales fell more than expected. shares unchanged at 99.76. barclay's director of research jins us this morning. good morning to you. >> good morning. >> thanks goodness for europe. how long can they carry all the water here? >> over the past six months europe has turned positive which has been a pleasant surprise. obviously investors want to see the u.s. turn positive which unfortunately has been negative for the past five plus months. people like to play the european recovery trade, mcdonald's the way to do it with 40% of their profits out of europe. >> is the u.s. getting an inordinate amount of attention and do you see comps turning significantly positive in the near future? >> the u.s. tends to get unusually large amount of attention. i guess not surprising because it's another 40% of their profits. most investors are u.s. based. you know the factors that have pushed it modestly negative the more challenging broader environment and competitive set neither will change on a dime. in the short term people are expecting the u.s. to re main modestly negative. europe to remain modestly positive. >> mcdonald's will tell you, we could use a little inflation here. especially knowing what margins have done in asia and u.s. we know food is getting a little more expensive. do youing think they've r they're going to have the -- do you think they're going to have the where with all to raise their margins? >> food is the biggest component for them. they expect their basket to be up 1 to 2% in europe. that's modest. they can cover that level of inflation with pricing. i don't think they want to go meaningfully above that by any means. their value is their message. they're somewhat limited from that perspective. >> you got it overweight, price target of 115. what leads us there if it's not comps turning positive here, how much pressure is don thompson under at the franchisee meeting and does he have to start reaching into his bag of tricks? >> yeah. i mean i don't think anybody believes don has made any big mistakes during his tenure. i don't think he's under any immediate pressure. with that said they did acknowledge in their press release this morning that they're looking at means to optimize shareholder value whether it be the balance sheet with leverage or how much of the restaurants they own versus franchise or g and a cuts. they have alluded to those things. those should provide a level of support in the near term. we want to see the fundamentals turn as well. in the near term they've touched on other avenues for opportunity for shareholder value. >> quickly want to ask you about the breakfast market. very much in focus. yum reports after the bell, i'll be covering it, they own taco bell, aggressive move into mcdonald's turf on breakfast. 25% of u.s. sales for mcdonald's comes from that market. is that at risk to losing share from the likes of taco bell and starbucks? >> mcdonald's market share on breakfast is huge. that 25% of sales is the envy of everybody else and we've seen wendy's, subway, others go into breakfast more often than not ultimately exit breakfast. it's hard to break. taco bell's push is going to cause pressure in the short term. the question remains whether they're targeting the same customer. it seems like you're talking about a different customer base. obviously a different type of product. so only time will tell. mcdonald's is aggressively looking to protect the breakfast share. >> is there better risk/reward in a chipotle or some of the other starbucks, dunkin', where does mcdonald's fit in your spectrum of favorites some. >> yes. we don't expect mcdonald's to be our best performer by any means. within the quick service world we believe expectations are fairly low from a fundamental perspective. at the same time you have the lowest valuation in the industry. you have the -- among the highest dividend yields and now this balance sheet optionalty which should provide a level of support. rather own a discretionary name, but for those who want to play a globally defensive multinational qsr mcdonald's down an out and we have expectations for slow but steady improvement this year. >> the growthy world. i like that. >> yeah. >> new term. jeffery, thank you so much. >> thank you. >> jeff bernstein joining us from barclay's, big report out of mcdonald's. dominic chu, a market flash this morning. >> what's going on, carl? we're watching shares of harley-davidson this morning. they are roaring ahead here after the higher end motorcycle maker reported earnings and sales that came ahead of wall street expectations. harley was helped by better retail sales of its motorcycles. it also said it would ship between 7 and 9% more cycles to its dealers this year over the same time last year. again, some nice upbeat news and, of course, we will have more with the president and coo of harley-davidson on closing bell. >> after the good numbers and good stock market reaction up almost 7.5% for harley-davidson. thanks very much. market check because we are looking at the sixth straight day of gains for u.s. equities and it's really across the board. the s&p, the dow and the nasdaq. carl you were mentioning that s&p level to watch. >> closing high for the year is 1890. >> not too far away. >> ten more points and basically talking about the highest close of 2014. given where we've been in april, we were in the red for a long time, s&p now in the black for the month as of today, so we'll see how much of this continues. >> we're looking at almost half percentage point -- half a percent of a rally for the s&p. the nasdaq up almost 1% and we are on a hot streak, it's the best winning streak for u.s. stocks since back in july. see if that can continue and close out near the closing highs. coming up on "squawk on the street" an exclusive interview with valueact's jeff ubben, one of valeant's largest shareholders. hear what he has to say about the hostile launch this morning. [ bagpipes play ] make it happen with fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. could mean less waiting for things like security backups and file downloads you'd take that test, right? what are you waiting for? you could literally be done with the test by now. now you could have done it twice. this is awkward. go to comcastbusiness.com/ checkyourspeed. if we can't offer faster speeds or save you money we'll give you $150. comcast business built for business. citigroup's shareholders meeting is going on right now. a lot of questions around the rejection of sit ty's capital plan, the fraud at its mexican subsidiary. no webcast. the meeting going on in st. louis right now. we have kayla tausche down there in st. louis. what have we heard so far and why don't they have a webcast? some complaints that shareholders have to schlep to st. louis to hear the answers? >> well, sara, no webcast, no photos or videos allowed inside. we would love to give you a live look but unfortunately we can't do that either. i will tell you there are about 100 people inside, some shareholders, but a lot of employees from citi's mortgage unit which is based here in st. louis and why they are here today. just moments ago, we wrapped up prepared remarks from ceo michael corbett and turning it over to the vote on the key issues for citigroup. some of the headlines out of his remarks he did say it has been tough times for the mortgage business here. activity slowed dramatically as rates have increased and mortgage activity has dried up. he talked about the fraud in the mexico unit saying that, of course, it only takes one person to jeopardize everything you've worked for in your firm's credibility but that citigroup is working on every possible avenue to recover the funds they lost there and to punish the perpetrators in that situation. corebat did acknowledge the issue is the fed's rejection of its 2014 capital plan. and, of course, shareholders have not loved this news and they know they have to wait for almost another year until they get that bigger dividend or buyback because corebat said instead of resubmitting that plan they're going to try to hunker down and fix the problems and resubmit it next year. s they've been here before. the 2012 plan was rejected and had steep consequences for vikram pandit. at this meeting two years ago shareholders rejected pandis's pay package of about $15 million. then the board had to regroup and figure out how much they were going to pay him and how they would penalize him for the vote. shareholders said we're not going to pay someone that much when they can't deliver on these results. that vote will happen. corebat made $17.6 million and even though the turnaround of citigroup is under way shareholders will be expected to vote on these issue today. we'll have the results at 12:30 eastern time and follow me on twitter and on cnbc almost every hour with updates from citi's shareholders meeting you can't get anywhere else. back to you. >> kayla, fairly safe to assume corebat doesn't have problem with the compensation, it will roll through unlike before? >> well, it's unclear at this point, simon. i mean of course we know when pandit's compensation was rejected several months later he was ousted by the board. now we're not expecting that to happen here because he's just taken the raines. but there could be some sort of ding to his pay, maybe decrease one of his cash bonuses. we don't know exactly what will happen. only the results will tell us what could happen. shareholders could vote it in. we don't know. votes are being cast right now. >> it's real public service having you there. thank you very much. kayla tausche from outside the citi shareholders meeting. coming up on the program, a cup sharing program, a cup sharing program, in new york. it's kind of like citi but for your morning cup of coffee. we'll explain the program's founder on earth day next. p p (announcer) scottrade knows our clients trade and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) ranked highest in investor satisfaction with self-directed services by j.d. power and associates. at your ford dealer think? they think about tires. and what they've been through lately. polar vortexes, road construction, and gaping potholes. so with all that behind you, you might want to make sure you're safe and in control. ford technicians are ready to find the right tires for your vehicle. get up to $120 in mail-in rebates on four select tires when you use the ford service credit card at the big tire event. see what the ford experts think about your tires. at your ford dealer. for $175 dollars a month? so our business can be on at&t's network yup. all five of you for $175. our clients need a lot of attention. there's unlimited talk and text. we're working deals all day. you get 10 gigabytes of data to share. what about expansion potential? add a line anytime for 15 bucks a month. low dues... great terms... let's close. new at&t mobile share value plans. our best value plans ever for business. you are looking at a live shot of air force one has taken off from washington, d.c. president obama is headed to washington state where he's going to be meeting with families of victims of the deadly mudslide in the state this afternoon and then he is headed to asia. he's there for a four-country tour of asia in the president's -- let's stay in washington, eamon javers has breaking news for us. >> good morning. that's correct. the supreme court now upholding the state of michigan's ban on affirmative action. the supreme court ruling today that the voters of -- in that state were well within their rights to block racial preferences. an excerpt saying, deliver brative debate on issues such as ray shall preferences may shade into ranker. does not justify removing certain from reach. democracy does not prove some are too divisive or profound for public debate. voters getting their way and has implications for states acos the country. we're waiting for a couple more rulings from the supreme court today. we'll keep our eyes on those and bring them as we have them. >> thank you very much. the view from d.c. on the earth day you might be shocked to learn in this country roughly $16 billion paper cups are thrown out each year. that's billion with a "b." now some entrepreneurial students from the school in brooklyn hope their new cup cycle initiative could help reduce that waste. currently in a three-day test phase called good to go a reusable cup program, think of it as city bike to go for coffee. joining us is katherine who is the chief executive at the school which is dedicated to teaching social entrepreneurs. good morning. >> good morning. >> what was the idea? >> the idea was basically to create a program that would allow its users to reduce the paper waste from single use cups but actually giving them the same convenience that they have with the single use cups. and the whole program basically works the way that you get your to go cup which is reusable. you get your coffee like you're used to but when you're finished instead of tossing it away, you return it to any of the participating return locations. >> or the train stations i believe. >> yes. right now we're piloting so we have return location at the train station and coffee shops. basically what we want to find out is how do people use the system and where do people bring their cups back mostly. >> what are you finding? >> we just started yesterday. we had i think a really thrilling start. we started in the morning we already got rid of more than two-thirds of all the cups we have in our pilot. we got great feedback from all the consumers so far. and i don't have the final numbers of returns from yesterday. but in terms of feedback which is really important for us as well in terms of do people like the idea, will coffee shops participate in it and all these factors, and all of that is going really well so far. >> some might have questions about the sanitary aspect of all of this. how are they washed? how clean are they when you get them? >> absolutely. and, of course, we understand that concern. and therefore we're working on ways to have them cleaned and sanitized so they're meeting the standards of regular industry cafes and restaurants. so it's industrial dish washers and sanitation taking place to make sure that nobody will, of course, have to worry about that. >> i guess the question is, whether you could expand it, you know, towards a city wide scheme whether you need the public government behind that? is it possible or just businesses come together do you think? >> it would definitely be possible to also have businesses come together for this. but we actually have worked with the city government in this program that we're running with the do school from early on to make sure it's in line with what the city supports and we have seen very good feedback on their end as well from the sanitation department. they want to reduce the waste. >> it's a fascinating initiative. let us know how it works out. the coo of the do school. thank you. >> i have to say i'm guilty of the paper cup. >> absolutely. >> thank you. >> good to see you. >> next up an interview, exclusive with valueact's jeff ubben, one of valeant's largest shareholders. hear what he has to say about the hostile launch this morning. that's coming up. ♪ [ male announcer ] when fixed income experts... ♪ ...work with equity experts... ♪ ...who work with regional experts... ♪ ...who work with portfolio management experts, that's when expertise happens. mfs. because there is no expertise without collaboration. mfs. that corporate trial by fire when every slacker gets his due. and yet, there's someone around the office who hasn't had a performance review in a while. someone whose poor performance is slowing down the entire organization. i'm looking at you phone company dsl. go to comcastbusiness.com/ checkyourspeed. if we can't offer faster speeds or save you money we'll give you $150. comcast business built for business. welcome back to "squawk on the street." i'm david faber at the active passive summit. want to talk about activists at it for a long time and are, in fact, one of the biggest in the game, well, then you have to talk about valueact capital with $14 billion under management jeff ubben the fund's founder and chief executive officer. nice to see you. >> good to see you again. >> we skipped you last year even though you had big news at the conference when you took at the stake in microsoft. there's big news again involving one of your large positions. this time -- >> we save it for this conference and you. >> i appreciate that. thank you, jeff. valeant. you've owned that stock for eight years. you've been involved with that company for a very long period of time. one would assume you were aware given the size and your partner mason is on the board, were aware of what was going on here in terms of this transaction. tell me why this is something that shareholders of allergan and valeant conceivably should be viewing positively? >> you know, mason went on the board in 2007 and was part of the management change and basically brought in with the board mike, and mike pulled all the levers we saw power management could pull and proved to us over the next two years there was an interesting consolidation opportunity in pharmaceuticals. mike was buying gross profit dollars at three times and using debt, 6, 7% to do it. earnings went from a buck to basically 8 bucks over this period of time. this is a guy that, you know, as soon as he's about to close the deal, he's already got the names attached to the cost savings. so he's -- the speed and execution that mike brings is really fantastic. so allergan and valeant are a perfect match. it puts us 40% in health, number two behind al can. >> owned by novartis. >> yeah. >> number one in derm number one in aesthetics, private pay consumer driven businesses where the physician/patient relationship is still key, which is really really not where pharmaceuticals is generally these days. so it's 70% private pay, which is really interesting. it's 25% emerging markets, you know, when you put the two together. so it's -- it's a deleveraging transaction, so you're down somewhere around three times debt-to-ebitda. so we think it's a powerful combination, and mike is the right guy to do it. >> to those who would say, jeffrey, in fact, valeant is nothing more than a rollup that relies on an extraordinarily low tax rate, given it's bermuda now, usually barbados exclusion that they had, and cutting costs at all costs, but then it has to do the next deal. because then it runs out of runway, and once the music stops for this company, you better be out of there, because it's going to be an ugly show. >> we think that the model of acquiring r&d is proven. i mean, mike's been doing this since 2008. and we're still showing, you know, mid-single digit organic growth. and we're doing -- we're building our pipeline differently. >> are they real -- new products, though? can you name new products introduced by valeant? >> well, the bausch & lomb pipeline was actually fantastic. it's grown 10% in new products alone. >> and so, with allergan, it's your belief they won't necessarily cut out the future? i guess, that's what people believe that, yeah, you can show great accretion, incredible growth as a result of, of course, the favorable tax rate, but getting rid of the future. but just keep going, because one day -- >> we're talking about high single digit organic growth, the combination, we believe that. >> right. you believe that. now, i believe the proxy's been filed. i believe mason, your partner at valueact, on the board, is no longer on the board of valeant, is not running for re-election. why is that? >> yeah, that's a good point. mason is doing the microsoft board, and that is consuming a lot of time. of the valeant board seat, it's about as, you know, stressful as any board seat you could imagine. there's a lot of meetings and a lot of action. so we really need to reallocate mason's time to microsoft. i mean, there's an element here where we've kind of originated with mike this strategy of rolling up, to use your words, consolidating a pharmaceutical industry where there was a misallocation of resources. there was too much r&d with not enough return. we went at that, right? and we brought this strategy, put it in place, executed on the strategy, and after eight years, it's a little bit time to hand off to bill, who big ackman, came to us with the structure that was very tactically interesting to us. allergan was not responsive to our calls. and we identified the target, and so -- so innovative structure on bill's part and -- >> why does valeant need bill ackman? you say you've been a part of this country really from its outset in terms of the new management. why does valeant need big ackman? they certainly didn't need him to acquire the stake -- >> it's a blocking position. it's 10% of the votes. these are not easy to win. you know, we think -- you know, it's some cash but a lot of equity, so the allergan shareholders can participate. we think it's a higher probability of success to own the shares going into the announcement. >> and you use the word handoff to ackman. does that mean you guys are going to -- once you step off the board -- reduce your position in -- >> no, we love the combination, for all the reasons i described. we have a big position. >> it's the second largest position in your fund, certainly you're one of the largest shareholders. >> right, we think there's more to go. there's allergan and more. >> what, pfizer? merck? we could be $100 billion company. what's next? >> yeah. the one thing is mike has proven that the execution's there. and so, you execute and then you look to see what else there is to do. >> a couple of minutes left. can we talk a little microsoft here? again, a year ago, you took a sizable dollar position. as you say, mason, your partner, is on the board of microsoft. they haven't closed the nokia deal yet. i'm curious as to your thoughts, a, about new ceo, and, b, about whether you endorse what was not his strategy, but is this nokia deal that they are going to close in the not-too-distant future. >> yeah. you know, sacha is perfectly allianced with our interests. he grew the service and tools business double digit. he launched the cloud. he made decisions around the azra cloud that's un-microsoft-like. he made it an open-source software, so we brought in lennox. he's allowed mobile apps in the cloud, you know, to work on the android and ios system. he's forward thinking, not defensive around the windows franchise. that sort of stuff really is powerful, and i think the market's understanding this is a different company with his leadership. there's a lot of tough discussions still to go around the device strategy. and i just -- we're on the board. i can't really tell you where we end up. the board is still to work through that stuff. >> so it's still a question mark to a certain extent as to what happens? >> mm-hmm. >> with nokia? >> mm-hmm. >> you distinguish yourself, jeffrey, and valueact has, by being very long term in nature. i mentioned it, eight years in valeant. microsoft, conceivably, you'll be in there for many years. >> mm-hmm. we bought more microsoft at 37 on the back of the announcement. >> what do you own in that thing, like $3 billion worth? >> 2.5 plus, i'm not sure exactly. >> yeah. does it -- all of the other guys crowd your space a little bit? you know, i mean, meister now has $5.5 billion, geoff smith with 3 billion. you've been there way before them taking these very long-term stakes. does it make the landscape more difficult -- >> they don't crowd my space, because we really do our own thing. we don't -- we really kind of run away from other activist deals and focus on companies where the institution ownership, like a t. rowe and cap re, have been there for a long time. they become really galvanizing for us and helpful. i do have a problem with the cover -- the media coverage being so extensive. i mean, we got to the point where 13-fs, when we have a small farm team position, causes us to have to pay more. >> the stock runs up. >> and that's a problem. i have six fronting investments, but i can't get them graduated to a core investment partly because the market's been robust, but partly because people are watching everything that we're doing. i think it's a mistake, because we're really long term. i mean, our companies -- motorola is doing good stuff, but, you know, we've been there three years. we've made the portfolio smaller and more pure play like with the recent transaction with enter price business, but the company is going through a tough spot in their markets. you know, we have to work through that. we'll be there for many more years. >> yeah. >> the idea that you follow us because you expect something to happen tomorrow is -- you know, i think that's misguided. >> well, that's a good place to end, although i could talk to you for a much longer period of time. but this is tv. >> yeah. >> we've gotta go. thank you. >> good to see you again. >> you, too. jeff ubben. >> allergan shares up 16%, best performer in the s&p market. nasdaq and dow all higher. "squawk on the street" will be right back. [ male announcer ] what if a small company became big business overnight? ♪ like, really big... then expanded? ♪ or their new product tanked? ♪ or not? what if they embrace new technology instead? ♪ imagine a company's future with the future of trading. company profile. a research tool on thinkorswim. from td ameritrade. a research tool on thinkorswim. all stations come over to mithis is for real this time. step seven point two one two. verify and lock. command is locked. five seconds. three, two, one. standing by for capture. the most innovative software on the planet... dragon is captured. is connecting today's leading companies to places beyond it. siemens. answers. a short word that's a tall order. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again. for what reality teaches you... firsthand.e. in the face of danger, and under the most demanding circumstances. experience builds character. experience builds confidence. and experience... has built this. the 2014 glk. the engineering, and the experience, of mercedes-benz. see your authorized dealer for exceptional offers through mercedes-benz financial services. good morning. it's 11:00 a.m. on the east coast, 8:00 a.m. out west. here's what we're watching today. arguments starting in a supreme court case that could change the future of television. we'll go behind aereo's case and what it could mean for broadcasters everywhere. the most useful way to think about apple isn't as a tech company but as a movie studio. walt will explain to us what he means by that in a few minutes. price hike in netflix not scaring off investors with the stock soaring today. can anything stop the company's upward momentum? and from the boston marathon straight to your television screen, we'll talk to the first american to win the marathon in over 30 years. that's a little later on this hour. all right. joining us this morning, kevin o'leary, chairman of o'leary funds and an investor on "shark tank." kevin, good morning to you. >> great to be here, thank you. >> we'll start out with aereo. major supreme court case starting now on capitol hill, with aereo facing off against some of the top broadcasters in this country. aereo allows over-the-air programs to be watched for a monthly fee, meaning you don't need a tv to watch any of the local programming. aereo says this is the future of broadcasting while the networks say it's simply stealing. kevin, i was trying to think, what would o'leary think about this? i know you have a libertarian bent from time to time. i know you're also a fierce protector of copyright. where do you come down? >> i look at this as innovation. and, you know, i ask myself as a consumer, do i want to be able to watch content on any platform anytime anywhere and the answer is, yes. this company has found basically a loophole in the law using some very artful use of technology that allows it to skirt the issue of ownership of that fee. i don't think the supreme court is going to go against these guys. and i'll tell you why. innovation is crucial in maintaining technology advancement for anybody, including the incumbents. if this law actually gets upheld, they'll have to advance to provide it. and in a way, i agree with that. i think it's very creative in the way they've done it. they're going to force the change. it does make me ask a question as an investor, in the infrastructure of media, is there a risk premium i don't see? in other words, is it riskier than i thought to invest in established cash flows and maybe the answer is, yes. >> interesting point you raise there. one reason why the court may actually side with the broadcasters, the obama administration actually came out, filed a brief, supporting the broadcasters, saying aereo is liable for infringement, kevin. i wonder if this could provide heft to their argument? >> i think that's a little unfair. it's like putting advertising in front of the supreme court saying and suggesting that the president endorses one side or another. which i don't think he does. i just think that would be unprecedented to do that. i think we have a good system here. i believe that they will side on the law, which says to me -- and look, i looked at what these guys have done. and they've been very creative in using technology not to infringe on law. and so, you can argue the spirit of law issue, and that's exactly why we have a supreme court. but if this does not advance technology, if the ruling actually retards advancing technology on the side of consumers, we made a big mistake. >> what happens to retrans fees, in general, kevin, if this goes aereo's way? >> i have a big problem with net neutrality, even with the comcast deal coming. as an investor, i believe in the fundamental truth that when you use something more than someone else, you should pay for it. so if we're going to be streaming everything on the internet inperpetuity, i should pay more and i think that's a flawed concept. that's the core of the debate. if you use more of something in a capitalist society, you have to pay more. end of story. >> if you were -- i mean, you are on a broadcast team, right? you have a show that runs on a nbc-universal unit. if it was your copyrighted material that was being transmitted by aereo, i have to imagine you'd be at scotus today fighting as fiercely as these guys? >> yeah, and i'd have some knowledge of a probability of loss, that would force me to work out a deal. there are no long-term enemies or friends in business. there's just long-term interests. and if this is the way that we're going to provide content to everybody in the future, i'm going to figure out a way to make money doing it. and if i have to make friends with my enemies, i will do that. that's the nature of capitalism. that's why the court should side on advancing technology and making it better for consumers. everybody, where we position for profitability, after that. and that's the right thing to do for america, i think. >> well, we're going to have to see what they decide later in the summer. >> that's barry diller's argument, by the way. shares of netflix. the stock soaring after 2q earnings top estimates. netflix announcing they'll raise prices for new consumers by $1 or $2. prices for current netflix users will stay the same for a, quote, generous period of time. 44.9 million subscribers. kevin, for those who were bold enough to step in front of the quarter, it's paying off today. >> it has. you know, i look at netflix as a stock that's priced to perfection. i think there should be and will be more volatility in it, because this model is going to be pursued by everybody. i'll give you an example. last night i sat down to watch a film in my family basement, and we decided that we were going to look on netflix first. it wasn't there. i had to go buy a premium service. in the case of last night, it was apple. but it could have been vudu or somebody else. there's lots of competitors, and content is all that matters. i'll tell you what the problem is with raising the price on netflix. when you start saying i'm going to be in the content business, fund production, that's a different risk. you know, carl, that not every show that's created, that hollywood produces, is a hit. that brings that risk model into netflix. which i don't think many people understand. hollywood is not a great place to make money. >> but wouldn't you agree, kevin, that as far as the internet-video boom goes that we're seeing, netflix is in the best position to win from it? >> not if you tell me they're going to put a significant portion of their free cash flow into developing their own proprietary content. the long-term industry of movies -- >> but that's what's attracting the subscribers. people are loving the original content programs. >> but that's because they've had a couple of hits. wait until they go for a decade and have the same results that everybody else in that business has, which is basically a 7% or 8% return, if you're lucky. making movies, making content, making tv is a crappy business, bottom line. >> for 7.99, it's still, i think, one of the great bargains in media right now. kevin, if you ran this firm, i imagine you would have hiked prices a while ago. >> definitely i would have. 7.99 is very inexpensive for the risk they're about to take on. that's the way i look at it. i keep looking at this saying to myself, you show me one ceo in hollywood that gets to keep their job for an extended period of time after they've had three losers in a row. they get whacked. you don't want to see that happen to whoever's running this. this is a subscription business, not a hollywood production business. that's where i differ with the philosophy. >> what happens if this price hike results in slower subs? people are going to be watching out for that now for the next couple of quarters. >> they basically told you they have to raise prices, because they believe the only long-term sustainable model is to have proprietary content. carl, i say it over and over again, that's a different business than just providing a subscription and cureating content. they're going into curation. >> and that's for sure. adobe gave us an interesting look at facebook ad business. in the first quarter, revenue per visit from social media was down for twitter, for tumblr, for facebook. engagement jumped by double digits led by videos thanks to the new autoplay feature in the news feed. kevin they report later in the week, we know pricing has been good in the quarter, and now this. >> look, i think the company has done one thing they promised to years ago, that they would solve for the mobile ad business they didn't have when they went public. check the box on that one. the problem i have on facebook, and we've already stopped talking about it, is doing $19 billion deals that i believe are dilutive in the short term, not accretive. we don't talk about that anymore. you could have bought those users by just paying them and buying somebody else's mobile business. and this is at the heart of the decision to be a shareholder of facebook, is the dual voting clash share, which everybody ignores. you don't have a right to guide this company as a shareholder. you have to just -- >> why not? >> -- you have to believe. >> why can't you believe that they can monetize like they did mobile advertising, the instagrams and whaesapp they bought for eye-popping numbers? >> it's that i, as a board member, don't have a say in the best option. if you look at the big media companies, a lot of the decisions work until they don't. when you do $19 billion transactions, you're not necessarily betting the farm, but down the road, if that idea didn't work, you better have a whole bunch of other ones that did, because that's very, very dilutive. and i'm not saying this management team isn't fantastic. i just don't like the premise of not having one vote, one share. there's something un-american about that. >> yeah, that's -- we can say that about a bunch of different companies. kevin, you've told us before you don't like to hold equities that don't pay a dividend. would you make an exception for facebook given the growth it's had over the past year? >> no. you know, i believe that if a company makes money, and i'm a shareholder, why is it wrong to send me my portion of the profits every quarter? why is it that if i want, i'd like to get my cash, and then i'll reinvest if i wish. i really believe that the essence of why you put capital in harm's way is to get paid while you wait. and companies that do not provide any form of capital return in the long run, in my view, and they have for the last 40 years, have lagged. 70% of the market's returns over the last four decades came from dividends, not capital appreciation. that's all i need to know, carl. i don't have to take the risk of today's hot stock that doesn't pay a dividend. show me the money! that's all i care about. >> that's where a lot of the market is headed right now, at least psychologically. kevin, always so good. hope to next time get you on set. >> thank you. >> don't put a tv in front of him on "shark tank." >> kevin o'leary joining us from canada. apple known for being a maker of smartphones, tablets, computers, and a whole lot more. when you look at apple as an investor, should you think of it as a tech giant or perhaps as a movie studio? walt mossberg says a movie studio. he'll explain after the break. i'm type e. my golden years will not just be gold plated. i had 3 different 401(k)s. e*trade offers rollover options and a retirement planning calculator. now i know "when" i'm going to retire. not "if." if you have a business idea, we have a personalized legal solution that's right for you. with easy step-by-step guidance, we're here to help you turn your dream into a reality. start your business today with legalzoom. take a look at the consumer discretionary sector. a big winner this morning. dominic chu has more on that. harley davidson has to be helping this group. >> it is. the discretionary stocks are helping. the push coming from two names. we've been talking about it all morning. harley davidson is one of them, but also netflix, both surging in trading, up between 6% to 8%, after both had upbeat earnings reports. they're among the best-performing stocks on the overall s&p 500 today, as well. rounding out the top five are casino giant wynn resorts, also advertising and marketing company, interpublic, which is up on earnings, as well, and, of course, cnbc parent company, comcast. today, carl, a nice day overall for the consumer discretionary stocks. >> all right, dom, thank you very much. dominic chu. does apple's product cycle work like a movie studio? that's what walt mossberg thinks. he says apple releases new products and produces sequels. but he says time is running out and it's time for a new franchise. walt mossberg, the co-executive editor for recode, nbc is a minority investor, and a content-sharing relationship. good morning. >> good morning. >> i would argue, on your way to critical of apple over time, but these may be the strongest words yet? >> well, no, i just think it's a way to see it. it's a way to look at it. you know, there's this kind of debate -- there was always this kind of debate about, is apple doomed? is it done? or is apple perfect? and there's just nothing to be concerned about. and i think, obviously, neither of those positions is correct. i think it's helpful to look at it as if it was a movie studio. you know, you bring out a big blockbuster like "spider-man" or "the godfather," and bring out sequels that often make more money and are better. in some cases, they're better, the sequels. but after a while, people become tired of the sequels, you have getters who bring out their own new franchises, and you have to come up with a franchise, a new blockbuster. of course, steve jobs, who really cannot be replaced, and it's not tim cook's fault that he's not steve jobs, but steve jobs had a way of figuring out how to knock these out of the park every few years and do things that other people had not done, and then live off the sequels till the next one. >> right. >> all i'm saying this morning is, you have to understand that. it's not because they're idiots or they're doomed. they have a certain way of doing it that looks a lot like a movie studio. but now, it's kind of getting to be time for a new franchise. >> what do you think the new franchise should look like? >> well, it should look like something that doesn't look like what other people have done, or -- and this is an important subtlety -- apple has often taken things other people have done but not well or in a disjointed way, and pulled it together. it's not like nobody had ever made a tablet before the ipod -- the ipad, or nobody had ever made a music player before the ipod. but they pulled it together in an elegant, integrated way that integrated the hardware and software and the cloud services. and so, there are a number of opportunities for that. and we've -- you have speculated about them on your air. we've speculated about them on our website for years. one has to do with, of course, television, reinventing the television. and there, i think, there are problems they run into with the companies that control the content like nbc or others. there's one really interesting thing that hasn't got as much -- hasn't received as much discussion is they appear to be working on a mobile payment system which might finally make -- make the smartphone kind of the ubiquitous way of paying for things. another is they seem extremely interested in health and in monitoring health. again, are there other companies doing some of these things? yeah. but with the iphone, with the ecosystem they have, with the possibility of a really sophisticated wearable that goes along with it, they could -- they could create a franchise there. so i think there's opportunities. i think there's a lot of skill. i think they have just gone through a tough transition period, tougher, i think, than people know, just because of the secrecy of the company. and now, i think -- i think it's time -- you know, i think they will -- they will do something. i don't know what it will be. >> my question to you is, okay, let's take this apple as a movie studio, sort of idea. >> sure. >> if i'm an investor, movie studios don't trade like technology growth stocks. they don't have the same kind of excitement and enthusiasm. and when you talk about franchises, i mean, you're talking about different product categories completely new innovations, also a little bit different than just releasing a new movie franchise. so how should investors think about this idea? >> you know, you'll notice that in that entire reasonably long piece, i did not talk about stock. [ laughter ] and i have no -- >> we're down here at the exchange, walt. come on, we're talking about the stock market. >> i have no idea how to translate what i think has been this amazingly influential company's pattern. really, i think they are the most influential company in any industry in the last 15 years. and -- but i have no idea -- i've looked at the -- first of all, i own none of their stock, because it's unethical for me as somebody who covers them to own any of it. but i watch what happens. i watch cnbc. i see the prices of the stock. and i look at it and i sometimes say that's ridiculously high, or that's ridiculously low. i mean, it's extremely volatile. i have no stock advice on this, except think about it as a company that has in it and has in its history the ability to up-end an entire business. and what i'm saying this morning is it's getting to be time for them to try to do that again. >> yeah, it has been a while, some argue, walt. a great prism to look at the company through. thank you so much. >> thank you. >> walt mossberg talking apple. the tesla model now available in china, and ceo ilan musk was on hand. what is the future? hear his answer to the question next. hi, are we still on for tomorrow? tomorrow. quick look at the weather. nice day, beautiful tomorrow. tomorrow is full of promise. we can come back tomorrrow. and we promise to keep it that way. driven to preserve the environment, csx moves a ton of freight nearly 450 miles on one gallon of fuel. what a day. can't wait til tomorrow. predibut, manufacturings a prettin the united states do. means advanced technology. we learned that technology allows us to be craft oriented. no one's losing their job. there's no beer robot that has suddenly chased them out. the technology is actually creating new jobs. siemens designed and built the right tools and resources to get the job done. welcome back to "squawk on the street." i'm david faber with some breaking news involving darden. i can tell you now that sources familiar with the situation tell me that starboard, the activist fund that owns more than 5% of darden shares, has succeeded in a consent solicitation to call for a special meeting of darden's board of directors. sources tell me that starboard has received consent from 54% of the outstanding shares of darden, which would allow the company to deliver those consents and ask for a special meeting. darden would be obligated to hold that special meeting within 60 days of receiving the consent. again, i am told 54% of shareholders have voted in favor, or given their consent for that special meeting, at which then they would consider a nonbinding shareholder proposal to basically not split the company up, or to actually hold a vote at some point on whether or not it could be allowed. but much more important, what this really is is a definitive rate of the shareholder base of darden saying, we are not interested at this point in this company being split up. of course, that split-up is moving ahead at this point with a division of the red lobster division being separated from the remainder of the company. we'll keep an eye on darden shares, but again, we can tell you it has succeeded in a rarity, although something we are seeing more of, a consent solicitation. this time not to throw out a board of directors, but simply to hold a special meeting. back to you, sarah. >> all right, david, as you speak, the stock popping. darden restaurants, the intraday, up 1.5%. meantime, the tesla model is available in china and elon musk was on hand for some of the first sales. phil lebeau has more in chicago with more on what china means for elon musk and tesla. >> huge potential, sarah. huge potential. mainly because it's got a couple of things going for it. we'll talk about that in a bit, the fact that china is a huge market, as well as the pump for e.v.s. but this was the scene earlier today in beijing as elon musk was on hand for the delivery of the first model ss that have been sold in china. selling price? approximately $122,000, which i know that sounds expensive, but most people are saying that's not a bad deal compared to other luxury vehicles in china. here's what he told us earlier today in beijing in terms of the demand he expects in china. >> as far as our sales in china, it's difficult to make precise predictions. what we see right now is pretty strong demand. i think probably more demand than we can fulfill this year. >> as a result, they're already taking some vehicles that might have been shipped to europe or here in north america and shipping them over to china. tesla expects to sell 35,000 vehicles worldwide this year, about two-thirds of those overseas, mainly europe, but also developing in china and asia. and because of the size of the market, and because it makes sense to sell where you build, elon musk says they're likely going to start building vehicles in china, within the next four years. keep in mind, china, huge potential here. not only in terms of overall sales of autos, but electric vehicles in particular. the government has set a target of selling 5 million electric vehicles in china by 2020. right now, in beijing, because there's so much congestion, guys, you have to win a lottery in order to get a license plate to buy a vehicle. but they see huge potential throughout the country. shares of tesla up today more than 5%. this is the beginning, guys, of seeing how quickly sales ramp up in china. believe me, a lot of people are expecting sales to ramp up very quickly for tesla in that country. >> that's going to be fun to watch, phil. thanks a lot. our phil lebeau talking tesla today. when we come back, activist investors have been in the headlines a lot lately, but are they really good for companies and shareholders? we're going to pose that question to ralph whitworth in just a moment. chairman of hp. plus, the bell's about to sound across europe in about a minute. simon's on deck when we come back. ♪ [ dog barks ] ♪ [ male announcer ] imagine the cars we drive... being able to see so clearly... to respond so intelligently and so quickly, they can help protect us from a world of unseen danger. it's the stuff of science fiction... minus the fiction. and it is mercedes-benz... today. see your authorized dealer for exceptional offers through mercedes-benz financial services. markets are higher here. dow's up almost 90 and green in europe, too. simon will bring us that. >> we have some deep green in europe, as, of course, it returns from a four-day weekend. so a lot of catch-up in many senses there. consumer confidence for the euro zone also coming through now at pre-crisis levels, which i think is a surprise to many people. so higher, as you can see, across the board. an outperformance in the nordic region, partly because, of course, everybody is really focused on what's happening with pharmaceuticals, so many of the big plays are centered around there. the news over the weekend -- the report over the weekend, the potentially pfizer bid, bid $100 billion to get its hands on astrazeneca for products, has livened the biotech sector in europe. a lot of the guys making gains in the wake of that talk. and still navartis buying the oncology products from glaxo smithkline, as you can see, selling the vaccine business, doing a joint venture on the consumer health care, and the animal division going off to eli lilly. pharmaceuticals a big focus. under that m&a activity, some people might say to you, actually we're quite concerned about the quality of the earnings that are coming through in europe. certainly philips electronics, as reported today, and was actually down about 8% at one stage, because it's disappointing with its results and guidance moving forward. the ceo saying, look, we're taking losses on the translation through this very strong euro, into which we have to repatriate our products around the world, and also, he says, they have specific problems in emerging markets like russia. take a listen. >> when we talk about less momentum in the market, it is actually a china that has had a slowdown. we see the situation in russia affecting our business. and then, there are many smaller countries that are under pressure that have volatile currencies and so on. europe is, i think, fully bottomed out. we saw some up ticks in the south european countries, which is giving us confidence. but then, at the same time, the northern european countries are not yet getting into second gear. so europe is still flat for us. >> as far as the euro is concerned, one footnote, of course we're still waiting for the european central bank to possibly move on qe, citi says now it believes more than a 50% chance there will be big asset purchases. in the meantime, guys, bmy me n melon, is now planning to charge people interest on -- charge people to hold their euros in case we go to negative interest rates. i think i got that right. >> yeah, it makes sense. interesting the european recovery theme, as we saw that with the mcdonald'searly er earlier. top activists are gathering in new york city for the annual active-passive investment summit, discussing top investment ideas and the fight for shareholder value. david has another news maker for us. hi, david. >> thanks very much, sarah. we're joined by one of the earliest, perhaps a pioneer if you want to call him that, though he's not that old, in activism. ralph whitworth has been running the firm that time, $7 billion fund, of course, that takes large, long-term positions. you also obviously sit on boards, including right now, you're still the chairman of hewlett-packard, in case you didn't know that. >> yeah. >> ralph, let's start off with comments you made in the presentation you gave here, because i think they, at least, made a little bit of news, and it's always helpful to have you clarify it. you were asked about mondelez, 500, $600 million worth of stock in that company. you didn't seem particularly pleased at this point with the management. i'll give you the opportunity to say, are you happy with management? or do you expect perhaps they've got to do better? >> sure, david. of course, it's always good to be with you. well, you know, somebody asked me the question, they said, you know, do you communicate with management? we said, of course. and they said, you know, they've got some challenges there. their margins are inferior to the peers. and there's just blocking and tackling that needs to take place. the market's been waiting for it. they're starting to lose patience. and they've -- so then they said, well, can this management team get this done? i said, well, the jury's out. >> what does that mean, the jury's out? >> the jury's out. they need to get traction and start to move these things. if they don't, you know, there might need to be changes. >> sounds like a threat to me. >> no, no, no, no. that's a risky thing to change management. we don't like to see that. we hope that this team gets this done. but it does need to move. and they know that. they're very aware of that. and they're working hard. so we'll see. >> right. are you happy that there's another activist on the board in the form of trian? does that help you? >> sure. nelson peltz, nobody knows that industry better. and he'll do -- he'll help her a lot. irene rosenfeld, who runs the company. >> sure. >> so that's a great thing. >> all right. let's move on. you did spend a lot of your time talking about spx. i remembered from years ago, of course, it was described as a mini-tyco, when it is not what it used to be, having spun off so many of its businesses, what's the opportunity there? >> the opportunity there is a big one, a big upside. we've been involved with it for about a year. we've got an option to go on the board. we've got another option to put a board -- to nominate a director next year if we need to. but they need -- those businesses -- 90% of the assets are below cost to capital returns. and if you look at their peers, you know, they're just way inferior to emthis, the way they're running the assets, and they did lousy acquisitions and wasted shareholder money. they're working hard to get this stuff improved. if they do, there's, like, 60%, 80%, 90% upside in this stock over the next couple of years. this is a big opportunity. but it will depend on a lot of hard work. it's stuff in their control and they can get done. >> all right. do you believe in management, though? how important is it given you've been doing this longer than anybody. give me a sense here. how important is management to getting everything done and sort of following at least what you believe can be the ability to create value for these companies? >> well, it's people all the way through the organization. but it starts at leadership. you know, if you're a school or church or wherever, it's all about leadership. and so, it's true at spx, and mondelez and across the board. so, yeah, we looked at incentives. we think about incentives a lot, because that's what drives people and we look at who the people are. and they've been there for a while. so some of this stuff is on their watch. >> how much impact can you have when you're on a board, even if you're, let's say, just one board member? >> a ton, yeah. so if you come prepared -- the way to be a good board member is to be likable, but everybody knows you're not there to be liked. and if can you pull that off -- which is that -- you know, you have to thread a needle there -- >> right. >> -- then you'll get a lot of stuff done. if you come prepare and have your research and you're respectful and you present it, you get it done. one person. >> all right. well, you are one person on the board of hewlett-packard, and you also happen to be the non-executive chairman of the company. the last time i had meg whitman on, who happily joins us every quarter to update us, i asked her, she indicated you're no longer interim. i kind of asked and got an answer that indicated to me you're there for a while as a chairman, is that right? >> i'm there as long as they need me and for the foreseeable future. we have a great dynamic on the board. we have a great board. we added new members last year. meg whitman is probably the most outstanding executive in corporate america, if not around -- >> there has to be a learning curve, even. >> oh, yeah. >> but this is a huge organization. >> you cannot believe the way she's absorbed this. i mean, it's, like, her learning curve, and just the last board meeting, i was sitting there going, wow. >> why? what was the wow? do you remember? >> no, just the grasp of this very complex, large, global organization. and she's got it. and you need that. we were talking about leadership earlier. and she's got a lot of good leadership skills, and she knows the business, knows the people. so we're betting on her and her team, and they are getting traction. >> they are? >> and you know, they're just kind of hitting their pace. >> you really believe that? you're in there for a lot, about $1 billion worth of stock, i believe. >> yes. >> you can't sell. you're on the board. >> yeah. >> and you may be on the board for a while to come. obviously, you believe there's a lot more upside i would assume in hewlett-packard, even though it had an incredible year last year? >> yeah, it's still one of the cheapest stocks out there in the s&p. and it does surprise me that these large investors are willing to leave this asset sit out there like that. >> well, what -- >> and trade at this low multiple. they're concerned about the -- >> they still have no top line growth. >> right, and that's a big concern. that is stabilizing. cash flows are improving greatly. the organization -- you know, when we look at other kind of leading indicators that we might see internally versus externally, our employee base, you know, when we do engagement surveys, has just moved, i mean, like, hugely. so it's a different company since -- in the past couple of years, since meg's been there. two and a half years. we came about the same time. >> right. >> and, you know, it's gotten some recognition. the investors have given it some recognition, but they should be giving it more. >> well, we'll, of course -- they will, i assume, after they put up quarter after quarter of improving numbers, and especially top line growth. real quickly, ralph, some talk of the conference is bill ackman. his partnership with valeant, first time we've seen that in a while. but you did do something similar about 14, 15 years ago when you went after waste management, didn't you? >> yeah, we did something very similar. we went to the third largest company in that industry and proposed to them a joint investment in waste management, which was the largest company. and then, we would take that and approach waste management to merge. now, we did this more behind the scenes, a little different style -- >> it wasn't a hostile bid. >> no, no. >> in fact, you got -- >> we got the job done. we merged these companies. and ran it, did a big turnaround, painted the trucks green and white, and rebranded it. yeah, we started out with a similar approach. >> you think it makes sense to you? there are some who look at it and say, well, ackman was able to pocket a huge profit and they're kind of scratching their heads, even though it is perfectly legal. >> i haven't looked at the deal that closely. there are smart people around there, and they'll -- go they haven't figured it out, they will. you know, they smell value, so i assume it makes sense. >> all right, ralph whitworth, as always, appreciate your time. >> you bet. >> ralph whitworth, as said, they've been at it longer than just about anybody and has a track record better than the s&p's returns over those years. >> great stuff, david. david favor at the activist-passivist investor. one year after the terrible tragedy at the boston marathon finish line, meb keflezighi became the first american to win it. he'll join us to talk about the history-making run in just about 30 minutes. [ bagpipes play ] make it happen with fidelity active trader pro. it's one more innovative reason serious investors are choosing fidelity. call or click to open your fidelity account today. [ banker ] sydney needed some financial guidance so she could take her dream to the next level. so we talked about her options. her valuable assets were staying. and selling her car wouldn't fly. we helped sydney manage her debt and prioritize her goals, so she could really turn up the volume on her dreams today...and tomorrow. so let's see what we can do about that... remodel. motorcycle. [ female announcer ] some questions take more than a bank. they take a banker. make a my financial priorities appointment today. because when people talk, great things happen. make a my financial priorities appointment today. can you start tomorrow? yes sir. alright. let's share the news tomorrow. today we failrly busy. tomorrow we're booked solid. we close on the house tomorrow. i want one of these opened up. because tomorow we go live... it's a day full of promise. and often, that day arrives by train. big day today? even bigger one tomorrow. when csx trains move forward, so does the rest of the economy. csx. how tomorrow moves. today is tuesday today, we greet you. treat you. care for you. today, you can come to cleveland clinic for anything, everything or just to get that "thing" checked out. big, small, and yes, the best heart care in the nation. it's here everyday, for everyone. that's the power the power, that's the power of today. cleveland clinic. call today, for an appointment today. coming up, it is the return of the mega deals. what can the deal boom tell you about the overall market and where could the next big deal be? we'll analyze. mcdonald's, first-quarter profits slip. but one of our traders still lovin' it. we'll get both sides of the fast-food debate in a heated discussion. and shares of netflix getting a big boost after last night's earnings, but could one thing they're doing actually be the best reason to own the stock? we're going to speak with a top analyst about where he thinks it is headed next. that's coming up. but right now, let's get a "market flash" from dom chu. >> all right, brian, we're checking out what's happening with the overall stock market. we're a hair away from the records in the s&p, but one with a fresh record high is energy. among the stocks that are helping the cause are names like baker hughes on the oilfield services side, and then hess, eqt, payne. the one thing the stocks share in common today is they're trading at fresh 52-week highs, at one point. so a nice day for the energy sector overall, sarah. back over to you. >> and the s&p up, well, .5% right now. dominic chu, thank you very much. up next, the crew wants to be one of the largest financial planning companies in the country. and now it's moving one step closer. we'll talk to the business trying to make financial planning easy for everyone. raised another $28 million in funding. when we come back. we come back. [ male announcer ] the wright brothers started in a garage. mattel started in a garage. disney started in a garage. amazon started in a garage. ♪ the ramones started in a garage. my point? some of the most innovative things in the world come out of american garages. introducing the lighter, faster cadillac cts. 2014 motor trend car of the year. ain't garages great? could mean less waiting for things like security backups and file downloads you'd take that test, right? what are you waiting for? you could literally be done with the test by now. now you could have done it twice. this is awkward. go to comcastbusiness.com/ checkyourspeed. if we can't offer faster speeds or save you money we'll give you $150. comcast business built for business. watching the markets closely here. nasdaq was briefly up by a full percent, netflix and tesla. >> records within sight. learn best is the start-up on a mission to make financial planning a consumer product for the masses. to that end, learn best recently announced a new strategic funding round of $28 million sks bringing its total to more than $72 million. alexa vaughn toebl is the ceo and she joins us now. congratulations. another $28 million in funding. >> thank you. >> talk about the growth you're seeing in your business that's attracting new money. >> so i think the coolest thing we've been able to see is our program, the learn best program that can take any household, whether you make $50,000 or $1 million and put you through a seven-step process connected to an expert. we're seeing customers get healthier. not only are we expanding across the web but we launched our program which allows you to get access to learnvest and a few pilot programs up and running. >> you're talking about increasing to a different level, a scale, right? >> he ya, market share and being able to grow by tens of thousands at a time. >> we talk so much about percentage of households that have stock in this country, how many households are watching us. is that necessarily a factor for demand? >> yeah. >> for your services? >> when people think about financial planning, we talk about investing advice, which unfortunately for the 98% of the country, having, you know, great advice for their extra money to invest outside of their 401(k) isn't the problem. the problem is juggling the mortgage and credit card debt and the kids' 529 plan, while thinking about retirement. as the whole world has zigged and focused on investing, we focus on creating a financial-planning platform that does everything else. >> are you getting more questions about certain types of things, rising food costs, how will i manage my grocery bill? >> one thing that's really important, as learnvest focuses on the mass, there's 40 million households out there. one thing to remember, 74% of the country lives paycheck to paycheck. 30% of people who make over $100,000, people are spending more than they have, and it really puts them in a pinch. when we talk about extra money, i'm talking a well educated mass affluent struggling to figure out what to do with the extra $100,000 they can get together and where to put it. that's the biggest question we see. if i have extra money, where should it go? >> "barron's" did the top 100 financial advisors. when you look at the themes -- these are high net worth clients, the average financial advisor they surveyed, 55 years old, been in the business something like 30 years. you're offering something different. >> yeah, a completely new market we're creating to make basic financial planning a true consumer product. i want it to be as accessible as a gym membership, as weight watchers, we pulled on the former ceo of weight watchers as an advisor. it's making something available to the masses with a $500 a year subscription. >> you were on the program a long time ago. you're a lot smaller than you are now, and we'll continue to watch the evolution. it's been an amazing story. >> thank you. >> alexa, the ceo of learnvest. when we come back, the next guest made history yesterday becoming the first american to win the boston marathon in over 30 years. meb keflezighi will join us live in a few moments when "squawk on the street" comes back. why relocating manufacturingpany to upstate new york? i tell people it's for the climate. the conditions in new york state are great for business. new york is ranked #2 in the nation for new private sector job creation. and now it's even better because they've introduced startup new york - dozens of tax-free zones where businesses pay no taxes for ten years. you'll get a warm welcome in the new new york. see if your business qualifies at startupny.com welcome back to "squawk on the street." we want to call your attention to shares of dillards, the retailer ticker up about 6%, just off the session highs. the stock was mentioned positively at the active-passive conference that david faber is attending. in that conference, mick called the company worth possibly $1 55 a share if they're able to spin off the real estate holdings. dds shares in focus on the heels of positive comments, mercado capital, saying it could be worth $155 a share if the real estate is spun off, carl. back over to you. >> we will watch that one, dom. thank you so much. for the first time since 1993, an american man has won the men's side of the boston marathon. 38-year-old three-time olympian meb keflezighi of san diego crossed the finish line yesterday two hours, eight minutes and 37 seconds. meb joins us this morning by phone. member, congratulations to you. what a race. >> thank you so much for having me. it was a great day, not just for myself, but for boston, for the united states, and the world. it was just better than last year. >> you looked like you were in total control by mile 17. you had about a one-minute lead and a lot's been written about what was going through your head in those final miles. the phrase boston strong, right? >> correct. boston strong, the bombing last year, i was in the stands, four victims had lost their lives, and half minute before the explosion i left for an appointment. and ever since then, i've been thinking how could i do a positive contribute to boston, and the boston strong has been in my head every day, and i'm so happy i was able to have victory in front of the 32,000-plus. >> meb, your victory was also a win for sketchsketchers. i found this fascinating. especially since skechers doesn't sponsor a lot of athletes and you used to work with nike. why did you work with skechers after breaking up with nike? >> i've been working with skechers, and had been with nike a long time, and skechers gave me the opportunity to be a partner with them. ever since i was skechers go run, speeds we just launched, it's been phenomenal boost to my career and almost 39 years old, and nike felt i was probably too old. you know, with skechers' partnership, things have gone well. just ran my fastest time ever. yesterday, the boston marathon. and i have two previous before that also in new york and houston at the trial. it's been a great partnership to be able to work. and i think they're helping me mekally. >> finally, meb, 19 kenyans have won that race since '91, and now you as an american. is the era of kenyan dominance over? >> well, it's just an honor to be able to win as an american after 31 years. greg myers, 1983. yeah, the kenyans were second and third this time. i feel -- we all train hard. but yesterday was my day, and especially after what happened last year, i couldn't be happier to carry that torch for the united states. >> and we couldn't be more proud of you, meb. thank you so much for your time today. congratulations again. meb keflezighi. >> thank you so much for having me. >> and the oldest. >> yes. >> an inspiration for older athletes. let's get back to headquarters, check in with brian who's filling in for scott. >> hey, carl, hey sarah. congratulations to meb and the city of boston. boston strong. >> welcome to "halftime report," everybody. here is the roadmap for tuesday. citi in st. louis. citigroup shareholders getting their chance to question the ceo at the bank's annual meeting. we'll have reaction from outspoken analyst mike mayo. streaming profits. netflix surgen on better-than-expected
europe doing okay. the greek tenure yield is down and the market up for the fourth straight session. dow components ibm and alcoa. ibm downgraded today by goldman. kicks off earnings season with a beat. >> b & n ceo resigning. >>. the latest on the asiana airline crash in san francisco as investigators try to piece together what happened in the cockpit. a live report from the scene. first up, shares of ibm falling in the premarket, downgraded by goldman to neutral from buy saying it sees pressure on the growth markets and revenue streams. interesting note, guys, they say the whole reason to add ibm to the buy list back in august of 2011 was some of these higher revenue streams to sort of smooth out the cycle over time. they think that's now coming in to what they're calling a challenging period. and say that the quarter will bring more volatility than investigators are accustomed to. hasn't really paid off for goldman as a bet since adding it to the buy. ibm up 16%. s&p up 39%. >> wow. >> see if that sets the tone for earnings season. we know that the stock hasn't gone up as much lately as earlier. >> facing head winds and questions. virginia romney not in the job that long and seems to be a tougher job than she might have anticipated when she took over not very long ago. goldman looking at a 11 pe on their 14 estimate of let's call it about 18 bucks. 17.92 versus what's 13 times the ep estimate. not as though it's done particularly well. it's worth noting again heading in to earnings season and led off by alcoa. >> july 16th is absolutely going to be one to watch. 378, the current estimate. moved 90 days at 395 and downward momentum there. >> not the only component cut today. dupont cut to a neutral talking about sort of an echo of the deere downgrade yesterday. lower farm income. pressure in the chemical business. they say that dicey earnings report is calling the upcoming report. that's going to cast doubt on the company's aggressive second half outlook so two big dow components with analysts cold feet. >> a lot of caution priced in to the shares and maybe alcoa is interesting in this regard. there's a lot of negative news baked in. not to say that the companies need to come out and say anything that great to get people reassured here. alcoa's call, look through it. spent time yesterday going through the lines of business to emphasize where they improved productivity, better on the downstream side of things. >> yeah. alcoa, up in the premarket this morning. take out aluminum producer did report a profit slightly above revenues essentially in line. the company says it sees solid growth in the demand for products later on this year and the ceo appearing late yesterday on "the closing bell." >> there are some exciting opportunities in the auto, aero space and then come down on the upstream business and can't control the aluminum price but we can on where we are on the cost curve. coming down, closing the facilities, containing those at high cost and bringing saudi arabia in line and there's legacy issues like the one removing this quarter, trying to remove this quarter with the new initiations. >> some of the legacy issues makes them believe the pop is short lived because the long-term picture for aluminum prices is not good but the downstream business is trying to doits best. >> exactly. look at the comments made and tried to shore up the business. they closed or idled 13% of capacity. 11% under review. trying to close this smelter in italy, as well. but it's the price of aluminum that's fundamentally going to dictate what happens to the shares. they point to the operational efficiencies and beholden to the broader hangover issues. >> do what you can do in an environment like this. interesting, days like today, calm before the storm. alcoa, difficult to say anything of upcoming earnings. they're weighing in. but fairly soon we are going to start to get a better sense and it will become much more important one would expect to the overall market environment particularly, again, given what are we'll see mixed expectations certainly when it comes to the bottom line and we'll be focused on top line. what will it really say when you have so many investors grappling with the inputs and looking at the bond market, not just the stock market and understand what's going on and then back to china with an alcoa, for example. >> well, there -- >> almost there in terms of real data points we can -- >> if you look through the lines of business that tell you about the broader environment and marked down the numbers, for example, for europe. i mean, the number of times that claus would say things looking better in the u.s., revised higher for autos and this, that and the other and europe is a different story and they had the worst may for auto sales in 20 years and holding china to about a 7% to 10% growth rate this year in auto. production year to date is up 13%. beverage cans down and you have to wonder if there's more of a sector specific story. commercial building was okay. they still see 8% to 10% growth there in china and then again, head winds for gas turbines. >> worst performing dow stock of the year down 10%. the dow's up 19%. >> now another stock that won't perform particularly well and hasn't. barnes & nobel say nounsing william lynch resigned after three years on the job. barnes & noble is yet name a success successor. >> if you just look at the multiple that must be embedded in our implied valuation on retail it's extremely low. and anybody would tell you that. and what i'll say is, we think retail's going to be an incredible profit driver for the foreseeable future. >> of course, that is the retail part of the business, which is not the concern. the concern is that digital nook business in which mr. lynch was chosen to lead them in to that digital future. it has not happened. they have suffered sfapt losses. far what was anticipated. microsoft owns about 17% of the nook business. my math may be off but you get the basic idea there and the numbers that they came in at implied a very large valuation and none of which, of course, is proved to be true at this point. with the cfo running the company now, running the nook business and president overall of barnes & noble. there's a bid potentially for the overall book business. the old retail book business. we'll see what happens with barnes & nobel. not a large market cap but interesting stock with so many people in and out of this include this thing including liberty. >> the "times" piece, somebody's quoted saying on the glide path to oblivion, you can affect your own speed and describes so many different names we talk about. there's a good chance they're not around forever but in the meantime they're going to do a bunch of things to keep them around for who knows how long. right? >> yes. the key is new growth business when the model is changing. by the way, there's a lot of businesses facing that conundrum and a yes. they tried but they failed thus far at least to really get any traction. >> talking about going against a competitor like amazon, hitting all-time highs every day. is there a cooler kid? if stocks are high school, is there a cooler kid than amazon or starbucks. >> amazon which so perceptively got itself in to the cloud business and so huge for them. talking about different levers to pull with regard to stock performance, that's one that they're not just the walmart of retail. they didn't just go there and after books, they have really gone after the entire digital space and part of the conversation with an hulu. you know? they're crossing so many lines of business in the u.s. >> no doubt. one thing to remember and we saw it with mr. lynch, people still are going in the stores and group of people who buy books. >> i am one of them. >> they still have that but not much else. >> not enough of us. dinosaurs. >> want to get the latest on the crash landing in san francisco. the ceo of asiana airlines says he plans to improve training as questions arise over what caused flight 214 to crash. phil lebeau is on the ground with ntsb chairman deborah hersman. phil? >> thank you. i'm joined by deborah hersman. quickly bring me up to speed where you are in terms of your ability to talk with the pilots of asiana 214 and what have you learned so far? >> well, the good news is we have been able to conduct about half of the interviews. two of four conducted yesterday. it was a long day. we got really good information. they took a little bit longer than anticipated because of some of the translation issues. we hope to interview the remaining two crew members today including the flying pilot. >> so you have yet to talk to the pilot actually at the controls at this point? >> that's right. we hope to do that today but we have been getting excellent cooperation and we expect it to continue. >> do you expect to reach a conclusion, an initial conclusion by the end of today when you do the update for the media? >> well, i think we'll probably provide factual information and if there's anything that we can rule out we will identify that but i think as far as reaching conclusions, we are just really two full days in to our investigation and premature for us to reach conclusions or determine what happened. >> one of the concerns that is being heard across this country and really around the world is what kind of training system is in place at asiana and really all airlines and if i'm flying somewhere, how can i be assured that the pilot who's at the controls truly has the training and the expertise needed? >> sure. we'll be taking a look at training and experience. what we do know is that we have an experienced pilot. he's got a lot of hours. but he's new to the 777. he's flown aircraft in the boeing family before. we need to look at the transition flying and this is what he was doing getting the time in the aircraft with an experienced instructor. >> is there any talk or discussion about the possibility of setting up some kind of a database so there's transparency, so that the flying public or corporations or the media, whoever it is, can look at the crew or pilots and say, boy, they've got a checkered record or these guys have a spotless record? >> well, probably not for the crew, for the pilots but certainly there's information out there with respect to airlines, with their records, with their history. but there is an expectation that anyone who's putting themselves out there to provide passenger service meets minimum safety standards. and we need to make sure that those safety standards are set high and that every flight is a safe one. >> i know you do that for here in the u.s. but how do you do that for foreign carriers and then the other question that comes up here is, 43 hours, i know people are saying he has to land the plane at some point and at 43 hours, should he have been at the controls? >> certainly, we'll take a look at all of these issues. when you look at hours, though, really, we want to make sure that we fully understand this. no pilot is going to walk in to an aircraft type with 100 landings. they have to accumulate this experience and the landings, the takeoffs, the cruise flight. they need to have that operating experience. you can do a lot in a simulator but you do have to take the controls and so you want to make sure that you have a good crew pairing and there's good training. >> it is our understanding he had 43 hours, 9 flights in the 777. does that include this flight or prior to this flight? >> you know, we're taking a look through all of those records. they have been provided to us by asiana and we expect to be able to brief on some of that this afternoon. >> as people are looking at the wreckage here and looking at the survivability of a plane crash like this, there are question that is are coming up in terms of the ability of the crew to get people off of a plane in 90 seconds. are you convinced that that is still the standard or do there need to be changes? >> well, we know that the 90-second rule is the standard coming to certification but what we see in real life with evacuations after an accident is that it doesn't always happen in 90 seconds as expected. and so, we'll be looking very closely at this crash to see what we can learn about survival factors and video evidence provides great tools for us to look at that timing and look at how long it took. >> deborah hersman, chairman of the ntsb joininging us just outside here on san francisco airport, very busy day. as you heard, carl and everybody else back there, they have yet to talk with the pilot who was at the controls of the 777 that crashed here. back to you. >> phil, thank you very much for that. we'll get some food for thought. the ceo of general mills ready to ring the opening bell in honor of the company's investor day. you should see the hamburger helper sign outside the exchange today. huge. he'll join us. take one more look at futures as we got earnings season officially under way. i'm a careful investor. when you do what i do, you think about risk. i don't like the ups and downs of the market, but i can't just sit on my cash. i want to be prepared for the long haul. ishares minimum volatility etfs. investments designed for a smoother ride. find out why 9 out of 10 large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus, which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. the fdic expected to propose stricter rules for banks less than an hour from now. they want eight of the largest banks to reduce the threat they pose to the financial system as cnbc's kay kelly first reported, the fdic expected to raise the leverage ratio for banks to 5% from 3%. and that will be interesting ahead of obviously a bunch of bank earnings that begins on friday. >> this is so critical and stricter but all relative because it's stricter relative to the international bali agreement at 3% and regulators with respect happy and just so people understand, a 3% leverage bank is a bank leveraged 33 to 1. that's high. in the u.s., going to 5% and can be levered 20 to 1 and, david, people saying it should be 6 or why not 8 to 10? why shouldn't it be the case to be protected from having the equity falls out a reasonable 8% to 10%? >> right. especially when you considered certain things that were off balance sheet and really were not off balance sheet. >> right. >> we don't see many institutions levered anywhere near that at this point. >> well -- >> we don't. >> maybe not the sky high ratio leverage of the past. >> look. i always looked at the leverage ratio that's hard to determine. a lot of ks and qs is somewhat difficult to do that. trance parsparency is important and the new rules. >> the fact to include off balance sheet assets is critical and raise questions for derivatives, for example, when you have trillions in derivat e derivatives off the balance sheet, just a little bit is a huge difference for banks. >> interest margin, delinquencies are low. >> by the way, moving the bond market, the affect on securities on some of the balance sheets is a big thing, as well. >> absolutely. when we come back, helping you navigate the markets in days and years. art cashin become with words of wisdom for you and your money. one more look at futures. opening bell is just under ten minutes. at's your function? ♪ hooking up the country helping business run ♪ ♪ build! we're investing big to keep our country in the lead. ♪ load! we keep moving to deliver what you need. and that means growth, lots of cargo going all around the globe. cars and parts, fuel and steel, peas and rice, hey that's nice! ♪ norfolk southern what's your function? ♪ ♪ helping this big country move ahead as one ♪ ♪ norfolk southern how's that function? ♪ a lot can happen in a second. with fidelity's guaranteed one-second 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. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. got just about eight minutes to go before the opening bell today. let's bring in art cashin with ubs financial services. good morning. >> good morning. >> this morning you're saying bulls in control yesterday s. that the case, though? volumes have been pretty light. >> it is. but, you know, i think it is the new world we live in. a lot of the equity volume has been drained in to things like etfs. old days if you wanted to buy s&p 500, you might have 500 little transactions. now you do it in one fell swoop. early days, they used to offset that with transactions. now they've become reasonably liquid enough that you don't see the instantaneous rebounds. some of the former equity volume is sub assusumed. >> there's more volume than just by the normal mshls alone? >> absolutely. you have more and more of this is an institutional business which means a slightly longer time holder. we see figures out that take in to account things like high frequency traders and short life span of the trade. it's not really so. there's a small group that trade actively but the others trade slowly. >> wait a minute. do you mean just here or in general? >> i would think equities in general. and i think you see it reflected in the lower trading volumes as we have seen over the last several years. so you have etfs is a factor and now i think we've gone from something like 48% of everything under institutional management, if you would, up to figures somewhere in the 60, something like that. >> two seconds, but if you are the retail guy out there, what should you be watching out there? >> a couple of things. on the longer term, a little disappointed. china was trying to rally. they're seeing some inflationary pressure and that comes up. the feeling down here is a lot of this is new money for the new month. by the end of the week that may flatten out and you have to be very wary tomorrow for the fmoc minutes. >> big event on wednesday. >> right. >> art, thank you, sir. >> my pleasure. >> opening bell in 4:30. ceo of general mills ready to ring it. he'll join us at post 9. hey linda! what are you guys doing? having some fiber! with new phillips' fiber good gummies. they're fruity delicious! just two gummies have 4 grams of fiber! to help support regularity! i want some... [ woman ] hop on over! [ marge ] fiber the fun way, from phillips'. [ cows moo ] [ sizzling ] more rain... [ thunder rumbles ] ♪ [ male announcer ] when the world moves... futures move first. learn futures from experienced pros with dedicated chats and daily live webinars. and trade with papermoney to test-drive the market. ♪ all on thinkorswim. from td ameritrade. you're watching "squawk on the street." opening bell about to ring in 90 seconds. s&p up 7 of 9 sessions. nikkei had the highest close in about six weeks. >> wow. >> s&p and dow highest close in three weeks and it is the highest close for the nas since may 30. back to levels we were feeling pretty good about. >> that's right. just off the all-time highs. incredible. >> a couple of stocks moving around. oracle is coming over here to the big board and tesla is added to the nasdaq 100. tesla gets a bit of a bounce on that news. near to date gain, tesla, 259 -- >> looking pretty good. bought stock not that long ago and has to be up nicely. >> the market cap a third of gm's. >> incredible. >> just incredible. the mother of all short squeezes as somebody called it today. >> love this story. kroger. >> interesting price. 38 cents. don't forget the 38 cents. >> yes. >> but it's a bond market story, also. they will be refinancing, borrowing to finance $2. 5 billion deal. >> general mills holding the investor day at the nyse. speaking with the ceo in a moment. sun power celebrating a solar powered plane took off from california and landed this past sunday in new york. >> not fast but it is solar powered. meantime, kelly, i believe you have breaking news. >> the latest global growth forecast calling for slower world growth than three months ago. 3.1% the growth rate this year, down from 3.3% it projected in april and says europe will see a 0.6% contraction. that's deeper than the 0.4% predicted last time ago. it improved the forecast for japan and united kingdom. cutting the outlook for europe for 2014 and does see a return to growth next year. guys, just looking down, this is the update to the projects. looking down for 2013, some of the biggest cuts coming to russia. almost a full percentage point lower than the april forecast. south africa. also to world trade volume which is so important. so a big slowdown there and something to keep a mind on. >> a reflection of what we have been talking about for a while now and to have the imf put it in context, we'll see the degree to which it weighs on -- >> emerging markets. brazil took the numbers down almost a percentage point. spain, as well. pain in europe and hoping, everyone's hoping they're looking for signs of a bottom. >> 2% growth in japan and not for long. >> back to 101. nikkei highest in six weeks. >> you have to watch. they had some better signs in terms of industrial production and demand and inflation closely for policy gaining traction. a key debate for them is what to do about the sales tax. they have parliamentary elections i think mid month. that's the plank in the way that position themselves. is this an economy to afford a sales tax hike right now? they have an extremely debt and deficit situation and stuck in a difficult spot. do you raise the sales tax to address that? >> hard question. >> very difficult. >> difficult is saying it mildly for the amount of the growth. 260%. it is incredible is what it is. by the way, any of those people talking about it for years, rates still stay incredibly low. >> absolutely. absolutely. a real rate in japan than the u.s. >> the supermarket industry has a deal today. growth is tough to come by. kroger's number one leader on the s&p right now, david. >> wow. >> like the ganette of the supermarket business. >> go ahead. >> that is something that we should watch because it's not just, of course, the acquired company in this case harris teeter. how they got to the 38 cents is interesting. i know kelly's exciting shopping at both of these places. >> i know them well. >> we talk about it so often. acquirer stocks go up. talking about accretion here. >> the thing about harris teeter is maybe this is a reason why kroger is responding well, it positioned themselves. only 200 some stores around the mid-atlantic. harris teeter kind of done the wegman's whole foods thing. gone upscale. i'm sure that's good for margins and kroger would like to see that. >> they do expect acession between 6 and 9 cents in the first full year after the merger. growth rate off of what will be a highest earnings base and makes sense being applauded by kroger shareholders. aural cash, of course. that's not part of the consideration and not going up as a result of kroger shares going up. an interesting deal, t nonetheless, in the environment where we see so few. >> biggest loser on the s&p, down 15.5%, lowered guidance. three downgrades a today. a stock that herb greenberg is pounding the table on for a long time. it's painful for the holders. >> 16%? sharp stands out on this one. >> in general, big cap tech not doing well at all. ibm's fourth biggest loser on the s&p. apple, oracle, tell labs, dell. >> the underperformance of the nasdaq, we asked a guy about this on "closing bell" saying there's no cap x going on but you have to wonder if there's an element of truth to it. is the traction in the job market coming at the expense of capital investment and struggling or have they just not done a good enough job of staying ahead of the innovation side? >> the new york stock exchange is taking over the administration of libor from the british bankers starting in early 2014. having just closed a deal, david, kelly, you know more about this than we do. diversifying the business might not be such a bad idea. >> i can tell you with regard to libor, they deal this, keep a subsidiary in the uk, libor has the word london in it. london inner bank offered rate. how libor is computed, ownership is fine but is either for them to own up to the fact it's a manipulated rate, there are people telling each other what that rate should be or is or making it more of a market-based gauge and the financial crisis has given people some caution when it comes to wanting to make it a purely market based. imagine what your mortgage or corporate loan would have done if libor reflected the lack of lending. >> atlanta-based company is running libor. >> so at 1649 on the sprks let's get to bob. bob? >> notice the rally? we have a global market rally essentially. alcoa not as bad as some people feared. i was frankly surprised of how optimistic they were. the ceo on our air emphasized they can't control aluminum price but costs and doing a very good job of that and they were optimistic about global demand. more so than i thought. commodity stocks are up. all those stocks are on the upside right now up 2% to 3%. i'm reasonable about earnings. china and i.t. spending, weak specifically. you see the producer price index on china? 16 straight months it's been falling now. that's enforcing concerns of slow growth over there. watch people's bank of china report next week, how much loans are outstanding. if that number continues to shrink you will almost certainly see weaker chinese gdp growth. second concern, you saw it in the goldman sachs downgrade of ibm noting that's the prix mare concern and said ibm is doing great, perfectly happy with it. weak i.t. growth causes them to pull back and overall earnings i'm not as pessimistic as everybody has been. every first week of every earnings quarter we hear people saying we're getting sub par growth in earnings on the bottom line. 2% to 3%. can't continue and no growth on the top line. here's the way i look at it. 2.9% the estimate right now. historically beat for quarter after quarter and add 3 plus 2.9. that's what would be the historical number. that's true. 8% has been the historical growth in 15 years so 6%, 5.9%, that's a little sub par for a quarter. i'll admit that. but that's not a disaster. enough to muddle through and then getting in to potentially better economic situation in the second half. that's when you might get some top line growth and maybe even some multiple expansion at this point. remember the key point about this whole thing, kelly. this is a lot like the stock market rally. nobody believed it and just like nobody believed the stock market rally, nobody believes that the economy will reaccelerate. nobody thinks that the u.s. economy can possibly stand on its own absent ben bernanke standing behind it. but if that starts to change and the stock market is starting to act like it, things could change. the stock market could move up on that. kelly, back the you. >> all right, bob. thanks for that. let's check on things at the nasdaq. >> hey, kelly. yesterday the nasdaq underperforming the major indices. today another mixed session for tech. apple weighing on the composite. microsoft steve balmer is set to unveil a restructuring strategy. semiconductor stocks, lagging yesterday and analysts voice concern about how rising competition in the smartphone space will weigh on chip demand. and some stock specific action. tesla added to the nasdaq 100 index on july 15th. replacing oracle moving to the new york stock exchange. and lastly, last but not least, david, blackberry a half an hour away from kicking off its annual shareholder meeting and the ceo is expected to hear from a lot of investor who is are frustrated with not only its earnings but how blackberry's management handled that earnings call. i'll listen in and report back on any noteworthy developments. david? >> yes. you can see, of course, the stock having suffered from that earnings report last week. thank you. let's get to energy and commodities with bertha kooms live at the nymex. >> good morning. we have a strong dollar and getting a mixed picture here in the commodities pits today. as far as energy is concerned, oil, wti, both are trading lower. part of the concern that strong cpi number out of china. inflation on the consumer level stronger than expected in june. that will certainly limit any kind of easing efforts there. meantime, that continues to be offset by the concerns about the unrest that continues in egypt. we're seeing gasoline move higher. expecting to see gasoline inventories rise tomorrow. nat gas off the gains. the tropical storm not expected to impact production in the gulf. in the gold pits, eyeing 1250 an ounce. that inflation hedge is certainly part of what's fueling what a lot of traders are saying is short covering, technical move to the outside. we'll see if it can continue. copper sitting out the rally with the concern that china will not continue to move forward with building if consumer inflation continues to move higher. carl? >> interesting. thanks a lot rg b, bertha. let's get to rick santelli. rick? >> thanks, carl. we are starting to lose a little momentum to the notion of selling treasuries, pushing rates up, but just subtle. see it on the two-day chart. now, it's been about a year since maturities made the historical low yields. in july we traded under 140 in a 10-year and traded as high intraday as eventually as yesterday. we are moderating. you want to use 262 yield as a pivot. same could be said for the 5-year. look at the two-day chart dipping below yesterday's low yields. boy, i'll tell you, the five-year wins on a duration adjusted move from july at 54 basis points of 2012 to its current rate just under 150. yesterday it was around 162, 163. but here's what's fascinating. let's take the dollar index which is up a bit today. mostly due to weakness in the pound. they had some weaker economy economic information. look at how the dollar wasn't far from where it is today around 84. back in july last year. so the correlation, higher rates and higher dollar index is something since the fed taper issue has come in since may 1st. the last chart is a year to date of the dollar-yen. we have overtaken 101 and starting to build momentum in benefit of the dollar. carl, back to you. >> all right. rick santelli. when we come back, fresh from ringing the opening bell, ceo of general mills joins us here at post9. and then later, the most powerful man in real estate. head of real estate joins later on. look at the early movers. dow up 63. s&p up 7.5. at farmers we make you smarter about insurance, because what you dont know can hurt you. what if you didn't know that it's smart to replace washing-machine hoses every five years? what if you didn't know that you might need extra coverage for more expensive items? and what if you didn't know that teen drivers are four times more likely to get into an accident? 'sup the more you know, the better you can plan for what's ahead. talk to farmers and get smarter about your insurance. ♪ we are farmers bum - pa - dum, bum - bum - bum -bum ♪ it's a brand new start. your chance to rise and shine. with centurylink as your trusted technology partner, you can do just that. with our visionary cloud infrastructure, global broadband network and custom communications solutions, your business is more reliable - secure - agile. and with responsive, dedicated support, we help you shine every day of the week. [ male announcer ] you wait all year for summer. ♪ this summer was definitely worth the wait. ♪ summer's 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. diarrhea, gas, bloating? yes! one phillips' colon health probiotic cap each day helps defend against these digestive issues... with three strains of good bacteria. [ phillips' lady ] live the regular life. phillips'. [ phillips' lady ] live the regular life. everphillips' lady ] live the regular life. ybody has different ideas, goals, appetite for risk. you can't say 'one size fits all'. it doesn't. that's crazy. we're all totally different. ishares core. etf building blocks for your personalized portfolio. find out why 9 out of 10 large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus, which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. big day at the exchange if you like hamburger helper. we are joined this morning by the bell ringer, ken powell is chairman and ceo of general mills, holding the investor day today. welcome. >> great to be here. >> jim's going to be bummed that he was not here. but it's great to have you. obviously, the story of the day has god got to be new items, right? how many in the first half? >> so a couple hundred items in the new half. exthe engss of lines. you flavors. brand new products. yoplait greek blended. new cereals. soft eat meal bars. new hershey dessert products. new frozen food products. a very good long list and pleased with the new product lineup of this year. >> built around convenience, right? consumers on the go whether it's dinner or breakfast. you name it. >> almost all consumers are on the go and so convenience is a key part of what we do. we have to help them make dinner simple, whether it's new varieties or versions of hamburger helper or dumpling flairs. chinese consumers looking for convenience and the same simplicity as consumers all over the world and really a fundamental play for us. >> your stock became almost a touch stone for us at this desk because of the performance, because of the defensive nature of it. and then bond yields shot up and the stock took a spill. is there going to be material information on volume growth in the second half? >> not today. i mean, we announced our end of fiscal year results a few years ago and outlined fiscal 14. we expect to have a good year here and not adding detail to that. today as you said it is not talking so much what we try to do this year but how we do it with new products, with innovation, with expanding our business around the world so it's really today's about the business detail. >> earnings themselves were quite strong. you have generated free cash flow and some of which you used to buy back stock and aided earnings per share. some say you have restrained capital spending to enhance free cash flow. do you change that strategy or where you continue? >> really, that's not how we look at it. the first call on our cash is whatever we need to add capacity, make sure that our plants have all the right technology so making, you know, that capital investment is key. that's always the first call on our cash. we are, however, and have been for well over 100 years very committed to returning free cash to shareholders. very good dividend yield. 9% or 10% compound over 5 years. 114 years without interruption. so we're very proud and committed to that dividend growth. we are returning cash to shareholders buying back shares as you mentioned. so that's part of our formula. i think that's the resiliency and rheliability of the investment in general mills. >> you have the cereal and biggest consumers of honey in the country. any affect from colony collapse? any shortage of honey? are prices going up? are you worried at all? >> you read from time to time about issues with the honey supply. it's never, ever been a problem for us. and you know, generally, as we look at inflation across our inputs for next year, we're thinking about 3%. there will be some inflation. dairy prices will be up. packaging prices will be up. 3% is a very manageable level of inflation for general mills. we can offset it with prod productivity and consumer prices will be stable over the course of the next 12 months and means that the volume momentum will continue to be there. >> you raised guidance a couple of times this year before pricing down and margins narrower. did you overshoot on the guidance in the early part of the year? >> we came in very close, really, on our guidance. we were mid single digits for the year and i they few pennies and so we feel that we were there, thereabouts. this year we're just entering now we're as we say so-called on model. we think the sales growth in the low single digits and what we can do at general mills. operating profit will expand as a result of our good productivity and eps, guiding to the high single digit 7% to 8%. that would be a very typical year for general mills and we'll return cash to shareholders. we think that's a good performance for us. >> to the extent the growth depends as so many other companies do on developing markets, india, brazil or china, what unites them is concern about growth. are you seeing and are you concerned about growth in those markets? >> we're not seeing any slowdown or change in trajectory. you mentioned china, actually our fourth quarter ending in may was a little bit stronger than the proceeding quarter. our products are every day. we sell dumplings, you know, very traditional products in china. very resilient brands. every day products. brazil is another country that's been mentioned. we exceeded our growth expectation in brazil and very well targeted, very middle class targeted brands for brazil. very convenient. very great value and i think one of the beauties of investing in a company like general mills, the resilience of our products, the resilience of the markets, we the end to do well in great times and also in time that is are challenging and that's appealing to our kind of investor. >> last question. is hamburger helper getting a marketing revamp? >> it is. we'll talk about that today. we are renovating that brand as we say. lots -- americans are still buying lots of hamburger and as much chicken for use in the evening meal and more varieties of hamburger helper chicken and it helps. it's a helper. chicken, hamburger, tuna. we're launching a line of ultimate helpers, liquid sauces. great stuff to talk about today. that's been a great brand nor general mills over the years, very high penetration. helps a lot of people every night so we'll talk about that later this morning. >> raised on it right here. ken, thanks for coming in. >> appreciate it. >> great to see you. >> thanks a lot. >> when we come back, the man who said the president essentially fired ben bernanke. >> this is really remarkable. i almost fell off my chair hearing the president's remarks last night. he essentially fired ben bernanke on the spot and a fairly tepid testimony and time to focus on the next chairman might be. >> former fed governor larry meyer's here to figure out who that might be. ♪ norfolk southern what's your function? ♪ hooking up the country helping business run ♪ ♪ trains! they haul everything, safely and on time. ♪ tracks! they connect the factories built along the lines. and that means jobs, lots of people, making lots and lots of things. let's get your business rolling now, everybody sing. ♪ norfolk southern what's your function? ♪ ♪ helping this big country move ahead as one ♪ ♪ norfolk southern how's that function? ♪ barnes & noble ceo resigning. while they don't aim to be a player in the tablet business, they'll make the nook e raidire devices. barnes & noble should be called barnes and what? tweet us and get the responses later on in the morning. i like that one. >> yeah. i think people will have a little bit of fun with this one. looking forward to seeing those responses. larry meyer will join us live with his take on who could replace ben bernanke as fed chair. the banks are required to hold more cash. find out what could mean for bank stocks and the industry as a whole. together with latino to support hispanicize, and the adelante movement. teaching tools for success, and fostering creativity. these programs are empowering people to lead positive change, and helping them discover how great a little balance can feel. through initiatives like these, our goal is to inspire more than three million people to rediscover the joy of being active this summer. see the difference all of us can make, together. i turn ed 65 last week. i turn the math of retirement is different today. money has to last longer. i don't want to pour over pie charts all day. i want to travel, and i want the income to do it. ishares incomes etfs. low cost and diversified. find out why nine out of ten large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus, which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. breaking news on the banks. regulators introducing new capital requirements. kayla is at hq with details. >> hey, carl. this is the latest move by washington to attempt safeguard bank balance sheets in preparation for a coming financial crisis in the near future or far future as it may be but under the current rule banks can't lever up as much as they previously would. fdic announcing meeting a 5% leverage rating. the biggest banks to hit 6%, even higher. a move that limits how much banks borrow and seeks to lessen counter party risk, as well. for every $100 on hand, they now need to have $143. not to mention more capital to offset the off balance sheet items like derivatives under the new rule. how does it add up? official said all bank holding companies need additional $63 billion. big banks clearing the high bar need additional $89 million. almost no bank meets the new ones. that's according to a recent report by kbw. wells fargo appears to be near it. gold mman sachs and citi with t lowest. rules aren't final for 60 days. the fdic has the proposal open to comments. anyone in the industry who feels like they should weigh in on this. given how much commentary was provided for a lot of these previous capital rules, it looks like it could get very vocal before we see something final. back to you. >> all right. kayla, thanks. important issue. look at how it impacts the banks and bring in larry meyer of macroeconomic advisers. good morning. >> good morning. >> you know, we just learned that it's 5% for all banks, 6% for the biggest. why shouldn't it be 8% to 10%? >> well, this clearly is a balance here in terms of making sure that banks can withstand shocks and yet have enough funds available to make loans and do what banks are supposed to do. clearly, there's a view they didn't have enough liquidity and capital. this makes banks safer. but it also does have some impact on the macroeconomy. >> larry? >> balancing those things. these are very much more stringent than they were before. >> well, i mean, stringent relative to the 3% ratio. which a lot of people say is too low. you said bank vs to do what they're here to do but is leveraging themselves up what they're supposed to do? >> well, that's the part of liquidity ratios and regulators are very sensitive now to the degree of leverage in the banking system. also, by supervision. i think we have to look at this as a very significant step forward and, you know, i think that the basis international agreement did a very good job here. now, it's not just looking at the amount of capital in the banking system, it is looking at the quality of the capital and that's very important change. more of this capital is now what we call core capital, good capital, real capital. as opposed to what sometimes call pretend capital. that's another very important consideration. >> larry, 2018 is still a ways away. is that as soon as this can happen reasonably? is that soon enough? >> well, i think you have to be careful in interpreting phase-ins here. the phase-in will be as fast as the markets demand it. banks will be rewarded for getting there early. and they'll be pressure on banks to meet these standards well before 2018. indeed, i think most banks have been moving in that direction because this is no surprise. this is no surprise. and they've had time and they will have time to adjust but they're going to adjust much more rapid listen than a slow phase-in to 2018. >> they have many of them as you just say, they take them and immediately move. shareholder base demand it. i'm curious on the subject of lending and the velocity of money. i mean, connect the two for me. if there's a connection to be made in terms of how much the fed has done and yet the velocity hasn't increased that much, has it? >> well, the word velocity doesn't appear in my vocabulary but the issue is amount of lending by banks. there are two issues here, certainly. some banks are capital con stained but you lend money when you have firms that want loans and are credit worthy. the demand side has been, i think, as important or more important than supply side considerations. when the economy picks up, demand is stronger, there will be greater loan demand and banks make more loans. >> larry, why do you say velocity isn't in your vocabulary. >> i don't know what you mean by velocity. >> the velocity of money. >> because that's not a concept that i think is very useful. monetary policy is about affecting rates which affect financial conditions and affect aggregate demand. let me just say that the word money is never said in our office probably not by the staff at the fed. money doesn't appear in any modern macro model. we have to get over there. okay? we're beyond that now. monetary policy is determined by basically a strategy that's embedded in policy rules. and i can't tell you what the money supply is, how fast it's growing. i don't care. >> well, i think it's one thing to say that these tools are -- or these gauges aren't necessarily the best way to measure or try to figure out what's going on in the economy and another thing to say it's irrelevant and doesn't exist. >> you can -- velocity is just income over money. it's a definition. it exists in the sense that you can define it. the question is, is it a meaningful concept? does it help me explain anything? helped me explain what determines inflation and aggregate demand? the answer is no, no. velocity is very variable and it's no longer a useful -- see, if velocity were constant, then if money supply went up, nominal income would go up. it's too variable. >> take it from another tact then. do we have the deleveraging forces in the economy that we have for a few years after the crisis or has that abated? >> oh, it's abated significantly. and i mean, this is a very important point. deleveraging hurts growth when it's more and more intense. when you turn the corner as we clearly have, and deleveraging is diminishing in intensity, that's good for the economy. that's promoting growth. deleveraging can go on for a while. consumer balance sheets are really significantly improved now. so i don't think the deleveraging is a particular head wind right now. the big head wind is fiscal policy. if you like deleveraging the government. >> yes. finally, larry, your office tells us you believe the fed is itching in your words to taper. what -- is that a september suggesti suggestion? >> everything is conditional. the committee clearly believes that the incoming data is strong enough to allow them, give them the opportunity, to taper very soon. and that would be september. now, we can only say surely when we see the rest of the incoming data but the last press conference really portrayed an fmoc that i say is itching to tighten either because they're much more confident about the second half rebound, about the underlying momentum of the economy or they have become more worried about the risks of further easing. >> larry meyer, joining us there. i think people are going back and looking at what exactly money is after this interview. thanks very much for your time this morning. >> okay. good. i'll get a lot of letters. >> yes. i have a feeling. we'll keep the discussion going and job market data. important gauge for those trying to figure what's going on. rick santelli, whatting you tell us about jolts? jolts is better than anticipated. 3.83 million job openings. and that's for may. april's read was originally released at 3.75 million, upgraded to 3.8. let's get some context here. we had a higher number several months ago in march at 3.875. but here's the key. february of this year we had a number just a whisker shy of 3.9 million. that's the best number back to the summer of '08. we haven't been over 4 million job openings in a single month on jolts since march of '08. but it has been trending steadily higher and i think it really does jive quite accurately with the recent strength in job creation. we see the first friday of every month. might not be everybody's ideal number. might not be an ideal number especially when compared to, for example, population growth. but it's impossible to dispute that it has improved. >> rick, we did see a tiny tick-up in the number of quits, not necessarily in the rate, but 2.2 million, a gauge people look to as a sense of confidence in the labor market. people walking away from their job. >> not only to pay attention to that but then there's the whole variety of issues of why people may be restricted from leaving jobs and moving to better jobs. the rise in interest rates may affect housing in a way that will keep that dynamic in place. all things considered, the series continues to trend higher and that's a good thing. i'm going to wait patiently to breach the 4 million mark. >> all right. we'll keep an eye out for that. more from rick coming up in the show. meantime, a look at blackberry. the annual meeting is you shoun in ontario, canada. stock's up slightly right now. updated with headlines out of the meeting as they happen. in general, though, large tech cap dragging us down today. >> straight ahead, new details on the asiana flight 214 and what could have happened in the cockpit moments before the crash. live in san francisco. that's right after the break. stay with us. enerate income? with fidelity's options platform, we've 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. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. because what you dont know can hurt you.urance, what if you didn't know that it's smart to replace washing-machine hoses every five years? what if you didn't know that you might need extra coverage for more expensive items? and what if you didn't know that teen drivers are four times more likely to get into an accident? 'sup the more you know, the better you can plan for what's ahead. talk to farmers and get smarter about your insurance. ♪ we are farmers bum - pa - dum, bum - bum - bum -bum ♪ for over 60,000 california foster children, having necessary school supplies can mean the difference between success and failure. the day i start, i'm already behind. i never know what i'm gonna need. new school, new classes, new kids. it's 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. welcome back to "squawk on the street." watching wolverine worldwide rising this morning. raised its full-year adjusted earnings outlook. not everyone is a fan. i spoke with a hold on this one says it's trading on the expectation that the acquisition of plg goes flawlessly and the core biz down double digits in the quarter. that stock up about 40% so far this year. carl, back to you. >> all right, josh. thanks so much for what. the investigation in to the crash of asiana flight 214 continues as the ntsb interviews the four pilots on that flight. our phil lebeau is live in san francisco with the latest on that. hi, phil. >> reporter: hi, carl. we talked with the ntsb chairman in the last hour. they're continuing to take data off of the flight data recorders. excellent information. but so far no indication of a mechanical failure. they have interviewed two of the four pilots in the cockpit but yet to interview the pilot at the controls at the time of the crash and an area of to cushion -- how experienced was he flying or not flying a 777? >> we will be taking a look at training and experience. what we do know is that we have an experienced pilot. he's got a lot of hours but he's new to the 777. he's flown aircraft in the boeing family before. we need to understand what that transition training looks like and what the initial operating experience, which this is what he was doing, getting the time in the aircraft with an experienced instructor. >> reporter: what happened in the last minute and a half of this flight? the key here is that they want to be at 137 knots or wanted to be at that speed when they were landing. at 1,600 feet, they disengaged the auto pilot. they were down to 134 knots and just above the level of the runway, just 3 seconds before impact, the air speed was all the way down to 103 knots. >> when you look at hours, though, really, we want to make sure that we fully understand this. no pilot is going to walk in to a new aircraft type with 100 landings under their belt. they have got to accumulate the experience, the cruise flight. they need to have that operating experience. you can do a lot in a simulator but you have to take the controls and so you want to make sure that you have a good crew pairing and there's good training. >> reporter: the training is one area of focus. meanwhile, the ceo of asiana airlines, he is going to be coming here to san francisco. he is enroute. he'll be landing early this afternoon. he says he's coming here to apologize for this accident and to meet with the victims. so more information is expected to come out today, guys, especially regarding the interviews with these pilots and the level of experience that they had at the controls of a 777. for now, this's it here in san francisco. back to you guys. >> all right. that's our phil lebeau following that story for us. after three years on the job, the barnes & noble ceo is stepping down. what does it mean for the stock? it's been suffering. we'll tell you how to play it. the most powerful man in real estate, blackstone's global head of real estate will join us live. we'll be right back. ♪ ♪ ♪ ♪ ♪ [ male announcer ] the all-new 2014 lexus is. this is your move. since aflac is helping with his expenses while he can't work, he can focus on his recovery. he doesn't have to worry so much about his mortgage, groceries, or even gas bills. kick! kick... feel it! feel it! feel it! nice work! ♪ you got it! you got it! yes! aflac's gonna help take care of his expenses. and us...we're gonna get him back in fighting shape. ♪ [ male announcer ] see what's happening behind the scenes at aflac.com. [ hooking up the countryat's hwhelping business run ♪nes ♪ build! we're investing big to keep our country in the lead. ♪ load! we keep moving to deliver what you need. and that means growth, lots of cargo going all around the globe. cars and parts, fuel and steel, peas and rice, hey that's nice! ♪ norfolk southern what's your function? ♪ ♪ helping this big country move ahead as one ♪ ♪ norfolk southern how's that function? ♪ for their family. that's why i created the honest company. i was just a concerned mom, with a crazy dream. a wish that there was a company that i could rely on, that did all of the hard work for me. i'm jessica alba, and the honest company was my dream. [ male announcer ] legalzoom has helped a million businesses successfully get started, including jessica's. launch your dream at legalzoom today. call us. we're here to help. welcome back. we're watching shares of intuitive surgical falling after the second quarter revenue below expectations and sales of the surgical systems turned negative. those devices causing a lot of controversy recently. herb greenberg is all over the story from the beginning. herb, walk us through what's happening here. >> okay, kelly, look. this is not a few good months for intuitive surgical. it's just the latest in a series of events including legal challenges based of allegations of death and injury tied to the robot. dangerous flaws in one of the instruments and as i pointed out in the cnbc.com documentary, the davinci debate, criticisms that the company overly aggressive with the marketing. here's what a former employee said talking on condition of anonymity. >> intuitive did a fantastic job providing hospitals and doctors with marketing. television, radio, calling up the hospital. when you're on hold and there could be a davinci recording. that is a very powerful message. when patients hear the word robotic. >> perhaps most disturbing to investors with intuitive's warning is sharp slowdown in growth with revenue in the second quarter to grow by 7% compared with average of 25% in each quarter over the past 2 years. now, the company blamed the slowdown on a number of things including increased pressure on hospital. each robot is more than a million and a half dollars. they cite something new, conservative management and treatment in outpatient settings. all of this follows increased criticism that the robot while a tool in many procedures is simply overused. the big question now -- is this just a temporary setback or a sign that the robot's best growth days are behind it. >> you were in front of this one, herb. thank you so much. >> sure. >> watching for that story a long time. barnes & nobody ceo lynch resigned. two weeks after reporting losses at the nook digital business more than doubles. here's what lynch had to say about the company's future nine months ago. >> if you look at the multiple that must be embedded in our implied valuation on retail it's extremely low. and anybody would tell you that. and what i'll say is we think retail's going to be an incredible profit driver for the foreseeable future. >> shares trading higher. how do you play this move? two analysts covering bks. guys, good morning to both of you. >> good morning. >> good morning. >> talk briefly about what did lynch in? all the problems, what was the straw that broke the camel's back? >> i assume it was the size of the loss. and the fact that they're now acknowledging they're out of the production business which really means that barnes & noble exited the technology division. perhaps he was usurped to the needs of the company. the chairman announced months ago he was interested in taking the retail business private. nothing's happened since then and at some point that has to come to a head and the question's been how do you value nook in this? given the size of the write-off, the fact it's not selling this sort of deals with that issue. >> yeah. david, obviously, there have been as john puts it some deal oriented investors taking interest in the story over time but i wonder if it's complicated if that trend continues. >> yeah. we have been big advocates of potential montization of the assets and downgraded the stock a month ago with the feeling that the nook business may not have the value we thought it might have. a lot of people look at the retail business and there's a point where everyone hated best buy going out of business because of amazon. they generate $300 plus million of ebita. i take my kids in there to look at the games, the toys the kids stuff. it is a great store with a lot of traffic and landlords still love it. there's real value there. the college bookstore business has value. there's still real value here. i think sort of somewhere in the mid to high teens it is in the high teens probably about right. >> what do you think happens to liberty now? how patient are they? >> i think that's a big question. i mean, you know, there's speculation that they've had -- they were somewhat behind some of this. i think a lot of it had too many losses. they were not an advocate of the losses. my sense is perhaps even on the potential buying of the retail business, liberty may be the one preventing, you know, demanding a higher price and maybe delaying that deal, as well. so i mean, they're out there like anybody else trying to maximize value and want the highest price for the asset ice john, if push comes to shove, they're not afraid about making pushing for some management changes. >> i would suggest that michael hughes be promoted to president was a liberty basically backed appointee last year as a cfo and if you look at the history of liberty, when they're not happy, they have come in. they tend not to want to get involved in the operations but want to protect the investment. one could suggest with hughes step up liberty are as interested as ever given remember they did bid to buy 70% of the company a couple of years ago. >> guys, interesting story. so many different ways to come at it. appreciate both of your time. thanks so much. >> thank you. >> talking some barnes & noble. don't forget to tweet us. young the book by its cover. barnes & noble should be called barnes and what? when we come back, blackstone's real estate division made the largest dollar investment in private homes in the country. $5 billion and counting. global head of real estate of blackstone will join us right here at post9. are you sure we should take this billboard down? people find out state farm does car loans as well as they do insurance, our bank is through. good point. grab an edge. look there's two guys on the state farm borrow better banking sign. nope for real there's two dudes on the state farm borrow better banking sign. [ reporter ] breaking news from the state farm borrow better banking sign... we're seeing two men that have climbed the borrow better banking sign gentlemen please get down from the state farm borrow better banking sign. phil get the hose. okay he's getting the hose. alright, let's go. [ male announcer ] talk to a state farm agent about car loans that can save you hundreds. that's borrowing better. an hour in to trading. some of the stories, 7:30 on the west coast, 10:30 on wall street. sprint says it's completed the transaction for 100% of clearwire. a day after shareholders approved the deal. new territory for 3m and unit unitedhealth. ibm falling after downgrade of neutral to buy. when you hear the name blackstone you may think of leveraged buyouts but it's real estate where they dominate with $60 billion under management, $10 million available to invest. not to mention its control of hotel chains like hilton. the man who runs the business, jonathan gray. and he joins us. nice to have you here. >> nice to be here, david. >> talk rates. because that's the key focus broadly speaking for everybody and real estate. the backup in rates in a very short amount of time. what does it mean for your business, your portfolio, the ability to borrow and lend and everything else? >> well, i think everybody when's looking out there starting to get a little nervous about rates going up across asset classes and real estate in particular but think about real estate as a combination of both the yield it pays and potential growth in cash flows and looking historically, commercial real estate performed well when the economy's been growing. and so, when we look out there, we say, look, yes, it's a difficult rate environment as it starts to move up but when owe look at the fundamentals of the properties, because of the lack of new supply, commercial real estate's likely to perform fairly well going forward and we're calmer about it focusing on supply and demand and the supply picture today looks very good. question, rates can go up. they'll impact commercial real estate in the short term. longer term, we think the cash flow in values does more than offset this. >> give me your sense why you're saying about the overall economic environment. you own hilton, seeing it on the hotel side. 30,000 single family homes and then a huge portfolio of office buildings. what's going on? >> looking at the underlying portfolio companies particularly here in the u.s. the fundamentals are good and not because of robust economic growth but back to the lack of new supply. hotels, 6%, 7% same store sales growth. shopping centers 100 basis points, 200 basis points annual increase and the housing market and everybody is focused on, seeing robust pick-up in terms of price appreciation. double digit across the country. so out there on the ground, yes, rates are moving up but i think that's starting to happen with better economic performance and in our sector in particular, the lack of new supply is making it even stronger than the economy at large. >> all right. conceivably, if cap rates move up in a rising rate environment, does that make you less likely as a buyer? >> cap rates can stay low. yields stay low if rents are higher. if the rents in the west coast office buildings are $35 a foot in place, but the market rent moves to $50, you will pay a high multiple even in the -- >> is that really going to happen? >> we think given the lack of supply, so if you use shopping centers as an example, we're one of the largest owns of them in the country, new supply of 200 square feet in 2006 to less than 10 million square feet in 2012. that's why shopping centers are performing well so i think in real estate today you have to look a little less at the yield component, less as utilities and more about the growth and that's why where i think you get the offsetting impact to the rising ra rates. >> you have to think about ex exits. you are investing but to get a return. individual homes, a great deal of attention of blackstone being the single largest owner of single family. $5 billion. are you done buying? >> not yet. in places like california, it's gotten more difficult but as you move east in the united states, and atlanta, chicago, northern florida, we still see good value out there. home prices, you know, people are focused on the fact in the short term they have gone up a fair amount. right? they've gone up 15% nationally in a number of markets. get you go back to where they were in '06, there's still many of oir markets 40% down from those levels. so we think they still represent good value. and the supply demand picture, again, looks pretty good there. >> how much longer with a sense of how much longer to see that opportunity, what would it be? >> i'd say for us we're probably in the latest stages of that for our model but in terms of the overall picture, i think we have got two to four pretty good years in the housing market. once again, back to supply. we have only been building at about half the rate of population growth in terms of new starts and that's supporting the values. >> you know, i mentioned exits because eventually you have to start to monetize i would think this large portfolio. we have seen a number of competitors choose to go the route. ringing the bell. haven't done particularly well, the ipos of residential homes and many trading below asset value. does that give you pause? >> we focus on trying to build a first-class business. so in the short term, a lot of companies are raising capital, they're trying to do different things. that's difficult. we're private. we have the benefit of our investors giving us capital for a long period of time. >> you hold it for a long time? generate a nice return and not think about an exit? >> we want to buy the homes, buy them in good markets, quality homes. invest this the homes. we spend about 10% of the purchase price renovating them. we have a dedicated leasing team. we want to lease them up and we found if we operate in scale, we have 2,000 to 4,000 homes in each of the markets to do it efficiently and have brand recognition and finding with customers is they like the product. so today on homes that we have renovated, more than 60 days, we're 94% occupied. our view is that if we can get the model right, private market or whoever buys the business will like it. we can't focus -- you know, people tend to focus short term, interest rates today, when's happening in houses pricing or this company isn't trading well. we're trying to build a long-term business here. >> hilton, we hear so often that it's a -- you bought this thing in '07. right? >> yes. >> towards the top of the market. >> yes. >> many people including the eop deal wondered what are they doing? it's been a good investment. nonetheless, when are you going to try to take it public? >> so we don't comment on individual investments as much as i know you'd like me to break news here and we said to expect a material pick-up in dispositions over the next couple of years. relating to hilton specifically, as you said, it's been a very good investment for us and the reason why is the company's had phenomenal growth. the ceo has done a great job with this company. when we bought it, it had 2,900 hotels across the world. today more than 4,000 hotels. looking forward, the company, when we bought it way back when less than 20 hotels being built outside the u.s. today it's got nearly 300 hotels outside the u.s. so it's a business that's benefiting from global growth. it's really well positioned with the range of brands from waldorf to hampton inn and we think it's going to do well. when we take it public, it will happen. >> it will have to happen. of course it does. >> well, we think of ourselves as investors and what i would say is, yes, the nature of what we do is we have to sell. so sometimes people ask, are you selling because you're calling the top of the market? what i would say is we're in the buy it, fix it, sell it business. we want to fix whatever's broken, sell them and when we sell them it's a nature of what we do. so for instance, we sold a stake in general growth which went through bankruptcy a few years ago. we and some other investors re-- >> bill okackman a part of that >> we sold our stake. do i believe in general growth as a company? yes. phenomenal company. phenomenal assets. but the nature of our business is we have got to return our capital back to the investors. >> exactly. some point hilton will be back in the public market. occupancy rates are strong. are you seeing the room rates move up or a tougher fight? >> i would say what tends to happen early in the cycle is occupancy. now rates of the total potential sort of revenue growth today. more than half of it is coming from rate growth so we're seeing that and that's obviously helpful for hotel margins because the incremental dollar tends to flow to the bottom line. >> europe here briefly, as well. we don't just have to dwell on the u.s. you are buying assets from the banks perhaps that want to get them off the balance sheet. is that increasing in velocity? >> well, we think europe's very interesting. not -- >> you do? >> yes. not because of economic growth. europe's got real head winds. the monetary fiscal union challenges. the banks there because of their leverage. we are not believers in robust economic growth in europe but the distress in that market, much like the u.s. a couple of years ago, is creating fraifrible investments for us. we bought the largest hotel in dublin and the price was 80% lower than the level in 2007. we bought it at a foreclosure sale and debt on a european shopping center sale. the distress throughout is creating a favorable environment for us. we don't have a ton of competitors there. a lot of the larger financial institutions, today they're not in it. that creates a better investment environment for us. we think you want to invest in places when people are more negative about those places. that's the case in europe and i think increasingly emerging markets. >> how much money in europe? >> last year we invested $3.5 billion of equity, much larger i think than anybody else and a good investment cycle for a couple of years but you have to buy things, anticipating very slow growth. >> it's nice to have capital tied up for a long time because i would think it's a long-term investment. >> yes. one of the very nice things about our business is investors give us capital for long periods of time. and you saw this in this great downturn and we weren't forced to sell when the markets went away from us. when dislocation happened, so if interest rates go up and everybody sells, we can move because we have discretion with the capital. we are not forced to sell in the short term. europe's a good example of that. if we buy assets and we think are favorable prices, we may have to wait a number of years for the economies there to recover. >> all right. not that long ago, up on that balcony right there ringing the bell. blackstone mortgage trust went public. i'm curious. we started on rates. let's end there. the backup in rates, does that help you in the mortgage trust? how long until you're fully invested, for example, in paying a full dividend? >> blackstone mortgage trust is a floating rate lender. it is interesting. the stock's traded off in sympathy with other morlt reads and it's throwing the baby off with the bath water. rising rates are better. what we want to do is help borrowers so m cog out of the crisis there are asset that is need capital. banks are more cautious. lending to those types of assets and what blackstone mortgage trust is focused on. we have a robust pipeline. and where the banks are more hesitant. >> painting too positive a picture on everything. there's got to be something that scares you. >> well look. as rates move up, it creates dislocation, slowdown. you could see values, you know, level off here instead of moving in the straight line they have been. in the housing market, rates moving up certainly could slow things. frankly, i think that's healthy. i don't think people expected rates to be at 0% forever. and obviously there are longer term fiscal issues. challenges in some of the emerging markets we invest in this terms of currency accounts. the business is to worry but when everybody's worried and people tend to be more coming out of the crisis when it's a better investment environment. back in '06, '07 no one's worried when things are scarier. that's the way we look at the world. >> all right. i look for those worried. you are not one of them. thank you so much for being with us. >> thank you, david. great to see you. thanks. >> kelly? straight ahead, how big banks will be affected by the new capital requirements that were just detailed. "squawk on the street" will be 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 usaa's 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. a lot can happen in a second. with fidelity's guaranteed one-second 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. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. welcome back to "squawk on the street." check out alaska air ripping higher this morning. june passenger data, traffic climbed 7.5% and flying alaska air, get ready for higher fees for checked baggage and ticket changes as of october 30th. the company says it brings in $50 million a year. that stock down some 14% in the past 2 months but sharply higher today. carl, back to you. >> all right. thanks so much i. when we come back, blackberry ceo facing likely not so happy shareholders. question is will he be able to reassure investors and get the stock back on track? head lines from that meeting later on. ♪ trains! they haul everything, safely and on time. ♪ tracks! they connect the factories built along the lines. and that means jobs, lots of people, making lots and lots of things. let's get your business rolling now, everybody sing. ♪ norfolk southern what's your function? ♪ ♪ helping this big country move ahead as one ♪ ♪ norfolk southern how's that function? ♪ [ male announcer ] you wait all year for summer. ♪ this summer was definitely worth the wait. ♪ summer's best event from cadillac. let summer try and pass you by. lease this all-new 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. . >> dow is hanging on to that gain despite ibm dragging it down after a downgrade. let's get to rick santelli exchange. hey, rick. >> hi, carl. the minutes on the last meeting coming out tomorrow, there is a whole lot of issues globally that i think markets are paying very close attention to. i think we can summarize them into a very easy common denominator. i think investors are going to test the metal, test the resolve of central bankers and central planners. and i think that sound easy, but it's not going to be, for a variety of issues. let start with china. okay. so we learned today that their ppi was down 2.7%. most of the conversation is about that. and i understand in the great picture of how they are at such a reduced rate of growth based on where they have been over the last several years, how the producer end would see that. but what wasn't talked about was that cpi for june released at the same time was up an identical amount of 2.7. and why was it up? it was up mainly because of food. i know in this country. it's very easy to dismess, food and energy, in china, not necessarily the case. there was a great article yesterday in the journal about the issues of a chinese ship yard, but there was one quote in there, i tound very fascinating. the quote was by a spokesman for the china labor bulletin. here's what he said. when orders dry up, workers are often the first ones not to get paid. we've seen a lot of stories about this at cnbc. we seen they saw a factory basically put in quarantine the workers understand they have very little efficacy going through proper channels, the long and short of it is, is the biggest thing for central planners is keeping peace among the larger middle class and food prices and not getting paid aren't going to go very far. so they might want to try to pop bubbles and restrict credit, but we are going to test their metal. let's look at the u.s. on the u.s. side. we know that dodd-frank quite simply has made so it banks can't hold the inventory. they can with the the market makers they once were. because the cost to do so is prohibitive from a compliance and a balance sheet stand point primary dooels dealers were huge into the corporate market making world. they have low inventories, so what happens is we continue to get aggressive in rates. it's going to test the fed's metal on a number of levels, not least of which is the process of how rates move up is going to be tested in a way we haven't seen in many decades. kelly. back to you. >> all right. rick santelli, thank you very much, sirment keep those tweets coming, folks, be i the way. >> yes. >> we should. as we continue to watch the blackberry news the meeting with authorsten heinz, fedex the number one gator on the s&p. is a big move. 6% plus, a lot of rumors going around the street, which we will not get into at this stage right now. we see that's going to give the notice of some people. >> that explains the transport index jumping today. barnes and noble ceo william lynch resigning today, two weeks after the book seller said it would stop making the nook touch screen tablets. brings us to this morning's squawk on the tweet. barnes and noble should be called barnes and what? tweet us your responses at squawk street. we'll read some of those answers within we come back. at farmers we make you smarter about insurance, because what you dont know can hurt you. what if you didn't know that it's smart to replace washing-machine hoses every five years? what if you didn't know that you might need extra coverage for more expensive items? and what if you didn't know that teen drivers are four times more likely to get into an accident? 'sup the more you know, the better you can plan for what's ahead. talk to farmers and get smarter about your insurance. ♪ we are farmers bum - pa - dum, bum - bum - bum -bum ♪ ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] [ telephone ringing ] they're the days to take care of business.. just a room. 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 what's next. . >> zbaerns and noble no longer aims to be a player in the tablet business, it will continue making the similar enook devices. you want to judge this book by its cover. barnes and noble should be kauls called barnes and blank. sullivan writes, barnes and no nook. joe sue writes barnes and no no. >> tweets barnes and noble should be called barnes and starbucks, nothing more. some truth in that and barnes and rubble, eric tweeting barnes and trouble. >> yeah, interesting. interesting discussion earlier in the hour about what liberty may do in terms of pressing for management changes. they tend to be a patient holder of some names, definitely a complicated story now that lynch is out. take a look with the dow at 52 on some of these home builders. rich peter sen says since the tenure crossed 2% may 22nd, three of the top seven laggers are home builders. i think the three that have been hurt the most, toll brothers, lennar and pulte. nits black and white for those who think interest rates matter. >> here, 3 to 4% gains, we seen the ten year gains capped a little now. a lot of people making the case say if you believe this is a sign of stronger growth, you still want exposure here the valuations are a hurdle. >> yes. also, netflix which blew my mind early this morning, it's up 3 plus percent today for the month, though, one month performs, 14%. >> wow! >> those who doubted their pricing, their ability to add subscribers, they have been shown the door. it's and i mazing name to watch. >> meanwhile, keeping an eye on rival lulu. in the way that people look to monetize it and protect content. how long before programs that were just aired are a part of their offerings? how much on the original side? >> yes. we'll keep an eye on that, the dow hanging on to a 50-plus point gain. if you are joining us, where you missed earlier on. >>. >> welcome to "squawk on the street." . >> banks do what the economy does. we did not have a great second quarter from an economic standpoint, so we're not going to have a great second quarter in terms of bank earnings. >> on the die like today on the calm before the storm, it's difficult to make a read only a quo a and say anything different on upcoming earnings. >> people aren't going in the stores. there already are a group of people who buy books. >> i am part of them. >> yeah, they still have that. not much else. >>. >> the ims is out with its global world forecast, the imf is out. >> we are proud and we are returning cash to shareholders by buying back shares as you mentioned. so that's a part of our formula. i think that's the resiliency and the reliability in an investment like general mills. >> i think most banks have been moving in that direction, because this is no surprise, this is no surprise and they've had time and they will have time to adjust, but they're going to adjust much more rapidly than slow phase into 2018. >> out there on the ground, yes, rates are moving up. but i think that's starting to happen because of better economic performance and in our sector, in particular, the lack of new supply making it even stronger than the economy at larg large. >> good tuesday morning. we are live here at the new york stock exchange with the check on the markets. the dow, despite a downgrade for dow component ibm, hanging on to a gain of about 58 point, s&p is up at 1648 up about 8.5 points. we mentioned ibm getting slammed after goldman cuts the stocks in neutral citing concerns over the near term business outlook. it says it may begin to see some pressure on some high margin revenue streams. can you often tell what wall street thinks of the ceo by how the stock reacts after they step down. case in point barnes and noble rallying after william lynch resigns from his post, a replacement has not been named. the company says it is reviewing its overall strategy. >> now, let's get to the road map for our hour following the latest on the plane crash in san francisco t. pilots of that flight drawing scrutiny for what took placement should you know more about your pilot before you fly? we'll take a closer look. we'll tell you if any exec should be worried about their jobs and it's time for state of the states. cnbc's exclusive lists of business in this country. find out if yours made the cut. first up, news now, a possible new regulation on the horizon, financial big movers in the markets recently, michael jones, charles, the vice chairman with yaerl investments, guy, it's good to have you both back. good morning. >> good to be here. >> charles, they move to a large degree as the curve steepens. we see the regionals do well, a bit of a sell-off on these new regulation, even though the deadline the official deadline is off in the future. what is the trade right now? >> well, we think the financial, particularly the investment banks are one of the few parts of the market that's still pretty cheap. for the last 50 years, investment banks have traded between one and two times book. you got morgan stanley and goldman sachs trading right around book. so even though they've had these massive books, morgan stanley basically doubled. we think it's cheap, ten times earning, one times book. >> michael, what do you think? whether you want to go with the big money centers, the region also, what's your fa effort? >> i think right now, all of the banks have had a really powerful move based on loan growth and consumer credit has been accelerating and i think that at this point we're expecting them to step back and be more than of a market performer because as this morning's news may clear, while there has been a lot of good tail wind with the steepening yield curve the accelerating loan growth, washington still hates this industry. if they make a lot of money, washington will find a way to regulate it back out of them. >> michael, is it really that unfair to ask banks not to be leveraged more than say 20 to 1? >> no, i don't really think so. i am very grateful as a tax pay ter fdic has put the regulation in place. because one of the things that catalyze especially the recent move in the regionals is they unexpectedly kept a 50% risk waiting on mortgages. and if you think about what the big catalyst for the crisis in housing was, the fact that banks had this huge incentive to make mortgage loans over corporate loans was one of the reasons they made too many mortgage loans. so i think today's announcement is basically putting a sanity cap on the amount of leverage that mortgages can represent on the bank allen sheet. that's a good thing for taxpayers. it's not necessarily a good thing to validate this big runup in the regions. >> you just said you were citing that as evidence of walk coming after these banks for naked political reason, but then said actually maybe this is a prudent things for them to do. >> well, i think that the move keeping the 50% risk waiting worried me without question and it catalyzed a huge move in the regionals. today's announcement said they're not going to let it get out of hand in the extent they did in the 2000s. it's a good sanity check. i think that move in the regionals was probably overdone because they were thinking there would be a more of a hands off approach than we are expecting out of walk. >> charles, how much is trading going to be the focus after what's happened to bond in the past two weeks? >> short term big focus, longer term less focus. so this quarter, it's hard to predict how these firms did. everybody thinks the interest rates got killed. that's an old view of the world. these frirms not as long, they're more heads than they used to be. somebody might have been on the wrong side of the move, longer term, fixed income will be less important. >> i keep thinking back a few quarters ago, goldman said the markets have become too volatile. they were bringing risks down. are we going to hear an echo of that from the major banks? >> you can. it's hard to predict. what i think is that longer term this steepening yield curve is going to be good. it will mean a choppy quarter. some of these names will get hit. it's hard to say who had what trade on. if i had to bet. i would say the people at goldman sachs and j.p. morgan and morningen stanley have gotten good at this. that's not why you own these stocks. they are cheap on a long-term basis t. bes is actually getting better. >> michael, everyone is saying the yield curve is steepening, in fact, it has flattened since early may. so is it just the case that part of the curve, which these banks are most geared towards say the two to 10 part of it is more important here or are people missing the fact that actually we haven't seen this increase. we seen the opposite happen on the longer end. >> yeah, the very long end of the curve tends to be not as relevant for the banks. there is so much duration mismatch. they don't tend to be as active. what has been important to them is the increase in yield, particularly out to the five year. then the 5s to 10s has been a nice catalyst for their earnings. i also don't think we should underestimate that it has been important that the consumer credit is growing again. as profitable as it is to buy a ten-84 treasury at a 0 risk waiting with spread to 0 funding cost, it's much better to be making a car loan or a business loan at two times that kind of yield. that's where the big profit drivers are. >> absolutely. michael, charles, thank you both for your views on that this morning. >> let's send it over to mary thompson and get a quick bharkt flash. good morning. >> hey, we are taking a look at federal express. it's up 7%. the biggest percentage move since december of 2011. now, there is some chatter out there that is unsubstantiated concerning a letter that was sent by bill ackman pershing square talking about two new funds he is raising. in the letter to his investors or potential investor, he said these two new funds will invest with existing funds they have in a certain company. this is how they describe it. a large capitalization investment grade u.s. corporation that principally operates in one business segment and serves a diversified global base. there appears to be the target of ackman and these two new funds could be federal express. ackman says they plan to take a 5% stake in this company and issue a 13-d filing. we do want to note we have reached out to pershing square. they have given us a no comment. once again, federal expression is up substantially about 6.75%. back to you, kelly. >> a big move there. blackberry kicking off a couple minutes ago. checktives are expected to get a grilling after the company's disappointing performance, seema mody has more for us live at the nasdaq. >> kelly, blackberry ceo thorsten heinz got obvious the call 10:30 eastern time. he reiterated a similar message in the earnings calm. is that blackberry is still in the early stages of a major transition. just like any transition, change can be volatile on a short-term basis. he highlighted blackberry's three-step transition plan. listen in. >> we will focus on returning the company back to profitability and establishing a leadership position in computing. >> so other major take-aways on that calm. blackberry's focus as behind says, returning the company's profitability, establishing a leadership position in the mobile commuting space. it seems blackberry can become a leading mobile computing platform. here's the interesting part, making a move from mobile communication to mobile computing, which you guys basically shows that blackberry is not only committed to getting more of its devices in the hands of consumers, but also focused on its blackberry enterprise system being used across the industry. now, the call is still under way, including the q & a part of the call, where shareholders are likely to ask some tough questions. another interesting part, carl, blackberry, thorsten behind said that blackberry will explore every opportunity, including partnership opportunities. so that will be something to watch very closely. >> yeah. stocks will move around today, we know that, seema, thank you so much. we are following the latest on that terrible plane crash in san francisco. the pilots of that flight set to meet again with the national transportation safety board. we will go live to the scene next. first, rick santelli watching the resolve of some central bankers. rick. >> yes. we're going to wind through central bamplgers in lew of fed and taper an minutes. we're also going to talk to ray stone, who is our guest at bottom of the hour, a legend in research about what he said in march could be a big issue for rising interest rates. he was very much correct. we are going to talk about some of his newest survey ideas and warnings. bottom of the hour, ray stone, be there. here at fidelity, we give you the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account. ♪ unh ♪ ♪ hey! ♪ ♪ let's go! ♪ [ male announcer ] you can choose to blend in. ♪ ♪ yeah! yeah! yeah! or you can choose to blend out. ♪ oh, yeah-eah! ♪ the all-new 2014 lexus is. it's your move. . >> flight speed may be the main reason behind the san francisco flight. the pilots will meet again today. our phil lebault has more live. good morning. >> good morning, carl. we are hoping to learn more later on from the ntsb regarding the experience and what happened with the pilot at the controls of asiana 214. also today, there is video we received out of seoul, south korea. the ceo of asiana airlines is flying to san francisco. he plans to meet with victims of the crash and at some point i would not be surprised if we hear from him in terms of an apology for the accident. here's the latest on the investigation. the ntsb said they're getting a lot of data from the flight recorders. so far, there is no indication of mechanical failure. they interviewed two of the four pilots in the cockpit. they have yet to interview the pilot at the controls at the time of the crash. that pilot is the focus of the investigation. he had 43 hours of flying time in a boeing 777. you need 60 hours in asiana to be considered a captain in a 777. the asiana pilot was attempting his first landing of a 777 here at sfo and his lack of experience brings up the question of whether or not investigators and regulators should be able to give the public more information about how much training pilots have when they get behind the controls of t controls of the cockpit. >> there is an expectation anyone putting themselves out there to provide service meets minimum safety standards. we need to make sure those safety standards are high and every flight is a safe one. >> the chairman of the ntsb, we are expecting to hear from her. an update on the investigation later today. we should stress again, they have yet to interrue the pilot at the controls, so carl, this brings up the question of how long will that interview take. they've also got to work with the translator. so it may be later today, much later today here in san francisco, perhaps this afternoon that we get some kind of an update. it will be interesting to see what they can tell us about. what actually happened in the cockpit the cockpit voice recorder, we have yet to hear those transcripts. we want to hear what was going on in the conversation between the pilots in the cockpit. guy, back to you. >> to remind us on the element of flight speed, how fast were they coming in on approach, what would be a typical speed for a plane that was going to land normally? >> the target speed 137 knots. that's the target speed at landing. they were at 134 knots, 500-feet left to come down to the runway by the time they were just above the runway, they were down to 103 knots. so essentially, that's why the plane was stalling. they tried to act sell rate and lift up into a go around at the last minute. there was no room there. that's why the tail clipped the sea wall right in front of the runway. >> phil lebeau with the latest on that story. thanks very much. let's send it to mary thompson. hey, mary. >> kelly, we are looking at shares of wd-40. a nice pop there. the company reported a better than expected earnings. 10 vents ahead of estimates. the sales were a little better as well. this is the maker of lubricants in vehicles and homes, et cetera. the company is raising its full year guidance. it has been hit by higher commodity prices. it has offset this with cost cutting measures. carl, back to you. >> all right, mary, thank you so much. former new york governor eliot spitzer making a memorable appearance on morning joe today. he -- well, you got to check it out. take a look. >> how are you different than you were five, six years ago? what has changed? personally? with who you are? >> a lot of pane. a lot of pain. >> that's it? >> yee. you go through that pain of change. >> the governor crying on the national television. a lot more on the former governor in a moment. later this hour, a cnbc exklausive. the reading for business, our scott cohn is live in the top state. he just won't tell us what it is, scott. >> i can't do that yet. because that would remove all the suspense, we're getting a lot of great guesses on twitter, i like the guy from tennessee who thinks he recognizes crab grass in the background and this is his back yard we are shooting in. he has an awful nice back yard, we are getting set to reveal state number four as we count them down. with le have that coming up a little later on "squawk on the street." [ 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 usaa's 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. for the strong and the elegant. for the authentic. for at home and on the go. for pessimists and optimists. for those who love you a little and those who love you a lot. for ultimate flavor and great refreshment with or without calories. for carefree enjoyment. for those who have a lot to say and those who have nothing to add. for those who want to choose and choose. for every generation. for us. for everyone. forever. [ 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. ♪ it's not rocket science. it's just common sense. from td ameritrade. [ male announcer ] you wait all year for summer. ♪ this summer was definitely worth the wait. ♪ summer's best event from cadillac. let summer try and pass you by. lease this all-new cadillac xts for around $399 per month or purchase for 0% apr for 60 months. come in now for the best offers of the model year. . >> former new york governor eliot spitzer running for city comptroller. he was on morning joe on msnbc where he was questioned about the prostitution scandal that forced him to resign. here's a clip. it was a memorable one. >> how are you different than you were five, six years ago? what has changed? personally? >> a lot of pain. >> of who you are? >> a lot of pain. a lot of pane. >> that's it? >> yeah, you go through that pain. you change. >> make sure you tune into "closing bell" this afternoon, by the way, his opponent for comptroller will be live. it might not be the top story for viewers watching elsewhere in the country. certainly, it's a big deal in new york. he made an appearance in union square yesterday hounded by press. >> right. >> so much that anthony weiner who is running for mayor admitted the focus is not on the new york mayor's race, it's on the comptroller's race. >> if ruin vested in the financials and the index, you are invested in the main indexes, then it is going to matter with what happens to spitzer. we've seen him go after banks so aggressively in the past. no reason to think that has changed. >> a lot of discussion about the dynamics of that job, which in general involve cooperating between varies interests in the city, getting them on board. that's not how spitzer has operated in the past. would he change the playbook of the comptroller position? >> my bet would be capital letters, yes, but we'll see. >> meantime, let's get to rick santelli in chicago. hey, rick. >> hi, carl. i'd like to welcome my very special government. any of us out there that started using stone mccarthy in the ''80s realize it was a real pioneer in research. managing director co-founder dr. ray stone, welcome, thanks for being our guests today. >> my pleasure. >> all right. i want to cover three areas, first area is the fed. we have the minutes last set fomc meeting coming out tomorrow. are you surprised the market isn't as gradual in its adjustment process as the very, very overcommunicated gradual nature of what the fed's looking to do? were you surprised by the how the market behaved? >> i was very surprised by the market behavior after the fomc meeting. when bernanke made his post-meeting press conference, i thought he told us everything that we already knew. however, the market took it differently. the market thought it was new news that the fed kass going to start tapering at some point in the not too distant future. i found it a month earlier, he said it would be a few meetings before they would start pairing back purchases. now it's going to be later in the year, which i take to mean maybe september or october, something of that nature. but i was surprised by the market reaction. >> all right. second topic. we just came off an employment report that was in many ways better than most had anticipated. but the average for the last three months is still under $200,000. did you have any observations, anything jump at you in the last employment report? a. >> well, it was the headline number was better than i expected at 195. i was thinking maybe it would be 170 or so. but the good news is that in general we're running close to 200. just under 200 over the past three months. a little over 200 over the past six months. but the disappointing thing is that the composition of the payroll gains have been mixed. in the first quarter, with esau good gains, good producing in the industry the manufacturing sector and the construction jobs. in the second quarter, the jobs were largely in retail and leisure and entertainment. these jobs tend to pay less. they're more frequently part-time jobs. so i think if i were an fomc member, what i would be happy with around the 200,000 payroll growth, i would be dispinted a little bit in the composition of the second quarter's boost. >> all right. this is my favorite topic and the last topic. about a month before may 1st. you were my guest. you said based on your survey what you were doing since '91, some of the big players had duration issues that made you bearish, looking for higher rates. within four weeks, we had a huge move, over 100 basis points higher than may levels intends, what does your survey tell us now. is it still flashing red with regard to risks to higher rates? >> well, it's splashing red in that the survey is telling us very similar story to what we saw in april and that is that our portfolio managers are quite bearish. maybe overly bearish. maybe there is a chance for at least a temporary correction. rates may ease a little bit temporarily. i think the longer-term outlook is for higher rates. that's good news because higher rates would, in theory, be associated with a lower unemployment rate and a stronger economy and a normalization of things right across the board and that's what we should all be hoping for. >> dr. ray stone, thanks for taking the time today to be our guest and we'll welcome you back in another couple months to update your survey, thanks again. >> you are welcome. >> carl, kelly, back to you. >> that's the santelli exchange. rick, thank you very much t. bells are about to sound across europe. a couple minutes to go. we'll bring you details on the close. 2.5 minutes to go when we come back. [ shapiro ] at legalzoom, you can take care of virtually all your important legal matters in just minutes. protect your family... and launch your dreams. at legalzoom.com we put the law on your side. what are you guys doing? having some fiber! with new phillips' fiber good gummies. they're fruity delicious! just two gummies have 4 grams of fiber! to help support regularity! i want some... [ woman ] hop on over! [ marge ] fiber the fun way, from phillips'. [ woman ] hop on over! (announcer) scottrade knows our and invest their own way. with scottrade's smart text, i can quickly understand my charts, and spend more time trading. their quick trade bar lets my account follow me online so i can react in real-time. plus, my local scottrade office is there to help. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade. voted "best investment services company." because what you dont know can hurt you.urance, what if you didn't know that it's smart to replace washing-machine hoses every five years? what if you didn't know that you might need extra coverage for more expensive items? and what if you didn't know that teen drivers are four times more likely to get into an accident? 'sup the more you know, the better you can plan for what's ahead. talk to farmers and get smarter about your insurance. if you have high cholesterol, here's some information that may be worth looking into. in a clinical trial versus lipitor, crestor got more high-risk patients' bad cholesterol to a goal of under 100. getting to goal is important, especially if you have high cholesterol plus any of these risk factors because you could be at increased risk for plaque buildup in your arteries over time. and that's why when diet and exercise alone aren't enough to lower cholesterol i prescribe crestor. [ female announcer ] crestor is not right for everyone. like people with liver disease or women who are nursing, pregnant or may become pregnant. tell your doctor about other medicines you're taking. call your doctor right away if you have muscle pain or weakness, feel unusually tired, have loss of appetite, upper belly pain, dark urine or yellowing of skin or eyes. these could be signs of rare but serious side effects. is your cholesterol at goal? ask your doctor about crestor. [ female announcer ] if you can't afford your medication, astrazeneca may be able to help. . >> that's the sound of trading ending across the country. on a day in which the imf says it expects a 0.6% contraction in the euro economy. as a result stocks for the most part did close off their highs. imf also raising the forecast for the u.k. economy to 0.9% adding it believes the british economy generally remains weak. take a look at the major european bourses. spain lagging up 0.3. it by the way was the one imf singled out, adding a little more 0.6% currencies are one to watch. the euro has fall on the new three-month lows against the floor t. british pound, charm, has now slipped to three-year lows. you have as to wonder what that means both for travel and also for corporate takeovers when people start to eye those companies. >> one of my favorite tweets of the day can i get a holler for the dollar? it's amazing what's going on. >> i know the correlation stronger dollar, higher bond yields and equity, importantly, that will be the one to watch. >> let's bring in rand see what else is moving on the big board, bob. >> i want to point out. we are 1% from a historic high on the s&p 500. i know, everybody is down on the stockmarket the earnings will be this quarter. they're down on the stockmarket because the economy recovery is not going to happen. the fed tapering will be on the stockmarket. but the s&p closing high with 1669 historic closing high. we're at 1650. 1% away from a new high. i'm just observing things going on. we are being helped by the cyclical leaders. those are the growth potentials. yes, the global economy is not in great shape. in the u.s., some cyclical stocks are doing fine. the sectors leading, we particularly noted the air 48 companies. you heard it earlier, there has been vague comments, reports, rumors floating around, ackman may be stait taking the state and fed axe ex. it's floateding around. some of the other stocks, united parcel, robinson, they're to the upside. home builders do better. they have been doing sideways. a little better today here, pulte, kb, lennar. this group hasn't done much later, same with the building materials, as a result can, owen, usg. we see strength in semi conductors. remember that down in intel, it drives people crazy, people who are professionals go in and out a lot of the time a. lot of people recovering today as you can see, klac did raise their quarterly dividend. finally, i.t. consulting first, goldman sachs downgrade of ibm. the concern is general slowdowns will affect ibm. of course, the big thing, guys, is that consulting business that ibm has a little worries on that one. back to you. >> we are also keeping an eye on shares of blackberry, which hit highs and they discussed whether blackberry would be comfortable to splitting the company? what did he seem to say? >> kelly, that was the first question asked to ceo thorsten heinz if blackberry would be opened to splitting up the company in terms of its hardware verizon its software business division, thorsten heinz said before we discuss those specific options, blackberry has to create value and the company is focused on right now. i think because thorsten heinz didn't dismiss that idea, investors on the street got excited about the potential or i guess that idea being floated on the streets and we're seeing shares up about 3% on a zay day off session highs. we did see shares hit session highs around when that question was asked. back to you. >> thank you so much, seema. meantime, according to a new study out, rent and demand for apartments is still rising despite the housing recovery. if you factor in rising mortgage rates, demand for apartment rent apples can push them higher. diana olenick has more in washington. >> reporter: analysts and investors have been down on the sector lately. the thought was that the rush to rent we saw during the housing crash was shifting back to homeownership. well, now rising mortgage rates may change all that. take a look, rents went up in q 2 both asking and effective rents. according to a new report, the growth is slower than a year ago, but that's largely due to weak income growth and of course this was just before the big rate jump. vacancies were flat nationally at 4.3%, 54 out of 79 markets saw decreases in vacancy. 4.3% is well below the peak of 8% in late 2009. the vacancy decline is largely due to more supply coming on over 26.5 thousand new apartments were completed in q 2. vacancies and rents have been moderating lately the rise in mortgage rates could turn up the heat on them yet again. >> mortgage rates going up by 50 to 100 basis points takes out a lot of the ability for people to afford to buy a home. two with rates going up, it kur tails development because it makes it more expensive for developers. bodes well for the reits. that irthe ones with the capital. >> now, essex which has half its earnings coming from southern california also post properties based out of atlanta, which benefits from upscale apartments in the sun belt, he also likes trade street, which recently went public and also plays in the sun belt. now, one more thing to note, starts have been low for multifamily, ramped up pretty dramatically in the last two years. they are running above normal levels. it does take a lot longer to build an apartment than a single family home. we will start to see all of this supply come on to the market more in 2014 and 2015. that's when you will need to look at that. for now, an interesting play when rates are going up. back to you. >> a nice push in full on housing in this country. thanks, diana. let's send it over to mary thompson, the dow is up 66, mary. >> the dow is up 66, carl. we haver is sirius satellite the operator up over 3% right now t. company on having some very good subscriber numbers. it's total subscriber based 25 million, not in the second quarter. it added 715 new subscribers. 715,000 i should say. new subscribers in the second quarter, above expectations. thanks to strong auto sales. it's raising its estimates for the full year of new subscribers, now expects 1.5 million up from a prior estimate of 1.4 million. it's stock is responding up 10%. that's a gain of a little over 3%. kelly, back to you. >> okay. mary, thanks, now. it's the time you have been waiting for, all the best states around. we're bringing you the top states for business in this country. we'll name another one when we come back. with fidelity's options platform, we've 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. i'm greg stevens, and i helped create fidelity's options platform. it's one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. 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 forward-looking companies not only run better, but run different... to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because now more than ever, the future belongs to those who challenge the present. . >> coming up, we get a view on where stocks could go from here. big black and blue, ibm downgraded at goldman sachs. now our traders battle over the next move. can you bank on the financials, all that in about 20 minutes, we are excited about that. >> that will be great, scott. see you in a few, thanks. it is that time again, cnbc's annual renting in this country. we are sto scoring all 50 states. counting you down to the top five. scott cohn joins us from this top state with another of our elite top 5, hey, scott. >> hey, good morning, carl. this study gets a lot of attention every year. the house small business community will be featuring our stop states for business rankings. we understand the star witness will be governor bob mcdonald of virginia. we v. already told you virginia and utah tied for number five this year. let's continue our countdown now with state number four. >> nebraska the corn husker state is number 4 this year cracking our top five for the first time with 5,575 points. nebraska came in 6th last year. nebraska's best category is business friendliness where it finishes third. it boasts the fourth best economy and fourth best quality of life. the state does poorly in access to capital and technology and innovation. tax reform has been a major focus in nebraska with the governor signing a series of tax relief measures into law last month. the top individual income tax rate 6.84%. the top corporate rate 7.1%. state sales tax 5.5%. unemployment in nebraska is 3.8%. nebraska's largest sploir tyson foods, its largest industry is agriculture and food processing. so we kel welcome nebraska to our elite as number four this year as we are maybe seeing a little trend of the economic center moving towards the heart of the country. we will see if the rest of our countdown bears that out. here we are in america's top state for business with one more hint about where i am. the hin is the scratch beneath the surface. so we have big mouths. we have well anchored. now we have scratch beneath the surface. we want to hear from you on twitter, use the hashtag top states. remember our special website top states.cnbc.com. >> scott. i think a lot of people will be looking out their windows to see if you are standing in their back yard today. i thought it was interesting, the access to capital is one of the places where nebraska scored pretty low. other measures like unemployment are high. what is going on there, access to capital? >> well, access to capital is one of our categories. it's the least weighted category. but a lot of the venture capital money is still not flowing to places in the mid-west, to smaller states. a lot of it disproportionately flows to california and silicon valley and new york. kind of going to the coasts. so what we're seeing in a state like nebraska. what we've seen historically in some of these central states is they're not getting that venture capital that is really important to the keep that momentum going among america's stop states for business. >> it's fascinating. especially because as you point out, scott the fundamental also are strong. if anyone is sick of san francisco, maybe they can look to the berrior. >> one of the great franchises of all time, these stop states, skorkts i am a member of the first 84, man, it's grown into something absolutely incredible. i can't wait for more. >> thanks a lot. >> now, transportation officials dill trying to figure out what happened in the cockpit on asiana airlines flight 214. so how well do we know our pilots? should we get more information before picking a flight? we will put that information to a former pilot when we come back. ♪ ♪ ♪ ♪ [ male announcer ] if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end july 31st. 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 usaa's 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. . >> carl icon getting a supporter for his dole for dell. assets management came out in support of the hedge fund manager's tender offer of $14 a share. the management co-chief and senior vice president, he joins us this morning with more. steve, good morning, great to have you. >> good morning. >> you have been leaning this way, at least that's what you told the journal in april. since then, we've had iss. clearly not enough to change your mind? >> yeahsh that's correct. i think one of the things that has been missed here is that the board at dell has come out in support of this deal t. board and management haven't been the problem all along. we have limited our position size based on their prior actions. if you go back and look, they had done share acquisition of approximately $35 billion over the last eight years, if they left the share count where it was eight years ago, you'd have over $14 a share in cash. clearly mismanagement on their part has led to the situation where you are in now. so as people are looking at, going, well, what's the company really worth? i think in the new hands of icon, that you could have a lot more valuable property as it won be mismanaged. the stocks before we bought it did not reflect a possible management change, which you now could possibly have. >> when you saty board has been the problem all along, how far back, i mean, how deep do you see the legacy issues running here and what do you think i concan bring that's different? >> i think the parl is the boards have been the same board has been in charge all along. they've made a lot of acquisitions as i said earlier of about 13 to $14 billion over the last eight years. they've used another approximately $20 billion towards share purchase. just to show you how management and the board, they're obviously in charge of things like share purchase. when the stock was higher at higher levels, they bought precrisis, pre-2008, pre-29 crisis. in the market the s&p was at 666. they bought know shares. so, clearly, when it came time to buy something cheap, they weren't there for the shareholder. so i don't think they're there for the shareholder now. so the problem begins with the board and then it's passed through to management. >> dell certainly isn't alone in poorly shares. this has been demonstrated over and over again. i just wonder the fundamental issue isn't really the timing of their share repurchase, it comes down to whether there is pc demand. so that has to really be the crux of it here. >> right. now, one of the things that people it gets down to faund amountal board issue, management teams are compensated on how big their companies are. they come up with surveys and studies and say a company of this size this much revenue the company should be compensated x. obviously the biller you are the bigger that number is. no management team wants to be looking over aem fire thn empirg in size. so dell's management went out and with the board went out and made acquisitions at very high prices. and that's part of the problem. it's led us to where we are today. sometimes things need to be broken up, sold off. sometimes you just need to milk the thing on the way out the door. that's just an option that's never really been considered here. >> finally, there is anything about ackman himself? some of his calls have been calls of luck. do you think he can strategically bring something that others cannot? >> we don't really follow netflix and ackman. i can't comment on that at there the. >> steven, thanks so much for making the call for acman. many questions still remain regarding asiana airlines. now the focus is shift together pilot who had only 44 hours experience flying a boeing 777. an aviation expert joins us now. paul, good morning. >> good morning. >> what strikes you upon first looking over the details here? is it the lack of experience that this pilot had? is it the fact that he was at the controls or that no one else seemed to take over for the landing here? >> no, not really. it's funny, but everybody has to have a first landing. and everybody has to have low time in an airplane. it's very much, though, like driving an automobile. you know how to steer. you know how to accelerate and stop. but you might not know how to work the cruise control or the air conditioning or the stereo when you get into a new automobile. so the issue is training a pilot in the shall i say the systems of the airplane. basic airmanship should be there. >> but just to be clear, so while that training is important, isn't that training that should happen not for the first time with a planeful of people landing it at san francisco airport? >> oh, it happens for hour upon hour upon hour in a simulator and then also with check airmen, very highly experienced people occupying the other seat in the flight deck prepared to take over at the moment's notice. i think that we're rushing to judgment just a little bit on this particular event. clearly something happened. but the something happened would appear to be the relationship between the ougautomatics of th airplane and the two pilots in the airplane. it might have to do with experience or nothing whatsoever to do with experience. it's too early to tell. >> a lot of times we talk about so-called cockpit resource management, various egos colliding in a plane especially with a guy who's made a career on a 747 and now a new plane for him. do you think personalities may have gotten in the way here or not? >> well again, we're going to see the transcript of the whole cockpit voice recording. the crew resource management came out of an old and i've always referred to it as we used to have divine right captains. the captain was always right and the other pilots were afraid to criticize. that was dangerous. and we changed that 25 or 30 years ago. but it's a long culturally difficult road to plow. i don't think we're there yet. >> paul, can you comment as well just on what was happening in the aircraft? the number of people trying to take bags off, the time it took for them to leave based on the media reports as well? >> yels, the photographs of people with carry on luggage that's just wrong in another situation that could have caused deaths. when the flight attendants say get off of the airplane and leave everything on they mean it. i think this flight attendant crew is to be commended. looks like they did a fabulous job under very trying conditions. >> even though as you say perhaps they should have been more quick to get people off that aircraft instead of letting them take those bags? >> i would have liked to have seen them stop it. but again we're talk about different cultures. and what we may expect in north america may not always be the way things happen in other situations. >> so do you have any concerns with the details again i know a lot of this has not been verified, but with the details you've heard so far do you have any concerns with this particular pilot or the way the landing was described, or do you think that this is just a case of something went wrong and we have to accept that and move on? >> well, something went wrong. the data points that we've been given, for example, the 500-foot data point, we don't have all of the data, but what has been out there so far seems normal. and all of the speeds are consistent with getting to a point at 4 or 500 feet where the power should have come up and did not for whatever reason. and when the power did not come up, in a 30-second or less time frame, things very quickly unravelled. it is something that he woo train against, that we have crew resource management against. it can still happen. and the why and the how is going to take a couple of months to be fully set out. but clearly this accident says we have more work to do. >> okay. paul mccarthy, retired pilot, aviation expert thanks for your time this morning. >> thank you good morning. one more check on fed-ex, the chatter that bill ackman is targeting the company. that's led to at least a rumor of it a nice gain today. one of the best gains we've seen in over a year. we did call pershing square for comment and they said no comment. i'm confusing ackman with icahn with dell. but fed-ex is up $6. barnes & noble ceo william lynch stepping down today this coming after the company reported major losses in its nook digital business. so let's judge the book by its cover and ask what barnes & noble should really be called barnes and what? tweet us at "squawk street" we'll have some of your answers when we come back. ♪ norfolk southern what's your function? ♪ hooking up the country helping business run ♪ ♪ build! we're investing big to keep our country in the lead. ♪ load! we keep moving to deliver what you need. and that means growth, lots of cargo going all around the globe. cars and parts, fuel and steel, peas and rice, hey that's nice! ♪ norfolk southern what's your function? ♪ ♪ helping this big country move ahead as one ♪ ♪ norfolk southern how's that function? ♪ when you do what i do, iyou think about risk.. i don't like the ups and downs of the market, but i can't just sit on my cash. i want to be prepared for the long haul. ishares minimum volatility etfs. investments designed for a smoother ride. find out why 9 out of 10 large professional investors choose ishares for their etfs. ishares by blackrock. call 1-800-ishares for a prospectus, which includes investment objectives, risks, charges and expenses. read and consider it carefully before investing. risk includes possible loss of principal. ackman. squash of the tweet barnes and noble should be called barnes and what? let's judge the book by its cover. if you build it, they will cloud. thanks. welcome to the halftime show. four hours to go until the close. right to the wall. the dow is up 60 points, nasdaq, s & p positive as well. super mario investing legend mario cabelli is here live with his view on the markets, media and so much more. black and blue, ibm gets ripped by goldman sachs. but do our traders agree wit
dow chemical, procter & gamble, boeing, apple and facebook all being released today. a lot coming up. at 7:30 eastern time, the dow chemical ceo will be joining us and we'll be hearing from at&t ceo john stevens. the company says it had a higher than expect ed amount of customers switching to a new plan. if you take a look at what's been happening with at&t shares, you'll see at least it was down by 2% after hours, i think. 35.50 was the last trade. >> yum brands getting a boost from stronger sales. where it's most important, china, the parent of kfc, taco bell and pizza hut says that first quarter sales in china rose 9%. customer in china are buying more chicken following an avian flu outbreak and food safety scare which impacted demand. the fast food operator gets more than half of its overall sales from china. most of its more than 6,300 restaurants. >> how many? >> 6,300 are kfcs. that stock traded higher. in after hours trading. >> speaking of china, china's factory activity slowed for the fourth straight month. the hsbc purchasing manager'sen devil for april rose to 48.3 for march's final reading of 48. that's still below the 50 line. that 50 line separates expansion from contraction. this signals more economic weakness. the first quarter gdp slowed to 7.4%, its slowest pace in 18 months. >> back to u.s. markets. stocks rally once again to get closer to record territory after the recent little bit of whatever you want to call it, medium, intermediate, short term pull back. it was like all the other ones we've seen. shallow but steep. investors rushed in the health care and pharmaceutical stocks. the dow is now 0.7% away from an all-time high. the index added 65 points, up more than 100 for a lot of the session. it closed at 16,514. the s&p 500 gained just over 7 points. it closed at 1879. it's about 1% from a new high. that's up like 30 points from its december 31st close. the s&p 500 along with the nasdaq are on a six-session winning streak. the nasdaq added nearly 40 points, which is bigger on a relative basis. look at the futures at this hour, you can see -- they're not really saying anything. a lot could happen between now and the open of trading. >> i'm sure it will with all the earnings we have coming out, too. one of the biggest winners on tuesday, allergan, the botoxmaker soaring after valeant pharmaceuticals. activist investor bill ackman made an offer to buy the company. allergan says it will carefully consider the proposal and pursue the course of action that it believes is in the best interest of the company's stockholders. the company also adopted a poison pill that's effective april 22nd. that will trigger if a person or group acquires 10% or more of its shears. ackman's pershing square capital management has a 9.7% stock. valeant offered to pay $48.30 a share in cash and 0.83 of its common share for each allergan share, valuing it at $152.88 a share. michael pierson will jone us on cnbc, coming up at 7:30 a.m. eastern time. >> at the time of the show we have bill ackman. >> we have michael pearson as well. we have both on to explain this. >> i've coume to different conclusions. i finally realized i don't think david soakle did anything wrong at all. he says this is an undervalued company. i want to buy a lot of it. he says you know, you should take a look at this company. it's really cheap. they noticed it's cheap, too. they decided to buy the whole thing. he happens to make money. then i thought the difference with ackman, both of these companies are able to decide that allergan is cheap but for a minute i thought maybe it's front running because ackman agreed with the company. he knew beforehand they were going to make an acquisition. >> my question is do other people know that valeant had been trying for more than a year to try and buy this. >> allergan was in play. if ackman is going to remain an owner of this company and help run it like he's been doing, like an activist investor, what's the difference between two companies deciding that they want to make an acquisition together? why isn't ackman's company just considered if it was a private equity firm? a private equity firm could share with the publicly traded company. >> that's a distinction. if you promise you'll stick around for at least a year? >> i don't see a problem with it. if they decide -- >> you spent a lot of time thinking about this. >> i did. >> you had to think it through and try to come to some conclusion. there's something different and something that feels weird. >> i came to this conclusion. a public company decides it's going to make an acquisition, it slowly buys shares and doesn't tell anyone all the way up to 10%. it was able to buy shares from shareholders at $40 and it's going to make a $70 acquisition. but it was able to buy the first 10% at $40. are they front running because they know they're going to buy their own -- >> not if they know what they're going to do. if you find out what somebody else is going to do. >> ackman and valeant are a team together bidding for allergan. you know, i've decided, i can't figure it out. >> how much time did you spend thinking about this? >> i thought about it. i was going it tell you you were wrong. then i was thinking you might be right. because i was thinking, wait a minute. >> i might be wrong. i admitted it yesterday. >> harvey pitt said if it's front running, then that's the issue. but he's just -- he's not just a -- >> i don't know what i think. >> he couldn't flip it like the day the acquisition was announced probably. >> right, right. >> probably could though. >> he didn't seal it yesterday. this wasn't a go into it, get out of it type of pot. >> right. >> that makes it different if you're looking at this as a longer term investor. >> the story, it's a template, it totally changes the playing field. >> i think ceos would say 2013 was the year they got concerned about activist investors and blue chip companies for the first time had to sit around and start thinking what happens if the activist investor comes after me? you might have thought that was going to die down. it's not. this ups the game. >> the other quote ackman said was, we want companies to do the right thing for shareholders and we have ways of making them do that. i'm not here to, oh, the ceos are scared about their jobs. i don't care about them. >> i just want the company run well. >> i want the shareholders to do well. i don't want them to keep their stupid job as a crappy ceo. for years entrench management should be afraid. >> there is something about shareholder rights and the rise of shareholder rights. >> is this you or me? >> this is a continuation. >> you're reading? >> yes. >> you go ahead. you're good at this. who's this david faber guy? is he related to mark. >> no. this is our good friend and colleague. >> oh, that guy. handsome guy. >> that's right. david faber caught up with carl icahn yesterday and asked the billionaire investor about ackman's latest move. >> with all the stuff i've said with ackman back and forth, back and forth, i think he's dead wrong about herbalife. >> right. >> and we have our differences but i never said he's not a smart guy. >> right. >> i think the concept of this is good. i hope it works out belter for him than herbalife did. >> david also got icahn to comment on ackman's new activist approach to this deal. >> i would like to see more of this done. and done by the real good guys. i think it's very hard to break into the business of activism. you have to have staying power. you have to have -- >> right. >> -- a fairly good bank roll and i think it's very important to do it. >> as we mentioned, bill ackman and michael pearson will join us in less than 90 minutes. carl icahn likes what they've done, would like to see more people doing something like this. >> i'm not ready to say ackman is not going to win on herbalife, either. i told you, i wish i had -- i had some of their candy bars. i was just going to open one and eating one on set when ackman was here. >> not mention it. >> no, but i don't have one. they're pretty good. >> you ate them all? >> now the mainstream media with the fbi and -- >> there are investigations taking place on this. >> globally there's investigates going on. >> china. >> there's employee whistle blowing stuff going on. carl may have won because he's out. i don't know, ackman has stayed in some of his positions for years and years and years. we know what finally happened. they don't always -- who knows what jcpenney or target. wasn't he an mbia? was -- >> no, einhorn was mbia. >> are they different people? they are, right? >> yes. famed hedge fund manager david einhorn has a clear warning for technology investors. he thinks we're in a bubble. so wrong on gold, though. in a letter to green light investors he says there's a clear consensus we're witnessing our second tech bubble in 15 years. it's uncertain how much further the bubble can expand. including the rejection of conventional valuation methods, short sellers forced to cover their positions and a huge first day stock appreciation of initial public offering. einhorn says, we have to make sure that the exuberance doesn't outlast your ability to stay short. >> there are people that said even if you look beyond technology, looked at what happened with the markets with this m & a, that does indicate the bull market is getting long, too. >> right. >> it doesn't mean the end but it signals the next stage. that means more maturity. >> i like the notion that the cool kids are starting to get their compensation looked at a little bit. that's in the ft today, talking about eric schmidt, they're talking about jamie dimon getting $13 million or something. eric's pay package, 2011 was 100 million and no one questions it. and the tech companies are masters of separating the classes of stock. google might not do any evil but they certainly know how to keep control of the company through financial methods. so now einhorn is weighing in there, saying, look, at this point because they're in silicon alley or whatever you want to call it, they don't get the same scrutiny about even compensation because they're the cool kids, the cool companies. >> that's where some of the biggest investigations took place and things that kicked off the pricing of options, repricing of options and what you were handing out. >> steve jobs never got in trouble for repricing. he was untouchable. he was steve jobs. apple will be reporting its fiscal second quarter results after the close today. chris caso is with susquehanna. he joins us. what are the moving parts. >> the space between the iphone 5s and the iphone 6. typically the old phone tends to ramp down a bit as people anticipate the new phone. our view right now is the street estimates are too high for the calendar's second quarter. i think they're too low for the second half when the iphone 6 comes out. >> does that mean volatility between now and then? >> it could possibly be. apple has been a lacquerquelacq. we're constructive on that is ba is. >> as a result you think that the stock has been punished too severely? even though you could have rough numbers still to come. >> it hasn't reacted as much as the rest of the market in this rally. apple lost its mojo. the iphone 5s was a successful product but it wasn't revolut n revolutiona revolutionary. i think what apple needs to show its stockholders is a revolutionary thing. >> is that true or not? what is their total global penetration in smartphones right now? isn't it in the teens? 12%? >> i'm not sure the number off the top of my head. >> if they increase market share in smartphones, that's the question. i hear people want bigger screens or something. are there android phones more popular than the iphone? >> it's still the largest selling phone. apple only plays in the higher end of the market right now. >> would that hurt if they played in the lower end? >> it was a question about a year ago. especially as they were looking into getting into china as well. the available market in china for $650 phone is not tremendous. >> it was the most valuable company in the world and it was on its way to a trillion dollar valuation. no matter how good it is, they still sell gadgets and phones, don't they? i don't know. when is a company like $700 billion instead of 500 billion? >> i look at a cyclical around product cycles. the stock is being valued on what people see today. the iphone 5, the iphone 5s. i think iphone 6 is a bigger cycle. i think the stock will get rewarded for that. >> why do you think is a bigger cycle? what's new and different and cool? >> the biggest thing is a bigger screen. >> that will be a real selling point? >> right. what we've seen in the supply chain is two different screen sizes, both of them bigger than the existing iphone 5s right now. but there's other things as well. and a lot of people talked about a watch product and we've seen that rumblings in that in the production supply chain for the second half as well. >> apple tv, too. >> i haven't seen that. certainly that's been a rumor there. i think they've been working on things. that they haven't come out with a brand new thing in a while. i think we need to see what it is, how innovative it is. i think the stock reacts to that. >> what is your price target right now for the stock? >> 650. i think there's significant upside for it. >> okay. chris, i want to thank you very much for joining us today. >> thank you. right now, let's get a check on the market as morning. we've been talking about the futures. hard to say where things will trade today. yesterday, you saw the markets up for six days in a row. dow ended up 60 points, off the highs of the session. six days in a row of gains. that's the first time that happened since last year. oil prices this morning, yesterday, i'll provisions dropped by i believe their second biggest decline of the year. down another 43 cents today. well above $100. wti at 101.32. >> you saw big moves yesterday. the yield is sitting right at 2.706%, pushed up even higher yesterday. the dollar this morning, you'll see that it is up against the pound but down against the euro and the yen. euro is trading at 1.3838. gold prices had a huge decline yesterday, up about $4.80 this morning but gold trading right now at $1,285.90 an ounce. >> i'll do this tease. going into twitter here. did you see this? show your best side, new profile photo. you can spruce up your thing. >> i don't really want a profile. >> i don't know. >> that takes work. >> people put weird pictures in, movie pictures. anyway, coming up, today's executive edge. we'll talk about a union vote at jet blue that had a direct impact, plus this hot sauce, roll i rolling srachi. >> i defer to the in-house expert. what is this? we'll have a story about it. ♪ ...who work with regional experts... ♪ ...who work with portfolio management experts, that's when expertise happens. mfs. because there is no expertise without collaboration. mfs. at your ford dealer think? they think about tires. and what they've been through lately. polar vortexes, road construction, and gaping potholes. so with all that behind you, you might want to make sure you're safe and in control. ford technicians are ready to find the right tires for your vehicle. get up to $120 in mail-in rebates on four select tires when you use the ford service credit card at the big tire event. see what the ford experts think about your tires. at your ford dealer. time now for the executive pej the pilots of jetblue a airways voted to join the pilots' union. jetblue has 2,600 pilots, 96% were eligible to vote. this vote marks the first successful union drive by a group of workers at jetblue. could lead to higher paying benefits and it's likely to encourage other workers to organize at jetblue and other airliners as well. the news sent shares of jetblue lower yesterday. although you can see this morning up by about 8 cents. >> i don't see how this work out. it was the same day that -- not the same day but in the last week or so we've seen the situation down in tennessee take care of itself. the uaw abandoned efforts to -- they were talking about corker and whether it was everything happened. there was a reason they did it. it looked like if they were to try it again they couldn't lose. >> is this me? >> this is you. congressman from l.a. community is seeking to lure the factory that makes that stuff i showed you, the best selling sriracha brand hot pepper sauce. he's trying to get it to his district after residents in its current location complained about the smell. tony cardnes, he wants to convince david tron, the owner of huy fong foods to relocate rather than fight with the residents of the city of irwindale. i used to live next to irwindale. i can't believe they'd be complaining about anything in terms of smell. cardnes says the company grows 60 million in sales from that branned with little marketing and hailed tron, an ethnic chinese immigrant from vietnam who founded this company in 1980. they hire full-time and produces over 20 million bottles of the hot sauce every year. >> try some. >> i don't want to try it. my stomach in the morning is -- potato chips? >> i'm not a big hot sauce fan. i feel like we saw like it. >> i like salsa. >> i like mild-hot salsa. >> let me have a chip. >> you touched all of them. i hate that. >> you know how quickly i have to -- okay. >> all right. ready, wait? on the count of three. >> one, two -- ♪ the heat is on >> it's not that hot. oh, it is hot. hold on, hold on. it's hot. >> where is it? i'm taking it home. >> you can have it. >> i'm serious. whoo! i'm serious about irwindale. they have a lot of nerve. >> ever been to irwindale? >> no, i haven't. >> i lived in monrovia, which is right near there. >> there's a kick on the end of it. it's sweet in the beginning, hot in the end. >> i like it. i like the guy that made it. you know what, i like the congressman. you don't like this great business that's employing people, come to us, irwindale. you can be irwindale, the industry of industry. >> that's not bad. i don't like hot sauce but there's something strangely -- ooh. >> take us to break. we put the markets front and center after yesterday's rally. taking another bite? >> i am. >> this wasn't bad. it's not just hot for the sake of hot. it has flavor. >> oh, my god. >> starting at 7:00 a.m. eastern time, we have big earnings lineup kicking off. dow chemicals andrew liveris will be joining us. we also have jon moelle and and john stephens. the performance review. that corporate trial by fire when every slacker gets his due. and yet, there's someone around the office who hasn't had a performance review in a while. someone whose poor performance is slowing down the entire organization. i'm looking at you phone company dsl. go to comcastbusiness.com/ checkyourspeed. if we can't offer faster speeds or save you money we'll give you $150. comcast business built for business. [ girl ] my mom, she makes underwater fans that are powered by the moon. ♪ she can print amazing things, right from her computer. [ whirring ] [ train whistle blows ] she makes trains that are friends with trees. ♪ my mom works at ge. ♪ my mom works at ge. are we still on for tomorrow? tomorrow. tomorrow is full of promise. we can come back tomorrrow. and we promise to keep it that way. csx. how tomorrow moves. what a day. can't wait til tomorrow. for what reality teaches you... firsthand.e. in the face of danger, and under the most demanding circumstances. experience builds character. experience builds confidence. and experience... has built this. the 2014 glk. the engineering, and the experience, of mercedes-benz. see your authorized dealer for exceptional offers through mercedes-benz financial services. they changed it too late. i need more notice to prepare. >> okay, diva. >> i know. good morning. i don't. i'm just kidding. welcome back to "squawk box" on cnbc, i'm joe kernen along with becomes. andrew is off this week. a lot of housing indicators. the mortgage bankers association will be out with its weekly look at mortgage politics at 7:00 eastern. at 10:00, the government will report on new home sales. boeing earnings will be out in about an hour. also p & g, another dow component. that will come at about 8:00 eastern. you know, in other news, toyota took the number one spot in global sales. global vehicle sales during the first quarter. the automaker sold 2.58 million cars and trucks, beating out general motors which sold a respectable 2.42 million. volkswagen was a third at 2.4 million. >> let's get a check on the broader markets. the futures at least at this point, it's hard to figure out which direction they're going to go. they barely budged. if you'veland looking at those futures again barely budging. if you look at what happened yesterday, it was a big deal. stocks were up across the board. the dow, 0.7% from a record high. the s&p 500 is less then a percent from a new historic high, only off by 0.9%. you could see just about anything happen today. you have a lot of earnings coming out. if you take a look at what's been happening in europe, at least in the early trading, things are trading weaker. the biggest losses are coming from france, the cac, down 0.4%. asia overnight, the nikkei was up by about 1% but the hang seng was off by about 1%. first we'll take a look at oil. oil prices were down by 2%, the second biggest drop of the year. the biggest drop we've seen since january 2nd. they're down 40 cents. the ten-year note yesterday, that yield ticked above 2.726%, the highest level in three weeks. the yields are lower as prices rise this morning. the yield is at 2.706%. the dollar looks like it's been weaker against both the euro and the yen. the euro is trading at 1.3838. the yen at 1.0222. this morning, it's rebounding to $5 to $1,286.10 an ounce. >> the nasdaq jumped about 1%. are we in a frothy sort of a tech bubble? hedge fund manager david einhorn of green light capital is starting to see unications of that. he had this to say yesterday in his fund's quarterly investment letter. now there's a clear consensus that we are witnessing our second tech bubble in 15 years. what is uncertain is how much further the bubble can inflate or expand and what might eventually pop it. here with us now is mark, global head of investment at ubs wealth management. he oversees $2 trillion. 2 trillion? seriously? >> that's big. >> is it true? you swear? 2 trillion? you have proof of that in $2 trillion. >> that sounds right. >> it's true. yes. >> it's you? >> he said it's true. he's backing you up. >> merrill lynch we had 2.3 trillion in private klein the assets. >> you only have 2 trillion? all right. chris wolf, chief investment officer at portfolio solutions for merrill lynch private banking and investment. do either one of you gentlemen think we're in a full-pledged tech bubble? >> i think if you separate it into old and new tech, you can look at new tech and think the valuations have gotten way ahead of themselves. some of the older tech is lots of cash, interesting ideas and opportunities. if you look at it as a big blob, you miss some things. >> are you mark or chris. >> i'm mark. >> so history rhymes, it doesn't repeat. there's no pets.com around. >> exactly. >> we were talking before. you remember what it was like back then. >> i do. >> it's not like that at all. einhorn is one of the smartest guys in the business, as you know, he's one of the nicest guys in the business but he's focused on valuation. if you look at the tech sector, cut it into the s&p 500 tech names, they're tried traading w% free cash flow. they are trading 10 below p/e average. if you look at some of the names that are ipo'ing, sure. >> david could be right, the valuations could be out of whack but you can't necessarily tell what human behavior will do. >> look, market volume is different now versus late 1990s. 1990s saw a narrow set of the market, you had qualcomm and others driving higher. you had the whole internet and the digital elements driving the markets. i really think the market in technology is separated these days. there may be elements but it's not clear. >> you couldn't have two situations in 15 years without learning something. as long as we're all talking about it at this point, too, it's unlikely that we're calling on these things, when they're going to burst in 1999. >> you have health care, that's a moniker. the biotech valuation is extended, certain type of investors driving those stocks higher. the other part of the market, health care broadly, hanging in there. good free cash flow. >> the infamous henry, he talked about it back then. these were pieces of crap that we were selling at infinity times revenues. >> yes. >> back in the mid-'90s. we weren't talking earnings. you didn't know if they were going to make any, or even revenue. i remember some of them. can you point to anything like that at this point? >> sure. there's people who are looking at eye balls again and total addressable market, all those things that david mentioned. >> some of that like the whassap? >> yes. anything goes, because they're referred to as cool kids in american business right now. >> as you know, there's always new tricks on the block. we've been talking about focus on the free cash flow yield. there's a lot of tech, the guys that survived from the last tech bubble. those names are still out there, which offer still some value. >> yes. it's a much more nuanced idea. you're right. i think david is smart. i don't know what he was talking about with gold. i really don't. everybody is allowed to mack a mistake once in a while. to finally load up on gold as the fed had done what it was going to do basically, people were loading up on gold five years ago knowing that the fed was likely to do what it did. load up on it then didn't seem like smart timing. everybody is allowed to -- >> a lot of people think of its is a political hedge. >> timing wise. >> yes. >> where do you buy? >> do you buy a year or two ago? i don't know. the bottom line here is there are some sectors that are probably overvalue. we may have cured some of that in the last month. >> we're still long equities. we like developed market equities, u.s. and europe, we're seeing a global growth improve and we want to be leveraged into that. >> there's a weird game we've been playing, up and down, up and down. are we going to set new highs or not? will there be market gains or double digits? >> i think there's more games ahead. a lot of it will be driven off business vending. we've erased mortgage debt, credit card debt over last couple of years. you have a consumer that's in much better shape. they hang in there. it's about the increment of capital expend touitures that w think will drive things higher. it's sensitive to capital spending. companies picking up their spending is a self-fulfilling prophecy. they're talking about an uptick in capex going through the balance of this year. that gives us confidence that that kind of industrial material that -- energy, which has been weak recently, is part of the place we want to be focused on. >> is that something the broader markets could see a gain of 10% or more? >> from current levels it's probably single digits, given that a lot of it is built in. i think to mark's point about free cash flow yields, companies need to maintain them at high levels. >> we think it will be a bumpy ride. the s&p can go up in line with earnings. we think about 8% this year. which is not bad. >> do you have individual -- i assume you like some of the more established players, both of you? what's your three biggest holdings? >> we don't comment on individual names. 2 trillion, what? >> you don't either? >> we talk about sectors and things broadly that work. you had apple on earlier. >> together you have 4.3 trillion. will you let us know when you think it's a bubble? ? if you start selling it would be good for us to know. 2 or 2.3. >> merrill lynch has 2.3. >> anyway -- do you know mccann? he used to be with you. >> that's correct. >> now he's running your shop, isn't he? >> bob mccann, yes, he is a wonderful man. >> i do the same thing. that was smart. >> i learned it from you, joe. >> you have been watching since harvard boy. where is harvard boy? i think he's a big-time lawyer now. >> i think so. chris, mark, thank you both for coming in. we appreciate it. >> thank you. within we come back, a real housewife of new york with a booming business. heather thompson, the founder of the shapewear company yummy will be joining us later this morning. and bill ackman and mike the pearson will join us at 7:30 eastern time. "squawk box" will be right back. really... so our business can be on at&t's network for $175 dollars a month? yup. all five of you for $175. our clients need a lot of attention. there's unlimited talk and text. we're working deals all day. you get 10 gigabytes of data to share. what about expansion potential? add a line anytime for 15 bucks a month. low dues... great terms... let's close. new at&t mobile share value plans. our best value plans ever for business. welcome back. u.s. equity futures haven't been doing much this morning. they're up a little bit, up 3 points. the s&p is called down. coming up -- nasdaq also called down. who's coming up first? dow chemical at some point. we have boeing and -- >> they're both at 7:00, both dow chemical and procter & gamble. >> that's 15 minutes away. coming up, she's on bravo's "real housewives of new york city" which is a comcast and nbc show. really? heather thomson will be joining us. she's the founder of yummy. we'll talk shapewear and reality tv. that's coming up next. hi, are we still on for tomorrow? tomorrow. quick look at the weather. nice day, beautiful tomorrow. tomorrow is full of promise. we can come back tomorrrow. and we promise to keep it that way. driven to preserve the environment, csx moves a ton of freight nearly 450 miles on one gallon of fuel. what a day. can't wait til tomorrow. i'm spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast? go to ziprecruiter.com and post your job to over 30 of the web's leading job boards with a single click; then simply select the best candidates from one easy to review list. you put up one post and the next day you have all these candidates. makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter.com/offer2. at a special site for tv viewers; anbe a name and not a number?tor scottrade. ron: i'm never alone with scottrade. i can always call or stop by my local office. they're nearby and ready to help. so when i have questions, i can talk to someone who knows exactly how i trade. because i don't trade like everybody. i trade like me. that's why i'm with scottrade. announcer: ranked highest in investor satisfaction with self-directed services by j.d. power and associates. ♪ i'm back back in the new york groove ♪ ♪ i'm back back in the new york groove ♪ welcome back, everybody. the shapewear industry is a booming one, thanks in large part to celebrity endorsements and pop culture. our next guest has dressed the likes of jessica simpson, beyon beyon beyon beyonce, just to name a few. heather thomson, founder and chief creative officer of yummy by thomson. heather, great to have you here. >> so great to be here. >> let's talk first of all about shapewear itself. this used to be something i remember even ten years ago thinking i would never wear any of this stuff. but women have changed and this industry is booming. i was and this industry is booming. it says it is now an $812 billion industry. >> i think that we modernize the idea of shape wear, it's not your grandma's girdle anymore. it is a proper foundation. you need the right canvass to build on for any outfit and that's what shaping really is. yummy is redefenning the shape wear category. because it's not a dirty little secret. it's not embarrassing. it's something you can show off and be proud of. i call it intimate apparel on steroids. >> why did you come up with this, after you had your children? >> it was a selfish initiative. i did what any good designer would do. i took off my consumer hat when i wasn't finding in the market what i needed. i put on my designer hat and made it myself. so 12 patents later the original yummy three panel tank is the core of my business today. >> your thought is you need a good foundation, but it has to be comfortable, too? >> it has to be comfortable. i don't think anything that squeezes you for a long period of time is good. so it's a spoother. i call it tight and right. it keeps everything in check. i want people to embrace their curves and rock what you got. do it if a way that leaves everything looking clean as a perfect foundation rocking an outfit. like i said. >> we had sarah blakely on the show the founder of spain, there is a lot of competition here. have you all kind of players getting involved, ruby ribbon and others, so how do you differentiate yourself from others out will? >> i think there is room in the market for eb, but as long as you have a difference of opinion. what i found when i went to the shave wear as a consumer, it was a sea of the sameness, it wasn't attractive. it wasn't a feel good. it wasn't a confidence booster. yummy by heather thompson is about confidence, it's about looking and feeling yourself. if you will have sausage casing around the mid-section or an ace bandage garment, you won't feel sexy. yummy is about every day shaping. so it's literally an essential, your bra, your panties, your yummy, it's how i get dressed every day. >> i don't wear a bra, my panty, any men's stuff yet? >> yes, i have done men's. >> what have you done? can i buy them? >> well, joke licensed my technology, it's an amazing men's wear company. >> for my tummy or my abs? >> for your tummy. >> i like a booty. i want to keep it popping. i'm all about the waist. >> what if i need some help for my booty to pop? >> i think that, you know, i'm not sure about a man. i can certainly say this for a woman, your boobs and butt can be whatever you want. if you cinch in the waist, you are 100%. >> if i need something for my booty, can i wear squats? >> i'm about smoothing, shaping, rocking what you got. not about pumpings things up. >> i can stuff like you the. >> all right. no, no, no. i can eat some of this maybe. >> i think bethanie frankel's line has some booty book. can you check her out. >> okay. so for even like, i have someone gave me one of these tee shirts and like getting it on. getting it on, it gets stuck here. i start panicing, i think i'm claustrophobic. i get it down, but it does kind of if you got any like. >> jiggly mess. >> not cellulite. >> it reminds you, your pos cure is albert. i can't get it off i feel like i'm in a straight jacket. >> yummy is about not doing that. it's about feel good. you put it on. you definitely feel compressed and hucked, but you are not feeling like this. that's not good and feeling claustrophobic is not good or putting something on that's difficult every morning is not good. this is every day solutions for women and for men. >> so i can rock what i got without being fake. because i already got it. i'm rocking what i got. >> you know people hug you, what you got under there? it's really supposed to be like what you use for a bra, it's supposed to enhance who you are, not take away from it. >> you are not wearing it? >> yes, i am. i have both my bra and yummy on. it's perfect. it's moved in bras, pant years our active collection is launching, i have denim. >> yoga gear? >> it's about versatility for women. we see women in active aparm, going to parent-teacher conferences not being in the gym? why is that? there is something feeling about feeling good and feeling together and you can move around and be versatile in. the active apparel takes us from the gym to the conference room with a quick change. you can still feel together, not like you are if your gym clothes. >> can you give us any hints on what we can expect in the new season? >> buckle your seatbelts. we launched with unfortunately a ton of drama we are built on. there is a lot of feels good stuff in the season. season six is a good one and a great platform for a lot of good reasons. definitely tune in. a little drama and feel good stuff. >> now i know you, i will tune in. i see it on my dvr, i'm going to stop feeling embefore a rased. >> it's a fun show. you can watch it. >> i know someone who watches it. i do. i won't mention any names. okay. i will. i'll page hear. thank you. >> thank you so much you guys. >> we appreciate it. >> coming up, i get something out of every interview, i am going to rock what i got all the time from now on. but a flurry of poor results are about to hit the street. png, boeing, dow chemical. do you want to see what i got? >> a, no. >> you know, not a lot. andrew liveris join us to talk about the global economy and thenous-makers of the morning. activist envestor bill ackman, ceo michael pearson on the set together join us 7:30 eastern. we'll be right back. be right ba. . good morning, everybody, welcome to "squawk box" here on cnbc. i'm becky quebec, andrew is off this week. we have been watching the futures. after sex days of gains for the fax the markets are mixed. yesterday the dow also finished higher. it was up five out of the last six sessions. you can see dow futures are up five first half points. s&p and fax futures are slightly lower. we are watching the markets closely. we are continuing to keep an eye on the ten year note. this morning, you will see the ten year at 2.756%. >> proctor and gamble looks like it's bid high on the dollar versus expectations of a dollar one on sales. i like sales numbers from procter & gamble. 20.56 billion, which is actually a -- >> a little light. >> -- a little below the 21.2 billion wall street was expecting. the fet number they managed to earn a nice tidy $2.61 billion in the quarter and in the core earnings per share was up 5% and organic sales increase of 3%, which i think is about where muller has been guiding us we'll have him on the cfo. he probably knows more about the result, themself, he comes prepared. so we will talk to him about organic and water happening around the globe. it's an info saitor of invasion and everything else. i don't think there is a corner of the world people aren't using some procter & gamble product. is dow out? >> dow is out i'm looking through that. dow chemical is out. they came in with earnings at 17 cents a share if you take a look at what's happening with revenue, you will see revenue coming in below expectation, that number is $14.5 billion. the street had been looking for $17.2 billion. andrew liveris says various measures have been put in to stream lean the company. >> that has helped expand profit margins, andrew, good morning, thank you so much for being with us this morning. >> good morning, becky. >> okay. so explain a little bit. your earnings per share were quite a bit better than the street had been anticipating. revenue was light. so what happened? >> it's what we call self help. a year-and-a-half of streamlining as you indicated, cost and cash controls. we've lowered the good sold line by 3% and boosted cash flow by managing working capital and inventories. it's sort of an economy, becky, i will say in this quarter, they were transporting weather issues in north america. we overcame those. we overcame those and we overcame actually $300 million in increased from the spain disturbs. with head wind, we did do quite a good beat here. i would say there is also tail wind in some parts of our world economy that especially came through in asia. >> so what happens now, if we were dealing first of all with the united states economy, you mentioned weather was an issue, you think things fire on all cylinders at this point? >> i wouldn't say all cylinders, if we're talking about an 8 cylinder car. it's a sustained recovery. we saw the other day. it's a slow and sputty recovery. the consumer side of it is starting to feel better. i could say we are showing decent signs of growth especially in construction and things that feed housing and things that feed automotive. >> we have been talking to analysts and smashing peckers looking over things the last quarter or some they say they do think that companies will start spending more on capital expenditures. is that rue for dow capital? >> definitely true for us. we got a $5 billion capex program where we have been improving the last year or so, the last lot of which got approved at our last board meeting. our capex was hugely increased from a year ago. so even our operations was up, free cash flow was down because of capex. we are spending for the future. in particular, we're spending against the changed shell gas we have in the united states. these factories are all going down in texas and louisiana. we announced a new r & d center down there as well. when you expand the r & d, that's good for sustained long-term employment. >> i was going to say, that creates jobs, what kind of jobs is that going to create and when can we see those coming online? >> clearly the construction jobs are in the thousand, 3 to 4,000 for that particular type of plan, remember, dallas revenue is roughly $60 become that revenue base proliferates for every job we have, there is five in our supply chains. that's 250,000 around us, the supply in the u.s. gulf coast is seeing skilled shortage and labor shortage and we skilling the work force is the major issue we are dealing with. we need state of the art people that understand auto makes. that's the issue. the u.s. recovery won't get there until we reskill the work force and many of us are working on this and at company level and business round table level. >> andrew, you mentioned china and asia i should say and water happening there, is coin doing better than we think? >> you know, i must say, i have been trying a few times in the first quarter and in march, i wouldn't have come out of there bullish at all. i think water going this time around is stimulus of a different kind. it's targeted sim lus they don't want the hot commodity bridges to no. where they want targeted investments. they're stimulating i think chinas r7x 7.2k3wr50e9, we had 9% growth in the quarter on china, it's actually exceeded our expectations is coming because we're targeting the new needs, value-ad packaging, value-ad agriculture. coating materials of higher standard than some of the stuff we saw in the west. these sorts of high end products cloud computing. i would tell you some of the materials we provide for cloud computing is showing growth in places like china. >> does that say something about dow capital or china's economy? is it growing better than people expect? >> so i'm not going to declare that yet. i water fairly bearish last year. i don't want to turn to bullish overnight. i would say i'm not certain,ly give you this. top down economies like china, they will get there to the 7, 7.5%. i think it will what you said, targeted growth. i think have you as to pick your places. >> you mentioned something in passing that really struck me you said one of the things you face this quarter was a $300 million increase in hydrocarbon cost because of what's happening in ukraine and russia. explain to me how, what that mean, how closely you are watching that situation and what it could mean for the rest of the current quarter. >> well, you know, russia, ukraine is our now most region version of geopolitical intervention in the economy. as the economy in terms of construction, that's not the issue. the issue is the effect they have on on xhotdity price, we had one geopolitical event in the arab spring, the middle east, syria, you name it. here we go, here's russia, which in essence is huge in the world area of gas markets, you know the threats the non-threats, what's going on causes oil prices to go up. luckily enough, it doesn't cause the gas price in the u.s. to go up. in fact, that's actually beneficial for companies like ours. north american business should be possibly benefiting and it is from lower class gas vs. oil. oil goes up, nap that goes up means our margins around the world go down. >> so you think it's specifically those tensions, the geopolitical tensions that is definitely above $100? >> i think it's a huge factor. i think it's this uncertainty an volatility combination that frankly the world economy has been in since '08/'09. oil went down if late '08/early '09. it stayed high independent of the world economic recovery. now consumption is coming being, it's bored by demand. it's driven the last 10 to 15 $20 in essence by this volatility. >> you think this volatility dow chemical now considering that oil will be above $100 potentially the rest of the 84? >> these assumptions we have made to build these plants in louisiana has an oil and gas arbitrage back in a minute into them. we have those shrinking in time. right now the availability of gas in the u.s. and oil in the world markets is a factor of 24-to-one. our assumptions have it 10 to 1512-to-one. that means gas would have to go up to $8. gas is $4.50 in the u.s. oil is $110 bucks. you can see there is room for that arbitrage to come down before we worry. we are putting in place self-help measures to overcome these issues. we believe this is the new normal. this is the way the world will tick from here on in. companies have as to help themselves through cost and cash management. >> you have been, andrew the focus of an activist investor dan loeb. we saw bill ackman most recently. we will be talking with him in a bit. i wonder from the ceo suite, what you think about activist investors and what they're doing these days? >> well, i think it was over a year ago within i was first asked this question and i was asked, what do you think if they enter your company? i said i will say right now, look we work with all investors. the activist kind have a point of view. we engage that point of view, whether you are an activist investor or number and engaging third point is being what we have done. i will tell you it's been a positive interaction to date. we have learned some things. they've learned some things. i think if you approach it as an investor, they have a reason for that, they have a belief. you have to listen to it. you have to deal with it. think all the rhetoric that goes around it, quite frankly, becky, comes from the media play. i think when you go back to most of these investorings, that irlo irthey're looking for a dialogue. we share that interest in common. >> wow, smooth that was. andrew, i. your ozzie to come out. some die i want you to say, thoseedon't know anything about my company. i'll crush them. has any ceo ever said that? they never do, that was so tactful what you said but true and well said. we do in the media, see we want to you say what i just said. we try to get you to, but you don't. >> he's like, not happening. >> joe, i always enjoy talking to both of you. you guys do a great job. but whether it's ozzie or not, here at dow, we're on a march to improve our earnings and they have been improving six consecutive quarters in a row year on year improvement. >> as long as an activist says, i want to increase shareholder value. the ceo that comes out against that, it's a losing game, you can't. you got to say, hey, i listened. they got good ideas, blah blah blah. that's exactly what you need to do. thanks for coming on, andrew. >> my pleasure. >> check out the shares of procter & gamble t. dow component just rolling out some results. cfo john muller talks with us piers. they have some activists in there. and we're going to have come about the flex buhl razor. >> i don't believe this is real. >> it's a weird looking thing, scares me. >> all kind of man scapeing questions that every chief financial officer better know if you are a procter & gamble. the news makers of the morning, bill ackman and vamiant pharmaceutical michael pearson will both join us on set at 7:30 a.m. eastern. more "squawk box" in just a moment. moment. project tore gamble quarterly ceo joining us. he is a member of the global cfo council, god, almighty, billy hamilton, i'm excited. i don't know if he is able to hit. the other night i watched him go from 1st to 3rd and score into home on a ground baum. at least there is some excitement at the reds, right? >> there is definitely some excitement. i wouldn't count them out. >> hamilton is the most exciting player in the leak right now. >> i would think, to watch. i'm rejuvenated. anyway, your stocks called higher, 80, 90, to 81.25. the 5% number on the earnings per share growth is at the high end. isn't the 3% organic sales, western you saying that's the low end? >> we actually gone give quarterly guidance, we are on track to deliver that. the 5%. >> but you did 3, you got to do better to hit the 4? >> it was over 3. we are right on track. the 5% core per share, that's 17%. reflecting a whole bunch of cost takeout. so on both the top and bottom lean, we are pretty happy with where we are. >> as we go around the world, any changes sense the last time you were on? has china weakened with some of these numbers we have seen? >> market growth rates on a global basis are down probably a point sense we last talked, which would have been in october. that's true in developing market. still global growth and our product category is about 3%. we basically maintain market share in the quarter we just had, consumers around the world remain very responsive to value creative innovation like our laundry and products like the new aizor products, et cetera. >> so ag is how far along in doing what he set out to do when he came back, would you say? >> well, highs got, focus just like the rest of us are in continuing this march and i don't think there is a day he thinks about the march being over. this is a countaroun -- 175 yea. >> he's a young guy, he looks young. it's a different world than we are living in right now. it's successional on the mind of the board and the company day in day out or should we assume he will go for it as long as helps to have it go? >> well, it's certainly in the on my mind day in and day out. he has been very clear saying the company will be time driven, i think the board shares that view. >> you don't. you are in cincinnati. will you not have one of those, you know, one of those adamle 59 type beards, are you? is that what that fall thing is for? is that for real, that thing? what is that? >> we will be revealing that in more detail at a big event in new york on april 29th and so i'm not at liberty to disclose more details. what i will tell you is men are telling us, which is they prefer that product two-to-one versus the best selling razor currently. we are excited to build our franchise, to build the razor market. it's all good innovation should do. wale hear more on the 29th. >> have you used it, john? >> i have been using it for about aer 82. i absolutely love it. >> it looks like a crazy contraption. >> are you using that body razor? i'm afraid, i don't want to know, whether you are using that, don't tell me. >> that other one, i can hurt myself. what is -- i'm afraid of that, couldn't i hurt myself with that? >> wait until we get it in your hands, i think you will love it. >> are you also developing, seriously, things for these guys that don't grow full beards. they have the generation x sort of, you know, you get past the velvet ropes at studio 54 with it. you can see i'm dating myself. that's been close for years. do you make stuff for that? >> absolutely. absolutely. we want a gillette product available for every man, regardless of what his shaveing choices are. >> you know, as far as input costs go, john, i mean, is it just food where we've seen a big spike? are post-things pretty well behaved in terms of commodity costs for you? >> things are reasonably well behaved with a bias up. so year on year, we have about $350 million of additional commodity costs. >> that compares to some years, where it's been close to 2 billion. it's with a bias op. >> currency continent to be a negative, suspect you are managing? >> yeah. >> that goes part in parcel with our cost savings program. we are also able to price in in market to help to phrase some of that hit. >> all right. we got to go. so you're debuting this inc. this. are you volunteering to come up here and demonstrate that body razor, john? have you, would you agree to do that? >> i'll parks joe. >> you will pass on that? ask ag. if we haven't seen ag in a long time, i'm not thinking our prospects are good for that, either. anyway the rangers, i have an adopted hockey team. maybe you can watch. they won last night. all right. >> i'm hoping to get up above 500 in the next week or two. i would appreciate it, john. thanks. >> of procter & gamble. which has now indicated up about 40 cents or so on the day. >> for more on our global cfo count sim, check out cfo council.ynbc. we have another guy coming, at&t's cfo. >> joining us later this morning. also, results are a few minutes away. plus the move to take over allergan, valiant ceo michael pearson will be joining us, coming up at 7:30 a.m. eastern time, joe mentioned at&t out with results last night. cfo john stephenson will be joining us with the competition at 8:00 a.m. eastern. :00 a.m. e. . . welcome back, everybody. when we come back, a lay for botox maker allergan, ceo michael pearson, here in studio and ready to talk about the offer, how they met, what they plan to do. we'll have all of that right here right after this. ht after . . welcome back. let's check out the futures and i'm told that boeing was like an alarm clock. it hit exactly at 7 and phil le beau, that's his boat. how did they do? >> better than expected on the top and bottom lean. in the first quarter, they earned a dollar 76 vs. the street estimate of a buck 56. whether you take the number last year that included a tax benefit or not. they had better than expected earnings by 2% better or 14% better, revenues stronger at 25 billion. the street was expecting 22 billion. three important things that came out in the earnings report. 11.4% in the first quarter last year. part of that is do you to a higher delivery rate. operating cash flow, that's higher than many on wall street. boeing raised its full year earnings guidance, this is did you to a tax benefit it expects receive. boeing now says it expecting to earn between $7.15 an $7.35. water interesting, guys the estimate on the street right now is $7.38. they're not coming up to where the street is betting. being to you. >> phil, topping very much. phil joining us with those footballs. that stock is up by close to $2345 is going to help. bill ackman and pharmaceutical company valiant teaming up for rival drug maker allergaf. they outlined the presentation yesterday if new york. joining us right now in their first interview, bill ackman the founder and ceo of the $13 billion capital management and michael pearson on set with us our very own kate kelly to joannous this interview, bill, michael, thank you for being here. i have a couple questions, michael, i want to know, why teaming up with bill ackman in perching square, bill, i want to know why valiant and why allergan. so why don't we start off with that? >> so i admired what these guys accomplished. i never took a look at the company. the reason, most pharmaceutical companies are difficult to understand. they're a black box, they rely on pipelines where they spend enormous amounts of money, you weak up one day the stock doesn't get introduced. they collapse. we spend time together. i liked the bts model and the business, itself, reminds me of businesses we invest in. it's like a good company like procter & gamble much less tan a company like merck. when you understand the operating philosophy and their approach to capital allocation discipline, cost discipline the way they compensate tear team, it fit into a pershing mold of an investment. that's why we got interested in valiant. >> when did they meet? >> february conference. >> and it was a business school colleague who introduced the two of you? >> yes, a guy bill doyle joined pershing, halftime, about nine months ago, introduced us. he worked for mike back at mackenzie after our business quote. >> mike, let's talk about allergan. you have been interested in 18 months. >> probably longer than that. >> what attracted you to begin with? why do you like the company? >> they have a great set the of assets. we look for durable assets. these are assets, they're pharmaceuticals, sometimes they're over the counter trucks, it's what's plagued the industry. so these assets, if you take care of them will last a long, long time, more like a consumer product. botox is the primary asset people think about when they think about, they also have with these and other proublts, they're branded products, not patent. close. >> let's talk about your philosophy in terms of running a pharmaceutical company, being revolutionary. you have an interesting slide talking about how the cost of developing few drugs in r & d skyrocketed in 1975 to 1.3 billion on average, how do you see them emphasizing new sales? >> they have to come from somewhere? >> there is a misperception. this year, we are launching 19 products in the united states, there is no other pharmaceutical company launching in the united states and hundreds around the world. what we don't think is a good bet is early stage science. most trucks get discovered by universities and entrepreneurs, not by large truck companies. so we want to invest in the early stage the high risk technologies, instead, what we do is acquire late stage products and/or do high probability on development work and so it's just a different approach to r & d. it's not that we don't raise r & d. >> you have been hugely successful. you had more than 100 acquisitions if 2008 t. stock is up about 800% since then, i wonder, is that something that can continue. can you keep doing skwegss likes that when stock prices have come up so rapidly since 28? >> we believe. so again, we are very disciplined in terms of the prices we pay. that's been a key part of our success i believe. most of our acquisitions have been private companies and private companies just sit down with the other side and come up with a el do you. there is no, they're not publicly traded. >> you keep saying you are cheap. i know bill is cheap. you know, we've had lunch, that's a true story about was that when you met with them, you didn't like the salad they were serving? >> i happened to like chipotle. >> you were monita with his people? >> i didn't say send us. they very nicely offered to get me a burrito. >> and they charged you $20. >> is it a joke? >> you hit a road show, it was fancy, you said this was pe. >> a part of our partnership the last time they held a conference they did it in the new york stock exchange, they give you the right to do it free. i wanted to do it a little more place that made sense. >> you foot the bill. >> i present that. >> when it comes to r & d, allergann has invested in r & d. this is a way for you to capitalize on. most of us again, it happens in universities. you look at the top hundred drugs. the vast majorities are not discovered. >> it's not just that, can't you combine all the contact businos lomb has? >> in terms of ophthalmology, we are significant players in all those markets. >> we were contacted. >> i hope bosch & lomb contacts. >> an $8 water. that's what i like for the pay forum don't add anything, it's $8. >> i have no qualms about that. >> it's the cleanest water. >> it costs more than oil. >> you want a branded product you will put in your eye. >> an $8 water. >> that's cheap. >> can i ask you about the news from overnight about all sper gan adopting this poison pill defense strategy. how will you respond to that? as of yesterday, your impression was you hasn't heard from them directly. you heard through the analyst community they were going to blow you off. what's happening now? >> i'm no expert in frozen pills. we are disappointed. on the other hand, i think the deal will get done based on the creation for both sets the of shareholders. i think the fact we are offering allergaf shareholders almost $50 per share plus almost half our company, so they can enjoy the benefits going forward. >> that in the end is what will matter. >> are you making a play on avoiding therapeutics more, you are also a cosmetic player here. botox, it works great for people, but it involves like elective surgery i will probably never do it. these aren't life saving therapeutics, these are things that make people look better, la tis, botox, breast inplants almost seem like elective feeling good about yourself type medicine. >> you are right. a lot of our products are more consumer driven than they, are but the consumers want to look good and they also want to do things. they want to engage their doctor. >> if you saw a therapeutic, you would use it as well. >> it has a lot of therapeutic uses. >> indications, they're not aprovidence for a lot of them. >> half is an aesthetic product. half is -- >> depression is when you move your wrinkments, you get rid of your depression. is that how it works? >> it could work that way. >> bill, what do you think the poison pill move? is that complicated? >> it depends why the poison pill is put in place. if it's an entrenchment device, it's a way for the board to have a chance to explore other alternatives, i think it gives the board a chance to look at other alternatives, i wouldn't immediately accept, valiant, i would want to know what my alternatives are. i'm sure the banks will reach out to the big pharma companies and look at alternatives. the argue, though, is we're not excited about the company sold at a higher price for cash. we think the opportunity. right now we think valiant is cheap at a stand alone company, it's at 15% earnings, that's been the synergies from the deal. once the deal becomes perceived to be more probable, we think valiant stock will go up a lot. the deal value will go up a lot. right now they're trading 1.5% above the deal. >> could you offer more? you can make it work bet you. >> you put a fair offer on the table. you are disappointed. >> you are able to beat anyone up. they don't have the same possibilities of making it work. >> i think our operateing model is what separates us from the pack, if terms of our different model, decentralized model. i think we run a lower cost model. >> you aren't referring to tax savings. in the united states, you have a lot of debt. >> we have a lot of debt. a lot of other companies in the industry have tax rates. >> the allergan synergys, the bosch & lomb, the tax rate. you saw all this stuff. >> actually, it was, mike gave a list of companies to us and asked us for our opinion on who we thought was the most interested targets. he wasn't doing that. we looked at the list, it's clear allergan is not clear for the company. i think significantly, they're a strategic overlap in the business. >> is valiant a company you eventually want to own, there is a risk this deal doesn't get done, then you own allergan instead. >> the reason mike is going to share with us the opportunity for allergan, he doesn't need our help buying stock in valiant. he needs our help in geting this transaction done. >> did you meet him before you had a target? >> yes. >> really? >> yes. >> you met him. you liked how he did business, allergaf was the one that foot the bill? >> what happened was, they have been very public about the fact they're looking for large targets. there was a merge equal with a $10, $20 billion market cap. he said what is your thoughts? he said sign a confidentiality agreement. he said, actually, that's the one we're looking at. we talked about how we could help them effectuate a deal. >> this is almost kind of creating your own destiny if you will, is this a new paradigm for you? and do you see others in the hedge fund industry following suit? >> we are always looking for a way to create shareholder value. it's a great way to create it in a short period of time and hold it over a much longer period of time. >> we will take a break and return to this. we will create cnbc value. >> we also had some admirers in the activism industry. we were watching this, thinking this was a way to do it. >> and detractors and people questioning the front unarer, which we'll talk about when we come back. >> we will continue right after this break. by the way later the cfo of at&t john stephens will be joining us to talk about media, telecom and quarterly results of his company. >> that company beating expectation, revenue coming in at $25.6 billion. >> that stock is up by about 35 krevents, "squawk box" will be right back. right back. they're why we make life less complicated. cent let's get back to our special guest, bill ackman pershing senior management. j. michael pearson. here's what we have been talking about off camera. the nerves that i am, i was thinking about this yesterday at like 5:00 or 6:00 at night arguing with you. >> i know. >> there are people that say here you are, you get a company to agree to an acquisition in the future. nobody would be, the idea to buy the company is not our hour. the idea is valiant. >> either way, you are able, after knowing this is going to happen. are you able buy the stock before anyone else has any idea there is a takeover coming. >> that's correct. so you buy up to just under 10%, now you are in, you are buying from people that don't tow what you are. they are probably kicking themselves now obviously that they sold to you, but have you this knowledge that eventually valiant was going to make an acquisition. why is that not front money? >> sure. the way the rules work, you are permitted the trade on pence information as long as you didn't receive it from someone who has breached the fiduciary duty or confidentiality, et cetera. we teamed up with valiant, they basically came to us and said, look, you can help us acquire allergan. we said great, we formed a partnership. it has strarls. it gives us the right to buy a stake in allergan. >> we also have our money in this partnership. you have a partnership. >> does it matter how often? could you, would you be able to sell right now? >> no. >> actually, would you be allowed? >> sure, legally, not under the terms of our partnership. >> you don't have to agree to hold it a year an help the company. >> that's our deal with valiant. >> but, here's how it works, they share with us their interest in allergan and taking over the company on the basis we work with them to assist them in doing so. part of that working with them involves a stake in becoming a long-term shareholder in the combined company, electing to take stock in the deal. we put almost $4 billion into the deal. we agree we have to elect stock. we like the future of the combined business. it actually gives more cash to other shareholders. >> you didn't give perching square more money to acquire the stock? >> they invested in a partnership with us. a small amount of money. they are only allowed to buy a certain amount of stock as a player. we boy a stake in the company. if we are unsuccessful because someone comes in and pays a much higher price, hopefully the shareholders prefer that. the val yavent deal, it gives them 15% of the profits, almost like a break fee. we get the benefit of the merger by getting stock in the combined company. >> you see why this makes people fer vous in the ceo suites, hold on, i don't know which ofpy competitors is going to be trying to come after me and boy me in a hostile takeover or what they might be teaming up. they don't know it's him. you can see why people nervous thinking this is a whole new breed of activist investing. >> mike could have done this himself. >> why didn't you? >> i think having 10% share is a lot. i think doing due diligence and talking about our future is very helpful. and i think having bill out there in the public he doesn't give up. we don't give up either. i think that helps. i think it makes it more likely. in terms of other ceos, our job is to create shareholder value. so the people shouldn't be afraid of anything that happens that creates them shareholder value. that's our job. >> that's the conclusion i came to last night. let say if you weren't an activist investor, if you were a private equity fund and they decide with anotherenty that stock is undervalued and they'd like to acquire it an run it better, why can't both people team up? >> i can't see it happening in the past. >> the old days, actually, it was much more common for a company to buy a stake an watch them take it over. every time you create value, i assume the person you sold to us after the fact would have rather owned the stock. the person selling is a short-term value. we sell most in the above market prices in the six days right before we filed. the person that sold because it went up 5 or 10% is not a long-term investor. people that hold 90% of the shares get the benefit of the merger with valiant, the deal that happened. the person that dropped out. they saw it pop. i'd rather the people be the long-term beneficiaries. >> companies that launch, they can boy, before they disclose, they are buying knowing they will eventually. >> when warren buffet boys a stake in the company. i'm sure everyone that sold to him, he knows what he is doing. you are allowed to have the benefit of your own inside information if you will. >> so anyone, i don't think harvey knew the situation. >> i have been thinking about this since yesterday, we have been talking about it. could you buy all of allergan by yourself? i don't know why that seems different to me. i don't know why i keep getting stuck on this. i many es is the sec will eventually look at this. obviously, you have thought a lot more about it tan we have but again, if an individual knows about a dem and knows mike is planning to buy. >> actually, as long as they didn't get the information from someone breaching the duty. i'm a friend of mike. i go buy $100,000 of stock, i will -- there is no benefit to leak to some guy to buy $100,000 of stock in this case the board concluded by teaming up with us would increase the opportunity to get happened. if they increase the probability of the deal that fik economically offered synergy, if that's great for valiant shareholders and allergan shareholders. >> i think if we put that sound byte. we can hear it. let's take a look. >> i don't think there is enough of a basis to suggest that what happened is illegal. one would have to know when ackman started negotiating with valiant. but what is clear is that prior to his cons mateing an actual deal with valiant, he was in the marketplace and my suspicion is the sec will look at that and try to determine the facts to see whether he was front running valiant's bid, that itself the real issue. >> martin, before your dinner, that itself the difference. >> if they look at our agreement, once we send the confidentiality agreement, we couldn't do anything. >> we had to give bill permission to go forward. that was a board decision. we made the decision to go forward with the company. we told bill he could start buying. in fact the first shares he bought were for us. >> this interview was the focus on a miss. but, you know, there arant a million things i can ask you about. >> can i add on to this? >> he's so good. >> go ahead. >> there are many deals that should be happening on wall street or on corporate america where one company should be merging with another to create synergy to make it a more effective business it doesn't happen because of more social issues. >> either the ceo doesn't want to move the office from one state to another. i think it's very important for capitalism for these kind of transactions. the sense is kind of teaming up, facilitates efficiency, better run companies, that's good for the company, good for -- >> did you have a way of, whatever it takes to increase your shareholder value, if they're not going to play, you have the way of seeing the light of play? >> you make an offer they can't refuse. >> i wasn't going to ask them about herballife. i was going to open up a candy bar start eating, what would you say if i said, god, i love the stuff. >> id be concerned about the quality. >> back to i think much your paper losses have been what cut in half and cut in half. it's come down and there is a lot going on the terms of people looking into the main stream media, abc will do that. >> i got the sent it will come soon. would you say at this point that you are heardened by the change in circumstances over the last month? >> i think the important thing is our goal is to shine a spotlight. after a preliminary investigation, i think the preliminary investigation is more than the typical one. they didn't want to hom out looking like they were helping the short seller. there is a investigation by the sec, a criminal investigation by the department of justice and by the fbi, to state attorney generals, this is unfortunately a bad company causing a lot of harm. >> how long were you in the nba. >> seven years. >> to mike's point, some people accused me of being the most persistent guy in america. we think this transaction is a great transaction for shareholders of valiant and allergan. >> you think it's okay to talk your book at conferences and seminars and things like that as well? you have been criticized for that as well. >> i think capital marks benefit by transparency, in the old day, people spread rumors. right? today, our view is full transparency, if you attended the presentation yesterday, which we watched online, it's three-hour education in a pharmaceutical business. it's a good education about pike's companies, allergan. i think that transparency is healthy for investor, not just institutions. that was opened to the general public. you can download it. you can watch it. >> one of your buddy, einhorn is the high frequency. is the market rigged, where do you come down on that? >> i think michael lewis is right. we were one of the original backers for the imf exchange t. quality of execution, it's better than any exchange. there is a couple pennies that don't need to be spent on useless. >> it's not a couple pennies. >> it adds up. >> we are a beneficiary, if you look at our investment in allergan. that's sending constant signals to get in, the volume being many times normal. high traders buy a share in front of under the circumstances an sell it to us. buy a share in front of us. >> we have no choice because of the way the restrictions work. >> if anyone is front running, not you? >> yes. >> mike, i want to ask you really quickly, we have been talking about how you are very thrifty, how you are cheap, how you won't pay higher prices. >> we put in place a very fair offer and we have to sit down with the board of directors and if they want to get this deal done, we will sit down and try to make sure we get it done. >> then there will be more after if you are successful at this, you might be involved with that. with this company, all of a sudden running a pharmaceutical? >> i got a call from another ceo of a public company saying, we have a company, right now, i'm saving my capital. >> we have to wrap, thanks, guys. >> thanks both very much. we appreciate it. >> when we come back, another first cnbc interview the ceo and the company's quarterly results. then investors will be focusing on facebook. a lot of questions about recent acquisition and ad formats. we will ask analysts what investors can expect. the ceo of pnc financial services the cfo, you got several other people coming includes stephens from gm and caterpillar, "squawk box" will be right back. be right back. you probably know xerox as the company that's all about printing. but did you know we also support hospitals using electronic health records for more than 30 million patients? or that our software helps over 20 million smartphone users remotely configure e-mail every month? or how about processing nearly $5 billion in electronic toll payments a year? in fact, today's xerox is working in surprising ways to help companies simplify the way work gets done and life gets lived. with xerox, you're ready for real business. . welcome back to "squawk box," everybody, let's run through some of the high profile earnings report, procter & gamble, a dow component, that was three cents better than the street was expecting. the company's results were helped by a drop if overhead costs. even though it cut its earnings for the year. >> that stock is up about 13 cents, boeing beat estimates by 20 cents. it came in at $1.76 a share. it raised its earnings forecast for the year. >> that is good for a pop of two and a quarter percent. delta airlines, four cents better than expected. they did have to can sell more than 17,000 flights because of severe weather to make 90 million off its revenue. at&t coming in with earnings a penny better than expectation. revenue is strong. they added 1 million wireless subscribers. john stephens is a member of cnbc's global cfo council. john, thank you very much for being here. >> thank you very much, becky. >> let's talk about the wireless subskreebers you added. what happened? >> a great quarter. over a million total wireless net ads. over 600,000 post-payment ads. positive smartphone net ads in increasing the quality of our already very strong examiner base. >> so that shift, were you stealing from other competitors out will? >> well, we feel like our customers are choosing to stay with us and few customers are choosing to come to us because of our great choice and value, quite frankly, our great service and network. we believe our network is helping distinguish us. >> john, that has been such a battleground. we seen so much intents competition and i just wonder, is it still profitable to be bringing people in and offering lower prices? it seems like the consumer seems to when all the time. >> we are grateful the consumer wins. we will continue to stay with us. quite frankly, with the choices we have been giving customers, we were able to balance it with a quality service. for us, as you can see in our earnings, which were up nearly 11% year over year, it is not impacting our ability to provide good service while making a good return for shareholders is there what is that the result of? >> a lot of hard work from our sales team, manly a move to our shift. high speed internet, virtual private services used to put efficiency into their networks, to put security and quality into their new yorkers. it's the result of our three year investment program project vip or velocity vip. we have been envesting. ness starting to show in the transformation of our customer base. >> i know when it comes to capital expenditures, at&t has been the biggest corporate sperpd in spender in america, for several years running, that's because you are spending so much to build up that network. i wonder what you think from reed hasteings of netflix and others purposeing back saying companies like his soon have to be paying to run a lot of traffic over the internet. >> i think it's simple economics. everybody wants things for free. quite frankly, you should expect a reasonable return for your share olders. we like to do business for customers of all sorts so we look forward to doing business with netflix and everyone else on a reasonable basis. >> what's a reasonable basis? >> actually getting paid for provide tack iner connection. >> you said everybody wants something for free. this economy has strong results. is that a result of a strong economy? >> we are seeing a fairly weak economy. you mentioned we are one of the largest investors, quite frankly, not many customers are following suit. business fixed investment is at a very low level specifically our chairman is leading an effort to change some policies in washington to increase business investment in the united states because that's the way it will increase jobs. the best way to do that is tax reform. we have been a big proponent of lowering rates and closing tax loopholes. even though it applies to us, it will increase everyone's investment in the united states and really generate jobs quite frankly, becky, everyone having there is tax reform bills out there we need people to sit down, put their visual view points aside. the visual community is ready to be acceptable and negotiate a settlement or a joint effort. we look forward to that. certainly, we would be ready to put our support behind it. we certainly believe it can get done. we think it's a matter of choice. >> congratulations on the quarter. >> coming up, when it comes to social stocks, there is facebook and everyone else. the stocks have been battered over the past month. but many analysts rank it a buy. so what should you do with shares of the social media giant after reports of the night. we will preview and talk with analysts next. check out the "squawk box" market e financial noise financial noise financial noise financial noise can you start tomorrow? yes sir. alright. let's share the news tomorrow. today we failrly busy. tomorrow we're booked solid. we close on the house tomorrow. i want one of these opened up. because tomorow we go live... it's a day full of promise. and often, that day arrives by train. big day today? even bigger one tomorrow. when csx trains move forward, so does the rest of the economy. csx. how tomorrow moves. . >> facebook first quarter earnings after the bell. joining us from new york. the securities of senior analysts and facebook is one of your favorites, isn't it, antony? >> our top pick for the year. i cover pedia as well, basically within i talk to ad buyers and ad agencies and marketing firms, you continue to see this tech on theic shift of the marketing budget going to digital from traditional media. we think facebook is the best way too play that shift. >> i don't understand how it works. i should go on facebook. going to ongoing pricing uplift at facebook. tell pe, what is that? >> basically, we think on the news feed on your phone, the price of those ads is $4,000. >> that compares for tv cpns. so the idea is over time facebook could close the gap. now some would say in the history of the internet, it's a price deflator. one thing facebook has at its back is a mid-shift from desktop to mobile, their pricing is higher than on desk top, between that and core pricing believe we have and other ads having pricing upside. we think pricing will continue to grow rapidly for its ads. >> so ipads are mobile, right? >> yeah. >> so people are they're like friending people and watching what they're doing on the ipad? they care what other people are doing and look at their pictures? that's what's happening here? is that what's happening? >> what's happening is people are checking with each other online and mobile is definitely the way that people are doing that. they're posting photos, you know, your kids, your family, gentleman, you should put them on your facebook page and share all that. that's the type of content. i covered content. there is user generated content. facebook is clearly the leader because people care about the content that their friends are posting on their facebook site. >> on the phone, i don't think i can see it. unless i put onpy reading glasses number one. on an ipad i can see how you make money that's what we're talking about mobile advertising? >> you can see all the ads. >> maximize the fund. >> another thing, too, you bring up a point about ads, are they intrusive? we think increasingly, they're more targeted, customized to what you, joe, care about in your news feed. you may not boy that. the fact that ad buyers think that facebook is doing a good job. >> that's the holy grail. they will show me what i need. that's really going to happen? >> yeah, it's happening, targetability, your income bracket, where you live. i know what you care about in terms of commerce, that is something that ad buyers will pay a price for. they say you are wasting half your assets, you don't know which half we know which viewers are viewing the ad one other thing is the ad format facebook launched. we think we had $11 to $14 this terms of price per viewer. so our checks have been that. feel free to contang us for a transcript of one of our quarterly check calls. our checks are that spend it sequentially fat. >> that bodes well for facebook to add revenue. >> if i were to lock at one or two or three things tonight, because expectations i imagine have been going up. so how could they miss? how could they be that would cause the stock to go up? >> a shorter-term investor might say the setup is questionable because analysts like us have raised the expectation for the quarter, right? so it could be as simple as some more seasonality tan we and other folks are expecting leads to ad ref few coming in modestly below. i think the modern trend, we are actually bullish on trends in the quarter. i think people are also wondering about acquisition strategies. >> yeah. right. so that's another factor investors want to talk about. >> those drones are pretty cool. then it gives us an opportunity to play some sound i think. >> what's up? >> what's up? >> you know, you guys do this to me maybe one out of five times i come out here with the sound bytes. you know, like -- >> what's up? >> you talk about facebook, you don't think the audio guy is going to press, it's on a putton, anthony. he's liable to do anything at any time, jesse. >> i like the jessie eisenberg better than mark zuckerberg. i like him better. so i prefer him. >> it comes down to this. zuckerberg has a vision of connecting the globe online. is the future xaun indication going to be a real time over the top messageing platform like what's that? perhaps, right. i think your model, investors of facebook filled in some tlugs to shares for acquisitions mark will make each year that are strategic that may not have any discernible revenue impact in the near term. but that kind of help him achieve his vision of connecting. >> something could hit. something could definitely hit. i know. he's, you know. there is no way to second guess this guy at this point is he 30 yet? >> look at instagram. >> no way. how much is he worth? 25? >> i'd have to check. rig right. >> anthony, thank you. you didn't really answer, what's up, anything? is that you? >> xats up. >> you are on cnbc. that's it. that's what's up. >> that's good. >> all right, guy, take care. >> all right, coming up, a shareholder showdown in atlanta. it seems will is a starbucks in america. why are some worried about whether duncan is overbuilding? "squawk box" has more on that when we come back. ♪ ♪ [ male announcer ] help brazil reduce its overall reliance on foreign imports with the launch of the country's largest petrochemical operation. ♪ when emerson takes up the challenge, "it's never been done before" simply becomes consider it solved. emerson. ♪ welcome back to "squawk box," toyota keeping its position at the top, in total global vehicle sales, selling 2.vague million in january through march. first quarter sales rose by more than 6% over last year. gm sales were up 2%. they were in the number two spot. the 2.4 million vehicles sold. china and europe were big drivers. they love their buicks over there. they were up 14%, cadillac sales grew by 9%. gm chuck stephens will be joining us tomorrow. that should be interesting, too, given that there is a lot to talk about with xm. >> that's right. when we return today, coca-cola holding its annual shareholder meeting in atlanta. the big issue there, executive pay. we will be speaking about compensation, find out how he will be voting. and a related programing note for you, warren buffet coca-cola's biggest shareholder for berkshire hathaway. his lunch with the winning bidder paid just over a million dollars. as soon as that lunch is over, he will be coming joining us first on cnbc sometime between 2:00 and 3:30. watch before the 2:00 p.m. hour. stick around, "squawk box" will be right back. cars are dri . welcome book to "squawk box," dow capital out with its earnings. it came in at 79 cents per share, eight cents better than the street was expecting. revenue fell short of consensus. the ceo told cnbc self help programs have stream lined and increased profit margins. the consensus, the biotech company in terms of enbro were a little week weaker tan expected. and a secondary offering today, planning to raise as much as $100 million. they will have an option to buy 15 million more in shares. >> that is down by 4.25%. sales of allergaf soared yesterday on word valiant pharmaceuticals were teaming up for the whole company. earlier,ing aman explained why this dell does not coops substitute front running. >> the way the rules work is you are permitted to trade on "inside information" as long as you didn't receive the information from someone who has breached the duty of, a fiduciary or confidentiality. what's happened here is we teamed up with valiant. they basically came to us and said, look, you can help us acquire allergan. we'd like to work with you. we said, great, we formed a partnership. it has various terms. it gives us the right and permission to buy a stake in all sper gan. >> of course, there have been people buzzing about whether or not this is legal, whether or not the sec will look into it. ackman told us as he was walking out of here, yeah, he had his lawyers look at this carefully. guess who his lawyer is. the former director of enforcement at sec. he said if anybody has questions. they can call dr. robert kuzami. >> if two companies, three companies, five companies decide that they're going to make a bid, they is the company different? >> you have private equity. >> you get a private equity guy, why is that? >> you got a public company in the pharmaceutical business but you will also going to, in this case, she an activist that can help with board decisions and maybe as you heard, he thinks michael pearson thinks it's more likely withing a mavp as a partner that the deal finally goes through for whatever reason because he's so relentless. when a formal company decides, if they buy shares in a company, when warren will buy shares and no one knows about it and down the road, he might end up buying the whole company and he bought those first shares. >> in fact, sometimes he asks for dispensation from the sec. he has to tell people. >> that alone will make people come in and buy the stock. >> he is buying when no one knows it's in. >> it's interesting. it's a brand new breed of activist investing. i was scratching my ade about it. i am still mulling through everything i think about this. by the way, we also asked ackman if this is a play b.c. for what he will be doing down the road. he said yesterday he received a call from another public company that was offering up a target that it would like him to go after. he says he's not doing it yet. but, yeah, you can bet that's going to be happening, especially what we heard from carl icon yesterday, he said, hey, this looks like a really good way of doing things. you can bet he'll be checking out these things, too. >> having been in this business for a while, i remember when millikin, people used to park stock so people would foe who really owns, so a public company, you didn't know if there were, it doesn't look that different. >> having the stock owned by someone other than the acquiring company. >> i don't know. there is a lot to think through on this. i do have to say, they had a very convincing argument and the idea that khuzami signed up on this, that should make you think about it, too. there is a shareholder brewing atco ka cola. the company's equity compensation plan will be near the top of the agenda, it has been under attack by david winters. his firm has about $101 million of coca-cola shares. we learned he sent a second letter to warren buffet. berkshire hathaway, that letter says the proposed equity plan would could dilute all shareholders by taking up to 16.6% of the value of each share. joining us right now, jason zobotney. thank you very much for joining us today. we really appreciate your time. what do you think about this particular situation, is this a case where you come down with winters or do you think they're right? >> executive compensation is always a big challenge. i think where we end up coming down actually is this is not a make or brick poefl for makers of coca-cola. we think there is merit in both sets of arguments. we don't disclose exactly how we vote on the proxy issues. we think this is not a make or break item oncoka cola. >> on that issue of the dissolution of coca cola shares, winters has been hypercritical. we had him on the show last week. this was his response to what winters has been doing. >> the delusion is much most closer to 1% levels than the 14, 15, 16 numbers floated out there and our new equity program that we have proposed to our share owners in this coming month in april is completely inline with previous equity programs we have implemented in the company. >> jason, what do you think? is this dissolution of 16%? what does it tell you? >> it is much closer to what management says, i think the challenges is they're complicated and a lot of the details aren't fully flushed out. it's much closer to what manage. says. the amount of change compensation is not really that significant. >> so it sound like you are not all that concerned. how did you vote your shares? >> we done disclose how we vote our shares in cases like this. but it's not a really big concern for us. i mean, the exciting part of the coca-cola investment is this is one of the few stocks that significantly lacks the market over the last 12 to 24 hour month was. it's a great business. it's very consistent and at a very attractive valuation. >> you have ten times the shares of winters and you are obviously the seventh largest? >> that's right. it's a big company. this is one of the dominant companies in the world. that's the best thing about it is in good times and bad, they will continue to sell beverages around the world. >> it remind me, what was her name? it's outrageous. remember here? >> come on, you can still be able to own one share. >> you can own one share and go to the annual meeting and get up on the -- i don't, dam close. when you are talking about coca-cola. you get a big. >> it's outrageous. >> you get a big megaphone and he's not a player in the stock. >> what i think is interesting is the math. jason, i'd like to know your math with the number a lot closer to the di lucian to manage. 's numbers than winter's footballs. >> sure, basically, they're looking for you to improve a half a billion shares and from that, every share that gets issued of actual stock removes five shares from that half a billion count. so what you are looking at is potentially 100 become shares or up to 500 million options. so a lot of the calculation differences run from how you view the option and how many options they'll grant. >> okay. you have said, a part of the reason you like the investment thesis in coca-cola is thing to is under valued. what do you think of the management? particularly with muhtar kent? >> i think he is doing a good job. on a global bafts, they excut well. the spec challenges, they are investing very heavily to continue to create more demand for their product we like what they are doing. we think the management skill and the brand is really attractive here. >> what do you think about the thee sis overall, do you agree with any of the points he's brought up? >> we think shareholders being passionate about compensation is an exciting thing. i think shareholders having an important voice making sure it's fair. we think it's important to reward management for their execution. we applaud shareholders when they speak out about something they're passionate about. >> we should be glad at shareholders. i aghee with you completely. let hope that shareholders get as involved as they need to be with forward governance so these clowns that would like to pass laws based on this, so they don't get involved. because it's the shareholders that should be the pun u ones to make the final decision. >> that's why we need to urge them oranges embrace that so the alternatives don't happen where the lawmakers take it into their own hands on compensation issues. they're ready. >> i completely agree, executive compensation in getting it right is one of the most difficult tasks. we think coca-cola is working hard to get a proposal that works. we agree with you, shareholders having a voice is the most important thing. >> jason, i know you don't comment. i will characterize it that you agree with management and you voted? you request correct me if i'm wrong on that. i want to thank you very much for joining us today. >> thank you very much. >> it will be a matter of public record? >> it will be. >> ye. >> by the way, evelynn davis. >> that sound strange. >> outrageous. >> is she still with us? >> i love her up next, we will run lou the morning, is duncan brand getting too big? some say the company may have an overbuilding problem. ding probl. in a world that's changing faster than ever, we believe outshining the competition tomorrow . we help forward-looking companies run better and run different - . . >> welcome back to "squawk box," the futures right now, are they up a little bit? >> the dow. you had dow components. >> they're not up much. >> boeing should have been up. >> procter & gamble up a little bit. >> hold on a second, they earned a dollar four, they beat us by 3 cents, that is down a little. it was up boeing earned $1.76, improved forecast margins up almost $3. dow chemical posted first quarter profits of 79 cents. it's not helping, it's not in the average. it's helping the s&p by 8 cents t. company says its program to improve efficiency. >> that has helped to increase its profit mar jen. so we got six days in a row of s&p going up. so. >> six days in a row for the nasdaq going up. >> so, we'll see whether this is enough stuff coming out at 10:00. coming upping jim cramer from the new york stock exchange, his stuff on bill ackman and valiant, "squawk box" will be right back right back e financial noise financial noise financial noise financial noise . down on the new york stock exchange, jim cramer joins us now. we frame the question like this. i am convinced the way current law is that this is not front running with ackman, people are now saying it's a loophole and the law united to be changed. where are you on this? >> i agree, it's completely, you got policed by the former enforcement director. it's obviously going through. whether we think it's right or not doesn't matter, it's clear the sec can look into it. all they can look into is if someone leaked it. it was obviously a big wale buying, now, perfectly legal, maybe legal isn't right. >> i could even see kramer berkeley. i don't think you could have bought allergaf probably. if someone, a smaller company you thought was under valued, you could go with somebody else and say, look, this thing is so cheap, why done you buy it? you could present it to them. you could have been involved in the operations, isn't that possible to do that? is that front running? >> no, i think that, look, you guys had a fabulous interview, basically, value incentive was fine. they did buy a lot of stock in that period that, window that shouldn't exist. sec shouldn't probably change the law, i don't know what the sec is doing. i do tow that they did nothing wrong it's just if you sold allergaf like you said to these guys, you i think feel you are owed something. but the government can not find for you given the way the law is set up. >> but when buffet starts buying something, i don't know about it. let's say two years down the road, he acquires it, berkshire hath a way, didn't he boy those first shares? he may have known what they were going too do, they know. >> i think we are getting to the pointch even the, there is a story about pete ferrara, guys knew stuff and acted on it. it seems like people have kind of decided maybe these pencer trading rules don't apply. i listened to actman,ingackman. he says the sec isn't going to redo the rules, congress will dedo thing a to stop this. it's obviously not going to be an se controversy enforcement case. they're not going against it. >> i finally came around to your way of thinking. i don't always, i did on the high frequency stuff. if you are making that much money, it's a tax. it's a tax like going into thin air. it's not helping anything. it makes the cost of doing business for someone more than it needs to be. that doesn't make us efficient and low cost providers of things. >> right, at the same time, you look at an sec not focused. the sec is not focused on how to protect the little guy or level the playing feel as much as it is trying to figure out what it is going to do. they don't really know what they should be doing. >> something happened december 31st to herballife. you see, i will show you a year-to-date chart. we did talk to actman, it was up at 85 inter-day at one point. so we're down there. it's been going his way. he says more than half of his losses have gone his way and anyone over all the investigations going on, now abc will do something, talking to a whistleblower and i mean there are a lot of investigations. do you know how this will finally pan out? >> i think in the end, ackman wants to destroy the company. he can destroy it. you can continue with pressure, look, every company makes mistakes. i am sure we can go after coca-cola. ackman, look, he went through all the different investigations that he has going. of course i think some of these could destroy these companies. listen, i don't want this destroying my company. herballife has been defense free here. they haven't been able to make a strong case which is worrisome but i mean ackman told you he has another bunch of attorneys general that will come after it. the authorities love the case because he gives it to them. the authorities love it when you give them a case on a silver platter. ackman probably i don't know has the best justice money can buy. >> yeah. it's not the multilevel marketing can be done in a legit way. you can run a business like that. >> ackman doesn't think so. what does it matter? >> yeah. >> you know, honestly. you can -- look, you can get a lot of mind share. normally in the old days i would have said you can buy anybody you want. i think when you watch what happens to herballife ackman will not stop until it goes to zero. that's a powerful opponent. the government seems to be going his way. herbal life has nothing. what does herbal life have? like a supplement business? >> candy bars are pretty good. >> it doesn't matter. a guy wants destroy a company you can destroy a company if the company can't defend itself because it's squishy. ackman is a powerful opponent and he's making his case and i'm sure there are many more investigations to come. the fbi seems to know all the investigations before they happen. that's terrific. i mean, seems to know everything before it happens but it's legal. you're allowed to know -- allowed to have the paper before it comes out and until someone says that's illegal he's got 100 lawyers checking off on everything. >> yeah. >> he's legal. >> yeah. >> what can i say? i guess legal is different from what we may think is right. >> you got a lot -- >> sounds like everything he's doing is legal. >> you have a lot of gray. >> i do. but that's -- justice is -- justice is fudgeble. >> you're a recovering lawyer, aren't you? >> i know that -- 12 step. >> look, it's up to the government to decide what's legal and illegal. you can get a lawyer to say it's legal. if the government decides it's not pete ferrara decides it's not he has prosecutorial protection. >> the other angle forget about the sec. >> tons of exposure. he has the right lawyers. >> thank you. we will see you in a few minutes. >> when we come back, something may be brewing at dunkin' brands. jane wells joins us with a preview. good morning. >> good morning, becky. are californians ready to have their coffee premixed before they get it? >> dunkin' returning to the state after a dozen years away. one analyst is concerned. should you be? we'll mull that over a cup of joe i don't have in front of me when we come back. but the m-class sees in your blind spot... pulls you back into your lane... even brakes all by itself. it's almost like it couldn't crash... even if it tried. the 2014 m-class. see your authorized dealer for exceptional offers through mercedes-benz financial services. today is wednesday today, we greet you. treat you. care for you. today, you can come to cleveland clinic for anything, everything or just to get that "thing" checked out. big, small, and yes, the best heart care in the nation. it's here everyday, for everyone. that's the power the power, that's the power of today. cleveland clinic. call today, for an appointment today. should investors be concerned about an overexpansion at dunk nk brand. jane wells knows her way around a good doughnut joins us with more. >> thanks, joe. >> you're welcome. >> california has barely gotten over the notion of the waffle taco for breakfast from taco bell. taco bell home grown company. i've had one of those. we await the full return of d k dunkin' doughnuts that left the state because things didn't go well here at the time. there are currently three dunkin's in california including this one at the camp pendleton marine base. 150 planned over the next few years including 20 just announced this morning in orange county in the san fernando valley. dunkin' believes it could have 1,000 stores in the golden state, california, runs on dunkin', well, a shocking report earlier this quarter longbow initiated und perform. and channel checks indicated the rollout in california is running behind. andy berrish isn't buying it. >> i don't agree with those reports at all. i think the pent up demand for the brand and the ability to get real estate is there. california is not an easy place to secure sites but the company doesn't expect openings until 2015 anyway and it will kind of ramp from there. >> barrish says most of the money is coming from franchisees not the company and he's spoken to a few, they're well established, well financed and currently securing real estate. he predicts dunkin' will reports 20% earnings growth despite the harsh winter and will be interested in the new rewards program that dunkin' finally launched. starbucks program has really done well in driving sales. starbucks also reports tomorrow. but there has been at least one hiccup in california. a franchisee reportedly moving into this long beach doughnut shop famous for its pink doughnut sign, was planning to take that doughnut down. well, a facebook campaign to save it and pleas with city hall changed his mind. the doughnut is staying after dunkin' moves in. >> doesn't you cover krispy kreme at one point? you know about doughnuts. >> more than one. >> i know. >> that's what i mean. what did you think i was saying? >> no. any food -- well, i have -- i don't know. maybe i'm getting a little big around the middle, i don't know. maybe a little p 90 x. i'm just saying. >> can i ask you about sir ranch cha chili sauce. >> i will put on doughnuts. i put that on everything. >> this is going home with me. i loved it. i really did. >> not as hot as i thought it was going to be. >> oh. >> wow. becky. >> i don't like hot sauce but i have to say there's a sweetness to this. >> it's good. >> it doesn't burn for a few seconds. >> no. >> it's the new salsa. >> jane, you know, we -- dove did a -- dove got in trouble for calling new jersey like an arm pit or something. you know, that arm pits are pretty nice. if there is an arm pit in southern california you tell me irwindale is not the arm pit of -- it's in between el monte and azusa za and there's all -- they're too good for this sauce? they don't want the business there because of -- >> here's the thing. here's how poorly david tran has managed his pr. that irwindale is giving him a bad time because irwindale never gives anybody -- irwindale gave al davis $10 million which he pocketed and walked away and said thank you very much. >> i know. i know the place. we were going to show a picture. it's -- it's an industrial area. it's not near the ocean. it's not really up close enough to the san gabriels. kind of there. but i thought they had a lot of nerve to say we don't want you, we don't want you here. >> well, you know, they do say that a couple months a year it really is a problem but again, irwindale never says no to anybody so you have to wonder how poorly tran is managing. >> like you too sort of, isn't it? >> like meat? is that what you're saying? >> never said no to anyone. i was kidding. you know how we go back and forth. >> kidding. >> gosh, joe, doughnuts. i don't know. >> come back and get him, jane. >> i need some coffee. >> you know what -- >> i got up early for this show. >> come prepared. come ready to play. >> more coffee next time. >> so to speak. >> you look beautiful. >> you do. you're definitely as hot as we thought. >> thank you, becky. >> as hot as we thought. >> i was thinking she was glowing, beautiful necklace, hair looks perfect. thank you, jane. >> join us tomorrow. right now it's time for "squawk on the street." good wednesday morningp. welcome to "squawk on the street." i'm carl kinquintanilla with ji cramer and david faber. can the s&p go higher seven days in a row? futures suggest it might be a contest. awash in earnings. apple and facebook tonight. watch housing today. new home sales after existing home sales fell to the lowest in 2012p. europe in the red despite the strongest flash
positive, all the qe we take back. we weren't in a recession and won't have needed any of it, which is weird. huffington post -- >> never mind. >> lead story on huffington post is what the i guess the dallas fed figured out what the great contraction, they're calling it, what it cost us, something like 14, $15 trillion. >> wow. >> yeah. in lost wages and everything, take everything into account for the -- and naturally the huffington post points a finger squarely at quality for causing the whole thing. but anyway, let's check on the futures at this hour. yesterday after all was said and done, the averages were -- the dow was unable to hold on to the positive gains that it started with, closed down a point. up 36 points today. the s&p indicated maybe up 4 1/2. s&p is at a level that some people think could be important to make a stand if we want another leg to this rally. there you can see the nasdaq, which is probably a performing better, but doing pretty well since facebook and even though facebook is not a nasdaq stock. >> did you see facebook, where it is, within four cents of where it was -- within four cents of the closing stock price. still at like 37.60 something. >> that was the guy that had a good day on monday. >> yeah. >> the bad guy with a bad day on monday, is the friend you'll talk about right now, bill ackman, with herbalife and the wiener schnitzel had a bad day. >> a lot of bad days. >> i watched it, tmz, for what it's worth, it is pretty cool. they have cameras everywhere. did you see the -- i watched -- >> i didn't see what they got. >> what is leathers, what is her first name? >> sidney or -- >> she has gotten together with david faber, they did the report on the porn guy. ♪ i only got one source. she did get together with the guy he interviewed, the porn king of l.a., and they have a shot of her walking out, getting into a sports car with all of herta t tattoos, she's going toa porn movie and they're going to do the phone sex and everything. >> are you kidding? >> no. this may be the biggest opening of -- speaking of hollywood, adding to gdp, you got to -- everybody, all the economists are raising gdp. this is going to -- would this not be a big hit? huma is taking an extended leave, apparently, did you see that? she's on vacation. the clintons are so po'd at this point. i forgot about -- everybody loves me now and now this comes back and everybody is talking about the blue dress again, right? >> it dropped off. i kind of stopped. can i tell you about other breaking news? >> bigger than that? >> yeah. >> okay. >> are you ready? >> i am. >> listen up, bill ackman's pershing square has taken a 9.8% stake. this is something that cnbc has learned. air products is a $22 billion producer of industrial gases that are used in industries, everything from steel production to food processing to electronics production. this stake, which cost ackman $2.2 billion to acquire, it is the biggest investment pershing has ever made at cost. earlier this month, ackman told investors he built up a major position on a large cap investment grade u.s. corporation and ever since that time, the speculation took off. some were actually speculating that air products might be that company. that stock has risen from the low 90s to above $105 at its close yesterday. $105.61 is where it closed yesterday. last week, air products adopted a poison pill plan. the company cited unusually high volumes of stock trading. this gives existing shareholders the right to accumulate deeply discounted new shares if another group acquires 10% or more of its shares outstanding without board approval. that poison pill prevented ackman from taking a larger stake in air products. yesterday he said -- he zs acknowledge the speculation complicated his plans. he said -- air products major competitors include france's air lockheed, lendy and praxair. he thinks air products is undervalued and has ideas on how to make the company more valuable. he wouldn't elaborate, but a look at his involvement in the canadian pacific railroad, it may be a plaque book for what he plans to do with air products. ackman bought a 14% stake, he then proposed bringing in new management. the board resisted that and ackman brought a proxy contest. he won an overwhelming majority of the vote, something like 90%, ended up garnering 8 out of 14 board seats. and at that point, he did bring a new ceo, an experienced rail executive, hunter harrison, remember that, we talked with him about this. last june was when he brought in harrison. canadian pacific shares soared from $8 billion when ackman first got involved to over $20 billion today. now, in catching up with them, i got the chance to ask him about herbalife too. that's the company that he very publicly shorted. and which just this week reported a much better than expected earnings report. ackman has not publicly commented on herbalife since january of this year, and the stock has continued to climb. what he told me at this point is i haven't covered a single share. ackman wouldn't comment beyond that, but did put out a press release earlier this year laying out his concerns about herbalife's earnings, some thing he pointed out, this is a company that has 18% revenue growth, huge earnings per share growth, that's because they have a lower tax rate, brought back a bunch of the stock. look at the operating income, up 3%. points out in that press release those are not sustainable measures. also, if you look at this, the ten q they restated their balance sheet for 2012, 2011 and 2010. and price water house, their auditors did not review the financials and the company itself does count venezuela as a huge market. they had a big problem trying to exchange bolivars for u.s. dollars. if you're looking at it in terms of what they could bring back, those bolivars to u.s. dollars at this point, it would be 75% less than is reported on their balance sheet for a writedown of $93 million. this will continue. we saw herbal life shares yesterday, up something like 5% or 6% as we were watching in the premarket. by the end of the day, closed down 50 cents. this is still something that they're going to be watching very closely. >> do we know is carl icahn going to short air products? >> i don't know. watching what carl icahn had to say, you can imagine he probably would target this. >> ackman is saying that he sent a letter that sort of indicated -- >> he sent a letter to investors. people track down air products. >> how do they do that? what did he say? bigger than a bread box -- >> it is a an industry very difficult to get into. has high barrier costs, that it has multiple different -- >> and people watch volume and stuff and people figure out what it was. >> there was speculation and stock did rise on the speculation. the company adopted this poison pill plan. >> he thinks it's being mismanaged, undervalued based on -- >> undervalued. didn't -- >> usually what he means. >> look back in his playbook, that hasn't been what he's done in the past. >> sometimes it worked. >> sometimes it worked. this is an interesting arena. there are three other major competitors. >> the guy shook up the jp penney is back in and he brought his guy in for a year and the guy handed out some buttons with pictures on them and now he's gone and the original guy is back. >> you can look at wins and losses. >> hong kong dollar still not tied to -- still is tied to -- i don't know. he's had his -- had some huge home runs. how much has he made in cp? 8 billion to 20. is that the market cap? the market cap of the company. >> the market cap of the whole company over that time period. he's got a lot of money in canadian pacific. this is the biggest bet they have ever done. i want to look at where the stock is right now. >> can't tell. got a big wide -- this is something. we have three hours. we have -- is it really the employment report this week? >> it is. >> wasn't it just -- >> we're just getting older. >> the months are -- and -- >> time is -- >> andrew is back tomorrow. >> yes. >> are you alerting viewers or warning viewers? >> alerting or warning. >> we'll hear from nbc parent comcast also today. mastercard, sodastream, allergen and garmin among others before the bell. we have a few other stocks to watch today. all of these are after the bell movers from last night. amgen initially traded higher, reporting better than expected earnings and revenues and they said it expects full year revenue at the upper end of its range. when it was all said and done, looks like down a little. take two posted a smaller than expected loss on revenues. it beat the street. shares rising on that news. and earnings and revenue at restaurant chain buffalo wild wings topping analysts consensus. and hasn't been a lot of sporting events to watch, that helps, football season, buffalo wild wings, they go hand and hand, right? >> they do. >> and aflac, aflac, the earnings and revenue also surpassed expect takings. did they get a new guy? not gilbert? >> they had the guy, they did find a new guy. talked about it last time. >> a knockoff, cheaper version. the insurance company's guidance was slightly below forecast. see where that stock opens up today. and we'll talk to our friend ann amos, aflac ceo in the next half hour. i think he's doing it himself now in house. >> aflac. >> we didn't get the job. i was pretty close. aflac. that's pretty close, right? >> that's pretty good. >> yeah. going for the annoying -- >> i usually do. >> that worked well. >> yeah. >> did sound like gilbert. let's talk about technology news. facebook stock is close to reclaiming its $38 ipo price for first time since going public last year. the shares have surged more than 40% over the last week after the company came out with the quarterly results that really surprised the street. you can see right now that's trading at $37.87. just about 13 cents shy of the $38 ipo. microsoft is losing money on surface tablets. the annual report shows slow sales have been eclipsed by advertising costs and accounting charge as well. and china mobile says its chairman met with apple ceo tim cook in beijing yesterday. the two are said to have discussed cooperation, but no additional details made available. china mobile is the only chinese carrier not to have a deal with april to apple to sell its iphone and ipad products. auto news, fiat winning a sparbl vict partial victory for a full buyout of chrysler. a u.s. judge accepted the legal positions in two key disputes with an autoworkers health care trust that is a minority, as you know now, after everything. and the judge stopped short of ordering the trust to sell its chrysler stake and the remaining issues will now go to trial. and ford plans to offer a natural gas version of its f-150 pickup truck. >> wow. >> the trucks will have factory installed valves, pistons and rings to handle natural gas and gasoline and the option will cost $315. the buyers will have to pay an installer to put in new fuel tanks, lines and injectors, costing $7500, $9500. ford, general motors and chrysler have natural gas powered heavy duty trucks. it costs the equivalent of $2.11 a gallon. you make it back, but will take time. it is like anything, $3.62 is the average for a gallon of regular gas. we're in a position now where you don't know what comes first, the chicken or the egg, the infrastructure or the cars that need the infrastructure. you'll see more places where you can get it, as more cars can run on it. >> i see more cars that are plugged in lately. >> how beautiful is the way this works, though, now that fracking and now we see it is $2 and now people say $2 -- that's cheaper than $3.62. you can see the free market, the way it will migrate people to using natural gas and all our energy costs will come down asd birthday. how many times do we have to learn names? adam smith first wrote that book, in the 19th century, or 18th century. >> all knowledge is cyclical. >> yeah. then it went away andn brought it back and then went away, the elites kill it. and then milton friedman came along, and now paul krugman and we just learn it over and over and over again. i don't know. >> like everything in life. >> really? >> yeah, pretty much. >> i guess so. >> pendulum swing. >> it does, yeah. it is a dismal science. economics. i agree with half of that. it is dismal. i don't agree with the science. how can both krugman and friedman and people like him win a nobel prize when they're die metically opposed in all of their thinking, which is right. who is right? sorry. but i digress. tune in for that. neat to talk about -- we used to run -- what a perfect foil, phil donahue with his hair and everything, so clueless, and he used to try to go up against milton friedman and the look on his face, remember that video we would run, a cnbc ad, where he's asking those stupid questions and milton friedman buries him and can't do anything but just laugh at the end of it. he hasn't learned anything either. >> how old would he have been today? >> phil donahue? >> no. >> milton friedman. i don't remember. would have been quite a bit -- i think over 100, right? >> i think. i'll look that up. >> we should know since we're celebrating his birthday. the jury in the fabrice tourre case will begin deliberations today. he is accused of secretly helping paulson and company construct a $2 billion deal that it could bet against. he faces penalties and lifetime ban from the securities industry. >> me, i'm looking this up. time for the global markets report. >> 101. >> would have been 101. that's what i thought. and wasn't adam smith 17 -- i think -- anyway, ross westgate is standing by in london. see a little green, see a little red beneath you. what's going on over there, ross? >> well, we're finding it hard to find any momentum. so much event risk in the states with the adp, the second quarter gdp figures and the fed as well. investors don't want to put much in major asset classes. waiting for stocks here, fairly evenly split. bit more weighted to decliners. but the indices are mixed. look at the ftse 100, has been up to the best numbers of the day. the xetra dax is fairly flat. consumer confidence up to the best level for about three years. retail sales down in june. that's the worst for this year. the cac quarante is fairly flat. the ibex is down. away from the headline numbers, we look really at a lot of individual corporate news. and that's where the focus has been today. semens down .2%, confirmed peter loscher, the ceo is gone, he's resigned. that follows second profit warning of the year last week and the cfo is taking over. so that's been confirmed this morning. they also announced today new orders which beat expectations, but net profit came in a little weaker. ab inbev, the biggest beer brewer, second quarter, selling less beer. the maker of budweiser. profit up 5.8%. the market likes that, up 7%. peugeot doing well, up 7% as well. cut its net loss, still not making any money but cut its net loss by half in the first six months of the year. trying to reduce its burden of cash by half as well. and they have better news yesterday, the european commission and the financial assistance that france gave peugeot doesn't conflict with rules. they're also starting to bend their lines for gm. and diageo, 2.68%, the global spiritsmaker downgrading, suggesting we may be hard to maintain double digit growth in sales in emerging markets. but did have a 5% rise in net sales, the fiscal year, increased dividend by 9%. and really where they're benefitting from, of course, is better sales in the u.s. really switching their marketing spend, up their marketing spend for a year and a lot more of that is going into the u.s. a focus of global companies saying the marginal change in growth is coming from the states rather than elsewhere. they're putting more tension into that. that's where we stand with the individual news at the moment. elsewhere, pretty steady and unchanged ahead of all the u.s. data and fed we have coming up. back to you guys. >> ross, thank you very much. i'm glad you brought up diageo. we'll focus on that next. as ross mentioned, rising liquor consumption in the united states boosting diageo's full year results. we'll talk to one of the company's top executives right after this. let's get the national weather forecast from the weather channel's alex wallace. crisp, beautiful day yesterday. kudos. kudos. >> you are welcome. you are welcome. you can't blame if he mee for wh -- me for what is to come, though. right now, not so great in the south, rain impacting us in and around atlanta after a couple of dry days. rain this morning. we'll keep things unsettled for us, thanks to a cold front trying to move into parts of the south. ahead of it, showers and storms we'll see coming back into charlotte, charleston, back down to north florida as well. now, while all that is going on, several different cold fronts continuing to slide through parts of the midwest. and has kept us a bit on the cool side over the last several days. we'll keep that going over the next few. through at least the late part of the week, high temperatures here for us for the upper midwest and great lakes. a bit below average by anywhere from 5 to 10 degrees. today, temperatures, look at that 74, marquette. cincinnati, 76 degrees. not bad at all. in the northeast, after your great last few days, cold front will be marching in towards the east coast cities. out ahead of it, moisture flowing northward. a threat for storms coming in, not for today, i think today will be your last day. boston, new york, down towards philly, but tomorrow, those thunderstorms will return, potential for some heavy downpours out there. hope you enjoyed it. thanks will be moving downhill for the megalopolis. back to you. >> will it clear up by the weekend? >> weekend, yeah. half the weekend i would say looking pretty good out there for you. doesn't look like it will be a washout. i'll say that. >> you started with atlanta. if someone were going to be in the general vicinity of the south, this weekend, how is that looking? >> it is going to be one of those weekends where it doesn't look like it is going to be a widespread rain event, but we'll watch for some storms afternoon activity, typical for early august. >> it is. it is not like here because it rains and then it is gone. and it almost cools things, they come in and never really just rains and rains and rains. it, like, they come in and go, they come and go and then sunny and yeah. >> exactly. got to be prepared. >> just do. yeah. if you're in a bathing suit, doesn't really -- >> wet anyway. >> exactly. all right. >> thanks, alex. >> you bet. diageo is out with full year earnings. brands include johnny walker whiskey, smirnoff vodka and guinness stout. there was double digit growth in emerging markets, but sales in western europe continue to be a little bit of a problem spot. joining us is diageo's new ceo, ivan menezez. thank you for joining us this morning. it looked like your results came in and strong results because of demand in the united states and north america for high end spirits. can you tell us a little bit about that? >> sure. overall results was strong, both in north america and the emerging markets. we expanded margins and delivered good cash flow. north america is a real engine of growth for us. this market has great characteristics for premium spirits brands. and as you saw, total sales 5%, we grew our profits 9%. strong margin expansion. and it was driven by the performance of our top end, our reserve brands. these would be brands above johnny walker black label are growing double digit. crown royal grew 17%. now this is happening because the demographics and the economic conditions in the u.s. are very positive for our category. and we see spirits taking share of beverage alcohol on a sustained basis. we have done it for 15 years. and i expect it to continue. so that's a real strength for the company. over 40% of our profits. and that -- in an uneven world where market goes up and down, it is wonderful to have this bastion of strength at diageo. >> can you tell us how long that trend has been continuing? i guess you can see at least some emergence from a downturn in the economy here. how steady has that been and when did it begin? >> well, in the spirits category, it is actually been pretty secular trend. and what is behind it, becky, you have the demographic of america are very attractive. we have a million americans turning 21 every year. the multicultural composition of america is very positive for premium spirits brands. taste profiles and the social trends, the cocktail culture is alive. we have got whiskey performing very well, total whiskey business is up double digit. johnny walker is growing double digit. and so this trend has been going on for a while. i see it as sustained. and it is just americans want to drink better into cocktails and what better experience. and i expect that to continue. >> now, we did mention that the emerging markets were at the double digits. some people categorized that or looked at that and classified that as a little bit disappointing, that is not the same growth you've seen in the past. can you talk a little bit about that. >> sure. in the past year, if you look around the world, we have had some markets that have been more troubled. brazil is slower. nigeria is slower for us. india and china slowed a bit. on the other hand, mexico is amazingly strong. south africa is really strong. southeast asia markets like thailand and vietnam very strong. so we have traditionally grown double digits in the emerging markets. the prior two years would have been 14%, 15%. this last year, even with the downdrafts we have grown at 11% and we have grown profits there at 18%. >> when it comes to europe, still a problem spot? >> europe is a mixed picture. i would say southern europe, which used to be a big piece of our business, is still under pressure. it is now a much smaller piece of our business. places like spain, italy, greece, just not enough spending power. you got unemployment at 25%. people are not going out. they don't have the money in their pockets. now that is getting a smaller and smaller part. if i look at germany, we're growing double digit. our reserve brands, the high end of our portfolio in western europe grew 11%. even in the tough times. so it is a mixed picture. i expect our performance to improve over the years. things have stabilized. and we are driving the pockets of growth more strongly and playing to our strength. >> you say that the southern europe is becoming a smaller part of your portfolio, is that because you're pulling out of the markets or because the sales have dropped off so sharply? >> a combination of that and the growth in the rest of the world. if you went back many years, southern europe would have been 10% of our company. it is now 3%. >> wow. >> happenfulily say that. it is a good thing. as you look at the mix of our business, in terms of we are getting 42% of the emerging markets of our sales, north america is about a third. that shift in our balance towards the higher growth markets really gives us the confidence that we can be one of the best performing consumer product companies in terms of top line growth and margin expansion on a sustained basis. >> ivan, thank you very much for joining us this morning. >> thank you. coming up, more on bill ackman, talking to becky, putting an end to speculation and revealing his firm's largest ever investment. and thoughts on his much talked about -- is had herbalife or herbalife? why use the h? >> herbalife, right? >> i think it is herbalife, but herbs, and herb greenberg -- >> i call it -- that confuses me because -- >> i know. it is confusing. first, though, he got his start in business with a little help from donald trump. now the winner of the first season of the apprentice -- oh, my god. oh, my god! bill rancic! how are you? bill rancic joins us on the set next. you're like a big star. a quarter million tweeters musicare tweeting.eamed. and 900 million dollars are changing hands online. that's why the internet needs a new kind of server. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this ...is going to be big. it's time to build a better enterprise. together. to appreciate our powerful, easy-to-use platform. no, thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. hey ray, my uncle wanted to say thanks for idea hub. o well tell him i said you're welcome. he loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. yea, and these ideas are across the board -- bullish, bearish and neutral. i think you need a bigger desk, pal. another one? traders love our trading patterns, now with options patterns. what's not to love? they see what others are trading -- like the day's 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 that's all about options and futures. optionsxpress. open an account today and get a $150 amazon.com gift card when you call 1-888-280-0154 now. optionsxpress by charles schwab. welcome back. news we broke in the last half hour of "squawk box," bill ackman's pershing square has taken a stake in air problems and chemicals. something that cnbc learned and that stake cost him $2.2 billion to acquire. it is the biggest investment that pershing square ever made at cost. earlier this month, ackman told investors he had built up a major position in a large cap investment grade u.s. corporation. giving enough hints away that people started speculating, trying to figure out what company it was. air products was one of the companies that people speculated it could be. in fact, since then the stock has risen from the low 90s to close above $105 yesterday. last week, air products actually adopted a poison pill plan, cited unusually high volumes of stock trading. that prevented ackman from taking an even larger stake in air products. in speaking with ackman, he says i was a little too cute in my letter to investors, i didn't expect people to be running around looking for the company. i think it alerted the market. he also acknowledged that speculation had complicated a plan his plans a little bit. he said it made the stock more liquid, so it allowed us to buy 10% of the company, but we would have bought more if they hadn't put in the poison pill. he commented on herbalife, the company he publicly shorted and which reported a much better than expected earnings number coming out this week. ackman has not publicly commented on herbalife since january of this year, as the stock has continued to climb. this is what he had to say about this. i haven't covered a single share. ackman wouldn't comment beyond that, but put out a press release that laid out his concerns about herbalife's most recent earnings report citing the growth of 18% when it came to revenue. huge earnings per share growth, but operating income only up 3%. he said below tax rate and the company bought up a lot of stock, those are not sustainable. and also pointed to some things the company had to do, restating their balance sheets for 2010, '11 and '12 and pointed out that pricewaterhousecoopers did not go over those financials. >> i used to think, you know, herbalife, i followed it for -- used to live in l.a., you fly over the airport, you see the herbalife, the founder, i never knew what to think of it. then they sent me some stuff. no different than the powder -- probably as good as any of that that you buy at gnc. that's a viable business and people use it. you can make it out of whey or whatever. >> it is the way it is marketed and how they do -- we had the ceo on and asked him questions and he doesn't give you too much guidance. ackman says it is a pyramid scheme. >> got me with the candy bars. i would buy these. i don't know if i -- >> have you? >> i haven't bought any. i would have to go, like, a member of the cult to get some, right? they scare me, those people that are -- you have to join scientology or something? >> it is not like that. >> shouldn't say anything about scientology. our next guest is well known to tv viewers, bill rancic the winner of donald trump's first season of "the apprentice," now teaming up with intuit to launch a small business, big game, you got a reality show. you're -- i saw you, that was not acting. i mean, i saw you, i was like holy -- >> you're in studio with us. >> good to be here. >> this is so timely and don't get me started on small business. because here we are, 7.5% unemployment, five years after a recession. every big business we know of started as what? >> small business. >> see? that's why he's so good. but -- >> what is shocking is i don't think most people realize is that small business is what employs most of america. >> the engine. >> yeah. >> people think, entrepreneurs are a bunch of rich people. three out of four times they fail and they make an average of $50,000 a year. it is the whole -- if obama, president obama, sorry, if he wants to help the middle class, you got to help small businesses. and just this latest thing, the -- cutting the corporate rate on big businesses to 28, but leaving small businesses at the individual rate of 40%. not even thinking -- not even seeing that you need overall tax reform. >> it is the backbone of america. what made america the greatest country in the world. it is pretty cool. we're actually calling all small businesses to go to smallbusinessbiggame.com and we'll look at all the businesses and in the end one small business is going to get a fully paid, fully produced commercial to run during the biggest football game in the world. that's right, the super bowl. >> really? >> yeah. >> that's an opportunity of a lifetime. i commend brad smith, the ceo, for intuit because a lot of businesses say they're supporting small business but this guy is walking what he talks. >> what are the qualifications for the small businesss? what do they look like? >> financially sound, have to have 50 employees or less, if they go to the website, there is a whole list of rules and things, but essentially you have to be a small business owner. don't have to be a customer of intuit. so we're calling on anyone who wants to -- >> this goes all the way back to the apprentice stuff. you've been involved in -- >> right. >> business ventures ever since. >> even before the apprentice, i was a small business owner and mr. trump hired me on and that was ten years ago and i give him all the credit. if it wasn't for him, i wouldn't be here today. >> i'm trying to imagine a small business that could handle the demand that might come in. >> that's the great thing. we're not going to just feed them to the lions. the small business who is the winner at the end, we're going to arm them with all the tools. intuit will supply them with consultants and we'll prepare them. >> the website will be up and ready to go with extra servers? >> i compare it to like oprah's, you know, greatest things times 100. you think about the viewership of the super bowl, so it is going to change the life of one small business owner and really all of them. we're going to shine the light on the importance of small business like we're doing here this morning. >> marcus lemonis is this guy, we just launched a new show last night called "the profit". >> i saw it. i watched it. >> awesome. $2 million he's put into the -- can he win? this could be a like a cnbc intuit bill rancic -- i'm sure -- >> it just occurred to me that that car company, on the super bowl -- >> he uses a lot of tough love. >> yeah. he was on "the apprentice" at one point. maybe he needs to say you're fired. did you see the guy with the hat? >> i did. the two together. >> first thing i would have said is lose the hat. that's my first -- i own the company now, get rid -- you look ridiculous. take the hat off. he didn't do that. >> he did not. >> that was cut. >> editing room floor. >> this is good. >> what is the state of small business today? you've been watching this for a long time, has it gotten more complicated, more difficult after the recession? >> i think it is tough. it is harder for the small business owner to get money. the people who need the money can't get it. it is starting to loosen up a little bit. i think people are now moring could -- more cognizant, the money stays in the community, it helps build the community and people are enlightened a little bit more than they were over the last five years, because companies like intuit are shining light on the importance of the small business owner. i'm bullish. i think a lot of young kids are coming out of college now and saying, wait a minute, i can do this on my own. i don't need to go and work in corporate america. and i think that's great. that entrepreneurial spirit is now finally starting to come back. >> the most important thing, we need to do, you know, we need to do more in terms of making it easier for small business to succeed. >> it starts at the top. like you said earlier. got to incentivize them and -- >> we keep hearing 98% of them, i don't know. both sides have a reason to ignore small business. i don't really understand what it is. it really does -- every large company started as a small business. >> right. >> trying to think of -- now i'm thinking about reality programming. we got you here. and we are doing it at night. i'm trying to to think ofhink o use rancic. >> count me in. >> how long will this run during the day? the show you have now? >> the julianna and bill show? >> yeah. >> we'll see. we're the longest running most successful show in the history of the style network, which is part of this family. >> how long is this? >> seven years in. seven seasons in. seven seasons. so we'll see. >> so that's weird, though, your life. is it -- >> i'm the executive producer of the show. so -- >> is the camera always running? >> no. no, no. not like the old days. >> think of anthony weiner always had a camera on him. >> i love -- if you follow donald on twitter, i love his tweets about anthony weiner. >> think if he was a reality -- you know, i'm thinking ratings there too. >> he would pull major ratings. if he wins this thing, which he's in fourth place now, i mean, it is just -- >> you saw, what's her name? >> a better chance of winning the lottery, i think. >> flowers, or feathers. >> the sexting partner? >> yeah. leathers. >> she just met with -- >> steve hirsh. >> see, he's hip to what i'm talking about. >> cash in on this. >> yes, she is. >> no, dummy. >> she could be a small business owner. >> think of the names you could come up with for -- we got to get the post to help us, the name for weiner's reality show. think about that. will you think about that? >> i will definitely -- >> you got a lot to think about. another reality show for small business on cnbc or something and then whether intuit can back our boy lemonis. >> i'll do my homework. >> say hi to your wife. >> congrats on the son. 11 months, right? >> 11 months. 25 pounds. >> is he really? >> he's either going to be a concert pianist or wide receiver. his hands, i mean, they're giant. >> really? >> yeah. >> that's nice. good. that's awesome. or a small business guy. >> thanks, guys. >> thank you. when we come back, aflac's earnings and revenues surpassing expectations. we'll talk to the insurance company ceo right after this. "squawk box" will be right back. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ welcome back, everybody. aflac reporting better than expected profits thanks to stronger premium growth in japan. but the life insurer forecast for the next quarter are falling short of expectations. dan amos is aflac's chairman and ceo. thank you for being with us this morning. >> thank you, becky. my pleasure. >> you know, your earnings for the last quarter were stronger than had been expected, but the guidance is what the street is really focusing on. why are you bringing those numbers down below what the street had anticipated. what are you seeing? >> it is a luxury we have because earnings were so strong, we want to prepare for to prepa beyond and with changes in different areas of the world, especially with the post and what we made at announcement of, we're going to be spending more money on that. and then with health care, the affordable act, we are preparing and training our agents. we have the luxury of doing that and so we're going to do that that the second half. that ultimately means we're going to chaef oachieve our tar operating earnings per share. >> when you say you have to prepare and train your agents for the affordable care act, what do you have to get ready for? how complicated is it? >> well, for example, the exchanges that are out there, we want to have our own exchange and the opportunity to do that. we're not going to let our agents go out and use the exchange till they totally understand it. so it just takes time to go through that process. but the big thing is japan post which we announced on friday. most people don't realize that japan's post has -- is the world's largest insurance company with over a trillion in assets. >> wow. >> and the largest employer in japan. they're going to be selling for us. that's a real game changer for us. we are very excited about that. and think it offers wonderful opportunities for us in the future. >> obviously you have a lot of business in japan. you have for a long time. the yen was down about 19% over the quarter versus the dollar. that obviously poses a big head wind. do you expect that trend to continue? >> you know, i've always learned it's hard to predict. earnings excluding yen was up about almost 15% and the yen weakened about 15%. it was about a break even. i think around 100 yen to the dollar is probably the area it ought to stay in. as soon as i say that it will change. i think it's in this area and it's probably where it should stay. >> in terms of investment gains, you did see outsized investment gains. what have you been able to see in the market an just where has that strength been coming from? >> well, i think we're going to continue to see strength, you know, as interest rates have moved higher, ultimately that helps our operating income, so we feel very good about our investments. as you know, we revamped our investment department two years ago with eric hersch. he's doing an outstanding job for us and creating ability to be agile and adjust to the marketplace when things are taking place. and so i feel very good about what we're doing in that area. >> dan, thank you. we'd love to have you back to talk more about japan soon. >> love to. thank you. our lineup of corporate executives continues on "squawk box." brian roberts, comcast's boss. including the es and rx. ♪ this is the pursuit of perfection. ♪ peace of mind is important when so we provide it services you bucan rely on. with centurylink as your trusted it partner, you'll experience reliable uptime for the network and services you depend on. multi-layered security solutions keep your information safe, and secure. and responsive dedicated support meets your needs, and eases your mind. centurylink. your link to what's next. you know it even after all these years. but your erectile dysfunction - you know,that could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph, like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. [ male announcer ] come to the lexus golden opportunity sales event and choose from one of five lexus hybrids that's right for you, including the lexus es and ct hybrids. ♪ this is the pursuit of perfection. still to come on "squawk box," the final trading day of the month, also, the adp report and the first read on second quarter gdp. to have all our messages in one place. to browse... and share... faster than ever. ♪ it's time to do everything better than before. the new blackberry q10. it's time. the new blackberry q10. i've been doing a few things for playing this and trading.ove-- tdd#: 1-800-345-2550 and the better i am at them, the more i enjoy them. tdd#: 1-800-345-2550 so i'm always looking to take them up a notch or two. tdd#: 1-800-345-2550 and schwab really helps me step up my trading. tdd#: 1-800-345-2550 they've now put their most powerful platform, tdd#: 1-800-345-2550 streetsmart edge, in the cloud. tdd#: 1-800-345-2550 so i can use it on the web, where i trade from tdd#: 1-800-345-2550 most of the time. tdd#: 1-800-345-2550 which means i get schwab's most advanced tools tdd#: 1-800-345-2550 on whatever computer i'm on. tdd#: 1-800-345-2550 it's really taken my trading to the next level. tdd#: 1-800-345-2550 i've also got a dedicated team of schwab trading specialists. tdd#: 1-800-345-2550 they helped me set up my platform the way i wanted, tdd#: 1-800-345-2550 from the comfort of my home. tdd#: 1-800-345-2550 and we talked about ideas and strategies, one on one! tdd#: 1-800-345-2550 really gave my trading a boost. tdd#: 1-800-345-2550 all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 after all, i'm in this to win, right? tdd#: 1-800-345-2550 open a schwab account and learn how you can earn up to 300 tdd#: 1-800-345-2550 commission-free online trades for 6 months tdd#: 1-800-345-2550 with qualifying net deposits. tdd#: 1-800-345-2550 call 1-888-254-2600 today. tdd#: 1-800-345-2550 good morning, welcome back to "squawk box." we've been watching the futures. dow futures up by 3 points, s&p futures up by just over 4 after a mixed day for the markets yesterday, although the nasdaq did close at its highest level in 13 days yesterday. that index is indicated higher as well. in our headlines we've been looking through a lot of things, including earnings that are just hitting the wires from comcast. >> from comcast, the mother ship. that's the new mother ship. comcast is reporting 65 cents a share in the second quarter. the estimate was 63 cents. it's 2 cents above and it's up 30% from a year ago figure. before the results came out, there was a lot of conjecture about revenue and whether it would hit expectations. a lot of the wire service is saying that people in the last couple of quarters were, i don't know, somehow disappointed although the revenue number was good. in this case, revenue is up sharply, up 8%. i'm sorry, up 7%. just 16.3 billion. 16.3 billion, which is above the estimate which was 16 billion. when you talk about comcast and the consolidated results, with a lot of cable companies you talk about cash flow and consolidated cash flow. most of these metrics are well above expectations. free cash flow, total consolidated up 25.4%. that is a record for the second quarter at 1.95 billion. the estimate was 1.76. and total consolidated operating cash flow, up 8.4% to $5.4 billion. one thing that has been known and it's just been rumored that the cable business was going great, not just comcast but all of the cable players, that is illustrated here, but also the company is highlighting a lot of nbc universal highlights in what it's calling steady progress. at nbc, because revenues, nbc universal revenue up almost 9%, 8.9% to 6 billion. there was revenue growth in every business. film and entertainment was a pretty good turnaround as well, too. with "fast and furious" and "les miserables." did you see it. >> i did. >> i love the musicals. >> was it in english? >> yes. >> theme parks, there was a shift in holidays. that's been a bright spot for the company. we don't want to beat a dead horse. we'll talk to brian roberts at 7:30 about the comcast results, both on the cable side and the -- we had an up-front number out yesterday as well. i think it was 2.1 billion or so. we'll see how that was. and then you know, you've got all the stuff between cnbc and time warner to talk about. let's say steve burke says to brian roberts we are going to charge you more for bravo. how much do you want? we're thinking this. he says, no. brian might say, hit me, let's do it. then it goes to nbc. >> it all flows back. >> we'll ask him about that as well. >> he'll be joining us at 7:30 eastern time. let's talk more about the headlines this morning. the fed is set to release a policy statement at 2:00 p.m. eastern today. the dow, the s&p 500 have had relatively little movement over the past week or so. the dow was down by less than two points. it's because everybody is waiting to see what the fed might say and its market impact. we'll have more on that in just a moment. plenty of economic numbers for investors to start considering ahead of that fed meeting. a little over an hour from now we get the july adp report, a measure of private sector job growth. it gives us some insight potentially on what to expect on friday. when we get the jobs number from the government. at this point, the economists are looking for a number that is right around 183,000 new private sector jobs for the month. also coming up at 8:30 eastern time, the first look at second quarter gdp. consensus forecast are calling for annual growth, a rate of 0.9%. we'll have more on that. plus, cnbc learned that bill ackman's pershing square. that's a $22 billion producer of gases used in industry. that stake is the biggest investment pershing has ever made at cost. ackman told investors in a letter that he built up a large position. some had speculated that air products might be that company. air products stock has rizen from the lows in the 90s to close above $105 yesterday in part because of that speculation. you can see in the premarket it is up, trading at $109. just last week, air products adopted a poison pill plan, citing unusually high volumes of stock trading. the plan gives existing shareholders the right to accumulate deeply discounted new shares if another group would acquire 10% or more of the shares outstanding without board approval. that poison pill prevented ackman from taking a larger stake in air products. he says i was too cute in my letter to investors. i didn't expect people to be running around looking for the company. he says he thinks air products is undervalued and he has ideas on how to make that company more valuable but he wouldn't elaborate on the plans. he did comment on herbalife. ackman has not publicly said anything about herbalive since january of this year as the stock continued to climb. he tells us at this point that i haven't covered a single share. now, while the street's knee jerk reaction to its earnings this week was to run the stock up by more than 5.5%, the stock ended down by about 50 cents yesterday. for more, go to cnbc.com where you will find our newsmaker interviews on demand. we have a lot, the fed, adp, gdp all on the calendar today. here with us for the next half hour of allen. we also have ed keon. ed will tell us how to use the knowledge in our for tportfolio. what are we going to get on gdp? >> it's a weak number. it's all about the second half next year. and whether the economy will lift up, the unemployment rate will come down. >> the even though it may be under 1%, i don't know if it will, if you think it will be under 1% gdp. >> 1.2. >> this is not indicative of a swoon, according to everyone. it will snap right back. there's some one-items in here like an earnings report. >> i hate to do this but i don't think we should look too much at gdp. it's not a good indicator of the economy or a good indicator if you're looking at the stock market. >> some people think the stock market is a better encater of the economy. >> the stock market has a much bigger effect on the economy than most people think. what it is, the federal government purchases in real terms, which is about 7.5% of the real gdp. we have built in spending cuts as far as the eye can see, they're going to stay. we may change the sequester around some in washington. it's going to stay. and the government is shrinking as part of the economy. i think that's a good thing. i think you should look -- need to look at the private sector which is largely consumption in housing. later this year, business and capital spending. that numbers looks good. >> what's your number for unemployment. >> we're a little south of the consensus. i think it's lively out in the leisure, hospitality, services area, where the so-called low-paying jobs. those people earn money and spend money. the fundamentals around the consumer are getting better, i think. >> you know what to do with that info? >> buy stocks. >> yes? >> we're overweight, equities have been for quite a time. we continue to think that's the right long-term play i think overweight stocks, underweight bonds be that's been our position for quite a while. that's what we're sticking with. >> what are your favorite sec r sectors, some individual names. >> we're looking broadly. we are heavily overheat, the united states, for example, compared to the rest of the world. the u.s. story is compelling and there are issues we would like to see resolution of before we get more excited about the markets. >> do you like tech? >> i think you want to have exposure to kind of the higher beta stocks, parts of the stock market if you like the mark net general. >> does that mean we're early in the move then? it seems like we might be late. >> i think it has a way to run. the key is going to be the economy. i do believe the private sector is in much better shape, the gdp numbers are really influenced by this huge amount of fiscal drag and a huge tax increase we had to start the year. as the negative effects of that start to wear off through this year into next year, i think we'll see strong growth. >> weren't those offset by the fed? that's why i have a problem about the article and the stock market. certainly you couldn't tell 50% of the country that, hey, things are going great. what are you talking about things are hard for you? the stock market's up. what are you whining about? the stock market only helps certain people. >> there's a dichotomy there. a difference between main street and wall street. you know, companies are run to maximize shareholder value. that means maximize the share price. sectors are paid a lot of money to make that happen. they're very smart in doing that. you see it in all the earnings reports that you're showing. better than expected, that's not so much the case. the case is year-over-year. you keep the head couldn't the down. if you have a chance to substitute capital for people, you do that. >> eventually you have to if demand picks up. >> you need to produce more but these days you do it with machines. >> i can see how policymakers would hear what you just said and figure out a way to induce companies to do it then, which might not be the best thing when competing globally. >> they might do that. this mantra of shareholder value is engrained in our society. it ensures we get what we're seeing. >> does the fed get credit for raising asset prices in the stock market? and is that a real indicator that the economy is better or just an indicator that the fed has been really active? >> for me, the fed gets credit. for this inventive quantitative easing which i think has worked in the united states. we see it in the data. >> you don't care how it happened, do you? >> well, i think the key to the fed in my view right now is not so much whether they taper, what month they taper, when they end qe. the potential is in the real economy in the form of reserves. that money will eventually be loaned out and find its way into the real economy, even after the fed has stopped qe completely. i think if credit availability gets a little better next year, which there is a good reason to think it might, you combine that with strong growth in autos and the housing sector. the car rental companies ran out of cars when i was in chicago last week. it also suggests that maybe businesses are finding themselves with a lack of capacity, whether it's physical plant in equipment, whether it's people. that's when jobs will come back, when the shortages are strong enough that businesses need to have people to create that profit maximumization. we're not quite there yet in terms of getting momentum going but i wouldn't be at all surprised if that happens. >> i think jobs will be better but we're not going to see anything like the old days unless we get very, very rapid growth, which isn't in the cards. the stock market will do very, very well. and then we'll just see if those trickle down to the rest of the way. but i think to count on big-time jobs growth, it just isn't in the cards. >> i was thinking maybe the president should consider reinstating those payroll cuts as a way of helping the middle class. that was a big increase to start the year. that's the tax cut that puts more money into average people. every working person would benefit as opposed to some of the other tax cuts under consideration. >> thank you, allen, you'll be around for our next segment. we'll get back to whether we should thank the fed or fire the fed. i don't know. >> those are good questions. we should talk about both of those. >> when we come back, we'll be talking about mortgage rates. they've been creeping up slightly over the past week. economic news today. and fed speak this afternoon could change that. we speak to the ceo of the mortgage bankers association on whether now is the time to refi. also as we head to a break, check out shares of comcast. ceo brian roberts will join us to talk about the company's quarterly results. "squawk box" will be right back. this summer was definitely worth the wait. ♪ summer's best event from cadillac. let summer try and pass you by. lease this all-new cadillac xts for around $399 per month or purchase for 0% apr for 60 months. come in now for the best offers of the model year. welcome back, everybody. mortgage applications fell by 4.3% last week. the average 30-year mortgage rate is 4.58%. that is still near two-year highs. joining me is president stevens. >> you have been talk about quantitative easing. the interesting thing to look at is interest rates are up 1 full percent over two months ago. when you look at the that increase, that's without pullback. it's merely based on comments made by the fed chairman. we have yet to really know where interest rates are ultimately going to level once quantitative easing happens. a lot of this is a bit overlaid with emotional reaction based on betting on the future. our forecast is rates should level over lower than where we are today by year end. a lot of this is uncertain because what the fed says moves the markets dramatically. rates are clearly up and mortgage applications are down. and quite frankly we saw home sales drop a little bit last month -- this month over last month. some of this impact is already happening and i think more of it is driven by emotion than actual reality because the fed is still buying. >> you think this is a short-term shock to the system? >> we forecasted all along the rates would rise. that's a reality. the fed has created enormous -- a short in the market which has kept rates low for many americans. the question is where is the real level here? because you know, you hear the chairman speak as we heard a month ago and rates moved dramatically over a couple day period there. again, there's been no pullback yet on qe. you've been talking about it all morning, when are they going to slow down purchases? we have yet to see that real impact. so what's the real normal for interest rates? we think it's around 4.5% by year end. but again, that's taking emotion out of the market. >> how about you, what do you think? >> i think historically what happens in business cycles, demand comes on, interest rates rise as a derivative of that and housing keeps going up. my question for david is what's going on on the demand side. i know the refi stuff will soften because of the bump-up in rates. you get more wealth for the housing sector. they buy more houses. >> you've been commenting here for a while about main street versus wall street and how does unemployment ultimately affect consumer demand and those variables. those are the same things we look at. we saw 1.2% drop in new purchase applications. month over month. we think some of that is emotion driven. people see interest rates rise. they slow down a little bit of that eagerness to jump into the market. overall, i think the trend is for us from our perspective, we expect home price appreciation to continue ranging somewhere between 4.5% and 5% this year and increasing a little bit next year. we expect demand to continue on the purchase side. you know, inside all these numbers we've seen a 50% drop in refinance activity overall from just a month ago in the marketplace. but home purchase mortgage volume is up about 5%. so what we're in right now is this anomaly of waiting to determine what really the fed impact is going to be on interest rates and how that's ultimately going to affect home ownership demand. the last thing i'll say, 4.5% interest rates for 4.58, the rate we're recording now is still below where rates were a couple years ago when h.a.r.p. was implemented. we're in a low interest rate environment and rising rates is the sign of a healthier economy. all of this plays together that we're in a bit of a wait and see mode. >> how much does somebody have to put down today to get a mortgage? are we talking 20% for most people, is it more? >> if you do an fha loan, obviously it's 3.5% down payment. that's limited by loan amounts. those loan amounts will come down at the end of the year. and the conventional space you can do 5% down financing. you need very, very good credit. in the jumbo market it's about 20% or 25% for the high end of the market. >> okay. >> wow. >> david, thank you very much for joining us. i'm sure we'll be talking to you again soon. >> you bet. >> allen, thank you for joining us this morning and giving us the insight. >> happy birthday, milton. >> fire the fed or not? >> no. i think quantitative easing is actually working, has worked in the united states. it's working in japan. and if you light up the inners of the cyclical mechanisms and economy, here it's happening, housing prices are up, the stock market is up, wealth is building, people will realize capital gains. you get the mechanisms going to become self-sustaining. some people call that a liftoff and the quantitative easing has done its job, then they need to start to take that out. that is tough. that is tough. markets will react and leap around every time they do that. it's uncharted territory, we have no history. >> what we've seen, this is just the beginning of the moves? >> oh, sure. yes. we're talking about a three, four-year process, two parts to it. first part is slowing down the rate of purchases, then that stops. and then someday we'll raise interest rates, they're saying 2015. that's a lot of time for the economy to do better. that's a lot of time for revenues and earnings to grow. that's a lot of time for the stock market to have a very good run. >> is there a scenario you could come up with if you wanted to be negative, by when it was all said and done it was a net negative we didn't or do we already know it was a net positive qe? >> i think it's a net positive. >> no matter what. it's not going to end badly? >> i can never say no matter what. lots of things happen that co-mingle with it. you can't separate it out. >> the easy monetary policy we had before the financial crisis was a net negative, right? >> yes. >> we didn't benefit from that? >> the way we've dealt with this is controversial in japan, china now, we're not through with the whole episode, i think it is working. one of mechanisms is financial asset prices. >> allen, thank you. when we come back, we have a preview of today's big gdp report and what to make of those numbers, plus, the ceo of comcast. we are celebrating the life of milton freedman. he would have been 101 years old today. we'll speak to the ceo of the foundation that carries on his legacy. "squawk box" will be right back. no, thank you. we know you're always looking for the best fill price. and walk limit automatically tries to find it for you. just set your start and end price. and let it do its thing. wow, more fan mail. hey ray, my uncle wanted to say thanks for idea hub. o well tell him i said you're welcome. he loves how he can click on it and get specific actionable trade ideas with their probabilities throughout the day. yea, and these ideas are across the board -- bullish, bearish and neutral. i think you need a bigger desk, pal. another one? traders love our trading patterns, now with options patterns. what's not to love? they see what others are trading -- like the day's 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 that's all about options and futures. optionsxpress. open an account today and get a $150 amazon.com gift card when you call 1-888-280-0154 now. optionsxpress by charles schwab. a talking car. but i'll tell you what impresses me. a talking train. this ge locomotive can tell you exactly where it is, what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. it's 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, everyone's 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. ♪ up next, the ceo of comcast, brian report eoberts joins us t about the stock price. and later this morning, celebrating the legacy of milton friedman, the ceo of the friedman foundation for educational choice will join us. "squawk box" will be right back. could save you fifteen percent or more on car insurance. mmmhmmm...everybody knows that. well, did you know that old macdonald was a really bad speller? your word is...cow. cow. cow. c...o...w... ...e...i...e...i...o. [buzzer] dangnabbit. geico. fifteen minutes could save you...well, you know. welcome back to "squawk box," everyone. let's take a look at some of the earnings reports out this morning. humana reported second quarter profit of $2.60 a share. that beat estimates by 16 cents. the health plan provider raised its full-year forecast as membership levels continue to rise. it now sees $8.65 to $8.75 a share, up from the prior $8.40 to $8.60 that it guided. the street is by $8.68. that stock is up by 2%. adt earning 53 cents a share for the second quarter, cents better than the treat was expecting. revenue beat the consensus. the provider of security products points to growth in its business as well as cost controls. that stock is up by 3.7%. garmon posting 7.6 cents a share. revenue beat estimates about i aid wide margin as well. garmin warns that declines in the personal navigation device market continues to be a head wind. comcast reported second quarter profit of 65 cents a share, 2 cents above estimates. revenue also beat consensus, the stock is higher in premarket trading. joining us now is brian roberts, comcast chairman and ceo. mr. roberts, brian, good to see you. thank you for joining us. >> great quarter. happy to be here. >> anyone that follows media, when comcast reports, it's almost -- it runs the entire gamut to talk about. there's consolidated, cable, nbc, we want to talk about all those. initially you just want to talk about, it's the first quarter that nbc has been a wholly own unit. tell us what you think the highlights are of this quarter. >> well, i think that's a great place to start, because you know, we made a big, big decision for the company at the end of the first quarter to buy the other 49%. i think our timing at least for the first 0 days looks great. the market conditions were perfect back then. they've changed a little bit. media valuations have moved a bit. but mostly we had 21% growth in cash flow at nbc universal, 9% revenue growth, really all the businesses grew revenue and that's a real highlight for me. and so our decision to invest another $18 billion in con ten we feel great about that and we're off it a 21% increase in one quarter. that may not be completely sustainable at that level. but all the businesses are for the first half of the year, had a strong year. i really am pleased with steve burke and the advertising up front and all the things i'm sure we'll talk about. >> we do want to do that. you've made a few decisions about nbc. there was the initial decision and when to buy and the rest. i don't know if you thought about this, you probably have, but -- it was a different environment when you decided to buy nbc. obviously the macro environment has improved. you have steve burke, known as a great op writer of nbc. things have improved there but how much more do you think nbcu is worth now than when you paid for it? >> i'l that to the analysts. we figured we spent all in around $28 billion when you take -- >> 10%? 20? >> i'm going to defer -- you do see interesting things such as theme parks, a part of the company we don't talk a whole lot about, a solid first half of the year continues to do really well. we have exciting atracks in the future. you see other companies going public in that space. there's been a resurgence of interest. so i think the diversified nature of the content portfolio does have, you know, a lot of value. more importantly from where i'm judging, a lot of business opportunities ahead. we don't feel that we're at maximum performance. i think we're operating better and well. the team has gelled, as you said. steve's doing a great job. it's fitting well with our cable company. our cable company had a really strong quarter. we can talk about that as well. >> becky said she thinks 20%. i think 25% more. i think at least -- maybe 30 even. that was the next place i was going to go, actually, brian. that is i have heard anecdotally that cable, not just at comcast, that cable is just doing so well and, can you explain, is it the macro environment? is it that really is going to be what end up winning out over a lot of other delivery systems? why is cable doing so well? are small and medium sized businesses deciding that's the way to go? what makes it -- what's improving there? >> well, i really can speak about comcast. we had a good -- really good second quarter. we had about 6% revenue growth, 6% cash flow growth. just right around there. but we had the best quarter in high-speed internet sales. 120% better than the second quarter last year, for instance. that we've had in the last five years. and in video we continue to have losses and that's not our goal. but they were less losses than the year before. and phone also is doing well, the triple play bundle continues to be the best value and attractive product in the market. and then in our case, we're trying to digitize those products so you can take them everywhere. we're trying to wrap that under the xfinity brand. we have a business service unit that's the fastest growing in terms of percentage at 28%, 27% growth for the quarter. and all of those things help offset the programming costs which have been increasing. and so it's a recurring business, if you invest in those business as we have with our high-speed broadband platform, we increase speeds for the entire customer base in the last year or so. the product just keeps getting better and better and more important. on the video side we keep adding features like high-def, on demand and now of tv everywhere. it's the best, most compelling product and we have to keep working on it. it all comes down to service, can you show up on time, give customers more of an expectation that they can do it themselves. self-installation has never been higher. we have more online customer care than we've ever had. just the experience gets better quarter after quarter. kne neil schmidt has proved to be a world-class operator in making us a better company. >> earlier this week we had a strategist on and he was talking about how far the media companies, the cable companies have run. he thinks the next driver will be household formation. i'm wondering what you're see on that front, if you agree with that and what kind of numbers you've been seeing when it comes to household formation. >> it's not been a driver the way it was for years and really decades. and so it's a little better but not meaningfully so, such that we're having, you know, tailwinds. and so i would be hopeful that as the economy continues to improve, that we will get some more housing formation. that will be a great thing for our business. gives us a chance to sell all three of those products. we have to compete more than ever before. it's always nice to have a bigger pie to chase. and so i agree, it could be an upside but we have not yet really seen much in that way, that is pockets but not a meaningful driver. >> there's been stuff written lately about when content goes up against distribution, like we're seeing now, with cbs and showtime, et cetera, that content has been winning. sooner or later, the distributor has to pay up because they have to carry it. if steve comes to you and really tries to gouge you with some of the content, what are you going to -- are you going to pay up because you need it on the cable systems? have you thought about that scenario? >> look, we've said for a long time it makes a lot of necessity an sense for the consumer that both sides find a medium balance. it doesn't mean one side's business may not improve a little more than the other side. if somebody wins and somebody loses you end up in an untenable long-term model. this business model has been innovative, it's created wealth for both content companies and distribution companies. and frankly, we made a big part of our logic for why we wanted our shareholders to have something unique, which is a foot in both camps. we're actually trying to work with steve and neil schmidt, putting the two together, innovate, how can we make new steps forward for consumers, whether that's going to be in 4k television, ultrahigh-def someday, in whether that's in letting shows come to on demand and other devices sooner, in more ways. and at the same time, you know, yes, there's higher content costs, nbc universal have higher rising costs whether it's at the sports platform that they're buying for nbc sports or other content costs. it's part of the eco system. it's very much top of mind. i do hope in the end all sides find a way to work together. >> that's a good problem to have, obviously, to have both sides of that. and then i was thinking, i saw cbs and moonvest talking about they've had a lot of success with "under the dome." now they can go to netflix and amazon and get some more revenue doing it that way. you could do that and not go outside the company, couldn't you? you could go to xfinity or something. that's another advantage of having the different distribution channels, right? >> well, it's the kind of area where we're definitely making investments in. we have something called stream picks at the cable company. we have minority nonvoting interest in hulu. we want to be across the digital space. at the same time, we do business with netflix and amazon and, of course, our customers get those products through comcast broadband. it is in everybody's interest to find a way for the consumer to get whatever they want whenever they want it and to have a lot of choices. and that is what we're all racing toward. i think we're in a very special place at this cross-section of media and technology. it's an opportunity that we're not trying to be complacent but rather trying to innovate and push ourselves with the kind of things you're talking about. >> i didn't think about that. yes, with netflix you have the broadband. i was going to go on, i had an additional thought about that. i can't remember what it was right now. i will come back to that in a second. okay. the up-front for nbc was much better than last year. somehow it was bundled with the other properties. did that pay off and 2.1 is, what, how much more than last year? >> it's a couple hundred million dollars, my understanding. linda yockareno, new to the company, first up front. we changed something that had seemed kind of logical but maybe there was certainly other ways to do business. we chose to put all the nbc properties under one umbrella, under linda. so that would be the broadcast properties, the cable profits, the sports properties, the digital properties, hispanic offerings all under one executive to go out and offer a complete solution to your clients. and i think that we've had a very good up front, very strong up front. i think maybe better than some of our competitors. i think the overall environment was good, maybe not the best. and so net/net, we feel we came out with a real progress. and also our shows generally speaking performed better than they had in prior years and our ratings got better. and are, therefore, what it is we were offering not only was a complete solution but it also was doing better in the market. so a lot of good forces but it starts with leadership and we had, you know, a really strong leader in linda and we were delighted with the outcome. >> i was thinking about hulu. were the offers -- suppose there were five different people that wanted. were the offers not up to speed or the potential was it so compelling that it was better to invest in it than selling? >> i have to refer you to talk to disney and fox about that question. they're the decisionmakers, but it's a changing space and when they chose to keep it, and to invest and to be part of that company, we certainly said we'll put our pro rata share of that to stay in. >> yesterday i also saw that it was just written that moonvest said greenblatt made a comment that flat was the new up. he disagreed with that. where do you come down? >> i'll leave it to those two. they're more expert than i am. >> you're a cable guy. >> no. i think that -- i hope we're managers as well as folks who can see good opportunities and invest in those businesses and in bob greenblatt, i think we have a very, very super star talented programming executive who, you know, maybe is realistic in what's happening with so many choices for consumers. but it still is the best value for an advertiser, because it aggregates more eye balls than any of the other media offerings out there. what we're focused on is whether it's "america's got talent" or "the voice" return with the original judges or the new primetime season with some very exciting shows that i know bob and the team have worked really hard to create. they're starting to advertise those shows now. you can feel the excitement in the air. we are coming from a position when we bought the company where for year after year after year we were in last place, in 2013 we moved up. and i know bob would like to continue to move up. so part of it is getting paid for what you're already performing and in the case of nbc, it wasn't where we wanted to be. and we said it would take several years to do that turnaround. you feel like that's begun and that's his great leadership. >> it was losing money. is the broadcast network making money now brian? >> well, if you add up all the parts including the tv stations and the syndication, you know, i'll defer to mike angelocis when he's on here to break it up for you. we feel we're in a good trend and not in the position we were when we bought the company. that's why you see the improvement you started the interview with. >> we don't want to go too long. there will be a time and place to talk about aero and what happens if people are able to pick and choose cable channels that they want. the future is still daunting, but you feel like it's all manageable? >> let me say this. there's -- the future, when you're at the cross-section of technology and media and you have a company that's uniquely in that position, the first thing you have to do is execute well. what i think today is all about is the kind of numbers we posted, the broadband increases, nbc 21% cash flow growth. free cash flow, the best quarter we've ever had. i think that gives you the momentum to solve whatever is put before you and try to make those worries into opportunities which we've been having this conversation, i'll come back again and we'll continue to talk about where the media business is going because it's so interesting and exciting. >> good. this is a, you know, company reports at 7 and at 7:30 we get to talk. i think we should keep it like this. it's excellent for comcast and "squawk box." thanks for coming on and giving us so much time. up next, a check on the markets and later, day two of the fed meeting. we'll talk tapering with william poole. "squawk box" will be right back. weekdays are for rising to the challenge. they're 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 what's next. 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 forward-looking companies not only run better, but run different... to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through, we say: let's get to work. because now more than ever, the future belongs to those who challenge the present. funny thing. after the fall of communism, everybody in the world agreed that socialism was a failure. everybody in the world more or less agreed that capitalism was a success. and every capitalist country in the world apparently deduced from that that what the west needed was more socialism. >> and here we are. today we are paying tribute to a man arguably the most influential economist of the second half of the 20th century. milton friedman has been called the grand master of economics. joining us now is president and ceo of the friedman foundation for educational choice. i understand you're nice, robert, i saw some of your notes. i don't want to be too incendiary here but wealth of nations was 1776. we learned about how profit incentives allocate capital. hayek, 1944. milton friedman, 1962 and now it's 2013 and here we are. how do you explain, we learn these things and then the next generation has to relearn it all over again? >> so maybe samuel johnson said it best, you road to hell is paved with good intentions. a lot of us have good intentions but we forget that society is best organized as milton friedman said when it's organized in the interest of individuals pursuing their self-interest and not government coercion. >> yes. i have trouble sometimes getting people that disagree with that proposal to connect the dots between good intentions and outcomes. and a lot of them have no interest in looking at what the end results are. they like to feel virtuous on the front end and they just compartmentalize it or their brains are different or something. can you explain it? >> they forget about the back end, forget to unleash the productive enterprise of free markettes you need individuals working together. that's a far better way to organize society. milton friedman said it best as he always does, within he said, you know, when you spend your money on yourself you're very careful about how much you spend and what you spend it on, but when you send 134u7b else's money on someone else you don't care how much you spend and what you spend it on. that's government. that's the problem, we're spending someone else's money on someone else. that's education in a nutshell. >> history shows us that pendulum swings eventually swing back the other way. where are we at this point in history, do you think? there was the reagan revolution. i don't know, bill clinton sort of continued, noio, an emphasis on free market. where are we in the pendulum swing? does it eventually swing back to free markets and the private sector? >> seeing overregulation, government centralization. you're seeing more ideas tipping toward milton friedman. in the last three years you've had five statewide voucher programs. you're starting to see this idea of his about giving parents the freedom to choose the best school for their children be widely accepted. you have 23 states that have 44 programs over 250,000 children getting vouchers and over 600,000 families using tax credit. on one hand you have a centralization, you're seeing this growth, on the other hand you're seeing educational freedom. that's great for us in the long run. >> we all agree, both sides agree on education. it's the way -- once again, good intentions. thank you and congrats. we love milton friedman. anyway, thank you. >> thanks for having me. great birthday today. this is "squawk box." we'll be right back. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550 then schwab is the place to trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550 learn how you can earn up to 300 commission-free online trades tdd#: 1-800-345-2550 for six months with qualifying net deposits. tdd#: 1-800-345-2550 see how easy and intuitive it is to use tdd#: 1-800-345-2550 our most powerful platform, streetsmart edge. tdd#: 1-800-345-2550 we put it in the cloud so you can use it on the web. tdd#: 1-800-345-2550 and trade with our most advanced tools tdd#: 1-800-345-2550 on whatever computer you're on. tdd#: 1-800-345-2550 also, get a dedicated team of schwab trading specialists tdd#: 1-800-345-2550 who will help you customize your platform tdd#: 1-800-345-2550 even from the comfort of your home. tdd#: 1-800-345-2550 and talk about ideas and strategies, one on one. tdd#: 1-800-345-2550 get all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading tdd#: 1-800-345-2550 to open an account. tdd#: 1-800-345-2550 and learn how you can earn up to 300 commission-free tdd#: 1-800-345-2550 online trades for six months with qualifying net deposits. tdd#: 1-800-345-2550 our trading specialists are waiting to help you get started. tdd#: 1-800-345-2550 so call now. tdd#: 1-800-345-2550 stock futures have given back some of the gains this morning. still holding on in the green. we still have adp and gdp coming up, numbers that could move the market. we have former st. louis fed frez william poole. we'll be right back. [ male announcer ] these days, a small business can save by sharing. like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. it's 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, everyone's 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. ♪ at&t mobile share for business. "first day of my life" by bright eyes you're not just looking for a house. you're looking for a place for your life to happen. [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] two key data points that could move the markets. first up, a look at jobs in july. adp private payrolls at 8:00 a.m. eastern. and william poole will tell us how he thinks the central bank will react. >> and bill ackman is at it again. he's taking a new stake in air products and chemicals. we have more on that story as the third hour of "squawk box" begins right now. ♪ so get ready get ready welcome back to "squawk box" here on cnbc, first in business worldwide. i'm joe kernen along with becky quick. we'll less than 15 minutes from the adp private payroll numbers. forecasters polled by dow jones were looking for annan crease of 183,000 private sector jobs. and then, 15 minutes from now we get that. at 8:30 we get our first look at gdp which ranges, the estimates as low as under 1 to high 1s. think it would be point something? >> the consensus is for 0.9%. >> 0.9. it's not a swoon. then it's a one off. that's what they're saying. >> right. >> then at 2:00 p.m. the fed will release its latest policy statement. really you should watch all day. let's get a check on the markets this morning. the dow has pulled back, now up just 18 points or so. as far as the futures go here. let's see whether that changes as we move to our facebook. yes, it did. >> this morning in fact, facebook crossing that ipo price of $38 in free market trading. this is the first time that the stock has topped this price since the company went public last year. there were a series of them above $38. it's sitting right at $38 right now. the shares are up over 40% in the last week since the company came out with the much better than expected quarterly report. a lot of the comments that zuckerberg made on the call made analysts think this stock has room to grow. yesterday, the nasdaq closed at a 13-year high. news we broke earlier, cnbc has learned that bill ackman's pershing square has taken a stake in air products and chemicals. the stake which cost ackman roughly $2.2 billion to acquire, this is the biggest investment pershing has ever made at cost. earlier this month, ackman had told -- investors in a letter that he had built up a major position and a large cap investment grade u.s. corporation. since that time, obviously people started speculating, trying to figure out the company. some even assumed that air products might be that company. as a result, the stock has risen from the low 90s to close above $105 yesterday and on this news this morning, it's up another 4.6%. air products' latest trade at 110.11. just last week, air products adopted a poison pill plan citing unusually high volumes of stock trading. that plan gives existing shareholders the right to accumulate deeply discounted shares. the poison pill does prevent ackman from taking an even larger stake in air products. he says i was too cute in my letter to investors. i didn't expect people to be running around look for the company. i think it alerted the market. he said he thinks air products is undervalued and he does have ideas on how to make the company more valuable. he wouldn't elaborate on his plans but if you look back at what he did in canadian pacific, he brought in new management, a new ceo and that stock went from $8 billion in market cap from $20 billion from the time he got involved to the current day. ackman comment on herbalive. he publicly shorted that company. it came in with much better than expected earnings this week. he hasn't publicly commented on herbalive since january of this year. the stock continued to climb. he did point out in a press release he had issues with the numbers herbalive put out for those earnings. that stock end up closing down on the day. we'll keep an eye on everything that's happening with this but again, that stock ended down by 50 cents yesterday. read all about ackman's latest moves on our website, squawk.cnbc.com. that's where you find our newsmaker interviews on demand. cnbc parent comcast reporting earnings of 65 cents a share, revenue came in above expectations. earlier on in the show, we spoke to the boss, comcast chairman and ceo brian roberts. >> we had 21% growth in cash flow at nbc universal, 9% revenue growth, really all the businesses grew revenue and that's a real highlight for me. and so our decision to invest another $18 billion in content we feel great about that. all the businesses are, for the first half of the year had a strong year. so i am really pleased with steve burke, and the nbc universal team. >> on the news the shares of comcast currently up just under 3% at $43.90. the federal reserve are releasing its views on the economy this afternoon. joining us for the hour is bruce kazman, the managing director of global research. also from st. louis, we're joined by allen skranka. a huge part of the question is what is going to happen with jobs. you are not that optimistic in terms of jobs picking up. >> on a global basis, what we think is going to happen, gdp will pick up. that's the key issue once we watch the data this week. we think it will come with productivity. companies have provided us with a bridge here with big drags on the fiscal side and the global side. as we move forward and those drags fade, gdp picks up. >> you are convinced that those drags are going to drop off? we're not looking at another situation when we fall back into tough times. >> there's two things to be watching right now. one is the data this week. we'll get a weak second quarter gdp. we're below 1% in our estimate. to watch the july news, not only the payroll numbers. we have car sales for july. if we start to see those lift, we can see those giving us help. europe is a much more important player in the global scene and feeds back into the u.s. in an important way. we think europe exited recession last quarter will grow 1% for the next few quarters. i think watching the data and the dynamics in european financial markets becomes the second key, the global key to the u.s. story as well. >> what's the fed watching in terms of, i guess you can look at gdp and say it's not going to be a big deal because we think this is a one off and things improve from here, but the jobs picture, that's a key. what do they need to see to actually start tapering? >> i think they need to see a number somewhere in the range of the mid-100s. i think they're convinced if the jobs are holding up, it's the right thing to do to start tapering. they may not go that aggressively in the stages of this. they need a payroll number. >> that's a low bar. >> i think it is. it is a bar we may not reach. the issue right now is are we in the backdrop of this weak second quarter gdp number? are we seeing corporates hold in here on the hiring? we'll get information in a few minutes. the real surprise would be to be disappointed and go below that. i think the fed needs to borrow somewhere in the mid-100,000s to go forward in september. >> allen, what's the market going to do with this? if you see a number that's in the mid-100s, 150, let's say, and the fed makes it sound like that is enough to get them to start tapering, how does the market react? >> becky, we've been long-term throughout this period. we're a little bit cautious right now. we think the market is assuming qe will go on for a while. we think it's going to begin to taper in september. and so we're long-term bulls but short-term cautious. this is the fourth largest gain in the stock market since 1928 without a 20% correction. so i think we're overdue. >> so what happens at that point? i mean, what does it take to kick off that correction? is it anything that the fed says at this point? are we worried that the economy is not strong enough to stan on its own two feet if they were to start backing out? >> i think the fed has caused some confusion by making so many comments and putting out so many numbers and dates. i think some investors, not all, but some investors have lost sight of the big picture message from ben bernanke which is i'm going to stop buying government bonds soon. i'm going to start tapering. and i think that moves interest rates are moving higher and some investors with long-term bonds in their portfolio have not taken action yet and they need to. >> where do you think bond prices are headed or yields i should say? >> i think yields are are headed higher. the federal reserve is going to really take careful steps to try to manage that rise in interest rates but they are headed higher. i think investors have to understand that longer term bonds are going to fall more than shorter term bonds and that's why we've shortened the maturities in our investors portfolios to under five years. >> do you think that is going to be a violent move or do you think the market can handle this? you're making it sound as it you think it will be a real dislocation. >> well, you know, the market often corrects in a surprising fashion, becky. so you can never predict when that's going to happen or how much it's going to fall. you prepare for it and you do that by managing asset allocation. if you had 50% in stocks and 50% in bonds three years ago, that percentage now is 60/40 because the stock market has risen so far. >> you say pull back, when would you get back in, you need to see a 10% correction, 20% correction before you feel more comfortable? >> you never jump all the way in or jump out of the market. you manage that equity percentage to your risk tolerance. again, if your risk tolerance is 50/50 but the market is pushing it up to 60/40, that's a big mistake. investors make a big mistake as the market moves higher. i'm suggesting you need to manage that waiting carefully. >> bruce, you sound much more optimistic in terms of the economic outlook. do you think there's a way the market could get a better economic picture and still do what allen's talking about here by swooning? >> i think the big picture story we have to realize if that interest rates are going to go up, it will go up because the fed is convinced the economy is stronger and it will be tapering. there's a conditionality that i think we need to stand. i think the long end has done a fair amount of adjustment it needs to on the economy doing better. if the economy delivers and we're growing 2.5 to 3% over the next four quarters, i think interest rates will go up a bit. i think we'll get up to 3% on the ten-year yield. the bigger issue will be that the economy will be starting to break out of this rank that we've seen. i think that's going to be the big event. if we don't do that, payrolls don't hold up and gdp doesn't pick up, the fed will have to pull back its messaging and in that environment, the interest rate outlook will be quite different. >> bruce is staying with us. allen, thank you for joining us. >> thank you. >> we're minutes away from the adp payroll reporters. take a look at u.s. equity futures ahead of the number. in today's markets, a lot can happen in a second. with fidelity's guaranteed one-second 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. it's all part of our goal to execute your trade in one second. i'm derrick chan of fidelity investments. our one-second trade execution is one more innovative reason serious investors are choosing fidelity. now get 200 free trades when you open an account. "first day of my life" by bright eyes you're not just looking for a house. you're looking for a place for your life to happen. welcome back to "squawk box," just seconds away from the adp employment report for july. u.s. equities futures are indicated higher. liesman is here and they both know the numbers. i ridiculously act like i can't say it for another two seconds. steve? >> strong private payroll growth reported by adp of 200,000 in july. estimate was 183,000. june revised up. putting it on top of what the bls reported for the entire economy. good sector this month, up 22,000 with an inexplicable decline in manufacturing, zandy will have to answer for that. the nonfarm payroll estimate to are this friday, 183,000. this could cause some tweaking. depends on how much you think government will take off. we'll talk about that in a second. i wanted to give you the information 2349 discussion that we've been having about obama care and the size of the company, small business under 50,000 adding 82,000. medium business, 50 to 499 employees, adding 60,000. large business 57,000, overall, small business has been running ahead of those with 50 and more. that could be a reason the obama administration changed the rules. and delayed implementation of it or it could not be. we talk with chief economist at moody's analytics. mark, overall, does this suggest maybe we should be thinking more positively about the friday number? >> we've been growing 200 k for the last 3 months, 6 months, 12 months, 24 months. it's more of the same. 200 k in any other economy other than the one we're in with a 7.6% unemployment rate would be considered pretty darn good. 200 k is not too bad. >> put together the dissidents we're going to get. all the inputs have been weak. basically for the two months of data that we have. you've been doing this relatively strong jobs number. which one is right? >> i think they'll both get revised, actually. gdp growth will probably be revised up. i expect to see some of that in the revision we get in a few minutes. the trajectory of growth should be lifted a little bit. i would expect with the benchmark revisions -- >> every five years the government goes backward. >> in january we get a benchmark. i would expect that to be done. to make it more skin the with adp was saying in the spring. adp was weaker than bls in the spring. i think that's right. fundamentally, i think what's going on, a lot of the weakness in gdp is related to the sequester and the government cuts. it's to defense. that's very productive. that's a big hit to gdp. it's not as big a hit to jobs. >> it's hard to have this conversation without bringing bruce kasman in which we'll do in just a second. the sector, 22,000 up for construction. is that one of the stronger numbers we've seen for construction? that's a delay we had. we had a surge in housing but then we didn't see the employment gains, now it seems to be coming a little bit later. the manufacturing sector, which mark i went back and checked, your manufacturing numbers are much weaker than the government's manufacturing numbers. is there a reason you could be undercounting it or the government overcounting? >> first construction. i'm counting on lots of good things from construction. we'll get a lot more home building. we should see more months of 20, 30 k going forward. this is key to getting to a higher level of job growth going forward. i'm expecting a lot there. this is just the beginning of it. in terms of manufacturing, bls is 0 to plus 5. adp has been 0 to minus 5. >> it's 50,000 jobs over the level is different over several months. >> yes, this may be one area we see revisions to the bls data. this is where the sequester and the defense cuts have their biggest impact on manufacturing. >> would you react to the jobs number here? is this in line with your thinking of where the job market is? >> i think it is. i think it's an important message if it's confirmed by the friday payroll number. >> it will be, bruce, i'm confident it will be. >> let's talk friday at 8:30. i would step away from technical things here. there's a fundamental story, labor costs are cheap and companies are hiring. the other is companies have accepted a profit margin squeeze through the first half of the year through the drags. they're looking through it. the good news, it wasn't for sure coming into this number and coming into friday is that they seem to be continuing to provide us with that bridge as we looked three, six months out and start to see the drags fading. this is a very important number against the backdrop of what we're going to see at 8:30. it's behavioral, it's about corporate behavior holding up and having incentives to hire. >> the other reason for the weakness is inventory cycle in manufacturing. that's depressing gdp growth. it's not going to have as large an impact on jobs. >> i haven't checked the markets. were the markets reatting? >> i was watching closely. >> you would have interrupted, right? >> i was watching that closely. it looks like the last time i saw it, dow futures up 20 points. >> it's down a little. >> no, they were up 18. it's roughly the same. >> we don't know what to do if it's good news. we don't. we still haven't decided whether good news is good news or bad. >> good news could cause the fed to backward taper. the market doesn't like that. bad news, we keep the fed in the game. didn't it the make sense that good news is -- if you're thinking about the world making sense. >> it doesn't, though. >> if people are working, if people have jobs, that's a good thing, that makes we want to invest. >> bruce said he thinks if we get a number in the mid-100s like 150 or something, 150 or north of that for the jobs number on friday probably means the fed will say they can taper at that point. >> yes. >> that's a relatively high bar to jump over. >> to my mind the taper is coming and the economy has to prove why it shouldn't taper. that's really -- i think -- >> i don't know if the market has figured that out yet. that to me is a surprisingly low hurdle. it's coming in september? >> right. but let me just amend that. the real story is, the taper is coming for two reasons. one is the fed expects the economy to do it. i also think the board, the committee wants to come off that 85 billion. it's done a lot to prepare the market for it. i think they'll go to 85 and maybe 65 billion. and they may stay there for a little while, maybe for a couple months. is that your outlook, too? >> i think they'll stay there until december. >> right. >> i think if we get this number and validate it, we're done on tapering for september if we get a strong payroll number on friday. >> i think the market knows that. we're then going to enter a debate, which is how long can the fed stay on hold on rates? that's going to be a much more complicated discussion. we'll get a new round of fed forecast in september. they'll go tout to 2016 and forecast an unemployment rate to back where they think the norm is in the economy. they'll have problems holding down expectations on how fast they'll be tightening over the next two to three years. i think that's where the debate will go right now, how we guide markets. >> that's the thing the fed cares the most about, not so much the tapering expectation, it's the expectation for rate hikes. if you listen to the rhetoric in the last couple months, it's about, look, we may be tapering but we're not tightening. kasman is saying you can't keep the genie in the bottle. >> right. >> the fed has laid out a clear path for us. just as long as we're around the edges of that path -- >> just because the fed says it doesn't mean we have to believe it. >> eventually we will. if that's the reality of what's going to happen, i think expectations will get driven to it. >> mark, steve, guys, thank you very much. we'll talk to you again very soon. >> friday. >> friday you'll be here? >> yes. >> bruce is staying with us. when we come back, more key data. we get our first look at second quarter gdp. that's coming up in just about seven minutes. [ indistinct shou] [ male announcer ] time and sales data. split-second stats. [ indistinct shouting ] ♪ it's so close to the options floor... [ indistinct shouting, bell dinging ] ...you'll bust your brain box. ♪ all on thinkorswim from td ameritrade. ♪ from td ameritrade. it's been that way since the day you met. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain, as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than 4 hours. if you have any sudden decrease or loss in hearing or vision, or if you have any allergic reactions such as rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. welcome back, everybody. take a look at shares of ibm. a disclosure contained in a filing this morning, ibm says it is cooperating with the probe. the stock is down $2, which is about 1%. microsoft is losing money on its surface tablets. the company's annual reports shows slow sales. also shares of mastercard getting a boost this morning. the company's earnings beating the street by 66 cents. revenue also topping estimates and that stock is up by almost 3%. when we come back, we're just a couple minutes away from our first look at second quarter gdp. right now as we head to a break, take a look at the u.s. equity futures. they've been in the green all day. right now up by about 23 points for the dow futures. "squawk box" will be right back. ♪ [ male announcer ] you wait all year for summer. ♪ this summer was definitely worth the wait. ♪ summer's 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. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪ welcome back to "squawk box," everybody. we are just a few seconds away from our first look at gdp in the second quarter. we've been watching the u.s. equity futures ahead of that. after that stronger than expected number from adp, the dow futures are up by about 23 points. that number came in at 200,000. leaves a lot of people to wonder what will help on friday. rick santelli standing by, steve liesman and mr. kasman in studio with us. rick, the numbers, please. >> the second quarter gdp under new computations is bigger, up 1 1.7. if we look at consumption, it's been downgraded to 2.3 and it is currently on the new read 1.8. that's better than the 1.5 we were expecting. but 1.8 sequentially is a bit weaker. if you look at the price index, up 0.7, that's smaller than expectation and about half of the revised 1.3 from our last look. if you look at core, strip out of all-important food and energy on a quarter over quarter basis, it's up 0.8. also on the light side, and also close to half of the 1.4 last look. if we look at second quarter employment cost index, it was up a little more than expectations, up 0.5. this is not part of the gdp. this is another number. that was up 0.5. our last unrevised look was up 0.3. i can't tell you if that 1.7 would have looked different under old style or how much affect there is but it's definitely better than anticipated. and we moved up 4 basis points on the adp number on a ten-year from from 263 to 267. we've extended that to 269. i would suspect there's a good untoo the to challenge that. back to you. >> all right, rick, hold on. let's get more reaction for these numbers with steve liesman and bruce kasman who is here. looking at these numbers and the market reaction, the market is taking it by better news but not a whole lot. the dow futures are up 30 points, being up 20 points before we got this. steve, what makes sense to you? >> i'm trying to make sense these numbers. there's a lot of stuff going on. we want to focus on consumption. consumption was 1.8. bruce, a tad more than expected by the street. business investment, 4.6, a tad weaker, i saw numbers like 6% or 7%. it is a turnaround from the first quarter. i think a big surprise may be government. down overall just 0.4. compared to 4.2 down in the first quarter. so government a little bit, federal 1.5, state and local, actually positive. i'd have to go back and find when we had a last time a state and local positive there. but there's two ways to think about the government numbers which is "a," the sequester wasn't as bad as we thought or "b," it's coming. so i don't know which one, where you're going to side on that. let me take a look at inventories here. >> steve, folks, i have something big i should tell you. >> go. >> i normally don't look at the old revision, we are looking at a new look in second quarter. our 1.8 from the first quarter took a huge hit. >> right. >> huge hit, down to 1.1, which explains why i'm seeing a lot more selling, in my opinion anyway, in the s&p futures, the dow futures are down 33. so down, major down revision from 1.8 to 1.1. >> take that information back because i can't handle it. because the numbers we' s were supposed to go the other way. we were supposed to have upward revisions. hit the tivo, hit rewind. otherwise, kasman, we're out of luck. >> is it just a timing issue where it got washed into the second quarter instead of the first quarter? >> i can't see all the numbers but if we're running 1.5 in the first half of the year and the surprise in the second quarter was from a stronger gov, i don't think these numbers by themselves, i can't see all the details here, give us a profile of the economy that's a lot different. i think steve's point is right. we don't have a good visual on where government spending is going to go in the next few months. economy is growing 1.5%. that's probably reasonable guide to where we are. jobs are holding up and we see the july numbers coming in strong. i think our picture of the economy is broadly what we thought it would be. >> it's a slight gain, 56 billion versus 42. is that -- >> that's a bit stronger than we thought it would be. >> a bit stronger. okay. let's see if we can take a step back and do our job and make some sense of all this. it's hard on a day we get these revisions. we have 1.7 for the second quarter, 1.1. we're talking about a 1.5% economy, a final sales of -- do i see that right? final sales, 0.5 in the first quarter? >> you probably had the big gov weakness. >> can you separate out for us, how is the private sector doing? >> if you're willing to take away the government side and say you have the payroll number, if you look at the gdp numbers over the last few quarters, i think you have an underlying economy that's growing somewhere in the range of 2.5 to 3 which is where we think things will come back to as we go -- >> you don't change your outlook for a second half rebound here? >> no. there's volatility around gov but it looks like inventory is stronger. i think the dynamic here is basically what we thought, weaker gdp number on average in the first half of the year relative to what we'd like to see. payroll's holding in, momentum building into july. drags that we know on the fiscal side. >> can i do simple math here, i average the two, 1.7 and 1.1. >> about 1.5. >> i add a point for the government and i get a 2.5% economy. is that how i do the math. >> yes. >> when and if this washes out, we're not making a qualitative assessment, long term this could be good. >> are we including movies? >> that's another point, hollywood. >> lone ranger. >> anything that has long term. i was wondering if "squawk box" would be included on that. >> the money we spend on "squawk box." >> there's two moving points in the second half, the drag on gogov is expected to fade. the global stuff is getting better. >> where was the ten-year? >> rick, can you tell us if good news is good news down there or good news is bad news. >> i don't know if this is good or bad news. >> it's the same argument you are having. you're talking about oh, well it's because of the government side. you know, i'm only interested in the private side of the market. that seems interested in some sort of reality, continues to be the interest rate complex. so you know, yields moving up make sense. they didn't move up precipitously because as excited as i was at 1.7, even though it may be revisions in terms of the new calculations, when i saw the 1.8 go down to 1.1, if the average is around 1.4, the excitement of surprise is one thing. there's no excitement for stellar growth in these numbers. >> no. that's right. >> i think that's what the market should reflect. i think that's why we did an aboutface, we're headed to 270. we've slipped a little but but a double asterisk to that asterisk, interest rates have a bias to go up. the real rate should be 3.5. we'll cut them some slack, maybe it will only go up to 3. even that is probably at a discount. >> we have to say good-bye to steve. you can do that. do you still say that we should not have let brian roberts come on because you had a report to do and you're mad we let brian roberts -- do you stand by that? >> there are many ways you tried to get me fired over the last 11 years. this is the most diabolical of all of them. >> do you stand by -- >> if i answer that question i'll get in trouble. did i stop beating my wife. that's what you're asking me. i thought the interview you did was excellent, joe. i thought brian roberts were terrific. >> you wish we didn't do your report. >> i have no comment. great to be with bruce kasman as well. breaking news on dell. let's get to david faber. he probably doesn't have make-up because it's early. >> i have make-up on. we got the news from dell, tweeted out a moment ago, joe, as well, the special committee of dell, perhaps not a surprise here, finally says no to that revised offer, that higher offer from michael dell which had the condition of them having to change the voting standard by which dell shareholders would vote on the deal. the special committee saying we carefully reviewed the letter of july 23rd where you propose to increase your offer to 13.75, subject to our change in the voter standard. we can't do that. we're not prepared to accept that proposal. i've spoken to a lot of people as you know, close to this who indicate there simply was not really a great deal of support on the board of directors at this point. not that they couldn't do it under the business judgment rule or that it wouldn't pass muster in delaware court but simply they felt that not for 10 cents. it's unclear at what price would allow them to feel as they they could change the voting standards. what they are trying to do is encourage michael dell and his partner, servlink. they have not agreeded to do so. if they continue not to do so, we may still get the vote on friday. at $13.65 a share for that leverage buyout, which at this point if it were to go that way might very well go down to defeat. if, however, they do agree to 13.75, the special committee is prepared to move the record date for that shareholder vote. it is june 3rd currently, meaning you have had to have been a shareholder as of june 3rd. moving that to august 10th. that's where we stand an dell, guys. this battle continues but not unexpectedly. as we told you day one, the special committee has come out and said we can't do that, can't change the voting standard for a 10 cents bump. >> the biggest knock is the idea they would actually go along and change that. that would put a lot of pressure on the special committee. >> he's been out there, becky, write letters saying you can't change the stand art now, not after all of this. this is the field we've been playing on all along. it's not right to change it. michael dell says wait a second, let the shareholder votes be heard. nonvotes should not be considered no votes. but it is typical of delaware that that's the way it often goes in these situations. they're sticking with it. >> you're still into this. you don't have any update on the clear wire soft bank story, do you, david? >> they reported not great earnings yesterday. >> you do have something. >> i think it ended. >> you do have something. >> more on becky's story, of course on air products. it was probably -- >> what i love about dell, 10 cents. i love that. >> david reported that it was probably air products. >> you did? >> yes. last week. you guys go home. you don't watch 9:00 to 11:00. i don't expect you to. >>contrary. i certainly do watch. i like to watch. that's very true. i like to watch. >> i've known that about you. >> coming up, more on the gdp numbers, and a look ahead to the fed announcement and jobs friday. remember what this guy used to say some incredible stuff. maybe we can get him to say something today, william poole will join us next. [ male announcer ] it's 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. ♪ it's time to do everything better than before. the new blackberry q10. it's time. the most free research reports, customizable charts, powerful screening tools, and guaranteed 1-second trades. and at the center of it all is a surprisingly low price -- just $7.95. in fact, fidelity gives you lower trade commissions than schwab, td ameritrade, and etrade. i'm monica santiago of fidelity investments, and low fees and commissions are another reason serious investors are choosing fidelity. now get 200 free trades when you open an account. all right. let's talk more about all of this. we saw impossible to interpret the gdp and the jobs report without knowing whether it's good or bad and what the fed is going to do and who better to talk about this than william poole, a former st. louis fed president and a senior fellow at the cato institute. it's great to see you today, sir. i want to start with some of the things that i think you're implying in our pre-interview. that is that one thing we need when we get a new chairman or chairwoman and if we do get one, is someone who will be politically independent so the fed doesn't get behind the curve in terms of withdrawing all of this accommodation. but in saying that, do you think the fed has been too accommodative at this point? >> you're mixing up a couple different questions here. let me start with the latter point first. before the talk began, the taper talk began, everybody knew, everybody knew that the policy couldn't continue forever, that the fed would at some point reduce its purchases and wind down its portfolio. everybody knew that. inside the fed, outside the fed. so what do we make of the beginning of the fed's talk about it? how do we -- it wasn't news. but the market reacted, obviously, to the bernanke suggestion that maybe the time is not too far away. let me note that first. >> right. >> secondly, the fed hasn't actually done anything yet. there has been no change in its purchases. there's been no announcement about when the purchases might change. so the fed hasn't actually done anything yet. and yet, the bond yields zapped up by about 100 basis points, give or take. so let's try to put those things together. the fact that the bond yield responded had to be due to expectational effects. it had nothing to do with anything that the fed was actually doing. >> right. >> it had to do with expectational effects. so maybe we need to consider this hypothesis, that the entire effect of quantitative easing was a consequence of expectational effects and had little to do with the actual amount of money that was being poured into the banking system. so remember a couple years ago the fed started to talk about holding the fed funds rate near zero for an extended period and then they said, i think the first was to mid-2013 and then they put that later. maybe what's really happened here is quantitative easing was a giant earnest money if you will. it was meant or had the effect of convincing the market that the fed really was going to hang on to near zero rates for this very long period. and maybe the effect of quantitative easing was entirely through that route. >> yes, so it made us believe they would hold it low all the way till 2015, so the minute they start talking about not doing it, we can no longer be sure rates will stay low and the rates will start moving before they do anything. >> correct. and that's the natural thing that you would anticipate. so what the taper talk is all about is to begin to warn the market that the time is not too far away, and that means the time of interest rate increases is not too far away. >> all right. but your point about picking someone that won't let the market -- that won't get behind the market itself, is that saying that someone who would stay accommodative, because the president -- because politicians want the economy to do better and then the market itself would move by raising rates even though the fed was behind the curve, that could create a problem? >> we know that interest rates are going to be rising in coming years. that has to be the case. rates will be rising. and the question -- rising rates are always a source of controversy. so the president needs to appoint someone who's going to be tough enough to put those increases through as they have to go through, to keep the economy stable. >> you think that's yellen or summers? >> i don't know. what i'm trying to emphasize, though, this point has not been discussed in coverage by journalists. the president needs to pick somebody who has the guts, who will be able to do it, who won't get pushed around, who won't delay, dilly dally. that is an important issue. who will be tough enough to make it happen. >> who wild be independent enough and not care what the administration or congress or anybody else says and do you think that's what we're going to get. >> it's important for the president and his advisers to understand that it's in the interest of the democratic party for this to happen in a way that doesn't throw the economy off the rails. because if we end up with a period of inflation, it is going to cause a lot of turmoil that population hates it, and the voters don't like it, ap it is i it, and it is going to cause a great deal of trouble with the medicare system. we haven't had the medicare price controls tested by a price of general inflation so far. >> do you think that summers or yellen fits that requirement? >> you know, i'm not really sure. i'm not going to try to make that judgment quite frankly. >> hmm. >> interesting analysis. i'm trying to -- i don't know how many times we have seen in the past that they have considered what the effect on the economy would be when they do certain things, and i dont n't know if they will consider it this time either. we appreciate your time and we hope you come back because i think that we have more to come talk about, so we appreciate it. >> when we come back, we will get jim cramer's take on ackmanackman and the gdp a fend. ♪ this is the pursuit of perfection. oh, just diagramming this accident with my state farm pocket agent app. you can also get a quote and pay your premium with this thing. i thought state farm didn't have all those apps? where did you hear that? the internet. and you believed it? yeah. they can't put anything on the internet that isn't true. where did you hear that? [ both ] the internet. oh look. here comes my date. i met him on the internet. he's a french model. uh, bonjour. [ male announcer ] state farm. more mobile than ever. get to a better state. like carpools... polly wants to know if we can pick her up. yeah, we can make room. yeah. [ male announcer ] ...office space. yes, we're loving this communal seating. it's 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, everyone's 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. ♪ and experience the connectivity of the available lexus enform, including the es and rx. ♪ this is the pursuit of perfection. york stock exchange. jim cramer joins us now. jim, apple shares are on fire moving above $38 for the first time of the ipo and facebook -- blah! you said this, and you called this back when they came out with the earnings and you said it would get there, but i didn't think it would be this fast. >> well, in is the best conference call of the year, and they said we have figured out mobile and figured it out to the point where it is hugely profitable for us and maybe better than google and that is the subtext. and zuckerberg totally delivered and this was an amazing quarter and the stock's reaction makes sense given the fact that they have figured out the holy grail of how to get young people the watch something on the facebook and also click on ads. >> but a 40% move is phenomenal quickly. >> well, it is going to be -- people were shorting this. and there were analysts and i don't want to go into the like mitch richfield, and they were shorting it. and he is going to say, no, jim, but people were betting against the company, but you couldn't, because within one year, they figured out how to make mobile work and nobody has and congratulations to facebook and the stock deserves the runup. >> is this the goofus or the pacific ackman with the apd? >> well, i liked air gas and that is the company that air products tried to take a run at and failed. this is hard for me to get at a higher valuation than currently, unless there is some hiddens aset that is in allentown, and it is about 15 miles from where i grew up, and it is a sleepy stock and unless he bought it at $90 and needs to get to 120. >> well, he started out at 93 or 94. >> well, let' hope he can get out of that and cover it in herbalife and live happily ever after. >> that came down, and the balance sheets, big adjustments on the balance sheets? because income state adjustments are scarier than the balance sheets? >> well, i went to audit the financials, and herbalife came out with why it is a bad quarter and i dont n't know if they finished the release. they could not get the stock down and people were hoping for giant dutch tender, but they could not do it with the analysis. and the company is fine, and they have a higher valuation than tupperware and avon at this point. >> jim, we will be watchinger a coming up. >> and coming up our guest host will be given the last word when we return. "first day of my life" by bright eyes you're not just looking for a house. you're looking for a place for your life to happen. a talking car. but i'll tell you what impresses me. what it's carrying, while using less fuel. delivering whatever the world needs, when it needs it. ♪ after all, what's the point of talking if you don't have something important to say? ♪ welcome back, everybody. let's get the last word from our guest host, bruce kasman, if you had to sum up of what you thought of the gdp numbers today, what would you say? >> little better. when you go through the gdp report, through the guts of it, it is a little better demand and the july numbers and we haven't seen the big one in friday and the economy is going in a positive direction, and the bridge that we need and the wild card is the global. we think that europe is more important in improving emerging markets, but there is a lot of questions. the fed is your friend even though it is tapering, but the global picture is the wild card to keep your eye on. >> bruce, thank you for joining us today. that does it for us today, and join us tomorrow. right now it is time for "squawk on the street." >> good wednesday morning and welcome to "squawk on the street." i'm carl quintanilla and jim cramer is back and david faber at the new york stock exchange. 1.7% was the gdp in the second quarter, and it is above expectations, although nothing to write home about. and q1 is revised down, and futures have been hesitant to respond ahead of the fed decision at 2:00 p.m. today. it is worth the 10-year at 2.68 and whether that move is on any mention of the word
"halftime" is over. "power lunch" and the second half of the trading day start right now. whoa nelly, as keith jackson used to say and probably still does. the bulls have been running big time until just a few minutes ago. the dow did hit a new all-time high today. why? a lot has to do with good economic numbers, but, and this is the big but, the very same good economic numbers could hasten a federal move so the big question as far as ben bernanke and his merry men and women is -- are concerned is this. now what? we are looking at the scenarios and the impact on your money, and an about-face, maybe about time. facebook back to near that ipo level. is it a buy or has it hit a high? first let go check in on the floor of a very busy new york stock exchange. >> good to see you, ty. markets have been the big story of the day. even though we have modest advances right now, that was good enough to push the dow jones industrial average to a new high. since the 2009 bottom the dow is up 138%. take a look at dow since the 2007 highs, and even if you bought then you'd still be up about 10%. the s&p today is also in the green. the s&p last trade is up four points. the dow is up just about 19.5. the nasdaq composite is up 12 and the russell 2,000 is up 1.5 points. the ten-year note was a bit of a fly in the ointment because we've seen a big jump in yield. we're off the highs on the ten-year yield, 2.62% and 2.68% when we hit and did see a pullback in the market. let's get more on the trading action and bob pisani joins me on the trading floor. >> part of the data was good. >> and revisions in the gdp and that's a bit of the fly in the ointment. >> on the whole it looks slightly to the positive side but adp was the real mover on the interest rate scenario. dow, into an historic intraday high. come off of there. i'll get to why in just a minute. i want to emphasize sue's points about interest rates. the stock market has a problem. put up the interest rates. moved up five or six basis points. quite significant. coming down here in the middle of the day and overall it's been a great day. a great month. broad participation in the market so consumer stocks energy stocks and health care industrials. this is the broadest kind of rally you could look for, and this is what the rest of the market has been doing the whole month overall. we had a problem, sue, and this relates to master card and visa. under the dodd/frank act, the federal government put a cap on fees the banks could charge merchants. a federal charge ruled the cap was too lenient and through whole thing out. victory for the retail groups and bad news for mastercard and visa. visa did the same thing and mastercard had great earnings. at an historic high. >> i think that's why mastercard rebounded. focusing on the earnings rather than rules. >> the earnings came out this morning. 15% revenue growth. >> can't both that with a stick, right? >> everybody is complaining about revenue growth. >> thank you, bob, see you in a few minutes. >> we saw that the nasdaq is at a 13-year high. july, as bob mentioned has historically been the strongest month for stocks during the summer, and this year no exception. what can investors expect in august? seema mody is uptown at the nasdaq. hi seema. >> july has been a strong month. the s&p 500 up 5%. the nasdaq on pace for its best monthly increase since january of 2012. the dow up more than 4 has, the second best month of the year so what will happen in august? well, if you look back at the performance of the dow, since 1900 when july is positive for the dow, august is on average up 1.16%. okay, so does that mean more gains? well, not so fast. we're looking at over 72% of stocks on the s&p 500 trading at a price-to-earnings ratio that is higher than the average of the s&p 500, that according to fact set. for this reason asset management firm douglas mclain says the market might be due for a pause. however, if you look at stocks that may move higher douglas mcclain says since the fed will taper at some point stick to stocks that can grow organically without the stimulus from the fed, offer a dividend and have a high growth rate. currently only 31 stocks on the s&p 500 fit this criteria sue. some of these names are in the technology space, microsoft cisco, corning, c.atechnologies. other names outside of techs, kohl's staples, lockheed martin and ryder systems. more on this list. sue, back over to you. >> look forward to that. see you in a bit. and now to josh lipton with the market flash. the "new york times" looking to sell the "boston globe." john henry, he's interested. the owner of the boston red sox launching a solo bid for the "boston globe," that is according to reports in the "globe" which says henry previously submitted through the new england sports network which is 80% owned by his fenway sports group. that group reportedly dropped out. henry, one of the many interested in the "globe." sue, back to you. >> almost a 2.5% gain in the "new york times" today. thank you very much josh. kenny polcari joins the group, as you know a frequent guest, chef and also director at o'neill securities and a cnbc market analyst, too. you and i were talking just before we hit air, and you said the data is not good as you look at the gdp reports so you think mr. bernanke is not going to say anything new. >> i don't think he'll say anything other than what he's been saying full steam ahead and yes, we'll taper when the data tells us to and the data is not telling us that so therefore, i think the market is confused. it will hit a lot of natural sellers at the 1700 level, and i think, you know any reason today to pop and go through 1700, at least test it it should have done that very early this morning, and the fact that it didn't really get there on the s&p, the dow made a new high, the s&p didn't get there and the s&p has once again backed off and you can feel it it'slet jim. >> still a lot of volume. >> people are just sitting and waiting until 2:00. >> the timing of the meeting is unfortunate. it would have been a lot better had we had the non-farm payroll report on friday out and then the fed meeting. >> bob, that gives us a few more days to speculate. >> i wish i had the data. a lot easier for the federal reserve. a little bit of a conundrum. i'm assuming they don't have the data. >> if you're a trader what do you do? >> remain cautious. at the moment the path to least resistance will be lower. i think they will attempt a try and will get pushed lower so as a trade type that's how you play it. as a long-term investor type you wait for that and you take advantage of that weakness. >> a fewer e-mailed me we've got to start talking about the recipe. what's the recipe for tonight? >> i didn't write a note today out today, but yesterday i gave you grilled chicken with an apricot marinade. >> try that on for size. >> yes, it's delicious. ty up to you. >> serve lunch to us on fridays for the rest of the summer. all right. a milestone or maybe the shedding of a millstone for all of our friends and maybe yours at facebook. the stock hit its $38 ipo price today. there's the milestone. in the last year it is up 73%, believe it or not. in the past three months alone, 35%%. julia boorstin is our facebook watcher and is live in l.a. julia? >> tyler, how far facebook has come from its all-time low of 17.55 last september. facebook's turnaround is really about the company executing on the priorities laid out for investors. most importantly making money from its groebl growingwing mobile user base. facebook started to deliver when mobile revenue lept to 23% of all ad revenue but the real surprise for investors came last week. fook reported much faster than expected growth. mobile revenue is now 40% of all its ad revenue. a year ago it was nothing. now, looking forward investors are counting on facebook to continue to grow ad revenue and launch a number of new ad formats which the company discussed on its earnings call including video ads, ads tailored to its graph search and they are also watching non-ad revenue like the platform facebook announced yesterday to distribute mobile games and to take a cut of revenue. back over to you. >> julia, thank you very much. is facebook a buy or a sell or a hold at these prices? jeff killberg has been a buyer from day one. also bought the stock back into the teens and 20s. rose cliff's capital murphy is here to make the bear case short-term. lock term he's bullish and short term not so much. jeff, let's start with you. why do you think this stock is at least a hold and maybe a buy at this price close to the ipo price. >> well, tyler, this is all about the believers and the non-believers, and when you see sentiment change like this momentum to the upside 51% in just the last month. i really think it's a signal that a lot of folks out there might want to get into the waters there. really seeing the institutional ownership that's really underweight and compares them to a google so i think right here and now the signal is all clear because they have delivered. zuckerberg you know he delivered and executed on his mobile promise, so i know i was the first one to put on the hoodie and got withered down to a turtleneck and keeping the hoodie on ty, a long-term hold. >> mr. murphy you get the rebuttal here. at least in the short term you think the stock can pull back and indeed today it has pulled back off its $38 ipo price >> exactly. not sure how to rebut jeff's hoodie and turtleneck line but looking at the performance in facebook, ty up 50% in the stock and, yes, zuckerberg put up a phenomenal quarter. it was all about the mobile revenue growth and he nailed it but the stock moved 50%. you're going to see people who are in at that $38 price target. once they got hold you saw it this morning. they got their 38. they were sellers there, a wave of sellers. i think you need some sort of consolidation here down around 32. i think it gets interesting and long term ty you'll see facebook pushing up for that all-time high which is at $45 a share, but you need some pullback here first. >> so you're basically saying wait to buy wait for the pullback, and, jeff if i'm paraphrasing you correctly, say full steam ahead. it's safe to buy here. >> i don't think the short squeeze is over to be completely honest and once you get that institutional investor declaring it's okay to come into this investment you will see this move higher but give murph a lot of credit. a lot of dead bodies floating from 38 to 45 i was one of those. 540 million shares trading on the ipo so there will be selling pressure. as they break through the 40 level shares will continue to be on the run. >> thanks very much. jeff and mike appreciate it very much. well two titans or two or titans because they are titans in their own right but two titans making big moves on two companies and josh lipton has the news in a market flash. tyler? >> we begin with air products and chemicals ticker apd moving higher in today's trade, that after a big name investor carved out a big stake. bill ackman's pershing square the stake valued at $2.8 billion, according to ashman the largest acquisition by cost. ackman telling cnbc it's a great business that's undervalued and talked about its diverse customer and product base and substantial pricing power. we have some ideas on how to add value, ackman says. earlier this month ackman built his position in a large cap investment grade u.s. corporation and some had speculated air products might be the company. just last week air products adopted a poison bill plan which prevented ackman from taking an even larger stake. also news today on another name tied closely to ackman and that's herbal life. our own scott wapner reporting george soros has taken a long position in herbalife, one of his top three holdings. ackman has referred to herbalife as a pyramid scheme and is shorting it and herbalife is up nearly 100% this year. sue, back to you. >> that trade has to hurt mr. ackman. i've got to tell you. josh thank you so much. >> anheuser-busch and imbev moving higher. right now the last trade on the stock is in the green by 6% plus. the world's largest beer-maker sold less beer but it made more money than expected in the second quarter on increased prices and consumer moves to the premium laggers. the company also announcing it will list its shares in mexico. despite the rise today, the stock is flat over the past thee month. comcast is moving slightly higher. the parent of nbc universal and cnbc, the stock now up 5.75%, posting better than expected second-quarter profits boosted by stronger growth in high speed internet customers. the stock is up a full 20% this year to today. ty up to you. >> sue, he doesn't speak much but when he does it's important to listen. general keith alexander, the national security agency director and is giving a key address and we'll have the details of it next. also ahead, a huge super power player edition of the power pitch. the topic, storify. all the kids love it. if you don't know about this. it's big and getting bigger. one of our judges the chairman of yahoo!. you don't want to miss it coming up. n opportunity sales event to experience the precision handling of the lexus performance vehicles including the gs and all-new is. ♪ ♪ this is the pursuit of perfection. (announcer) at scottrade, our clients are always learning more to make their money do more. (ann) to help me plan my next move i take scottrade's free, in-branch seminars... plus, their live webinars. i use daily market commentary to improve my strategy. and my local scottrade office guides my learning every step of the way. because they know i don't trade like everybody. i trade like me. i'm with scottrade. (announcer) scottrade... ranked "highest in customer loyalty for brokerage and investment companies." [ 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. the head of the national security agency making a rare public appearance at a conference in las vegas today. i'm an javers is there live. they say what happens in vegas stays in vegas, but not really, especially with the nsa i guess. >> what happens in vegas is not staying in vegas for general alexander. the first cyber security and hacker conference since the edward snowden revelations. chairman alexander wrapped up his comments facing a really hostile and somewhat angry crowd here. a lot of hecklers interrupting his speech and one issuing a barn-yard epithet after general alexander says we, the nsa, stand for freedom and he defended the nsa and defended the actions it takes even after the edward snowden disclosures and here's a little bit of what he said about the damage that the nsa is experiencing as a result of that's disclosures. >> if we tell everybody exactly what we're doing then the adversaries will know how to get through our defenses. that's why i believe what has happened, the damage to our country is significant and irreversible. what we're talking about is future terrorist attacks. >> and, of course general alexander took a little bit of a lighter note talking about the limits on e-mail collection even he said when it comes to his own daughters. >> i have four daughters. can i go and intercept their e-mails? no. >> can you? >> no, you may be able to. >> i had a chance to catch up with general alexander just after the conference and he told me that he wants edward snowden to come home to the united states from russia to face justice. tyler? >> thank you very much eamon javers reporting from las vegas for us. >> shares of sumantek surging today. the maker of the norton anti-virus software posting better than expected results as customers used more of its security products in the wake of a series of publicized hacking attacks. the stock is up about 40% just so far this year. sue? >> some headlines to tell you about, ty. we start with michael dell. he says he expects his buyout deal to collapse unless the company's special committee changes how the votes on the transaction are counted. earlier the committee refused to change the voting standard for an improved 13.75 bid. potash shares falling as the company faces increased competition and lower prices from a russian cartel which had been supporting prices. that cartel is now breaking up. and chipotle hitting a new 52-week high. the restaurant chain is up a full 38% year to date. for more stock news let's send it over to josh lipton for a market flash. >> yes, sue, these headlines just dropping on sony. rts board is expected to issue a formal rejection soon to dan loeb's third point, initiating a position in sobey earlier in the year and has called for a detachment of its entertainment business and said in a recent letter that the division is poorly managed, but, again, reports now to the board of sony will issue a formal rejection to third point. tyler, back to you. >> thank you very much. the smartest college grads in america are giving up six-figure salaries for a new and unique cause. the story of how they are making a difference and how we might one day be working for them is just ahead on "power lunch." coming up power pitch. startups give us their 60-second pitch. >> mainly an advertising business. >> and we give you insight into the fast-paced world of venture capital. >> how fast are the stories growing? >> do these founders have what it takes? >> are you in or out on storify? stay tuned to find out. [ male announcer ] let's say you pay your guy around 2% to manage your money. that's not much, you think. except it's 2% every year. go to e-trade and find out how much our advice and guidance costs. spoiler alert: it's low. it's guidance on your terms not ours. e-trade. less for more for you. [ male announcer ] it's 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. ♪ ♪ it's time to do everything better than before. the new blackberry q10. it's time. on today's "power pitch" we have a founder who wants to build a new information met network that provides a social perspective. burt herman is the co-founder of storify. knows the news well spent 12 years at the associated press as a bureau choef and correspondent and one of his assignments included covering the war in iraq as an embedded reporter and now he gets 60 seconds to make his "power pitch." let's take a look. >> i'm burt herman and i'm the co-founder of storify. we're living in a time of media overload where anyone from all around the world can publish what they are seeing in realtime. that's amazing, but it's also really overwhelming. how do we make sense of that and find what actually matters in all of this media noise? that's why we created storify. storify is the best way that you can collect and publish what you see on social networks. we have a great dragon drop interface that makes it super simple to search across the entire web and publish that in a story. which then can be embed on any website. our users include people like the "new york times" and the "wall street journal," even cnbc and also top political organizations like the white house, the united nations and non-profits and brands who want to show what customers are saying about their products. we're launching a pro plan and premium features for these users, and we hope you'll check us out at storify.com. >> all right. there you go. burt is on the right side of your screen. in just a minute he can hear us but can't react just yet. our panel, andrew cleland, managing director for comcast ventures where he focuses on digital media, ads, games all kind of things and the legendary technology executive main-yard webb, yahoo!'s interim chairman and ebay's former c.o.o. maynard, your first impressions of this venture? >> he's finding a way to get a signal out of noise which is great. i have a question of how much traction he's got though he seems to have a number of good customers already, but definitely an area of interest for me. >> andrew you actually met with burt's compatriot or co-foundry couple years ago. what rehearing then and what did you hear today? >> the story is pretty similar. they are solving a real problem. it is difficult. a lot of noise in social media today. i think media organizations and news organizations and brands need to move from the centrally driven media to adapt and take advantage of social media so i like the pinpoint they are addressing and the background to the co-founders who used to be journalists themselves. >> they know the news business you work for comcast and we're cnbc, a natural customer or target for this product. all right. burt, welcome. time for you to join us in the hot seat and take some questions from our business consultants. andrew, you first. >> great. tell me a little bit more about the business model. if you look forward in the business in three or four years time mainly an advertising business or a premium services selling tools business? >> i think our strength is that we actually potentially have both options. we do have a consumer play in that you can come to storify and get your news and see news on other sites and that would mean more advertising, but we also have great customers as i mentioned including brands agencies non-profits, political groups who use us and actually want to pay for certain extra services. >> subscription and advertising. maynard, your questions? >> yes. i'm interested in traction and growth, so how many stories do you have now and how fast are the stories growing? >> so we have on our entire network, we're get begun 20 million readers a month, and most of that is embedded on other sites and we get a pretty significant amount on storify, and it has been growing. our curators are putting together millions of elements actually every month into story. >> as you look down the road what do you think the division of your revenue stream will be ultimately more the consumer audience or more the professional audience? >> we do have consumers using us for things like weddings family trips and such but really the professional users are the ones where we're seeing much more traction so we see that happening, and really now when there are major events happening around the world, whether it's protests in the middle east supreme court decisions, whatever it might be, people come to us and use us and embed us on their site and that's where we're seeing the most growth. >> are you in or out on storify? andrew, you first. >> i think the advertising business requires tremendous scale, a i'm not sure that storify has got there yet, and i think as a tools business underlying where there is traction with you i worry about market sides for that for that particular market so i'm out. >> maynard, how about you? >> i like the space. it is crowded. i like the founder. i love the fact that he's already got a business up and growing. there's more to do. i like his investor. i'm in. >> and i, too. i like the investors. i'm good. i like the idea of an aggregator that can pull together lots of media in one place where i can go and it's not so fragmented so i'm in. your reaction burt? >> appreciate the challenges definitely, as andrew highlighted, but i'm glad to hear that maynard is in that you're in and, yeah we look forward to keep growing our business. >> all right. thanks very much to all of you, to burt andrew and maynard, and that is "the power pitch." a media aggravator. you heard what we've had to say and seen that i've changed my suit on storify, but we want to hear from you. are you in or out on "power pitch" on storify? tweet us your response and vote in our poll. i got rid of the dark suit and blue suit up next. quick update on the first one we profiled on "power pitch," learnvest. the company raised 16.5 million bringing their total investment to more than $40 million bucks, more proof that you can't afford to miss "the power pitch." these are real companies doing real things and raising real capital right here on "power lunch." sue. >> we congratulate her and her company. great news. speaking of startups and venture capitals some of the best and brightest grads are giving up huge salaries to work at startups aimed at job creation where they desperately need it. three of them are here with us at the nyse. they are amazing stories and that and more coming up. meantime gold prices are closing right now. bertha coombs tracking the action for us over at the nymex. hey, bertha. >> hey, sue, we do have silver and gold closing here lower on the day after positive data this morning and ahead of the fed minutes this afternoon, but what's interesting is that gold has had a phenomenal month after hitting a low of 11.79 an ounce back on june 28th. it's had its best monthly gain of 7% here since january of 2012. also we've seen copper today higher on the back of that positive data that we saw this morning with the gdp stronger than expected and copper winds up with a gain for the month. palladium is the big winner there. it's a fundamental story. tight supplies and disruptions in production and continuing demand from the auto industry for catalytic converters. sue? >> bertha thank you. now to bob pisani right here at post 9 and ahead of the fed the markets did hit a new high but we're kind of treading water right now. >> the question isn't really why are we coming off of the highs? the question is why do we hit new highs to begin with? very difficult for the market to move up. dow industrials moving up and i saw unusual because interest rates moved up early on on the adp reports, and when that happens on days when you move up and go through new territory here nearly 2.7% that usually puts pressure on the market. it didn't today, and traders thought that was a little unusual. there is some nervousness going into the meeting at 2:00 p.m. eastern time. give you market leaders for the month. there you go 5% overall. can't ask for anything better than that. >> sure can't, bob. thank you very much. let's go uptown to the nasdaq. seema mody following the movers there for us. >> nasdaq at a 13-year high sumantek the best moving stock. 1 the maker of norton anti-virus software has been able to benefit from the increase of anti-hacking attacks. facebook breaking its ipo price of 38 bucks a share for the first time since it went public and apple on the move. ceo tim cook met with china analysts, a potential partnership with china mobile could be a big revenue driver for apple given that apple is the world's biggest smartphone player. back to you, sue. >> rick santelli is tracking the action at the cme, and we had a big jump in interest rates earlier this morning, ricky. >> we, have but we still have to go after that 2.74 high yield close from several weeks back. as you see on the 24-hour chart, did hit as high as 2.70 and closed at 2.61 hovering right near 2.65. open the chart up from the 20th of june. you can see the right side is taking out that high yield and close of 2.61 on the left. if you look at the boon they had spongy data. they had around 5:00 a.m. eastern. their yields went down. our numbers come out and the yields moved up unchanged. the dollar index, the month of the dollar index. you see it a big drop and today it started out stronger. it's given up a little bit of ground. we're all waiting for the fed statement. tyler, back to you. >> rick thank you very much. adp, gdp, fomc. is 1.7% growth good news or bad news for the u.s. economy? and summers versus yellin. who will be the next fed chief. a special econpower rundown is two minutes away. we'll turn off the clock on this one and we'll let it run. the power pitch has captured the attention of several players in the silicon valley and anyone with an idea and a dream from sea to shining sea. friday on "power lunch" meet a man who is also following his dream. he gave up an office at a major new york law firm to play with legos, and he's making more money than he ever did as an attorney. >> it was a bit liberating and also a bit scary. >> a brand new "power lunch" series escaping the cube friday at 1:00 p.m. eastern. ♪ ♪ [ woman ] destination assist. this is ann. where would you like to go tonight? ♪ ♪ [ male announcer ] it's a golden opportunity to see how lexus effortlessly connects you to where you're 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. if you're serious about taking your trading to a higher level tdd#: 1-800-345-2550 then schwab is the place to trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading to tdd#: 1-800-345-2550 learn how you can earn up to 300 commission-free online trades tdd#: 1-800-345-2550 for six months with qualifying net deposits. tdd#: 1-800-345-2550 see how easy and intuitive it is to use tdd#: 1-800-345-2550 our most powerful platform streetsmart edge. tdd#: 1-800-345-2550 we put it in the cloud so you can use it on the web. tdd#: 1-800-345-2550 and trade with our most advanced tools tdd#: 1-800-345-2550 on whatever computer you're on. tdd#: 1-800-345-2550 also, get a dedicated team of schwab trading specialists tdd#: 1-800-345-2550 who will help you customize your platform tdd#: 1-800-345-2550 even from the comfort of your home. tdd#: 1-800-345-2550 and talk about ideas and strategies, one on one. tdd#: 1-800-345-2550 get all this with no trade minimums. tdd#: 1-800-345-2550 and only $8.95 a trade. tdd#: 1-800-345-2550 call 1-888-284-9410 or visit schwab.com/trading tdd#: 1-800-345-2550 to open an account. tdd#: 1-800-345-2550 and learn how you can earn up to 300 commission-free tdd#: 1-800-345-2550 online trades for six months with qualifying net deposits. tdd#: 1-800-345-2550 our trading specialists are waiting to help you get started. tdd#: 1-800-345-2550 so call now. tdd#: 1-800-345-2550 time for a very powerful fed edition of the power rundown. vince was a former secretary and economist for the federal open market committee. gentlemen, what can we expect from the fed statement today, and will the fed begin to taper this fall given some of the data that we've seen? vince, you get the first shot. >> not much from the statement. yes, they will taper probably in september. they have lost the religion about qe and want to extract themselves from the program where chairman bernanke is still on watch. as for the statement, gdp data this morning let them off the hook. they don't have to worry too much about the weaker economic data of late. they don't have to express too much pain about overinflation so they will true up the first paragraph and align it with what the chairman said in his semi-annual testimony a few weeks back. >> pep you want to diverge from that or concur? >> i would like to concur in the interest of good tv 1.7 better than expected the adp number better than expected so the fear is the economy was somehow faltering again don't look to be realized so i think you'll see status grow and a little tweak to the statement and there's no indication that they will change course to start tapering the quantitative easing in september which some wonder no inflation, why would you do that. unemployment is still 7.6%. economy not doing great, gangbusters, but they are indeed quite committed to start the wind winddown of qe. >> what we've been talking about, that 1.7% number. does it hasten the taper, do nothing for it? slow the taper, and what does it say about underlying growth? is it a strong or a weak number? >> okay. first it doesn't change the taper. the taper is about sustained employment growth since they put the program qe open-ended in play. as long as the non-farm boy rolls don't fall off, they will be willing to start tapering in september, having set markets up for doing it sooner and the numbers are not so obviously strong to warrant that. as for the data themselves what's impressive about 1.7% growth in the second quarter is that was supposed to be the peak of fiscal drag. we had the equivalent of 1.75% of fiscal drag associated with the tax increases and sequester, and we could still get 1.75% growth. that tells you there's underlying support. >> ben, that's a very interesting point, and from where i sit where you have modest growth 2% or thereabouts and very most inflation. that's a pretty good recipe for the stock market ben. let's talk now about the topic that is on a lot of people's lips and that is who might replace ben bernanke? it looks as if the race has narrowed down to fed vice chairman janet yellen and former treasury secretary larry summers. is there an edge to one or the other or even a third party? >> i think there's a clear edge to larry summers. all my reporting is suggesting that the president is leaning strongly in his direction, very comfortable with larry summers as an economic adviser and credits him with decisions of policy after the stimulus wall street ballout, summers was important to the president for that, so i think barring any kind of major change between now and the fall it's more likely to be summers than yellen but he's not made a decision. the president went to capitol hill to talk to democrats. some democrats in the senate in particular had been behind janet yellen and said they would like to see the first female fed chair, were not so comfortable with summers. he made a very strong case in those meetings for larry summers, and he said don't believe everything you read in "the huff post" when it comes to summers' view on monetary policy his track record working with him. he's pushing back hard on this idea that summers is somehow unacceptable to the left. that should tell you a lot about who president obama wants. >> a nice little poke from the guys at "huff post." >> the president said it not me. >> mr. summers is alternately lauded as a brilliant economist, but he's also a controversial and sometimes asiddic guy. >> to me the most constructive thing is the passage of time. if the president has an easy choice of janet yellen and doesn't float any trial balloons, doesn't mention, it doesn't even use that as a mechanism to push back when the fed started talking about the exit six weeks ago, probably means that he doesn't really want to do it and is thinking about other candidates. the question is the backlash sufficient to mean he'd be unwilling to appoint summers, in which case you do have to put a third person on the list. don't know who that third person is. >> the third person might be timothy geithner. i can tell you that from former conversations i've had. the former treasury secretary doesn't want the job, just moved to new york but he's very comfortable with the president and the president is comfortable with geithner. >> if not timothy geithner maybe tim tebow. appreciate it. sue, down to you. >> all right ty when we come back you'll meet these three incredible people and they have incredible stories. they are young americans that are giving up big bucks to help the saumpt we haveusa. we have more on that on "power lunch" in two minutes time. rver. one that's 80% smaller. uses 89% less energy. and costs 77% less. it's called hp moonshot. and it's giving the internet the room it needs to grow. this ...is going to be big. it's time to build a better enterprise. together. weekdays are for rising to the challenge. they're 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 what's next. in a world that's changing faster than ever we believe outshining the competition tomorrow requires challenging your business inside and out today. at cognizant we help forward-looking companies run better and run different - to give your customers every reason to keep looking for you. so if you're ready to see opportunities and see them through we say: let's get to work. because the future belongs to those who challenge the present. i'm here at my house on thanksgiving day, and i have a massive heart attack right in my driveway. the doctor put me on a bayer aspirin regimen. [ male announcer ] be sure to talk to your doctor before you begin an aspirin regimen. go talk to your doctor. you're not indestructible anymore. some of the best and brightest college grads are giving up big salaries to work at startups to help revitalize u.s. cities part of venture for america, modeled after teach for america where these kids learn to be entrepreneurs, business leaders and job creators. joining us now are paige bemke and also jim cannon and sean lane. i'm going to start with you, paige. ladies first. why did you start to do this, a science and engineering degree and you could have gone into a field that really needs young people but you chose to do venture america. why? >> well startups are really big in material science which is what my degree was in so i was excited to join a startup and work at a small company and start building something but venture for america is really cool because they have given us an opportunity to meet top entrepreneurs in the area and the community of fellows has been really great and i'm excited to help revitalize philadelphia. >> jim why did you decide to do this? just said something during the break about skill sets. it is very generous for you to do this but you think you're looking much further ahead in your life. what is this doing in terms of your skill sets? >> so i started out initially with my heart set on finance, worked for merrill lynch for two summers, and working on a small team there i realized what i really enjoy is building businesses kind of from the ground up, helping that team build their book of business and that skill set, whether it's finance or anything else i think learning how to build a business from the ground up is the way that i learn, and i think that's what i'm good at so it has provided me the opportunity. >> what has surprised you as you work at the company and work with the entrepreneurs you've had the privilege of working with? >> the most surprising thing is just the availability of everybody in the venture for america so all the fellows in the program and the mentorses that they establish relationships with us and also the communities of the cities that we're in. everybody has been super welcoming to us and made us feel welcome the cities we're going to and made us feel like there's an impact. >> jim, you said something that you're bullish on america, that you're bullish on the job picture. tell me more about that. >> take a glimpse at my city i'm in cincinnati ohio and just looking at over the rind the number of businesses there and people very ambitious and very bullish and venture for america is looking for the same type of people, just building ourselves up. >> you know we talk a lot about washington on the program and the inability of washington to get something done. i know this may sound like it's coming out of left field, but what would you like to tell washington about what you've learned and how they can learn to execute? >> i think one of the things i've learned is how quickly people at my company can assess the problems that we have and make decisions quickly to rectify those problems. i mean as a startup you mess up almost every single day, but being able to identify the problems quickly and then also you know take steps to fix those moving forward is something that we've done a really great job on. >> paige? >> well i think startups and technology are some of the best ways to create jobs so my company grabbing frontiers warnings in nano technology and i've seen so many start yps come out of my university in nano technology so that's a growing firm that deserves investment there. >> congratulations to you all. it's going to be a fantastic journey for you. thank you for spending time with us today. we really appreciate it. >> thanks for having us. >> counting you down to the fed decision. that's coming up next. worth the wait. ♪ ♪ summer's best event from cadillac. let summer try and pass you by. lease this all-new cadillac xts for around $399 per month or purchase for 0% apr for 60 months. come in now for the best offers of the model year. you make a great team. it's been that way since the day you met. but your erectile dysfunction - it could be a question of blood flow. cialis tadalafil for daily use helps you be ready anytime the moment's right. you can be more confident in your ability to be ready. and the same cialis is the only daily ed tablet approved to treat ed and symptoms of bph like needing to go frequently or urgently. tell your doctor about all your medical conditions and medications, and ask if your heart is healthy enough for sexual activity. do not take cialis if you take nitrates for chest pain as this may cause an unsafe drop in blood pressure. do not drink alcohol in excess with cialis. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, seek immediate medical help for an erection lasting more than 4 hours. if you have any sudden decrease or loss in hearing or vision or if you have any allergic reactions such as rash, hives, swelling of the lips tongue or throat or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a 30-tablet free trial. yahoo! finance question of the day, with second quarter gdp and jobs and manufacturing better than expected where do you stand on the economy? >> 27% says it's getting better and 21% not enough signs of recovery and 52% say things are still shaky. that will do it for a somewhat abbreviated edition of "power lunch" because -- >> the fed decision on interest rates is minutes away on "street signs." ♪ ♪ [ agent smith ] i've found software that intrigues me. it appears it's an agent of good. ♪ ♪ [ agent smith ] ge software connects patients to nurses to the right machines while dramatically reducing waiting time. [ telephone ringing ] now a waiting room is just a room. [ static warbles ] [ engine revving ] ♪ ♪ [ male announcer ] it's a golden opportunity to discover the heart-pounding exhilaration beyond the engineering. ♪ ♪ come to the golden opportunity sales event to experience the precision handling of the lexus performance vehicles, including the gs and all-new is. ♪ ♪ this is the pursuit of perfection. welcome to this fed day version of "street signs." ben bernanke your special guest, well, kind of. the fed rate call is due out in minutes. will this be the fed meeting that things finally change or will bernanke and co give us more clarity on their bond-buying plans? all this as the dow hits another all-time high. hello, everybody, and welcome to "street signs." we've got an all-star panel lined up for you on this big breaking news hour. with us jpmorgan funds david kelly, vanguard's ken volpert, our own steve liesman, bob pisani and rick santelli. we'll hear from all of them in a minute and guggenheim's scott minor on board soon. the dow is up another all-time high. not soaring, up 12 points and well off the highs of the day, but those highs were enough to propel us to another record. bank of america one of the dow's big winners while american express is on the downside. incredibly there have only been five down days for the s&p 500, and the nasdaq this month, so much for any summer swoon. all right. as we await the fed let's kick it off with our guests. steve liesman first, your expectations, sir, on what the fed may or may not do. >> i'm interested in how they characterize the labor market. they said it was further improving, we had the 280,000 adp. i'm not sure if the fed will go with that as their be all and end all. that will be the key. they had some guidance. remember fed chairman ben bernanke came out and made us raise our eyebrows and said that the committee basically thought that if things go as planned we're going to essentially taper litter this year and end it a year from now. see if that works its way into the statement or the statement as is. >> spending some time to clarify and backing off. >> like a month's word. >> every fed official that spoke was like let me explain. >> they do the same thing except they said it with this or with that and a different exif a sis. david kelly, your expectations. >> very similar to that. >> the key thing is they are going to try to embed into the text some of what ben bernanke said at his last press conference, can't really leave that out, but also -- >> what if they leave it out? what if they leave it out? >> then they are getting further and further from clarity and communications because if they leave it out then people -- it's only going to beg more questions. it's bad for markets. bad for the stock market if they leave it out. i think it increases uncertainty, but i expect them to incorporate in some form and the key thing is i think they will say they are still in the same timetable because nothing in the data in the last six weeks should be enough to deviate from the timetable but they also emphasize data dependant depending on the labor mark. >> ken, are you looking for more clarify between the idea of tapering and tightening? there seems to be some confusion out there, and we've tried to clear it up for people. what's the most important thing for you in this statement? >> yeah i think they will kind of formalize the tapering plan or at least discuss it that it will start later this year that they are expecting that to happen, but i do think they will also talk about, you know their expectation or hopefully they will talk about their expectations from the end of taper to the beginning of tightening being a longer period of time and give more clear forward guidance of what it looks like to be you know finished with tapering and still not tightening. >> a key line in the previous statement, this from june and this is important because we always try to parse the differences between the statements. this is from the last statement. a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens, so steve, that's your differentiation between tapering the asset purchase program. >> absolutely. >> and tightening the accommodative policy. >> right. >> will that line change? >> i don't think so. that would not be my expectation. there's also by the way, the actual numerical metric 6.5% unemployment for changing the funds rate and also a substantial improvement for changing the. a quantitative easing. those have been a sore point of improvement that the fed has had to try to make that less nebulous but i'm not sure how successful they have been at that. >> my scary thought was quickly what if we don't get to 6.5% unemployment. >> ever. >> because of productivity gains, i mean, is that a possibility? >> i was thinking about that more and more what happens then? >> it's not what the fed thinks will happen, but if that does happen, then the fed will change its view of what the long run unemployment rate was and would ease off because it didn't think it could do any good, a matter of the fiscal authorities changing that. >> we're ate waiting the fed. the fed is not on a firm schedule. that statement usually comes down in ten seconds time so there you go the ten-year yield at 2.662%. the dow jones industrial average is up just 12 points well off its highs of the session so there you go. that's what it looks like before the fed. let's get to happen. ton pearson at the federal reserve. >> reporter: support a stronger economic recovery and help insure inflation over time. is it most consistent with its dual mandate? they decided to continue to purchase mortgage-backed securities at a pace of 40 billion per month and longer term treasury securities at a pace of 45 billion per month. the committee will closely monitor incoming information on economic and financial developments in the coming months and will continue its purchases of treasury and agency mortgage-backed securities and employ its other policy as appropriate until the outlook for the labor market has improved subst